Washington Post 2009 Annual Report Download - page 60

Operating income for 2008 declined 13% to $123.5 million, from
$142.1 million in 2007. The decline in operating income is due
primarily to overall weak advertising demand and the $9.5 million
gain on the sale of property at the Miami television station in 2007,
offset by the $6.9 million in noncash gains in 2008. Operating
margin at the broadcast television division was 38% for 2008
and 42% for 2007; however, the operating margins in 2008 and
2007 would have been lower without the property, plant and
equipment gains.
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 2008 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 $250.9 million in 2008, a 13% decline
from $288.4 million for 2007. The decrease in revenue is due to
an advertising revenue decline of 14% at Newsweek as a result of
fewer ad pages at the domestic edition and lower rates due to the
previously announced circulation rate base reduction, from 3.1
million to 2.6 million. Subscription revenue also declined at the
domestic edition in 2008 due to the rate base reduction. In
February 2009, Newsweek announced another circulation rate
base reduction at its domestic edition, from 2.6 million to 1.5
million by January 2010.
Newsweek offered a Voluntary Retirement Incentive Program to
certain employees in the first quarter of 2008, and 117 employees
accepted the offer. The early retirement program expense totaled
$28.3 million, which is being funded mostly from the assets of the
Company’s pension plans. In November 2008, Newsweek
announced another Voluntary Retirement Incentive Program, which
was offered to certain Newsweek employees.
The magazine publishing division had an operating loss in 2008 of
$16.1 million, compared to operating income of $31.4 million for
2007, with the decline due primarily to $28.3 million in early
retirement program expense and the revenue reductions discussed
above, offset by a decline in subscription, manufacturing and
distribution expenses at the domestic edition of Newsweek. The
magazine publishing division reported an operating loss in 2008;
operating margin was 11% in 2007, including the pension credit.
Excluding the pension credit, the division would have reported an
operating loss in 2007.
Other Businesses and Corporate Office. In October 2007, the
Company acquired the outstanding stock of CourseAdvisor, Inc., an
online lead generation provider. (CourseAdvisor is now known as
Avenue100 Media Solutions.) In the fourth quarter of 2008, a
goodwill and other intangible assets impairment charge of $69.7
million was recorded to write down the intangible assets of
Avenue100 to their estimated fair values, which declined primarily
due to lower than expected revenue and operating income growth.
In 2008, other businesses and corporate office included the
expenses of the Company’s corporate office and the operating
results of Avenue100. In 2007, other businesses and corporate
office included the expenses associated with the Company’s
corporate office and the operating results of Avenue100 from its
October 2007 acquisition date through the end of 2007. Revenue
for other businesses totaled $39.4 million in 2008, compared to
revenue of $6.6 million in 2007 from the Avenue100 acquisition.
Operating expenses were $148.4 million for 2008, from $42.2
million for 2007, due to the goodwill and other intangible assets
impairment charge of $69.7 million and increased expenses at
Avenue100. A corporate office early retirement program expense of
$3.0 million recorded in the second quarter of 2008 also
contributed to the overall expense increase in 2008.
Equity in (Losses) Earnings of Affiliates. The Company’s equity in
losses of affiliates for 2008 was $7.8 million, compared to $6.0
million in earnings in 2007. Results in 2008 included $6.8 million
in impairment charges at two of the Company’s affiliates. In the first
quarter of 2007, the Company’s equity in earnings of affiliates
included a gain of $8.9 million on the sale of land at the
Company’s Bowater Mersey affiliate; however, operating losses at
Bowater Mersey in 2007 largely offset the gain. The Company’s
affiliate investments at the end of 2008 consisted primarily of a
49% interest in Bowater Mersey Paper Company Limited.
Non-Operating Items. The Company recorded other non-operating
expense, net, of $2.2 million in 2008, compared to non-operating
income, net, of $11.2 million in 2007. The 2008 non-operating
expense, net, primarily consisted of $46.3 million in unrealized
foreign currency losses, offset by $47.3 million in gains from sales
of marketable equity securities. The 2007 non-operating income,
net, included $8.8 million in unrealized foreign currency gains.
As noted above, a large part of the Company’s non-operating
income (expense) is from unrealized foreign currency gains or losses
arising from the translation of British pound and Australian dollar-
denominated intercompany loans into U.S. dollars. The unrealized
foreign currency losses in 2008 were the result of the significant
strengthening of the U.S. dollar against the British pound and the
Australian dollar; the unrealized foreign currency gains in 2007
were the result of the weakening of the U.S. dollar against the
British pound and the Australian dollar.
A summary of non-operating (expense) income for the years ended
December 30, 2008, and December 31, 2007, follows:
(in millions) 2008 2007
Gain on sales of marketable equity securities ..... $ 47.3 $ 0.4
Foreign currency (losses) gains ............... (46.3) 8.8
Impairment write-downs on investments ......... (2.9) —
Other (losses) gains ....................... (0.3) 2.0
Total ................................ $ (2.2) $11.2
The Company incurred net interest expense of $19.0 million in
2008, compared to $12.7 million in 2007. The increase is due to
a decline in interest income, as well as higher average borrowings
in 2008 versus 2007. At December 28, 2008, the Company had
$553.8 million in borrowings outstanding at an average interest
rate of 4.1%; at December 30, 2007, the Company had $490.1
million in borrowings outstanding at an average interest rate of
5.3%.
46 THE WASHINGTON POST COMPANY