2013 Financials (PDF)
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2013 ANNUAL REPORT Consolidated Financial Statements The Associated Press and Subsidiaries Years ended December 31, 2013 and 2012 with Report of Independent Auditors 1 CONTENTS Report of the Audit Committee 1 Report of Independent Auditors 1 Consolidated Balance Sheets 2 Consolidated Statements of Operations 3 Consolidated Statements of Comprehensive Income (Loss) 4 Consolidated Statements of Changes in Members’ Deficit 4 Consolidated Statements of Cash Flows 5 Notes to Consolidated Financial Statements 6 REPORT OF THE AUDIT COMMITTEE Dear Ms. Junck: Members of the Audit Committee of The Associated Press (the “Company”) convened on March 27, 2014. The Committee members received consolidated financial statements reported upon by Ernst & Young LLP, Independent Auditors and reviewed them in detail. The report covered The Associated Press and its domestic and foreign subsidiaries. The scope of procedures used by Ernst & Young LLP in auditing the results of the Company’s worldwide operations was discussed. All questions raised by Committee members in regard to the assets, liabilities, revenue and expenses shown in the financial statements were addressed and answered satisfactorily by Company management or Ernst & Young LLP. Based on these discussions and the representations of management, the Audit Committee approved the 2013 audited consolidated financial statements. The Committee thanks the representatives of The Associated Press and Ernst & Young LLP for their assistance and cooperation. Respectfully submitted, The Audit Committee DUNIA SHIVE GRACIA MARTORE RICH BOEHNE DAVID PAXTON WILLIAM O. NUTTING ROBIN MCKINNEY Dallas, Texas Gannett Co., Inc., The E.W. Scripps Paxton Media Group Ogden Newspapers MARTIN McClean, Va. Company The Paducah Sun The Journal The Santa Fe New Rochester Democrat Cincinnati, Ohio Paducah, Ky. Martinsburg, W.Va. Mexican and Chronicle The Commercial Appeal Santa Fe, N.M. Rochester, N.Y. Memphis, Tenn. REPORT OF INDEPENDENT AUDITORS AUDIT COMMITTEE AND MEMBERS OF THE ASSOCIATED PRESS We have audited the accompanying consolidated financial statements of The Associated Press and subsidiaries, which comprise the consolidated balance sheets as of December 31, 2013 and 2012, and the related consolidated statements of operations and comprehensive income (loss), changes in members’ deficit and cash flows for the years then ended, and the related notes to the consolidated financial statements. Management’s responsibility for the financial statements Management is responsible for the preparation and fair presentation of these financial statements in conformity with U.S. generally accepted accounting principles; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free of material misstatement, whether due to fraud or error. Auditor’s responsibility Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of The Associated Press and subsidiaries at December 31, 2013 and 2012, and the consolidated results of their operations and their cash flows for the years then ended in conformity with U.S. generally accepted accounting principles. New York, New York March 27, 2014 1 THE ASSOCIATED PRESS AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31 (In Thousands) 2013 2012 ASSETS Current assets: Cash and cash equivalents $ 14,069 $ 7,043 Accounts receivable, net of allowance for doubtful accounts (2013—$9,812; 2012—$9,207) 44,695 56,247 Other current assets 15,566 14,832 Total current assets 74,330 78,122 Fixed assets, net 108,380 135,056 Other non-current assets: Goodwill 47,638 47,638 Deferred income taxes 5,428 3,390 Equity method investments 13,937 12,669 Accrued revenue 1,822 4,100 Other non-current assets 6,732 4,703 Total other non-current assets 75,557 72,500 Total assets $ 258,267 $ 285,678 LIABILITIES AND MEMBERS' DEFICIT Current liabilities: Accounts payable $10,361 $ 10,624 Accrued payroll expense 32,746 28,229 Taxes payable 3,853 2,440 Deferred