Washington Post 2007 Annual Report Download - page 63

Professional includes Kaplan’s domestic and overseas
professional businesses. Professional revenue grew 19% in
2006, largely due to the May 2006 acquisition of Tribeca,
the May 2005 acquisition of Singapore-based Asia Pacific
Management Institute, a private education provider for students
in Asia, and the April 2005 acquisition of BISYS Education
Services, a provider of licensing education and compliance
solutions for financial services institutions and professionals.
Excluding revenue from acquired businesses, professional
revenue grew 5% in 2006. The revenue increase is a result of
higher revenues at Kaplan Professional (U.K.) due to favorable
exchange rates, higher enrollments, price increases and an
acquisition, offset by soft market demand for Kaplan
professional’s real estate book publishing and real estate
course offerings. Operating income declined in 2006 due to
$6.9 million in transition costs at Tribeca in 2006, as well as a
$13.3 million decline in operating income for the real estate
businesses of Kaplan professional, offset by strong results at
Kaplan Professional (U.K.).
Corporate overhead represents unallocated expenses of Kaplan,
Inc.’s corporate office and other minor activities. Corporate
expenses increased in 2006 primarily due to a fourth quarter
2006 charge of $13.0 million related to an agreement to settle a
lawsuit.
Other includes charges for incentive compensation arising from
equity awards under the Kaplan stock option plan, which was
established for certain members of Kaplan’s management. In
addition, Other includes amortization of certain intangibles. In
the first quarter of 2006, the Company adopted SFAS 123R,
which required the Company to change its accounting for Kaplan
equity awards from the intrinsic value method to the fair-value-
based method of accounting (see additional discussion below
regarding the cumulative effect of change in accounting
principle). Excluding Kaplan stock compensation expense
recorded as a result of this change in accounting, Kaplan
recorded stock compensation expense of $27.7 million in
2006, compared to $3.0 million in 2005. The increase in the
charge for 2006 reflects growth and improved prospects for
several Kaplan businesses.
Newspaper Publishing Division. Newspaper publishing
division revenue in 2006 increased 1% to $961.9 million,
from $957.1 million in 2005. Division operating income for
2006 totaled $63.4 million, compared to $125.4 million in
2005. The decline in operating results for 2006 is due primarily
to $47.1 million in pre-tax charges associated with early
retirement plan buyouts at The Washington Post and a
decrease in print advertising at The Post, offset by improved
results at the division’s online publishing activities, both
washingtonpost.com and Slate, and a $2.3 million pre-tax
gain on the sale of property. Operating income at the
newspaper division was also adversely impacted in 2006 by
a 4% increase in newsprint expense for the entire newspaper
division. Operating margin at the newspaper publishing division
was 7% for 2006 and 13% for 2005, with the decline primarily
due to the $47.1 million in early retirement plan buyouts.
Print advertising revenue at The Post in 2006 declined 4% to
$573.2 million, from $595.8 million in 2005. The Post reported
declines in classified, national and retail advertising in 2006,
offset by increases in zoned advertising. Classified recruitment
advertising revenue was down 14% to $68.1 million in 2006,
from $79.3 million in 2005.
Daily circulation at The Post declined 2.9%, and Sunday
circulation declined 3.2% in 2006; average daily circulation
totaled 673,900 (unaudited), and average Sunday circulation
totaled 937,700 (unaudited).
During 2006, revenue generated by the Company’s online
publishing activities, primarily washingtonpost.com, increased
28% to $102.7 million, from $80.2 million in 2005. Display
online advertising revenue grew 46%, and online classified
advertising revenue on washingtonpost.com increased 18%. A
small portion of the Company’s online publishing revenue is
included in the magazine publishing division.
Television Broadcasting Division. Revenue for the television
broadcasting division increased 9% to $361.9 million
in 2006, from $331.8 million in 2005, due to an increase of
$27.9 million in political advertising and $6.3 million in
incremental winter Olympics-related advertising at the
Company’s NBC affiliates.
Operating income for 2006 increased 13% to $160.8 million,
from $142.5 million in 2005. The increase in operating income
is primarily related to the significant political and Olympics
revenue in 2006 discussed above, as well as the adverse
impact of 2005 hurricanes in Florida and Texas. Operating
margin at the broadcast division was 44% for 2006 and 43%
for 2005.
Competitive market position remained strong for the Company’s
television stations. KSAT in San Antonio, WPLG in Miami and
WJXT in Jacksonville ranked number one in the November 2006
ratings period, Monday through Friday, sign-on to sign-off; WDIV
in Detroit and WKMG in Orlando ranked second; and KPRC in
Houston ranked third.
Magazine Publishing Division. Revenue for the magazine
publishing division totaled $331.0 million for 2006, a 4%
decline from $344.9 million for 2005. The decrease in
revenue for 2006 reflects declines in both Newsweek
circulation revenue and revenue at PostNewsweek Tech
Media, offset by a 1% increase in Newsweek advertising
revenue related to increased ad pages at the international
editions of Newsweek.
Operating income totaled $27.9 million for 2006, compared to
$45.1 million for 2005. The decline in 2006 operating income
is due primarily to a $9.9 million goodwill impairment charge at
PostNewsweek Tech Media in the third quarter of 2006 and a
$1.5 million loss on the sale of PostNewsweek Tech Media
recorded in the fourth quarter of 2006. Also adversely
impacting results were lower Newsweek circulation revenue
and a reduced pension credit, offset by lower operating
expenses at Newsweek and a $1.5 million early retirement
charge at Newsweek International in the third quarter of
2007 FORM 10-K 47