Washington Post 2003 Annual Report Download - page 51

2003, the Company had $631.1 million in borrowings outstanding growth at Kaplan, Inc. (about one-third of which was from acquisi-
at an average interest rate of 4.1 percent; at December 29, 2002, tions) accounted for the increase in education revenue.
the Company had $664.8 million in borrowings outstanding. Operating costs and expenses for the year increased 4 percent to
Income Taxes. The effective tax rate was 37.0 percent for $2,206.6 million, from $2,112.8 million in 2001 (excluding amor-
2003, compared to 38.8 percent for 2002. The 2003 effective tization of goodwill and other intangible assets that are no longer
tax rate benefited from the 35.1 percent effective tax rate applica- amortized under SFAS 142). The increase is primarily due to higher
ble to the one-time gain arising from the sale of the Company's depreciation expense, higher stock-based compensation at the
interest in the International Herald Tribune. The Company's effective education division, early retirement program charges, and a
tax rate also declined due to a decrease in the overall state tax reduced net pension credit, offset by lower expenses at the news-
rate. The Company expects an effective tax rate in 2004 of paper publishing and magazine publishing segments due to lower
approximately 38.5 percent. newsprint prices and tight cost controls.
Operating income increased 27 percent to $377.6 million, from
RESULTS OF OPERATIONS Ì 2002 COMPARED TO 2001 $298.3 million in 2001, adjusted as if SFAS 142 had been
Net income for the fiscal year ended December 29, 2002 was adopted at the beginning of 2001. Operating results for 2002
$204.3 million ($21.34 per share), compared with net income for include $19.0 million in pre-tax charges from early retirement
the fiscal year ended December 30, 2001 of $229.6 million programs. The Company benefited from improved operating results
($24.06 per share). The Company's 2002 results include a net at the education and broadcast divisions, along with improved
non-operating gain from the exchange of certain cable systems earnings at The Washington Post newspaper and the cable division.
(after-tax impact of $16.7 million, or $1.75 per share), a transi- These factors were offset in part by increased depreciation
tional goodwill impairment loss (after-tax impact of $12.1 million, expense, a reduced net pension credit, the early retirement pro-
or $1.27 per share), charges from early retirement programs gram charges noted above, and higher stock-based compensation
(after-tax impact of $11.3 million, or $1.18 per share), and a net expense accruals at the education division.
non-operating loss from the write-down of certain of the Company's The Company's 2002 operating income includes $64.4 million of
investments (after-tax impact of $2.3 million, or $0.24 per share). net pension credits, compared to $76.9 million in 2001. These
The Company's 2001 results included net non-operating gains from amounts exclude $19.0 million and $3.3 million in charges related
the sale and exchange of certain cable systems (after-tax impact of to early retirement programs in 2002 and 2001, respectively.
$196.5 million, or $20.69 per share), a non-cash goodwill and
other intangibles impairment charge recorded by one of the Com- DIVISION RESULTS
pany's affiliates (after-tax impact of $19.9 million, or $2.10 per
share), losses from the write-down of a non-operating parcel of As discussed above, the Company adopted SFAS 142 effective on
land and certain cost method investments to their estimated fair the first day of its 2002 fiscal year. All operating income compari-
value (after-tax impact of $18.3 million, or $1.93 per share), and sons presented below are on a pro forma basis as if SFAS 142 had
an after-tax charge of $55.0 million, or $5.79 per share, for been adopted at the beginning of 2001. Therefore, 2001 pro
amortization of goodwill and other intangible assets that are no forma operating results exclude amortization charges of goodwill
longer amortized under Statement of Financial Accounting Stan- and certain other intangible assets that are no longer amortized
dards No. 142 (SFAS 142), ""Goodwill and Other Intangible under SFAS 142.
Assets.'' The Company adopted SFAS 142 effective on the first day Newspaper Publishing Division. Newspaper publishing divi-
of its 2002 fiscal year. sion revenue in 2002 decreased slightly to $842.0 million, from
Revenue for 2002 was $2,584.2 million, up 7 percent compared $842.7 million in 2001. Division operating income for 2002
to revenue of $2,411.0 million in 2001, with significant revenue totaled $109.0 million, an increase of 23 percent from pro forma
growth at the education, cable and broadcast divisions. Advertising operating income of $88.6 million in 2001. Improved operating
revenue increased 1 percent in 2002, and circulation and subscrib- results for 2002 reflect the benefits of cost control initiatives
er revenue increased 3 percent. Education revenue increased employed throughout the division and a 22 percent decrease in
26 percent in 2002, and other revenue increased 10 percent. The newsprint expense; these savings were partially offset by a pre-tax
increase in advertising revenue is due primarily to significant political early retirement program charge of $2.9 million and a reduced net
revenues at the broadcast division in 2002. The increase in circula- pension credit.
tion and subscriber revenue is due to an 11 percent increase in Print advertising revenue at The Washington Post newspaper
subscriber revenue at the cable division from rapidly growing cable decreased 3 percent to $555.7 million, from $574.3 million in
modem and digital service revenues, and a 4 percent increase in 2001. The decrease in print advertising revenue for 2002 is due to
circulation revenue at The Post due to circulation price increases. a continued decline in recruitment advertising revenue, with volume
This increase was offset by a 14 percent decrease in Newsweek decreases of 32 percent, offset by higher revenue from several
domestic circulation revenue due to difficult comparisons with 2001, advertising categories, including preprints, real estate and other
when Newsweek saw spikes in newsstand sales from regular and classified advertising.
special editions surrounding the events of September 11. Revenue
2003 FORM 10-K 31