Washington Post 2009 Annual Report Download - page 56

categories, particularly automotive, and a $19.4 million decrease
in political advertising revenue in 2009. Additionally, in the third
quarter of 2008, the television broadcasting division benefited from
$6.3 million in incremental summer Olympics-related advertising at
the Company’s NBC affiliates.
In 2008, the television broadcasting division recorded $6.9 million
in noncash property, plant and equipment gains as a reduction to
expense due to new digital equipment received at no cost from
Sprint/Nextel in connection with an FCC mandate reallocating a
portion of the broadcast spectrum.
Television broadcasting division operating income for 2009
declined 43% to $70.5 million, from $123.5 million in 2008. The
operating income decline for 2009 is due to the revenue decreases
discussed above and the noncash gains in 2008. Operating
margin at the television broadcasting division was 26% in 2009
and 38% in 2008.
Competitive market position remained strong for the Company’s
television stations. KSAT in San Antonio, WPLG in Miami and WJXT
in Jacksonville ranked number one in the November 2009 ratings
period, Monday through Friday, sign-on to sign-off; WDIV in Detroit
and WKMG in Orlando ranked second; and KPRC in Houston
ranked third.
Magazine Publishing Division. Revenue for the magazine
publishing division totaled $184.2 million in 2009, a 27% decline
from $250.9 million in 2008. The decrease in revenue for 2009 is
due to advertising revenue declines at Newsweek of 37%, resulting
from fewer ad pages at both the domestic and international
editions. In February 2009, Newsweek announced a circulation
rate base reduction at its domestic edition, from 2.6 million to
1.5 million, by January 2010. Subscription revenue also declined
at the domestic edition in 2009 due to the rate base reduction.
Newsweek offered a Voluntary Retirement Incentive Program to
certain employees in November 2008, and 44 employees
accepted the offer in the first quarter of 2009; early retirement
program expense of $6.6 million was recorded in the first quarter
of 2009, which is being funded primarily from the assets of the
Company’s pension plans. In the first quarter of 2008, Newsweek
also offered a Voluntary Retirement Incentive Program to certain
employees and 117 employees accepted the offer. The early
retirement program expense in 2008 totaled $28.3 million, also
funded primarily from the assets of the Company’s pension plans.
Additional cost savings initiatives were implemented at Newsweek’s
operations in 2009, and $8.4 million in severance and lease
termination costs were recorded.
The division had an operating loss in 2009 of $29.3 million,
compared to an operating loss of $16.1 million in 2008. Excluding
early retirement program expense, the division’s operating results
declined in 2009 due to the revenue reductions discussed above
and a reduced pension credit, offset by a decline in subscription,
editorial and manufacturing expenses at the domestic edition of
Newsweek.
In December 2009, Newsweek sold its Newsweek Budget Travel
magazine and realized a gain on the transaction. Budget Travel
revenues for 2009 were $18.7 million, compared to $23.5 million
in 2008. Including the gain on the sale, Budget Travel incurred
operating losses of $1.2 million in 2009 and $0.7 million in
2008.
Other Businesses and Corporate Office. Other businesses and
corporate office include the expenses of the Company’s corporate
office and the operating results of Avenue100 Media Solutions
(formerly CourseAdvisor). In the fourth quarter of 2008, a goodwill
and other intangible assets impairment charge of $69.7 million was
recorded to write down the intangible assets of Avenue100 Media
Solutions to their estimated fair values. The 2008 results also
include $3.0 million in early retirement program expense at the
corporate office.
Equity in Losses of Affiliates. The Company’s equity in losses of
affiliates for 2009 was $29.4 million, compared to $7.8 million in
losses for 2008. Results for 2009 included $29.0 million in write-
downs at two of the Company’s affiliate investments. Most of the
loss relates to an impairment charge recorded on the Company’s
interest in Bowater Mersey Paper Company as a result of the
challenging economic environment for newsprint producers. Results
in 2008 include $6.8 million in impairment charges at two of the
Company’s affiliates.
The Company holds a 49% interest in Bowater Mersey Paper
Company and interests in several other affiliates.
Non-Operating Items. The Company recorded other non-operating
income, net, of $13.2 million in 2009, compared to other non-
operating expense, net, of $2.2 million in 2008. The 2009 non-
operating income, net, primarily included $16.9 million in
unrealized foreign currency gains, offset by $3.8 million in
impairment write-downs on cost method investments. The 2008
non-operating expense, net, primarily consisted of $46.3 million in
unrealized foreign currency losses, offset by $47.3 million in gains
from sales of marketable equity securities.
As noted above, a large part of the Company’s non-operating
income (expense) is from unrealized foreign currency gains or losses
arising from the translation of British pound and Australian dollar-
denominated intercompany loans into U.S. dollars. The unrealized
foreign currency gains in 2009 were the result of a weakening of
the U.S. dollar against the British pound and the Australian dollar in
2009, versus the exchange rates in effect at the end of 2008. The
unrealized foreign currency losses in 2008 were the result of a
strengthening of the U.S. dollar against the British pound and the
Australian dollar in 2008, versus the exchange rates in effect at the
end of 2007.
A summary of non-operating income (expense) for the years ended
January 3, 2010 and December 28, 2008 follows:
(in millions) 2009 2008
Foreign currency gains (losses), net ............ $16.9 $(46.3)
Impairment write-downs on cost method
investments ............................ (3.8) (2.9)
Gain on sales of marketable equity securities ..... —47.3
Other gains (losses) ....................... 0.1 (0.3)
Total ................................ $13.2 $ (2.2)
42 THE WASHINGTON POST COMPANY