Washington Post 2007 Annual Report Download - page 64

2005. Operating margin at the magazine publishing division
was 8% for 2006 and 13% for 2005, including the pension
credit, with the decline primarily due to losses at PostNewsweek
Tech Media.
All revenue and operating results of the magazine publishing
division for 2006 and 2005 include PostNewsweek Tech
Media up to the sale date of December 22, 2006.
Cable Television Division. Cable television division revenue of
$565.9 million for 2006 represents an 11% increase from
$507.7 million in 2005. The 2006 revenue increase is due
primarily to continued growth in the division’s cable modem
revenue and a $3 monthly rate increase for basic cable
service at most of its systems, effective February 1, 2006.
Hurricane Katrina had an adverse impact on 2005 revenue of
approximately $12.5 million, from subscriber losses and the
granting of a 30-day service credit to the division’s 94,000
pre-hurricane Gulf Coast subscribers. In 2006, subscriber
losses from the hurricane resulted in lost revenue of
approximately $12.4 million.
Cable television division operating income increased in 2006 to
$120.0 million, from $76.7 million in 2005. The increase in
operating income for 2006 is due to several factors, including the
division’s revenue growth and an additional $10.4 million in
hurricane-related insurance recoveries recorded during the
second quarter of 2006 as a reduction of expense in
connection with a final settlement on cable division Hurricane
Katrina insurance claims. Also, Hurricane Katrina had an
estimated adverse impact of $23.7 million on the cable
division’s results in 2005, when the Company recorded
$9.6 million in property, plant and equipment losses; incurred
an estimated $9.4 million in incremental cleanup, repair and
other expenses associated with the hurricane; and experienced
an estimated $9.7 million reduction in operating income from
subscriber losses and the granting of a 30-day service credit to all
of its 94,000 pre-hurricane Gulf Coast subscribers. Offsetting
these items, a $5.0 million insurance recovery was recorded for
part of the hurricane losses through December 31, 2005 under
the Company’s property and business interruption insurance
program (this was recorded as a reduction of cable division
expense in the fourth quarter of 2005). Cable division results
in 2006 continue to include the impact of subscriber losses and
expenses as a result of Hurricane Katrina. As noted above, the
Company estimates that lost revenue for 2006 was
approximately $12.4 million; variable cost savings offset a
portion of the lost revenue impact on the cable division’s
operating income. The Company also incurred an estimated
$5.4 million in incremental cleanup and repair expense in
2006. Operating margin at the cable television division
increased to 21% in 2006, from 15% in 2005, due to a
strong year in 2006 and to the adverse impact of the
hurricane on 2005 results.
At December 31, 2006, the Gulf Coast region showed increases
in all Revenue Generating Unit (RGU) categories compared to
estimated subscriber counts as of December 31, 2005. For all
other regions, there was an increase in RGUs due to continued
growth in high-speed data subscribers, offset by a decline in
basic video and digital video subscriber categories primarily as a
result of the $3 monthly basic rate increase implemented in
February 2006. The cable division began offering telephone
services on a very limited basis in the second quarter of 2006; as
of December 31, 2006, telephone services were being offered
to about half of homes passed.
A summary of RGUs broken down by Gulf Coast and all other
regionsisasfollows:
Cable Television Division
Subscribers
December 31,
2006
December 31,
2005*
Gulf Coast Region
Basic. . . .............. 84,531 72,770
Digital . . .............. 31,686 27,501
High-speed data ......... 36,335 24,049
Telephony .............. ——
Total . . .............. 152,552 124,320
All Other Regions
Basic. . . .............. 609,019 616,408
Digital . . .............. 182,187 186,900
High-speed data ......... 252,675 210,012
Telephony .............. 2,925 —
Total . . .............. 1,046,806 1,013,320
Total
Basic. . . .............. 693,550 689,178
Digital . . .............. 213,873 214,401
High-speed data ......... 289,010 234,061
Telephony .............. 2,925 —
Total . . .............. 1,199,358 1,137,640
*Gulf Coast region subscriber figures as of December 31, 2005 are
estimated and reflect a 21,400, 7,700 and 3,100 decline,
respectively, in estimated basic, digital and high-speed data
subscribers due to Hurricane Katrina.
RGUs include about 6,500 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 2006
and 2005 in the NCTA Standard Reporting Categories (in
millions):
2006 2005
Customer premise equipment ........... $49.7 $ 30.0
Commercial . .................... 0.1 0.2
Scalable infrastructure ............... 24.4 8.1
Line extensions.................... 19.4 14.6
Upgrade/rebuild . . ................ 9.5 13.1
Support capital . . . ................ 39.4 45.3
Total ........................ $142.5 $111.3
Corporate Office. Operating expenses for the Company’s
corporate office increased to $42.5 million in 2006, from
$32.6 million in 2005. The increase is due to $3.8 million in
pre-tax charges recorded in the second quarter of 2006
associated with early retirement plan buyouts at the corporate
48 THE WASHINGTON POST COMPANY