Washington Post 2009 Annual Report Download - page 59

Stock compensation credits (charges) relate to incentive
compensation arising from equity awards under the Kaplan stock
option plan, which was established for certain members of Kaplan’s
management. Kaplan recorded a stock compensation credit of
$7.8 million in 2008, compared to stock compensation expense of
$41.3 million in 2007. The stock compensation credit in 2008
related primarily to the forfeiture of 21,526 Kaplan stock options
due to the resignation noted above.
Cable Television Division. Cable television division revenue of
$719.1 million for 2008 represents a 15% increase from $626.4
million in 2007. The 2008 revenue increase is due to continued
growth in the division’s cable modem, telephone and digital
revenues, as well as a rate increase in September 2007 for most
high-speed data subscribers; a January 2008 basic video cable
service rate increase at nearly all of its systems; and a rate increase
in August 2008 for telephone subscribers. The last rate increase for
most high-speed data subscribers had previously been in March
2003, and the last rate increase for basic cable subscribers had
previously been in February 2006.
Cable television division operating income in 2008 increased 31%
to $162.2 million, from $123.7 million in 2007. The increase in
operating income is due to the division’s revenue growth, offset by
higher depreciation and programming expenses and increases in
Internet and telephony costs. Operating margin at the cable
television division was 23% in 2008, compared to 20% in 2007.
Revenue generating units (RGUs) grew 5% in 2008 due to
continued growth in high-speed data and telephony subscribers.
The cable television division began offering telephone service on a
very limited basis in the second quarter of 2006; at December 31,
2008, telephone service is being offered in all or part of systems
representing 95% of homes passed. A summary of RGUs is as
follows:
Cable Television Division
Subscribers December 31, 2008 December 31, 2007
Basic ...................... 699,469 702,669
Digital ..................... 224,877 223,931
High-speed data .............. 372,887 341,034
Telephony .................. 93,520 58,640
Total ..................... 1,390,753 1,326,274
RGUs included about 6,900 subscribers who received 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 2008
and 2007 in the NCTA Standard Reporting Categories:
(in millions) 2008 2007
Customer premise equipment ........ $ 34.5 $ 52.5
Scalable infrastructure .............. 19.0 20.6
Line extensions ................... 16.2 21.1
Upgrade/rebuild ................. 14.8 12.8
Support capital ................... 29.7 31.3
Total ........................ $114.2 $138.3
Newspaper Publishing Division. Newspaper publishing division
revenue in 2008 decreased 10% to $801.3 million, from $889.8
million in 2007. Print advertising revenue at the Post in 2008
declined 17% to $410.4 million, from $496.2 million in 2007.
The decline in 2008 is primarily the result of a large decrease in
classified advertising revenue, along with reductions in retail, gen-
eral, supplements and zones. Revenue generated by the Company’s
online publishing activities, primarily washingtonpost.com,
increased 7% to $108.3 million, from $100.8 million in 2007.
Display online advertising revenue grew 17%, and online classified
advertising revenue on washingtonpost.com declined 3%. Daily
circulation at the Post declined 2.6%, and Sunday circulation
declined 3.3%; average daily circulation totaled 633,100
(unaudited), and average Sunday circulation totaled 872,500
(unaudited).
The newspaper publishing division reported an operating loss of
$192.7 million in 2008, compared to operating income of
$66.4 million in 2007. In March 2008, the Company offered a
Voluntary Retirement Incentive Program to certain employees of The
Washington Post newspaper, and 231 employees accepted the
offer. Early retirement program expense of $79.8 million was
recorded in the second quarter of 2008, which is being funded
mostly from the assets of the Company’s pension plans. Also, the
Post made plans to close its College Park, MD, printing plant in the
second half of 2009. The Company reassessed the useful life of the
presses and the fair value of the plant building and recorded
accelerated depreciation beginning in June 2008; as a result,
accelerated depreciation of $22.3 million was recorded in 2008.
Also in 2008, as a result of the challenging advertising environment
at the Company’s community newspapers, The Herald and other
operations included in the newspaper publishing division, the
Company recorded goodwill impairment charges of $65.8 million.
The decline in operating results is due to reduced revenues and the
unusual or one-time operating expense items noted above;
excluding these charges, however, the newspaper publishing
division still incurred an operating loss in 2008 due to revenue
declines. Newsprint expense was down 3% for 2008.
Television Broadcasting Division. Revenue for the television
broadcasting division decreased 4% to $325.1 million in 2008,
from $340.0 million in 2007. The revenue decline is the result of
weaker advertising demand in most markets and product categories,
offset by a $22.3 million increase in political advertising and $6.3
million in incremental summer Olympics-related advertising at the
Company’s NBC affiliates. Excluding the increased political and
Olympics-related advertising, revenues were $296.5 million in
2008, a 13% decline from 2007.
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. 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.
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