Washington Post 2007 Annual Report Download - page 60

In January 2008, the Company announced a Voluntary
Retirement Incentive Program, which is being offered to certain
Newsweek employees. The program includes enhanced
retirement benefits and should be completed by the end of the
first quarter of 2008; it will be funded primarily from the assets of
the Company’s pension plans.
Cable Television Division. Cable television division revenue of
$626.4 million for 2007 represents an 11% increase from
$565.9 million in 2006. The 2007 revenue increase is due to
continued growth in the division’s cable modem and digital
revenues, along with revenues from telephony services. The
cable division did not raise basic video cable service rates in
2007, having last implemented a basic video cable service rate
increase of $3 per month at most of its systems effective
February 1, 2006. In September 2007, a $3.05 monthly rate
increase was implemented for a majority of high-speed data
subscribers. Effective January 1, 2008, the cable division
implemented a basic video cable service rate increase of
$3.50 per month at nearly all of its systems.
Cable division operating income increased in 2007 to
$123.7 million, from $120.0 million in 2006. This increase is
due to the division’s revenue growth, offset by increases in
programming, telephony and technical costs. The annual
trends are also impacted by certain activity in the prior year. In
2006, the cable division incurred an estimated $5.4 million in
incremental cleanup and repair expense from Hurricane Katrina,
offset by $10.4 million in 2006 insurance recoveries. Operating
margin at the cable television division was 20% in 2007,
compared to 21% in 2006.
At December 31, 2007, Revenue Generating Units (RGUs) grew
11% due to continued growth in high-speed data and telephony
subscribers and increases in the basic video and digital video
subscriber categories. The cable division began offering
telephone service on a very limited basis in the second quarter
of 2006; as of December 31, 2007, telephone service is being
offered in all or part of systems representing 90% of homes
passed.AsummaryofRGUsisasfollows:
Cable Television Division
Subscribers
December 31,
2007
December 31,
2006
Basic .................. 702,669 693,550
Digital . . . .............. 223,931 213,873
High-speed data . .......... 341,034 289,010
Telephony . .............. 58,640 2,925
Total . . . .............. 1,326,274 1,199,358
RGUs include about 6,700 subscribers who receive free basic
video service, primarily local governments, schools and other
organizations as required by various franchise agreements.
Below are details of cable division capital expenditures for 2007
and 2006 in the NCTA Standard Reporting Categories (in
millions):
2007 2006
Customer premise equipment ........... $52.5 $ 49.7
Commercial . .................... —0.1
Scalable infrastructure ............... 20.6 24.4
Line extensions.................... 21.1 19.4
Upgrade/rebuild . . ................ 12.8 9.5
Support capital . . . ................ 31.3 39.4
Total ........................ $138.3 $142.5
Other Businesses and Corporate Office. In October 2007, the
Company acquired the outstanding stock of CourseAdvisor, Inc.,
a premier online lead generation provider, headquartered in
Wakefield,MA.In2006,theCompanymadeasmall
investment in CourseAdvisor. Through its search engine
marketing expertise and proprietary technology platform,
CourseAdvisor generates student leads for the post-secondary
education market. CourseAdvisor operates as an independent
subsidiary of the Company.
In 2007, other businesses and corporate office included the
expenses associated with the Company’s corporate office and
the operating results of CourseAdvisor since its October 2007
acquisition. In 2006, other businesses and corporate office
included the expenses of the Company’s corporate office.
Revenue for other businesses (CourseAdvisor) totaled
$6.6 million in 2007. Operating expenses were $42.2 million
in 2007 and $42.5 million in 2006. The decline in expenses for
2007 is due to $3.8 million in pre-tax charges recorded in 2006
related to early retirement plan buyouts at the corporate office
and other expense reductions at the corporate office, offset by
expenses from CourseAdvisor.
Equity in Earnings (Losses) of Affiliates. The Company’s equity
in earnings of affiliates for 2007 was $6.0 million, compared to
$0.8 million in 2006. In the first quarter of 2007, the Company’s
equity in earnings of affiliates included a gain of $8.9 million on
the sale of land at the Company’s Bowater Mersey affiliate;
however, operating losses at Bowater Mersey in 2007 largely
offset the gain. The Company’s affiliate investments at the end of
2007 consisted primarily of a 49% interest in Bowater Mersey
Paper Company Limited. In November 2006, the Company sold
its 49% interest in BrassRing and recorded a pre-tax
non-operating gain of $43.2 million in 2006.
Non-Operating Items. The Company recorded other
non-operating income, net, of $10.8 million in 2007,
compared to $73.4 million in 2006. The 2007 non-operating
income, net, included $8.8 million in foreign currency gains and
other non-operating items. The 2006 non-operating income, net,
comprised a $43.2 million gain from the sale of the Company’s
interest in BrassRing, $33.8 million in gains related to sales of
marketable equity securities and $11.9 million in foreign
currency gains, offset by a $14.2 million write-down of a
marketable equity security and other non-operating items.
44 THE WASHINGTON POST COMPANY