Washington Post 2007 Annual Report Download - page 59

lawsuit, along with a reduction in technology and other general
expenses in the fourth quarter of 2007.
Other includes charges for incentive compensation arising from
equity awards under the Kaplan stock option plan, which was
established for certain members of Kaplan’s management.
Kaplan recorded stock compensation expense of $41.3 million
in 2007, compared to $27.7 million in 2006 (excluding stock
compensation recorded in the first quarter of 2006 related to a
change in accounting discussed below). The increase in the
charge for 2007 reflects growth and improved prospects for
several Kaplan businesses, as well as an increase in public
market values of other education companies. In addition,
Other includes amortization of certain intangibles, which
increased by $9.5 million in 2007, due to recent Kaplan
acquisitions.
Newspaper Publishing Division. Newspaper publishing
division revenue in 2007 decreased 7% to $889.8 million,
from $961.9 million in 2006. Division operating income for
2007 totaled $66.4 million, compared to $63.4 million in
2006. The increase in operating income for 2007 is due
primarily to $47.1 million in pre-tax charges associated with
early retirement plan buyouts at The Washington Post during
2006. Excluding this charge, operating income was down
sharply for 2007 due to a decline in division revenues and a
$2.3 million pre-tax gain on the sale of property in 2006,
partially offset by a reduction in newspaper division operating
expenses, including a 19% reduction in newsprint expense.
Operating margin at the newspaper publishing division was
7% for 2007 and 2006; however, the 2007 operating margin
declined significantly, excluding the $47.1 million in early
retirement plan buyouts in 2006.
Print advertising revenue at The Post in 2007 declined 13% to
$496.2 million, from $573.2 million in 2006. The decline in
2007 is due to reductions in real estate, classified, general and
retail. Daily circulation at The Post declined 3.6%, and Sunday
circulation declined 3.7% in 2007; average daily circulation
totaled 649,700 (unaudited), and average Sunday circulation
totaled 902,500 (unaudited).
During 2007, revenue generated by the Company’s online
publishing activities, primarily washingtonpost.com, increased
11% to $114.2 million, from $102.7 million in 2006. Display
online advertising revenue grew 16% and online classified
advertising revenue on washingtonpost.com increased 10%. A
small portion of the Company’s online publishing revenue is
included in the magazine publishing division.
In February 2008, the Company announced that a Voluntary
Retirement Incentive Program will be offered in 2008 to some
employees of The Washington Post newspaper and the
Company’s corporate office in light of the current economic
environment and to assure the future strength of the business.
The cost of the program will be funded primarily from the assets of
the Company’s pension plans. The Company also announced that
The Post will close its College Park, MD, printing plant in early
2010, after two presses are moved to The Post’s Springfield, VA,
plant.
Television Broadcasting Division. Revenue for the television
broadcasting division decreased 6% to $340.0 million in
2007, from $361.9 million in 2006. The revenue decline is
due to a $28.6 million decrease in political advertising and
$6.3 million in incremental winter Olympics-related advertising
at the Company’s NBC affiliates in the first quarter of 2006.
In July 2007, the Company entered into a transaction to sell and
lease back its current Miami television station facility; a
$9.5 million gain was recorded as a reduction to expense in
2007. The Company has purchased land and is building a new
Miami television station facility, which is expected to be
completed in 2009.
Operating income for 2007 declined 12% to $142.1 million,
from $160.8 million in 2006. The decline in operating income is
primarily related to the absence of significant political and
Olympics revenue in 2007, as well as increased programming
expenses, offset by the $9.5 million gain on the sale of property
at the Miami television station. Operating margin at the
broadcast division was 42% for 2007 and 44% for 2006;
however, the operating margin in 2007 would have been
lower without the $9.5 million gain from the sale of property
at the Miami television station.
Competitive market position remained strong for the Company’s
television stations. KSAT in San Antonio and WPLG in Miami
ranked number one in the November 2007 ratings period,
Monday through Friday, sign-on to sign-off; WDIV in Detroit,
WKMG in Orlando and WJXT in Jacksonville ranked second;
and KPRC in Houston ranked third.
Magazine Publishing Division. Revenue for the magazine
publishing division totaled $288.4 million in 2007, a 13%
decline from $331.0 million for 2006. Magazine publishing
division results in 2006 included revenue of $23.4 million from
PostNewsweek Tech Media, which was sold in December 2006.
The remainder of the revenue decline is due primarily to a 9%
reduction in Newsweek advertising revenue for 2007, due to
fewer ad pages at both the Newsweek domestic and
international editions, despite one additional domestic and
international issue in 2007. The revenue decline was offset by
increased revenue at Arthur Frommer’s Budget Travel.
Operating income totaled $31.4 million in 2007, compared to
$27.9 million for 2006. Magazine publishing division results in
2006 included an operating loss of $8.8 million from
PostNewsweek Tech Media, largely the result of a goodwill
impairment charge of $9.9 million in the third quarter of
2006. Excluding PostNewsweek Tech Media, operating
income at the magazine publishing division was down due
primarily to advertising revenue reductions, offset by lower
overall operating expenses. Operating margin at the magazine
publishing division was 11% in 2007 and 8% for 2006,
including the pension credit, with the increase primarily due to
losses at PostNewsweek Tech Media in 2006. If the pension
credit is excluded, the division would have had operating losses
in 2007 and 2006.
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