Washington Post 2002 Annual Report Download - page 32

the year ended December 29, 2002, average daily circulation employees accepting early retirement programs offered by
at The Post totaled 760,000 (unaudited) and average Sunday Newsweek, and from significant cost savings programs put into
circulation totaled 1,054,000 (unaudited). place at Newsweek’s international operations.
Revenue generated by the Company’s online publishing activi- Excluding amortization of goodwill and other intangibles, oper-
ties, primarily washingtonpost.com, increased 18 percent to ating margin at the magazine publishing division was 7 percent
$35.9 million during the year, from $30.4 million in 2001. for 2002 and 9 percent for 2001.
Local and national online advertising revenues grew 60 percent Cable Television Division. Cable division revenue of
in 2002, while revenue at the Jobs section of wash- $428.5 million for 2002 represents an 11 percent increase
ingtonpost.com decreased 1 percent in 2002. from revenues of $386.0 in 2001. The 2002 revenue increase
Television Broadcasting Division. Revenue at the television is principally due to rapid growth in the division’s cable modem
broadcasting division increased 9 percent to $343.6 million in and digital service revenues. Cable division operating income
2002, from $314.0 million in 2001, due primarily to increased 15 percent in 2002 to $80.9 million, from pro forma
$31.8 million in political advertising, as well as Olympics-relat- operating income of $70.6 million in 2001. The increase in
ed advertising at the Company’s NBC affiliates in the first quar- operating income for 2002 is due mostly to the division’s reve-
ter of 2002. Additionally, revenues in 2001 were lower due to nue growth, offset by higher depreciation expense and
a general softness in advertising and several days of commer- increased programming expense.
cial-free coverage following the events of September 11. These Cable division cash flow (operating income excluding deprecia-
increases were partially offset by reduced network compensa- tion and amortization expense) totaled $169.8 million for
tion revenues in 2002. 2002, an increase of 25 percent from $135.3 million for
Competitive market position remained strong for the Company’s 2001.
television stations. WDIV in Detroit was ranked number one in The increase in depreciation expense for 2002 is primarily due
the latest ratings period, Monday through Friday, sign-on to sign- to significant capital spending, primarily in 2001 and 2000,
off; KSAT in San Antonio was tied for number one; WJXT in which has enabled the cable division to offer digital and broad-
Jacksonville ranked second; WPLG was tied for second among band cable services to its subscribers; depreciation expense for
English-language stations in the Miami market; and KPRC in 2002 also includes $5.4 million in charges for obsolete assets.
Houston and WKMG in Orlando ranked third in their respective The cable division began its rollout plan for these services in the
markets. third quarter of 2000. At December 31, 2002, the cable divi-
Operating income for 2002 increased 16 percent to sion had approximately 214,900 digital cable subscribers, rep-
$168.8 million, from pro forma operating income of resenting a 30 percent penetration of the subscriber base in the
$146.0 million in 2001. Operating income growth for 2002 is markets where digital services are offered. Digital services are
due to strong revenue growth, along with tight cost controls, currently offered in markets serving 98 percent of the cable
partially offset by a reduced pension credit. Operating margin division’s subscriber base. The initial rollout plan for the new
at the broadcast division was 49 percent for 2002 and 46 per- digital cable services included an offer for the cable division’s
cent for 2001, excluding amortization of goodwill and other customers to obtain these services free for one year. At Decem-
intangibles. ber 31, 2002, the cable division had 194,200 paying digital
subscribers, compared to 31,000 at the end of 2001. Most of
In July 2002, WJXT in Jacksonville, Florida, began operations as the benefits from these services began to show in the first quarter
an independent station when its network affiliation with CBS of 2002 and continued throughout the year, with the remaining
ended. portion of free one-year periods generally having ended by the
Magazine Publishing Division. Revenue for the magazine pub- close of 2002.
lishing division totaled $349.1 million for 2002, a 7 percent At December 31, 2002, the cable division had 718,000 basic
decrease from $374.6 million in 2001. Revenues for 2001 subscribers, compared to 752,700 at the end of December
reflect a significant spike in newsstand circulation revenue at 2001, with the decrease due primarily to the difficult economic
Newsweek due to regular and special editions related to the environment over the past year; basic customer disconnects for
events of September 11. Advertising revenues were down for non-payment of bills have increased significantly. At Decem-
2002, primarily due to declines in the international division. ber 31, 2002, the cable division had 79,400 CableONE.net
Operating income totaled $25.7 million for 2002, a decrease service subscribers, compared to 46,400 at the end of Decem-
of 20 percent from pro forma operating income of $32.0 million ber 2001, due to a large increase in the Company’s cable
in 2001. Operating results for 2002 include $16.1 million in modem deployment (offered to 93 percent of homes passed at
pre-tax charges in connection with early retirement programs at the end of December 2002) and subscriber penetration rates.
Newsweek. Expenses for 2001 included approximately Of these subscribers, 78,100 and 32,900 were cable modem
$5.0 million in nonrecurring costs associated with regular and subscribers at the end of 2002 and 2001, respectively, with the
special editions related to September 11. Costs for 2002 also remainder being dial-up subscribers.
have declined due to payroll and other related cost savings from
30 THE WASHINGTON POST COMPANY