Washington Post 2009 Annual Report Download - page 53

RESULTS OF OPERATIONS — 2009 COMPARED TO 2008
Net income was $91.2 million ($9.78 per share) for the fiscal year
ended January 3, 2010, up from $65.8 million ($6.87 per share)
for the fiscal year ended December 28, 2008. The Company’s
results for 2009 and 2008 include several unusual or one-time
items, as described below.
Items included in the Company’s results in 2009:
• $64.5 million in early retirement program expense, primarily at
The Washington Post and Newsweek (after-tax impact of $40.0
million, or $4.26 per share);
• $33.2 million in restructuring charges related to Kaplan’s Score
and Test Preparation operations (after-tax impact of $20.6
million, or $2.19 per share);
• $33.8 million in accelerated depreciation at The Washington
Post (after-tax impact of $21.0 million, or $2.23 per share);
• A $25.4 million goodwill and other long-lived assets impairment
charge related to Kaplan Ventures (after-tax impact of $18.8
million, or $2.00 per share);
• A $29.0 million decline in equity in earnings (losses) of affiliates
associated with impairment charges at two of the Company’s
affiliates (after-tax impact of $18.8 million, or $2.00 per share);
and
• $16.9 million in non-operating unrealized foreign currency gains
arising from the weakening of the U.S. dollar (after-tax impact of
$10.3 million, or $1.10 per share).
Items included in the Company’s results in 2008:
• Goodwill, intangible assets and other impairment charges of
$142.3 million at the Company’s online lead generation
business, included in the other businesses and corporate office
segment; at the Company’s community newspapers, The Herald
and other operations, included in the newspaper publishing
segment; and at two of the Company’s equity affiliates (after-tax
impact of $115.7 million, or $12.35 per share);
• Charges of $111.1 million related to early retirement program
expense at The Washington Post newspaper, the corporate office
and Newsweek (after-tax impact of $67.2 million, or $7.07 per
share);
• $22.3 million in accelerated depreciation related to the planned
closing of The Washington Post’s College Park, MD, plant
(after-tax impact of $13.9 million, or $1.48 per share);
• Expenses and charges of $11.0 million (after-tax impact of $6.8
million, or $0.72 per share) in connection with the restructuring of
Test Preparation’s professional training businesses;
• Non-operating gains include $47.3 million from the sales of
marketable equity securities (after-tax impact of $28.9 million, or
$3.09 per share), offset by $46.3 million in non-operating
unrealized foreign currency losses arising from the strengthening
of the U.S. dollar (after-tax impact of $28.5 million, or $3.04
per share); and
• Income tax expense of $9.5 million related to valuation allowances
provided against certain state and local income tax benefits, net of
U.S. Federal income tax benefits ($1.01 per share).
Revenue for 2009 was $4,569.7 million, up 2% compared to
revenue of $4,461.6 million in 2008. The increases are due
primarily to strong revenue growth at the education division and
increased revenue at the cable division, partially offset by revenue
declines at the Company’s newspaper publishing, magazine
publishing and television broadcasting divisions. In 2009,
education revenue increased 13%, advertising revenue decreased
21%, circulation and subscriber revenue increased 3% and other
revenue declined 2%. Revenue growth at Kaplan accounted for the
increase in education revenue. The decrease in advertising revenue
is due to declines in print advertising at The Washington Post, as
well as to declines in the television broadcasting and magazine
publishing divisions. The increase in circulation and subscriber
revenue is due to a 5% increase in subscriber revenue at the cable
division from continued revenue growth in all major product
offerings and a 7% increase in circulation revenue at the Post. This
increase was offset by a 14% decline in Newsweek circulation
revenue due to circulation rate base reductions at the domestic
edition of Newsweek.
Operating costs and expenses for the year increased 2% to
$4,375.7 million, from $4,287.4 million in 2008. The increase is
due to higher expenses from operating growth at Kaplan and Cable
ONE, offset by reduced costs at the newspaper and magazine
publishing divisions.
Operating income for 2009 increased to $194.0 million, from
$174.2 million in 2008. Operating results were significantly
impacted by the unusual or one-time operating items described
above. Excluding these one-time or unusual items, results at the
newspaper publishing, magazine publishing and television
broadcasting divisions were down, generally due to weakness in
advertising demand, offset by improved results at the Company’s
education and cable television divisions.
The Company’s 2009 operating income includes $8.1 million of net
pension credits, compared to $25.7 million in 2008. These amounts
exclude $64.5 million and $111.1 million in charges related to
early retirement programs in 2009 and 2008, respectively.
DIVISION RESULTS
Education Division. Education division revenue in 2009 increased
to $2,636.6 million, a 13% increase from $2,331.6 million in
2008. Kaplan reported operating income of $194.8 million for
2009, compared to $206.3 million in 2008. Kaplan’s results for
2009 and 2008 were impacted by several unusual or one-time
items (discussed below).
Kaplan completed a reorganization of its organizational and
internal reporting structure during the third quarter of 2009 that
resulted in changes to the composition of the Company’s reporting
2009 FORM 10-K 39