Washington Post 2005 Annual Report Download - page 51

taxes provided on foreign earnings and an increase in foreign tax expense. In addition to pre-tax charges of $10.5 million for the
credits. The Company does not expect foreign tax credits to reduce 10% buyout premium and $6.5 million for the Kaplan Education
the 2006 effective tax rate to the same extent as in 2005 and, Foundation, Kaplan results for 2003 included an additional
accordingly, expects an effective tax rate in 2006 of $108.6 million in Kaplan stock compensation expense. Operating
approximately 38.5%. results for 2003 also included a $41.7 million pre-tax gain on the
sale of land at The Washington Post newspaper and $34.1 million
RESULTS OF OPERATIONS Ì 2004 COMPARED TO 2003 in pre-tax charges from early retirement programs at The Washing-
ton Post newspaper.
Net income was $332.7 million ($34.59 per share) for the fiscal
year 2004 ended January 2, 2005, compared with $241.1 million The Company's 2004 operating income includes $42.0 million of
($25.12 per share) for the fiscal year 2003 ended Decem- net pension credits, compared to $55.1 million in 2003. These
ber 28, 2003. Each of the Company's divisions reported strong amounts exclude $0.1 million and $34.1 million in charges related
growth in operating income for 2004. The Company's 2003 results to early retirement programs in 2004 and 2003, respectively.
included a non-operating gain from the sale of the Company's 50%
interest in the International Herald Tribune (after-tax impact of DIVISION RESULTS
$32.3 million, or $3.38 per share), an operating gain from the Newspaper Publishing Division. At the newspaper publish-
sale of land at The Washington Post newspaper (after-tax impact ing division, 2004 generally included 53 weeks compared to
of $25.5 million, or $2.66 per share) and early retirement pro- 52 weeks in 2003. Newspaper publishing division revenue in 2004
gram charges at The Washington Post newspaper (after-tax impact increased 7% to $938.1 million, from $872.8 million in 2003.
of $20.8 million, or $2.18 per share). Also included in 2003 Division operating income for 2004 totaled $143.1 million, an
results is a charge in connection with the establishment of the Kaplan increase of 7% from $134.2 million in 2003. The increase in
Educational Foundation (after-tax impact of $3.9 million, or operating income for 2004 reflects higher print and online advertis-
$0.41 per share) and Kaplan stock compensation expense for the ing revenue, 2003 pre-tax charges of $34.1 million from early
10% premium associated with a partial buyout of the Kaplan stock retirement programs at The Washington Post newspaper and pay-
compensation plan (after-tax impact of $6.4 million, or $0.67 per roll savings from the early retirement programs implemented at The
share). Post in 2003. These factors were partially offset by a $41.7 million
Revenue for 2004 was $3,300.1 million, up 16% compared to pre-tax gain on the sale of land at The Washington Post newspaper
$2,838.9 million in 2003. The increase in revenue is due mostly to in the fourth quarter of 2003, a 12% increase in newsprint expense
significant revenue growth at the education and television broad- at The Post and a $10.8 million reduction in the net pension credit,
casting divisions, along with increases at the Company's cable excluding charges related to early retirement programs. Operating
television, newspaper publishing and magazine publishing divisions. margin at the newspaper publishing division was 15% for 2004
Advertising revenue increased 10% in 2004, and circulation and and 2003.
subscriber revenue increased 5%. Education revenue increased Print advertising revenue at The Washington Post newspaper in
35% in 2004, and other revenue was up 6%. The increase in 2004 increased 5% to $603.3 million, from $572.2 million in
advertising revenue is due to increases at the television broadcast- 2003. The increase in print advertising revenue for 2004 is primari-
ing, newspaper publishing and magazine publishing divisions. The ly due to increases in classified recruitment, preprints and general
increase in circulation and subscriber revenue is due to a 9% advertising categories. Classified recruitment advertising revenue
increase in subscriber revenue at the cable division from continued was up 20% to $74.8 million in 2004, a $12.5 million increase
growth in cable modem, basic and digital service revenues, a 2% compared to 2003.
increase in circulation revenue at The Post, and a 4% decline in
Newsweek circulation revenues due to subscription rate declines at Circulation revenue at The Post was up 2% for 2004 due to an
the domestic edition of Newsweek. Revenue growth at Kaplan, Inc. increase in home delivery prices in 2003 and an extra week in fiscal
(about 33% of which was from acquisitions) accounted for the 2004. Daily circulation at The Post declined 2.6% and Sunday
increase in education revenue. circulation declined 2.3% in 2004; average daily circulation
totaled 726,000 (unaudited) and average Sunday circulation
Operating costs and expenses for the year increased 11% to totaled 1,011,000 (unaudited).
$2,737.1 million, from $2,475.1 million in 2003. The increase is
primarily due to higher expenses from operating growth at the During 2004, revenue generated by the Company's online publish-
education, cable television and television broadcasting divisions, ing activities, primarily washingtonpost.com, increased 32% to
higher newsprint prices and a reduced pension credit, offset by a $62.0 million, from $46.9 million in 2003. Local and national
significant decrease in stock-based compensation expense at online advertising revenues grew 46% and online classified adver-
Kaplan. tising revenue on washingtonpost.com increased 33%.
Operating income increased 55% to $563.0 million, from Television Broadcasting Division. Revenue for the television
$363.8 million in 2003, due largely to significantly improved results broadcasting division increased 15% to $361.7 million in 2004,
at the education and television broadcasting divisions. Kaplan from $315.1 million in 2003, due to $34.3 million in political
results for 2004 include $32.5 million in stock compensation advertising in 2004, $8.0 million in incremental summer Olympics-
2005 FORM 10-K 35