Washington Post 1999 Annual Report Download - page 3

Houston and WKMG in Orlando ranked third in their respective mar-
kets but continued to make good progress in improving market share.
The operating margin at the broadcast division was 49 percent in
1999, compared to 48 percent in 1998. Excluding amortization of
goodwill and intangibles, the operating margin was 53 percent in 1999
and 52 percent in 1998. The improvement in 1999 operating margin
is attributable to 1999 expense control initiatives, the benefits of which
were offset in part by the decline in national advertising revenues.
Magazine Publishing Division. Magazine division revenues were
$401.1 million for 1999, up slightly over 1998 revenues of
$399.5 million. Operating income for the magazine division totaled
$62.1 million in 1999, an increase of 39 percent over operating
income of $44.5 million in 1998. The 39 percent increase in operat-
ing income is primarily attributable to the operating results of
Newsweek. At Newsweek, operating income improved as a result of
an increase in the number of advertising pages at the domestic edi-
tion, higher pension credits ($48.3 million in 1999 versus $35.9
million in 1998) and a reduction in other operating expenses.
Offsetting these improvements were the effects of a decline in adver-
tising revenues at the Company’s trade periodicals unit.
Operating margin of the magazine division increased to 15 per-
cent in 1999, from 11 percent in 1998.
Cable Division. Revenues at the cable division increased 13 percent
to $336.3 million in 1999, from $298.0 million in 1998. Basic,
tier, pay and advertising revenue categories showed improvement
over 1998. Increased subscribers in 1999, primarily from acquisi-
tions, and higher rates accounted for most of the increase in rev-
enues. The number of basic subscribers at the end of the year
increased to 739,850 from 733,000 at the end of 1998.
Operating margin at the cable division before amortization
expense was 29 percent for 1999, compared to 30 percent for
1998. The decline in operating margin is primarily attributable to a
16 percent increase in depreciation expense arising from system
rebuilds and upgrades, offset in part by higher revenues. Cable oper-
ating cash flow increased 11 percent to $140.2 million, from
$126.5 million in 1998. Approximately 70 percent of the 1999
improvement in operating cash flow is due to the results of cable
systems acquired in 1999 and 1998.
Education and Career Services Division. The Company provides educa-
tion and career services through its subsidiary Kaplan, Inc. Kaplan
provides test preparation programs in the U.S. and abroad for indi-
viduals taking admissions and professional licensing exams. Kaplan
also provides on-site educational programs to students and teachers
at elementary, secondary and post-secondary institutions, and offers
a growing number of distance learning programs. In addition,
Kaplan publishes books, software and other materials.
Kaplan also owns SCORE! Learning Corporation, a provider of
after-school learning opportunities for students in kindergarten
through the twelfth grade. SCORE! presently operates 100 SCORE!
Educational Centers (most opened within the last two years) and
plans to open an additional 45 centers in 2000. In September 1999,
SCORE! announced the launch of a new e-commerce site,
eSCORE.com, to provide customized online educational resources
and services to parents and children.
For the first nine months of 1999 and all of 1998, Kaplan,
through its career services division, was the leading provider of
career fairs in North America, bringing together technical, sales
and diversity candidates with corporate recruiters. Kaplan, through
its subsidiary HireSystems, also provided corporate clients with
web-based tools to streamline the recruitment and hiring process.
On September 29, 1999, Kaplan contributed its ownership of these
two businesses to a newly formed company named BrassRing, Inc.
(BrassRing). Partnering with Kaplan in the formation of this new
business are the Tribune Company and Accel Partners, which each
contributed cash and/or other assets to BrassRing. From September
30, 1999, the operating results of the career fair businesses and
HireSystems have been included in BrassRing, of which the
Company records its 54 percent non-controlling interest in accor-
dance with the equity method of accounting.
Excluding the operating results of the career fair and
HireSystems businesses, the 1999 revenues for the education and
career services division totaled $240.1 million, a 40 percent
increase from 1998 revenues of $171.4 million. Approximately
two-thirds of the 1999 revenue increase is attributable to businesses
acquired in 1999 and 1998. The remaining increase in revenue
is due to growth in the test preparation and SCORE! businesses.
Operating losses for 1999 totaled $17.4 million, compared to
$6.0 million in 1998. The decline in 1999 operating results is
primarily attributable to the opening of new SCORE! centers,
start-up costs associated with eSCORE.com and the development
of various distance learning initiatives, offset in part by operating
income improvements in the traditional test preparation business.
Including the results of the career fair businesses and
HireSystems, the education and career services division’s 1999 rev-
enues totaled $257.5 million, a 32 percent increase over the same
period in the prior year. Approximately two-thirds of the increase
is due to business acquisitions completed in 1999 and 1998. The
remaining increase in 1999 revenue is due to growth in the test
preparation business and SCORE! businesses. Division operating
losses of $38.0 million represent a $30.5 million increase in
operating losses from 1998. The decline in 1999 operating results
is primarily attributable to start-up costs associated with opening
new SCORE! centers and the launch of the eSCORE.com web site,
34 THE WASHINGTON POST COMPANY