Washington Post 2007 Annual Report Download - page 57

magazine advertising revenue was down 9% in 2007 due to
lower ad pages at both domestic and international editions. In
January 2008, Newsweek announced a Voluntary Retirement
Incentive Program being offered to certain Newsweek
employees.
The Company generates a significant amount of cash from its
businesses that is used to support its operations, to pay down
debt, and to fund capital expenditures, share repurchases,
dividends, acquisitions and other investments.
RESULTS OF OPERATIONS — 2007 COMPARED TO 2006
Net income was $288.6 million ($30.19 per share) for the fiscal
year 2007 ended December 30, 2007, down from
$324.5 million ($33.68 per share) for the fiscal year 2006
ended December 31, 2006. The Company’s results for 2007
and 2006 include several unusual or one-time items, as described
below.
Items included in the Company’s results in 2007:
• A charge of $6.6 million ($0.70 per share) in additional
income tax expense, net, as the result of a $12.9 million
increase in taxes associated with Bowater Mersey, offset by
a tax benefit of $6.3 million associated with recent changes in
certain state income tax laws. Both of these are non-cash items
in 2007, impacting the Company’s long-term net deferred
income tax liabilities;
• Expenses of $11.2 million (after-tax impact of $6.7 million, or
$0.70 per share) related to lease obligations, severance and
accelerated depreciation of fixed assets in connection with
Kaplan’s restructuring of the Score! business;
• A charge of $6.0 million (after-tax impact of $3.6 million, or
$0.38 per share) related to the write-off of an integrated
software product under development, and severance costs
in connection with Kaplan’s restructuring of the Kaplan
Professional (U.S.) businesses; and
• A gain of $9.5 million from the sale of property at the
Company’s television station in Miami (after-tax impact of
$5.9 million, or $0.62 per share);
Items included in the Company’s results in 2006:
• Charges of $50.9 million related to early retirement plan
buyouts (after-tax impact of $31.7 million, or $3.30 per
share);
• A non-operating write-down of $14.2 million of a marketable
equity security (after-tax impact of $9.0 million, or $0.94 per
share);
• A charge of $13.0 million related to an agreement to settle a
lawsuit at Kaplan (after-tax impact of $8.3 million, or $0.86
per share);
• A goodwill impairment charge of $9.9 million at
PostNewsweek Tech Media and a $1.5 million loss on the
sale of PostNewsweek Tech Media, which was part of the
magazine publishing segment (after-tax impact of $7.3 million,
or $0.75 per share);
• Transition costs and operating losses at Kaplan related to
acquisitions and start-ups for 2006 of $11.9 million (after-
tax impact of $8.0 million, or $0.83 per share);
• A charge for the cumulative effect of a change in accounting for
Kaplan equity awards (after-tax impact of $5.1 million, or
$0.53 per share) in connection with the Company’s adoption
of Statement of Financial Accounting Standards No. 123R
(SFAS 123R), “Share-Based Payment”;
• A non-operating gain of $43.2 million on the sale of
BrassRing, in which the Company held a 49% interest (after-
tax impact of $27.4 million, or $2.86 per share);
• Insurance recoveries of $10.4 million from cable division
losses related to Hurricane Katrina (after-tax impact of
$6.4 million, or $0.67 per share); and
• Non-operating gains of $33.8 million from sales of marketable
equity securities for the year (after-tax impact of $21.1 million,
or $2.19 per share).
Revenue for 2007 was $4,180.4 million, up 7% compared to
revenue of $3,904.9 million in 2006. The increase is due to
significant revenue growth at the education division, along with
strong revenue growth at the cable division. Revenues were down
at the Company’s newspaper publishing, magazine publishing
and television broadcasting divisions. Advertising revenue
decreased 9% in 2007, and circulation and subscriber
revenue increased 6%. Education revenue increased 21% in
2007, and other revenue was up 8%. The decline in
advertising revenue is due to declines in print advertising at
The Washington Post, the absence of significant political and
Olympics-related television advertising in 2007 and declines in
the magazine publishing division. The increase in circulation and
subscriber revenue is due to a 12% increase in subscriber revenue
at the cable division from continued growth in all major product
offerings. This increase was offset by a 5% decrease in circulation
revenue at The Post, and a 6% decline in Newsweek circulation
revenue due to subscription rate declines at the domestic and
international editions of Newsweek. Revenue growth at Kaplan
(about 38% of which was from acquisitions) accounted for the
increase in education revenue.
Operating costs and expense for the year increased 7% to
$3,703.4 million, from $3,445.1 million in 2006. The
increase is primarily due to higher expenses from operating
growth at Kaplan and Cable ONE, and increased stock
compensation expense, offset by charges of $50.9 million in
early retirement plan buyouts at The Washington Post and the
Company’s corporate office in 2006.
Operating income for 2007 increased by 4% to $477.0 million,
from $459.8 million in 2006. Operating results were
significantly impacted by unusual or one-time operating items
described above. Excluding these one-time or unusual items,
results at the newspaper publishing, magazine publishing and
television broadcasting divisions were down, generally due to
2007 FORM 10-K 41