Washington Post 2006 Annual Report Download - page 53

RESULTS OF OPERATIONS Ì 2006 COMPARED TO 2005 Washington Post. The increase in circulation and subscriber revenue
is due to a 12% increase in subscriber revenue at the cable division
Net income was $324.5 million ($33.68 per share) for the fiscal from continued growth in cable modem, basic and digital service
year 2006 ended December 31, 2006, up from $314.3 million revenue. This increase was offset by a 4% decrease in circulation
($32.59 per share) for the fiscal year 2005 ended January 1, revenue at The Post, and an 11% decline in Newsweek circulation
2006. The Company's results for 2006 and 2005 include several revenue due to subscription rate declines at the domestic edition
unusual or one-time items, as described below. and international editions of Newsweek and subscription rate base
Items included in the Company's results in 2006: declines at certain of the international editions. Revenue growth at
‚ Charges of $50.9 million related to early retirement plan buyouts Kaplan, Inc. (about 31% of which was from acquisitions) account-
(after-tax impact of $31.7 million, or $3.30 per share); ed for the increase in education revenue.
‚ A non-operating write-down of $14.2 million of a marketable equity Operating costs and expenses for the year increased 13% to
security (after-tax impact of $9.0 million, or $0.94 per share); $3,445.1 million, from $3,039.0 million in 2005. The increase is
‚ A charge of $13.0 million related to an agreement to settle a lawsuit primarily due to higher expenses from operating growth, and
at Kaplan (after-tax impact of $8.3 million, or $0.86 per share); increased stock compensation expense at the education division,
‚ A goodwill impairment charge of $9.9 million at PostNewsweek Tech charges of $50.9 million in early retirement plan buyouts at The
Media and a $1.5 million loss on the sale of PostNewsweek Tech Washington Post and the corporate office, and a reduced pension
Media, which was part of the magazine publishing segment (after-tax credit.
impact of $7.3 million, or $0.75 per share);
‚ Transition costs and operating losses at Kaplan related to acquisitions Operating income for 2006 declined by 11% to $459.8 million,
and start-ups for 2006 of $11.9 million (after-tax impact of $8.0 mil- from $514.9 million in 2005. Much of the decline is due to the
lion, or $0.83 per share); unusual or one-time operating items described above, as well as a
‚ A charge for the cumulative eÅect of a change in accounting for $24.7 million increase in Kaplan stock compensation expense,
Kaplan equity awards (after-tax impact of $5.1 million, or $0.53 per offset by strong results at the Company's cable television and
share) in connection with the Company's adoption of Statement of television broadcasting divisions.
Financial Accounting Standards No. 123R (SFAS 123R), ""Share- The Company's 2006 operating income includes $21.8 million of
Based Payment''; net pension credits, compared to $37.9 million in 2005. These
‚ A non-operating gain of $43.2 million on the sale of BrassRing, in amounts exclude $50.9 million and $1.2 million in charges related
which the Company held a 49% interest (after-tax impact of to early retirement programs in 2006 and 2005, respectively.
$27.4 million, or $2.86 per share);
‚ Insurance recoveries of $10.4 million from cable division losses DIVISION RESULTS
related to Hurricane Katrina (after-tax impact of $6.4 million, or
$0.67 per share); and Education Division. Education division revenue in 2006
‚ Non-operating gains of $33.8 million from sales of marketable equity increased 19% to $1,684.1 million, from $1,412.4 million in
securities for the year (after-tax impact of $21.1 million, or 2005. Excluding revenue from acquired businesses, education
$2.19 per share). division revenue increased 13% in 2006. Kaplan reported operat-
ing income of $130.2 million for the year, compared to
Items included in the Company's results in 2005: $157.8 million in 2005. The decline is due to a $24.7 million
‚ Charges and lost revenue associated with Hurricane Katrina and other increase in stock compensation expense; a $13.0 million charge
hurricanes; estimated adverse impact on operating income of related to an agreement to settle a lawsuit; a $13.3 million
$27.5 million (after-tax impact of $17.3 million, or $1.80 per share) operating income decline at Kaplan Professional's real estate busi-
primarily at the cable division, but also at the television broadcasting nesses; $11.9 million in transition costs and operating losses from
and education divisions; and acquisitions and start-ups; a reduction in revenue growth at
‚ Non-operating gains of $17.8 million from the sales of non-operating Kaplan's test preparation division due to a fourth quarter $6.1 mil-
land and marketable securities (after-tax impact of $11.2 million, or lion revenue decrease related to timing of courses and estimates of
$1.16 per share). average course length; and $3.0 million in asset write-downs at the
Revenue for 2006 was $3,904.9 million, up 10% compared to higher education division. These declines were offset by operating
revenue of $3,553.9 million in 2005. The increase is due mostly to income growth at Kaplan's higher education businesses.
significant revenue growth at the education division, increases at the In the second quarter of 2006, Kaplan completed the acquisitions
cable and television broadcasting divisions, and a small increase at of two businesses: Tribeca Learning Limited, a leading provider of
the newspaper publishing division, offset by a decline at the education to the Australian financial services sector, and SpellRead,
magazine publishing division. Advertising revenue increased 3% in originator of SpellRead Phonological Auditory Training, a reading
2006, and circulation and subscriber revenue increased 5%. intervention program for struggling students. In October 2006,
Education revenue increased 19% in 2006, and other revenue was Kaplan completed the acquisitions of two additional businesses:
up 3%. The increase in advertising revenue is due primarily to Aspect Education Limited, a major provider of English-language
increased revenue at the television broadcasting and magazine instruction in the U.K., Ireland, Australia, New Zealand, Canada
publishing divisions, offset by declines in print advertising at The and the U.S.; and PMBR, a nationwide provider of test preparation
2006 FORM 10-K 37