Washington Post 2006 Annual Report Download - page 59

from $366.1 million in 2004. The revenue decline in 2005 reÖects the decline of 3,100 CableONE.net service subscribers as a result of
weak domestic and international advertising environment at Newsweek, the hurricane. Both digital and cable modem services are now
particularly in the Ñrst quarter of 2005; overall, Newsweek advertising offered in virtually all of the cable division's markets. The estimated
revenues are down 8% for the year as a result of fewer ad pages at hurricane-related basic, digital and cable modem subscriber losses
both the domestic and international editions of Newsweek. are from destroyed or severely damaged homes.
Operating income totaled $45.1 million for 2005, down 15% from At December 31, 2005, Revenue Generating Units (RGUs), the
$52.9 million in 2004. The decline in 2005 operating income is sum of basic video, digital video and cable modem subscribers,
due primarily to the revenue reductions at Newsweek discussed totaled 1,137,600, compared to 1,106,600 as of December 31,
above, weaker results at the Company's trade magazines and a 2004. The increase is due to growth in high-speed data customers,
$1.5 million early retirement charge at Newsweek International, offset by an approximate 32,200 RGU reduction due to the
offset by a reduction in subscription acquisition, distribution and hurricane. RGUs include about 6,500 subscribers who receive free
advertising expenses at Newsweek's domestic and international basic video service, primarily local governments, schools and other
editions, and an increased pension credit. Operating margin at the organizations as required by various franchise agreements.
magazine publishing division was 13% for 2005 and 14% for Below are details of cable division capital expenditures for 2005
2004, including the pension credit. and 2004, in the NCTA Standard Reporting Categories (in
Cable Television Division. Cable division revenue of millions):
$507.7 million for 2005 represents a 2% increase from 2005 2004
$499.3 million in 2004. Revenues for 2005 were adversely
impacted by approximately $12.5 million from subscriber losses Customer premise equipment ÏÏÏÏÏÏÏÏÏÏÏÏ $ 30.0 $ 23.5
and the granting of a 30-day service credit to the 94,000 pre- CommercialÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 0.2 0.1
hurricane Gulf Coast subscribers; this was offset by increased Scaleable infrastructureÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 8.1 8.6
growth in the division's cable modem revenues. Also, the Company Line extensionsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 14.6 14.0
did not implement an overall basic rate increase in 2005. Upgrade/rebuildÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 13.1 15.6
Support capital ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 45.3 17.1
Cable division operating income decreased in 2005 to $76.7 mil- TotalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $111.3 $ 78.9
lion, from $104.2 million in 2004. The decline in operating income
in 2005 is due mostly to Hurricane Katrina, which had an estimated Equity in Losses of Affiliates. The Company's equity in
adverse impact of $23.7 million on the cable division's results. losses of affiliates for 2005 was $0.9 million, compared to losses
Through the end of 2005, the cable division recorded $9.6 million of $2.3 million for 2004. The Company's affiliate investments at the
in property, plant and equipment losses; incurred an estimated end of 2005 consisted of a 49% interest in BrassRing LLC and a
$9.4 million in incremental cleanup, repair and other expenses 49% interest in Bowater Mersey Paper Company Limited.
associated with the hurricane; and experienced an estimated Non-Operating Items. The Company recorded other non-
$9.7 million reduction in operating income from subscriber losses operating income, net, of $9.0 million in 2005, compared to
and the granting of a 30-day service credit to all of its 94,000 pre- $8.1 million in 2004. The 2005 non-operating income comprises
hurricane Gulf Coast subscribers. Offsetting these items, as of pre-tax gains of $17.8 million related to the sales of non-operating
December 31, 2005, the Company has recorded a $5.0 million land and marketable securities, offset by foreign currency losses of
receivable for recovery of a portion of cable hurricane losses $8.1 million and other non-operating items. The 2004 non-operat-
through December 31, 2005 under the Company's property and ing income, net, is primarily from foreign currency gains.
business interruption insurance program; this recovery was record-
ed as a reduction of cable division expense in the fourth quarter of A summary of non-operating income (expense) for the years
2005. The decrease in operating income is also due to higher ended January 1, 2006 and January 2, 2005 follows (in millions):
depreciation, programming and customer service costs. Operating 2005 2004
margin at the cable television division declined to 15% in 2005,
from 21% in 2004, due largely to the impact of the hurricane. Gain on sales of marketable securitiesÏÏÏÏ $12.7 $Ì
Gain on sales of non-operating land ÏÏÏÏÏ 5.1 Ì
At December 31, 2005, the cable division had approximately
Foreign currency (losses) gains, net ÏÏÏÏÏ (8.1) 5.5
689,200 basic subscribers, compared to 709,100 at Decem-
Impairment write-downs on cost method
ber 31, 2004. The Company estimates a decline of 21,400 basic and other investmentsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (1.5) (0.7)
subscribers as a result of the hurricane. At December 31, 2005, the Gain on exchange of cable system
cable division had approximately 214,400 digital cable subscrib- businessÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì0.5
ers, down from 219,200 at December 31, 2004. This represents a Other gains ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 0.8 2.8
31% penetration of the subscriber base. The Company estimates a TotalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 9.0 $ 8.1
decline of 7,700 digital subscribers as a result of the hurricane. At
December 31, 2005, the cable division had approximately The Company incurred net interest expense of $23.4 million in
234,100 CableONE.net service subscribers, compared to 2005, compared to $26.4 million in 2004. At January 1, 2006,
178,300 at December 31, 2004. The Company estimates a the Company had $428.4 million in borrowings outstanding at an
2006 FORM 10-K 43