NOTE 3

Facility consolidation and asset impairment charges

Facility consolidation plans led the company to recognize charges associated with revising the useful lives of certain assets over a shortened period as well as shutdown costs. Difficult business conditions have required the company to perform impairment tests on certain assets including goodwill, other intangible assets and other long-lived assets. As a result, the company recorded non-cash impairment charges to reduce the book value of certain of those assets. In addition, an impairment charge was taken to reduce the value of certain publishing assets sold in 2009 to fair value less costs to sell. The company also recorded impairment charges for certain minority-owned investments accounted for under the equity- or cost-methods.

A summary of these charges by year is presented below:

		September 30,		September 30,		September 30,
	2011
In millions except per share amounts	Pre-Tax Amount		After-Tax Amount ^(a)		Per Share Amount
Facility consolidation and asset impairment charges
Property, plant and equipment:
Publishing	$	17	$	10	$	0.04

Total property, plant and equipment		17		10		0.04

Other:
Publishing		10		7		0.03

Total other		10		7		0.03

Total asset impairment and other charges against operations	$	27	$	18	$	0.07

Non-operating charges:
Equity method investments		16		10		0.04
Other investments		15		9		0.04

Total charges	$	58	$	36	$	0.15

(a)

Total amounts may not sum due to rounding.

		September 30,		September 30,		September 30,
	2010
In millions except per share amounts	Pre-Tax Amount		After-Tax Amount ^(a)		Per Share Amount^(a)
Facilities consolidation and asset impairment charges
Goodwill:
Digital	$	11	$	11	$	0.04

Total goodwill		11		11		0.04

Other intangible assets:
Publishing		17		12		0.05
Digital		2		1		—

Total other intangible assets		19		13		0.06

Property, plant and equipment:
Publishing		15		9		0.04
Broadcasting		4		2		0.01

Total property, plant and equipment		19		12		0.05

Other:
Publishing		3		2		0.01
Broadcasting		5		3		0.01

Total other		8		5		0.02

Total asset impairment and other charges against operations	$	57	$	41	$	0.17

Non-operating charges:
Equity method investments		3		2		0.01

Total charges	$	60	$	43	$	0.18

(a)

Total amounts may not sum due to rounding.

		September 30,		September 30,		September 30,
	2009
In millions except per share amounts	Pre-Tax Amount		After-Tax Amount ^(a)		Per Share Amount
Facilities consolidation and asset impairment charges
Goodwill:
Publishing	$	17	$	10	$	0.04
Digital		16		16		0.07

Total goodwill		33		26		0.11

Other intangible assets:
Digital		9		5		0.02

Total other intangible assets		9		5		0.02

Property, plant and equipment:
Publishing		76		47		0.20
Broadcasting		3		2		0.01

Total property, plant and equipment		79		50		0.21

Other:
Publishing		7		4		0.02
Broadcasting		5		3		0.01

Total other		12		7		0.03

Total asset impairment and other charges against operations	$	133	$	88	$	0.37

Non-operating charges:
Publishing assets sold		28		24		0.10
Equity method investments		9		7		0.03

Total charges	$	170	$	119	$	0.50

(a)

Total amounts may not sum due to rounding.

2011: The carrying values of property, plant and equipment at certain publishing businesses were evaluated in 2011 due to facility consolidation efforts and changes in expected useful lives. The company revised the useful lives of certain assets, which were taken out of service or for which management has committed to a plan to discontinue use in the near future, in order to reflect the use of those assets over a shortened useful life. As a result of the evaluation, the company recorded pre-tax charges of $17 million in 2011. Deferred tax benefits were recognized for these charges and the after-tax impact was $10 million or $.04 per share. The company expects that it will incur $15 million of accelerated depreciation in 2012 associated with shortening the useful lives of production equipment.

The $10 million of charges in the “Other” category include shut down costs of certain publishing assets. Deferred tax benefits were recognized for these charges and therefore the after-tax impact was $7 million or $.03 per share.

In 2011, the carrying value of several investments for which the company owns a noncontrolling interest were written down to fair value because the business underlying the investments had experienced significant and sustained operating losses, leading the company to conclude that the investments were other than temporarily impaired. The investment carrying value adjustment totaled $30 million pre-tax and $18 million on an after-tax basis, or $.08 per share.

2010: The goodwill impairment charge results from the application of the impairment testing provisions included within the goodwill subtopic of ASC Topic 350. Because of difficult business conditions, testing for one reporting unit was updated during the third quarter of 2010 and for all reporting units on Dec. 26, 2010, in connection with the required annual impairment test of goodwill and indefinite lived intangibles. For one of the stand-alone businesses

in the digital segment, a potential impairment was indicated. The fair value of the reporting unit was determined based on a discounted cash flow technique. The company then undertook the next step in the impairment testing process by determining the fair value of assets and liabilities within the reporting unit. The implied value of goodwill was less than the carrying value by $11 million and therefore an impairment charge in this amount was taken. There was no tax benefit recognized related to the impairment charge since the recorded goodwill was not currently deductible as it arose from a stock purchase transaction. Therefore, the after-tax effect of the goodwill impairment was $11 million or $.04 per share.

