Washington Post 2006 Annual Report Download - page 55

pre-tax gain on the sale of property. Operating income at the ed in the fourth quarter of 2006. Also adversely impacting results
newspaper division was also adversely impacted in 2006 by a 4% were lower Newsweek circulation revenue and a reduced pension
increase in newsprint expense for the entire newspaper division. credit, offset by lower operating expenses at Newsweek and a
Operating margin at the newspaper publishing division was 7% for $1.5 million early retirement charge at Newsweek International in
2006 and 13% for 2005, with the decline primarily due to the the third quarter of 2005. Operating margin at the magazine
$47.1 million in early retirement plan buyouts. publishing division was 8% for 2006 and 13% for 2005, including
the pension credit, with the decline primarily due to losses at
Print advertising revenue at The Post in 2006 declined 4% to PostNewsweek Tech Media.
$573.2 million, from $595.8 million in 2005. The Post reported
declines in classified, national and retail advertising in 2006, offset All revenue and operating results of the magazine publishing division
by increases in zoned advertising. Classified recruitment advertising for 2006 and 2005 include PostNewsweek Tech Media up to the
revenue was down 14% to $68.1 million in 2006, from $79.3 mil- sale date of December 22, 2006.
lion in 2005. Cable Television Division. Cable television division revenue
Daily circulation at The Post declined 2.9%, and Sunday circulation of $565.9 million for 2006 represents an 11% increase from
declined 3.2% in 2006; average daily circulation totaled 673,900 $507.7 million in 2005. The 2006 revenue increase is due
(unaudited), and average Sunday circulation totaled 937,700 primarily to continued growth in the division's cable modem revenue
(unaudited). and a $3 monthly rate increase for basic cable service at most of its
systems, effective February 1, 2006. Hurricane Katrina had an
During 2006, revenue generated by the Company's online publish- adverse impact on 2005 revenue of approximately $12.5 million,
ing activities, primarily washingtonpost.com, increased 28% to from subscriber losses and the granting of a 30-day service credit
$102.7 million, from $80.2 million in 2005. Display online advertis- to the division's 94,000 pre-hurricane Gulf Coast subscribers. In
ing revenue grew 46%, and online classified advertising revenue 2006, subscriber losses from the hurricane resulted in lost revenue
on washingtonpost.com increased 18%. A small portion of the of approximately $12.4 million.
Company's online publishing revenue is included in the magazine
publishing division. Cable television division operating income increased in 2006 to
$120.0 million, from $76.7 million in 2005. The increase in
Television Broadcasting Division. Revenue for the television operating income for 2006 is due to several factors, including the
broadcasting division increased 9% to $361.9 million in 2006, division's revenue growth and an additional $10.4 million in hurri-
from $331.8 million in 2005, due to an increase of $27.9 million in cane-related insurance recoveries recorded during the second
political advertising and $6.3 million in incremental winter Olympics- quarter of 2006 as a reduction of expense in connection with a
related advertising at the Company's NBC affiliates. final settlement on cable division Hurricane Katrina insurance claims.
Operating income for 2006 increased 13% to $160.8 million, Also, Hurricane Katrina had an estimated adverse impact of
from $142.5 million in 2005. The increase in operating income is $23.7 million on the cable division's results in 2005, when the
primarily related to the significant political and Olympics revenue in Company recorded $9.6 million in property, plant and equipment
2006 discussed above, as well as the adverse impact of 2005 losses; incurred an estimated $9.4 million in incremental cleanup,
hurricanes in Florida and Texas. Operating margin at the broadcast repair and other expenses associated with the hurricane; and
division was 44% for 2006 and 43% for 2005. experienced an estimated $9.7 million reduction in operating
income from subscriber losses and the granting of a 30-day service
Competitive market position remained strong for the Company's credit to all of its 94,000 pre-hurricane Gulf Coast subscribers.
television stations. KSAT in San Antonio, WPLG in Miami and WJXT Offsetting these items, a $5.0 million insurance recovery was
in Jacksonville ranked number one in the November 2006 ratings recorded for part of the hurricane losses through December 31,
period, Monday through Friday, sign-on to sign-off; WDIV in Detroit 2005 under the Company's property and business interruption
and WKMG in Orlando ranked second; and KPRC in Houston insurance program (this was recorded as a reduction of cable
ranked third. division expense in the fourth quarter of 2005). Cable division
Magazine Publishing Division. Revenue for the magazine results in 2006 continue to include the impact of subscriber losses
publishing division totaled $331.0 million for 2006, a 4% decline and expenses as a result of Hurricane Katrina. As noted above, the
from $344.9 million for 2005. The decrease in revenue for 2006 Company estimates that lost revenue for 2006 was approximately
reflects declines in both Newsweek circulation revenue and revenue $12.4 million; variable cost savings offset a portion of the lost
at PostNewsweek Tech Media, offset by a 1% increase in News- revenue impact on the cable division's operating income. The
week advertising revenue related to increased ad pages at the Company also incurred an estimated $5.4 million in incremental
international editions of Newsweek. cleanup and repair expense in 2006. Operating margin at the
cable television division increased to 21% in 2006, from 15% in
Operating income totaled $27.9 million for 2006, compared to 2005, due to a strong year in 2006 and to the adverse impact of
$45.1 million for 2005. The decline in 2006 operating income is the hurricane on 2005 results.
due primarily to a $9.9 million goodwill impairment charge at
PostNewsweek Tech Media in the third quarter of 2006 and a At December 31, 2006, the Gulf Coast region shows increases in
$1.5 million loss on the sale of PostNewsweek Tech Media record- all Revenue Generating Unit (RGU) categories compared to esti-
2006 FORM 10-K 39