Washington Post 2002 Annual Report Download - page 34

RESULTS OF OPERATIONS — 2001 COMPARED TO 2000 DIVISION RESULTS
Net income for 2001 was $229.6 million, compared with net Newspaper Publishing Division. Newspaper publishing divi-
income of $136.5 million for 2000. Diluted earnings per share sion revenues in 2001 decreased 8 percent to $842.7 million,
totaled $24.06 in 2001, compared with $14.32 in 2000. The from $918.2 million in 2000. Division operating income for
Company’s 2001 results include after-tax gains of $196.5 mil- 2001 totaled $84.7 million, a decrease of 26 percent from
lion, or $20.69 per share, from the sale and exchange of cer- operating income of $114.4 million in 2000.
tain cable systems in the first quarter; a non-cash goodwill and The decrease in operating income for 2001 is due to a signifi-
other intangibles impairment charge recorded by the Company’s cant decline in print advertising, offset in part by a higher pen-
BrassRing affiliate (after-tax impact of $19.9 million, or $2.10 sion credit, higher online advertising revenue, lower newsprint
per share); and losses from the write-down of a non-operating expense, cost control initiatives employed throughout the divi-
parcel of land and certain cost method investments to their esti- sion, and the $27.5 million charge recorded in the fourth quar-
mated fair value (after-tax impact of $18.3 million, or $1.93 per ter of 2000 in connection with an early retirement program
share). completed at The Post.
Revenue for 2001 totaled $2,411.0 million, or flat compared to Print advertising revenue at The Washington Post newspaper
revenue of $2,409.6 million in 2000. Advertising revenue decreased 14 percent to $574.3 million, from $664.1 million
decreased 13 percent in 2001, and circulation and subscriber in 2000. Volume declines of 41 percent in classified recruitment
revenue increased 9 percent. Education revenue increased advertising for 2001 caused classified recruitment advertising
40 percent in 2001, and other revenue decreased 10 percent. revenue declines of 37 percent. The economic environment sur-
The large decrease in advertising revenue is due to declines at rounding most of the other advertising categories at The Post
the newspaper, broadcast and magazine divisions. The (i.e., retail, general, preprints) was also sluggish for fiscal 2001
increase in circulation and subscriber revenue is due to a 20 per- compared to the prior year. In these categories, rate increases
cent increase in Newsweek domestic circulation revenue and a only partially offset volume declines ranging from 3 percent to
10 percent increase in subscriber revenue at the cable division. 28 percent during 2001. The soft advertising climate worsened
Revenue growth at Kaplan, Inc. (about two-thirds of which was late in the third quarter of 2001 as the Company experienced
from acquisitions) accounted for the increase in education further reductions in advertising revenue and volumes following
revenue. the events of September 11.
Operating costs and expenses for the year increased 6 percent Daily and Sunday circulation at The Post declined 0.5 percent
to $2,191.1 million, from $2,069.8 million in 2000. The cost and 0.7 percent, respectively, in 2001. For the year ended
and expense increase is primarily attributable to companies December 30, 2001, average daily circulation at The Post
acquired in 2001 and 2000, higher depreciation and amorti- totaled 773,000 (unaudited) and average Sunday circulation
zation expense, and higher stock-based compensation expense totaled 1,067,000 (unaudited). Newsprint expense at the news-
accruals at the education division, offset by a higher pension paper publishing division decreased 6 percent for 2001 due to
credit and lower expenses at the newspaper publishing, televi- reduced consumption offset by overall higher prices during the
sion broadcasting and magazine publishing segments due to year.
extensive cost control initiatives.
Revenues generated by the Company’s online publishing activi-
Operating income decreased 35 percent to $219.9 million in ties, primarily washingtonpost.com, increased 12 percent to
2001, from $339.9 million in 2000. The decline in 2001 $30.4 million during the year.
operating income is largely due to a significant decline in adver-
tising revenue, increased depreciation and amortization Television Broadcasting Division. Revenue for the television
expenses, and higher stock-based compensation expense accru- broadcasting division totaled $314.0 million for 2001, a
als at the education division. These factors were offset in part by 14 percent decline from 2000. Excluding approximately
increased operating income contributed by Quest Education $42 million in political and Olympics advertising in 2000, reve-
(acquired in August 2000), higher profits from Kaplan’s test nue in 2001 decreased 3 percent due to a general softness in
preparation and professional training businesses, reduced oper- advertising (particularly national advertising) and several days
ating losses at Kaplan’s new business development activities, of commercial-free coverage following the events of
and an increased pension credit. In addition, 2000 earnings September 11.
included a fourth quarter after-tax charge of $16.5 million, or Competitive market position remained strong for the Company’s
$1.74 per share, arising from an early retirement program at television stations. WJXT in Jacksonville and WDIV in Detroit
The Washington Post. were ranked number one in the latest ratings period, sign-on to
The Company’s 2001 operating income includes $76.9 million sign-off, in their respective markets; KSAT in San Antonio ranked
of net pension credits, compared to $65.3 million in 2000. second; WPLG was tied for second among English-language
These amounts exclude $3.3 million and $29.0 million in stations in the Miami market; and KPRC in Houston and WKMG
charges related to early retirement programs in 2001 and in Orlando ranked third in their respective markets.
2000, respectively.
32 THE WASHINGTON POST COMPANY