Washington Post 2002 Annual Report Download - page 35

Operating income for 2001 declined 26 percent to $131.8 mil- At December 31, 2001, the cable division had 752,700 basic
lion, from $177.4 million in 2000, due to revenue declines subscribers, compared to 735,400 at the end of December
discussed above. Operating margin at the broadcast division 2000. The increase in basic subscribers is largely due to a net
was 42 percent for 2001 and 49 percent for 2000. Excluding gain in subscribers arising from cable system exchanges and
amortization of goodwill and intangibles, operating margin was sale transactions completed in the first quarter of 2001. At
46 percent for 2001 and 53 percent for 2000. December 31, 2001, the cable division had 46,400 Cable-
ONE.net service subscribers, compared to 18,200 at the end of
Magazine Publishing Division. Revenue for the magazine pub- 2000, with the increase due to a large increase in the Compa-
lishing division totaled $374.6 million for 2001, a 9 percent ny’s cable modem deployment (offered to 89 percent of homes
decrease from revenue of $413.9 million in 2000. Operating passed at the end of December 2001) and take-up rates. Of
income totaled $25.3 million for 2001, a decrease of 48 per- these subscribers, 32,900 and 3,600 were cable modem sub-
cent from 2000. The decline in 2001 operating income resulted scribers at the end of 2001 and 2000, respectively, with the
from a 24 percent decrease in advertising revenue at News- remainder being dial-up subscribers.
week due to fewer advertising pages at both the domestic and
international editions. The decline was offset in part by Education Division. Education revenue in 2001 increased
increased newsstand sales on regular and special editions relat- 40 percent to $493.7 million, from $353.8 million in 2000;
ed to the September 11 terrorist attacks, a higher pension credit excluding Quest Education (acquired in August 2000), educa-
and reduced operating expenses. tion division revenue increased 15 percent to $342.3 million for
2001, compared to $296.9 million for 2000. Excluding good-
Operating margin at the magazine publishing division will amortization, a summary of operating results for 2001 com-
decreased to 7 percent for 2001, compared to 12 percent in pared to 2000 is as follows (in thousands):
2000. 2001 2000 % Change
Cable Television Division. Cable division revenue of
$386.0 million for 2001 represents an 8 percent increase over Revenue
2000. The 2001 revenue increase is due to rapid growth in the Supplemental education** $ 328,039 $286,386 15%
Higher education ******** 165,642 67,435 146%
division’s digital and cable modem service revenues, along with
$ 493,681 $353,821 40%
an increased number of basic subscribers from the cable
exchange transactions completed in the first quarter of 2001. Operating income (loss)
Cable division operating income declined 51 percent in 2001 Supplemental education** $ 27,509 $ 18,636 48%
to $32.2 million, due mostly to a $25.3 million increase in Higher education ******** 9,149 (5,705) —
depreciation and amortization expense compared to 2000. Kaplan corporate
overhead************** (23,981) (38,693) 38%
Cable division cash flow (operating income excluding deprecia- Other ******************* (25,738) (6,250) (312%)
tion and amortization expense) totaled $135.3 million for $ (13,061) $ (32,012) 59%
2001, a decrease of 6 percent from 2000. The decline in cable
division cash flow is mostly due to higher programming expense, Supplemental education includes Kaplan’s test preparation, pro-
costs associated with the launch of digital services, and compar- fessional training and Score! businesses. The improvement in
atively lower cash flow margin subscribers acquired in the cable supplemental education results for 2001 is due mostly to higher
system exchanges completed in the first quarter of 2001. enrollments and, to a lesser extent, higher prices at Kaplan’s
traditional test preparation business (particularly the GMAT and
The increase in depreciation expense is due to capital spending, the LSAT prep courses) and higher revenues and profits from
which is enabling the Company to offer digital cable services to Kaplan’s CFA˛ and real estate licensure preparation services.
its subscribers. The cable division began its rollout plan for these Score! also contributed to the improved results, with both
services in the third quarter of 2000. At December 31, 2001, increased enrollment from new learning centers opened (147
the cable division had approximately 239,500 digital cable centers at the end of 2001 versus 142 centers at the end of
subscribers, representing a 35 percent penetration of the sub- 2000) and rate increases implemented early in 2001.
scriber base in the markets where digital services are offered.
Digital services were offered in markets serving 91 percent of Higher education includes all of Kaplan’s post-secondary educa-
the cable division’s subscriber base. The rollout plan for the new tion businesses, including the fixed-facility colleges that were
digital cable services included an offer for the cable division’s formerly part of Quest Education, as well as online post-secon-
customers to obtain these services free for one year. At the end dary and career programs (various distance-learning business-
of December 2001, the cable division had about 31,000 pay- es). Higher education results increased as 2001 includes a full
ing digital subscribers. Of these, 24,000 were from the new year of Quest results versus five months of activity in 2000.
Idaho subscribers and were not offered one-year free digital Corporate overhead represents unallocated expenses of
service. Most of the benefits from these new services are Kaplan, Inc.’s corporate office, including expenses associated
expected to show beginning in 2002 and thereafter. with the design and development of educational software that, if
successfully completed, will benefit all of Kaplan’s business
2002 FORM 10-K 33