revenue 11,033 11,443 Pension liabilities 7,813 6,295 Postretirement and other employee benefits 3,740 4,775 Other accrued liabilities 29,235 26,933 Total current liabilities 98,781 90,739 Non-current liabilities: Long-term debt — 18,600 Pension liabilities 210,936 300,931 Postretirement and other employee benefits 92,136 132,522 Taxes payable 7,774 11,870 Other non-current liabilities 22,461 23,803 Total non-current liabilities 333,307 487,726 Deficit: Operating account (62,003) (65,266) Accumulated other comprehensive loss (111,590) (227,407) Total Associated Press members' deficit (173,593) (292,673) Non-controlling interest (228) (114) Total deficit (173,821) (292,787) Total liabilities and deficit $ 258,267 $ 285,678 2 See notes to consolidated financial statements. THE ASSOCIATED PRESS AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS YEAR ENDED DECEMBER 31 (In Thousands) 2013 2012 Revenue $ 595,745 $ 622,247 Operating expenses: Compensation 350,790 367,191 Stringers 26,724 30,500 Travel and entertainment 21,607 25,969 Communications 29,707 33,175 Depreciation and amortization 35,129 39,906 Property rent and utilities 43,456 44,325 Supplies and maintenance 26,596 29,254 Other general and administrative 69,945 77,601 Total operating expenses 603,954 647,921 Operating loss (8,209) (25,674) Other income (expense): Earnings from equity method investees 10,732 6,743 Other income (expense) 3,971 (1,373) Interest income 4 21 Interest expense (1,260) (1,589) Total other income 13,447 3,802 Income (loss) before income taxes 5,238 (21,872) Income tax (expense) benefit Current (4,127) (7,145) Deferred 2,038 3,390 Total income tax expense (2,089) (3,755) Net income (loss) 3,149 (25,627) Less: Net loss attributable to noncontrolling interest 114 114 Net income (loss) attributable to The Associated Press $ 3,263 $ (25,513) See notes to consolidated financial statements. 3 THE ASSOCIATED PRESS AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) YEAR ENDED DECEMBER 31 (In Thousands) 2013 2012 Net income (loss) $ 3,149 $ (25,627) Other comprehensive income (loss): Foreign currency translation adjustments 1,290 2,043 Net change in unrecognized net actuarial gain (loss) related to defined benefit pension 114,527 (44,899) and other postretirement benefit plans Other comprehensive income (loss) 115,817 (42,856) Comprehensive income (loss) 118,966 (68,483) Less: Comprehensive loss attributable to noncontrolling interest 114 114 Comprehensive income (loss) attributable to The Associated Press $ 119,080 $ (68,369) THE ASSOCIATED PRESS AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN MEMBERS’ DEFICIT Operating Accumulated Other Members’ Non-Controlling Total (In Thousands) Account Comprehensive Loss Deficit Interest Deficit Balance at December 31, 2011 $ (39,753) $ (184,551) $ (224,304) $ — $ (224,304) Net loss (25,513) — (25,513) (114) (25,627) Minimum pension liability adjustment — (44,899) (44,899) — (44,899) Foreign currency translation adjustment — 2,043 2,043 — 2,043 Comprehensive loss (25,513) (42,856) (68,369) (114) (68,483) Balance at December 31, 2012 (65,266) (227,407) (292,673) (114) (292,787) Net income (loss) 3,263 — 3,263 (114) 3,149 Minimum pension liability adjustment — 114,527 114,527 — 114,527 Foreign currency translation adjustment — 1,290 1,290 — 1,290 Comprehensive income (loss) 3,263 115,817 119,080 (114) 118,966 Balance at December 31, 2013 $ (62,003) $ (111,590) $ (173,593) $ (228) $ (173,821) 4 See notes to consolidated financial statements. THE ASSOCIATED PRESS AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS YEAR ENDED DECEMBER 31 (In Thousands) 2013 2012 OPERATING ACTIVITIES Net income (loss) $ 3,149 $ (25,627) Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities Depreciation and amortization of fixed assets 35,129 39,906 (Gain) loss on disposal of assets (125) 598 Loss on sale of business units — 4,672 Defined benefit pension expense 4,305 11,271 Defined benefit pension cash contribution