Washington Post 2012 Annual Report Download - page 65

PSUs include about 6,000 subscribers who receive free basic
cable service, primarily local governments, schools and other organ-
izations as required by various franchise agreements.
Below are details of the cable television division’s capital expenditures
for 2012 and 2011 in the NCTA Standard Reporting Categories:
(in thousands) 2012 2011
Customer premise equipment .......... $ 43,629 $ 53,139
Commercial ....................... 4,549 3,487
Scaleable infrastructure ............... 24,048 34,748
Line extensions ..................... 5,997 6,318
Upgrade/rebuild ................... 16,957 12,951
Support capital .................... 55,345 32,582
Total .......................... $150,525 $143,225
Newspaper Publishing Division. Newspaper publishing division
revenue in 2012 declined 7% to $581.7 million, from $622.5
million in 2011. Print advertising revenue at The Washington Post in
2012 declined 14% to $228.2 million, from $264.5 million in
2011. The decline is largely due to reductions in general and retail
advertising. Revenue generated by the Company’s online publishing
activities, primarily washingtonpost.com and Slate, increased 5% to
$110.6 million, from $105.8 million in 2011. Display online
advertising revenue increased 6% in 2012, and online classified
advertising revenue decreased 1% in 2012.
In 2012, daily circulation at The Washington Post declined 8.6%
and Sunday circulation declined 6.2%; average daily circulation at
The Washington Post totaled 471,800 and average Sunday
circulation totaled 687,200.
The newspaper publishing division reported an operating loss of
$53.7 million in 2012, compared to an operating loss of $21.2
million in 2011, after including pension expense of $42.4 million
and $25.3 million, respectively. Included in pension expense for
2012 was an $8.5 million Voluntary Retirement Incentive Program
(VRIP) for certain employees and a $0.9 million charge at The
Herald in connection with its withdrawal from a multiemployer
pension plan. Included in pension expense in 2011 was a $2.4
million charge at The Herald in connection with its withdrawal from
a multiemployer pension plan. In addition, voluntary severance and
other early retirement expense of $9.0 million was recorded at The
Washington Post in 2012. In February 2013, The Washington Post
offered a Voluntary Retirement Incentive Program (VRIP) to certain
mailroom workers. The VRIP acceptance period ends in April 2013,
and the cost will be funded from the assets of the Company’s
pension plans.
The decline in operating results for 2012 is primarily due to the
revenue reductions discussed above and the increase in the
combined early retirement, severance and multiemployer pension
plan withdrawal expense, offset partially by a decline in other
operating expenses. Newsprint expense was down 10% in 2012
due to a decline in newsprint consumption.
In February 2013, the Company announced that it had signed an
agreement to sell The Herald, a daily and Sunday newspaper
headquartered in Everett, WA; the transaction is expected to close
in March 2013.
Television Broadcasting Division. Revenue for the television
broadcasting division increased 25% to $399.7 million in 2012,
from $319.2 million in 2011. Television broadcasting division
operating income for 2012 increased 64% to $191.6 million, from
$117.1 million in 2011.
The increase in revenue and operating income for 2012 reflects
improved advertising demand across many product categories.
These results include a $48.1 million increase in political
advertising revenue in 2012; $10.8 million in incremental summer
Olympics-related advertising at the Company’s NBC affiliates in the
third quarter of 2012; and increased retransmission revenues.
Operating margin at the television broadcasting division was 48%
in 2012 and 37% in 2011.
Competitive market position remained strong for the Company’s
television stations. WDIV in Detroit, KSAT in San Antonio and WJXT
in Jacksonville ranked number one in the November 2012 ratings
period, Monday through Friday, sign-on to sign-off; WPLG in Miami
tied for the number one rank (Anglo stations), and KPRC in Houston
and WKMG in Orlando ranked third.
Other Businesses. Other businesses includes the operating results of
Social Code, a marketing solutions provider helping companies
with marketing on social media platforms; WaPo Labs, a digital
team focused on emerging technologies and new product
development; and Celtic Healthcare, Inc., a provider of home
health care and hospice services in the northeastern and mid-
Atlantic regions that was acquired by The Washington Post
Company in November 2012.
Corporate Office. Corporate office includes the expenses of the
Company’s corporate office as well as a net pension credit.
Equity in Earnings (Losses) of Affiliates. The Company holds a
16.5% interest in Classified Ventures, LLC and interests in several
other affiliates. In the fourth quarter of 2012, the Company sold its
49% interest in Bowater Mersey Paper Company for a nominal
amount; no gain or loss was recorded as the investment balance
had previously been written down to zero. The Company’s equity in
earnings of affiliates, net, for 2012 was $14.1 million, compared
to $5.9 million in 2011. In 2011, a $9.2 million impairment
charge was recorded on the Company’s interest in Bowater Mersey
Paper Company.
Other Non-Operating (Expense) Income. The Company recorded
other non-operating expense, net, of $5.5 million in 2012,
compared to other non-operating expense, net, of $55.2 million in
2011.
The 2012 non-operating expense, net, included an $18.0 million
write-down of a marketable equity security, offset by $6.6 million in
net gains from cost method investments, $3.1 million in unrealized
foreign currency gains and other items. The 2011 non-operating
expense, net, included a $53.8 million write-down of a marketable
equity security, $3.3 million in unrealized foreign currency losses
and other items.
During 2012, on an overall basis, the fair value of the Company’s
marketable securities appreciated by $32.5 million.
2012 FORM 10-K 53