Washington Post 2004 Annual Report Download - page 49

In July 2002, WJXT in Jacksonville, Florida began operations as an At December 31, 2003, Revenue Generating Units (RGUs), the
independent station when its network affiliation with CBS ended. sum of basic video, digital video and cable modem subscribers,
totaled 1,077,500, compared to 993,600 as of December 31,
Magazine Publishing Division. Revenue for the magazine 2002. The increase is due to an increase in the number of digital
publishing division totaled $353.6 million for 2003, a 1% increase cable and cable modem customers.
from $349.1 million in 2002. The revenue increase in 2003 is due
to increases in ad pages at Newsweek's domestic edition, Arthur Below are details of cable division capital expenditures for 2003
Frommer's Budget Travel magazine, and the Company's trade and 2002, as defined by the NCTA Standard Reporting Categories
magazines, offset by lower advertising revenue at the international (in millions):
editions of Newsweek, particularly travel-related advertising at the 2003 2002
Pacific edition.
Customer premise equipment ÏÏÏÏÏÏÏÏÏÏÏÏ $17.0 $27.2
Operating income totaled $43.5 million for 2003, an increase of
CommercialÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 0.1 0.1
69% from $25.7 million in 2002. The improvement in operating
Scaleable infrastructure ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5.3 6.8
results for 2003 is primarily attributable to $16.1 million in pre-tax Line extensionsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 10.6 10.4
charges in connection with early retirement programs at Newsweek Upgrade/rebuildÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 21.4 37.4
in 2002, offset by a reduced pension credit. Support capital ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 11.5 10.6
TotalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $65.9 $92.5
Operating margin at the magazine publishing division was 12% for
2003 and 7% for 2002. Education Division. Education division revenue in 2003
Cable Television Division. Cable division revenue of increased 35% to $838.1 million, from $621.1 million in 2002.
$459.4 million for 2003 represents a 7% increase from Kaplan reported an operating loss of $11.7 million for the year,
$428.5 million in 2002. The 2003 revenue increase is principally compared to operating income of $20.5 million in 2002. The
due to rapid growth in the division's cable modem and digital decline is due to an $84.6 million increase in Kaplan stock compen-
service revenues, offset by lower pay and basic revenues due to sation expense in 2003 and a $6.5 million contribution to the
fewer average basic and pay subscribers during the year, and the Kaplan Educational Foundation in the fourth quarter of 2003, offset
lack of rate increases due to a decision to freeze most rates for by significant revenue growth during the year. Approximately 43%
Cable One subscribers in 2003. of the increase in Kaplan revenue is from acquired businesses,
primarily in the higher education division and the professional
Cable division operating income increased 9% in 2003 to training schools that are part of supplemental education. A summary
$88.4 million, from $80.9 million in 2002. The increase in operat- of operating results for 2003 compared to 2002 is as follows (in
ing income for 2003 is due mostly to the division's revenue growth, thousands):
offset by higher depreciation expense and an increase in technical,
Internet, marketing and employee benefits costs. Operating margin 2003 2002 % Change
at the cable television division was 19% in 2003 and 2002.
Revenue
Depreciation expense increased due to significant capital spending Supplemental educationÏÏÏÏ $ 469,757 $371,248 27
in recent years that has enabled the cable division to offer digital Higher education ÏÏÏÏÏÏÏÏÏ 368,320 249,877 47
and broadband cable services to its subscribers. The cable division $ 838,077 $621,125 35
began its rollout plan for these services in the third quarter of 2000.
Operating income
Depreciation expense in 2002 included a $5.4 million charge for
(loss)
obsolete assets. At December 31, 2003, the cable division had
Supplemental educationÏÏÏÏ $ 87,044 $ 54,103 61
approximately 222,900 digital cable subscribers, representing a Higher education ÏÏÏÏÏÏÏÏÏ 58,428 27,569 112
31% penetration of the subscriber base. Both digital and cable Kaplan corporate overhead (36,782) (26,143) (41)
modem services are now offered in virtually all of the cable OtherÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (120,399) (35,017) (244)
division's markets. $ (11,709) $ 20,512 Ì
At December 31, 2003, the cable division had 720,800 basic Supplemental education includes Kaplan's test preparation, profes-
subscribers, compared to 718,000 at the end of December 2002, sional training and Score! businesses. On March 31, 2003, Kaplan
with the increase due to significant marketing efforts in 2003 to completed its acquisition of The Financial Training Company
stabilize the subscriber base. At December 31, 2003, the cable (FTC) for 55.3 million ($87.4 million), financed through cash
division had 133,800 CableONE.net service subscribers, com- and debt. Headquartered in London, FTC provides test preparation
pared to 79,400 at the end of December 2002, due to a large services for accountants and financial services professionals, with
increase in the Company's cable modem deployment and take-up training centers in the United Kingdom and Asia. The improvement in
rates. In 2003, the cable division launched a number of marketing supplemental education results for 2003 is due to increased enroll-
initiatives, including door-to-door sales and bundled service offers ment at Kaplan's traditional test preparation business, significant
with monthly discounts, which have resulted in increased customer increases in the professional real estate courses, and the FTC
subscription rates. acquisition. Score! also contributed to the improved results, with
2004 FORM 10-K 33