The impairment charge of $19 million for other intangible assets, principally a masthead, was required because revenue results from the underlying business had softened from what was expected at the time the assets were last valued. Fair value was determined using a relief-from-royalty method. Carrying values were reduced to fair value for an indefinite lived asset and for certain definite-lived assets in accordance with ASC Topic 350. Deferred tax benefits have been recognized for these intangible asset impairment charges and therefore the total after-tax impact was $13 million or $.06 per share.

The carrying values of property, plant and equipment at certain publishing and broadcasting businesses were evaluated in 2010 due to facility consolidation efforts and changes in expected useful lives. The company revised the useful lives of certain assets, which were taken out of service or for which management has committed to a plan to discontinue use in the near future, in order to reflect the use of those assets over a shortened useful life. As a result of the evaluation, the company recorded pre-tax charges of $19 million in 2010. Deferred tax benefits were recognized for these charges and the after-tax impact was $12 million or $.05 per share.

The $8 million of charges in the “Other” category include shut down costs as well as the impairment of certain broadcast programming assets. Deferred tax benefits were recognized for these charges and therefore the after-tax impact was $5 million or $.02 per share.

In 2010, the carrying value of an investment for which the company owns a noncontrolling interest was written down to fair value because the business underlying the investment had experienced significant and sustained operating losses, leading the company to conclude that it was other than temporarily impaired. The investment carrying value adjustment totaled $3 million pre-tax and $2 million on an after-tax basis, or $.01 per share.

2009: The goodwill impairment charges result from the application of the impairment testing provisions included within the goodwill subtopic of ASC Topic 350. Because of difficult business conditions due to the economy, testing for certain reporting units was updated during the second quarter of 2009 and for all reporting units on Dec. 27, 2009, in connection with the required annual impairment test of goodwill and indefinite-lived intangibles. For one of the stand-alone business reporting units in the publishing segment and one in the digital segment, a potential impairment was indicated. The fair value of the reporting units was determined based on a multiple of earnings technique and/or a discounted cash flow technique. The company then undertook the next step in the impairment testing process by determining the fair value of assets and liabilities within these reporting units. The implied value of goodwill for these reporting units was less than the carrying amount by $33 million and therefore impairment charges in this amount were taken. Deferred tax benefits were recognized for the publishing charge only and therefore the after-tax effect of the total goodwill impairment charge was $26 million or $.11 per share.

The impairment charge of $9 million for other intangible assets, principally customer relationships and a trade name, was required because revenue results from the underlying business had softened from what was expected at the time these assets were last valued. Carrying values were reduced to fair value for an indefinite lived asset and for certain definite-lived assets in accordance with ASC Topic 350. Deferred tax benefits have been recognized for these intangible asset impairment charges and therefore the total after-tax impact was $5 million or $.02 per share.

The carrying values of property, plant and equipment at certain publishing and broadcasting businesses were evaluated in 2009 due to facility consolidation efforts, changes in expected useful lives and softening business conditions. The recoverability of these assets was measured in accordance with the requirements included within ASC Topic 360. This process indicated that the carrying values of certain assets were not recoverable, as the expected undiscounted future cash flows to be generated by them were less than their carrying values. The related impairment loss was measured based on the amount by which the asset carrying value exceeded fair value. Asset group fair values were determined using the discounted cash flow technique. Certain asset fair values were based on estimates of prices for similar assets. In addition, as required by ASC Topic 360, the company revised the useful lives of certain assets, which were taken out of service during the year or for which management has committed to a plan to discontinue use in the near future, in order to reflect the use of those assets over their shortened useful life. As a result of the application of the requirements of ASC Topic 360, the company recorded charges of $79 million in 2009. Deferred tax benefits were recognized for these charges and the 2009 after-tax impact was $50 million or $.21 per share.

The $12 million of charges in the “Other” category include shut down costs as well as the impairment of certain broadcast programming assets. Deferred tax benefits were recognized for these charges and therefore the after-tax impact was $7 million or $.03 per share.

In the second quarter of 2009, in accordance with ASC Topic 360, the company recorded an impairment charge to reduce the value of certain publishing assets sold to fair value less costs to sell. Fair value was determined using a discounted cash flow technique that included the cash flows associated with the disposition. This impairment charge was $28 million pre-tax and $24 million after-tax, or $.10 per share. The charge is reflected in “Other non-operating items” in the Consolidated Statements of Income.

In 2009, for certain investments in which the company owns noncontrolling interests, carrying values were written down to fair value because the businesses underlying the investments had experienced significant and sustained operating losses, leading the company to conclude that they were other than temporarily impaired. These investment carrying value adjustments totaled $9 million pre-tax and $7 million on an after-tax basis, or $.03 per share.