Washington Post 2014 Annual Report Download - page 60

2013. Due to rapidly rising programming costs and shrinking
margins, video sales now have less value and emphasis (video PSUs
were down 16% from 2013) and programming costs have been
reduced significantly. Effective April 1, 2014, the cable division
elected not to renew its contract for Viacom networks.
The cable division also continues to focus on higher lifetime value
customers who are less attracted by discounting, require less
support and churn less. Operating income margins increased to
22.4% in 2014, from 21.0% in 2013.
A summary of PSUs and total customers is as follows:
As of December 31
2014 2013
Video .......................... 451,217 538,894
High-speed data .................. 488,454 472,631
Voice .......................... 149,513 169,181
Total Primary Service Units (PSUs) .... 1,089,184 1,180,706
Total Customers .................. 686,671 712,910
PSUs include about 6,000 subscribers who receive free basic cable
service, primarily local governments, schools and other organizations
as required by various franchise agreements.
In July 2014, the cable division sold wireless spectrum licenses for
$98.8 million; a pre-tax gain of $75.2 million was reported in the
third quarter of 2014 in connection with these sales. The licenses
had been purchased in the 2006 AWS auction.
Television Broadcasting Division. Revenue for the television
broadcasting division increased 18% to $363.8 million in 2014,
from $308.3 million in 2013; operating income for 2014 was up
29% to $187.8 million, from $145.2 million in 2013. The
increase in revenue and operating income is due to a $31.8 million
increase in political advertising revenue, $9.5 million in incremental
winter Olympics-related advertising revenue at the Company’s NBC
affiliates and $18.6 million in increased retransmission revenues.
Operating margin at the television broadcasting division was 52%
in 2014 and 47% in 2013.
Competitive market position remained strong for the Company’s
television stations. KSAT in San Antonio and WJXT in Jacksonville
ranked number one in the November 2014 ratings period, Monday
through Friday, sign-on to sign-off; WDIV in Detroit ranked second,
and KPRC in Houston and WKMG in Orlando ranked third.
In November 2014, the television broadcasting division acquired
SocialNewsDesk, a market-leading software-based technology
platform created by journalists to help newsroom and content
producers publish, manage and monetize social media.
As a result of the Berkshire exchange transaction discussed above,
the television broadcasting operating results exclude WPLG, the
Company’s Miami-based television station, which has been
reclassified to discontinued operations for all periods presented.
Other Businesses. Other businesses includes the operating results of
The Slate Group and Foreign Policy Group, which publish online
and print magazines and websites; SocialCode, a marketing
solutions provider helping companies with marketing on social-
media platforms; Celtic Healthcare, a provider of home health and
hospice services; Forney, a global supplier of products and systems
that control and monitor combustion processes in electric utility and
industrial applications, acquired by the Company in August 2013;
and Trove, a digital innovation team that builds products and
technologies in the news space. Other businesses also includes a
number of businesses acquired in 2014.
In April 2014, Celtic Healthcare, Inc. (Celtic) acquired the assets
of VNA-TIP Healthcare of Bridgeton, MO. This acquisition has
expanded Celtic’s home health and hospice service areas from
Pennsylvania and Maryland to the Missouri and Illinois regions. The
operating results of VNA-TIP are included in other businesses from
the date of acquisition in the second quarter of 2014. In January
2015, Celtic and Allegheny Health Network (AHN) closed on the
formation of a joint venture to combine each other’s home health
and hospice assets in the western Pennsylvania region. Although
Celtic will manage the operations of the joint venture, Celtic holds a
40% interest in the joint venture, so the operating results of the joint
venture will not be consolidated and the pro rata operating results
will be included in the Company’s equity in earnings of affiliates in
the future. Celtic’s revenues from the western Pennsylvania region
that now are part of the joint venture made up 29% of total Celtic
revenues in 2014.
On May 30, 2014, the Company acquired Joyce/Dayton Corp.
(Joyce/Dayton), a Dayton, OH-based manufacturer of screw jacks
and other linear motion systems. The operating results of Joyce/
Dayton are included in other businesses from the date of acquisition
in the second quarter of 2014.
On July 3, 2014, the Company acquired a majority interest in
Residential Healthcare Group, Inc. (Residential), the parent
company of Residential Home Health and Residential Hospice,
leading providers of skilled home health and hospice services in
Michigan and Illinois. The operating results of Residential are
included in Other Businesses from the date of acquisition in the third
quarter of 2014. Since Residential owns a minority interest in the
Illinois operations it manages, the operating results of the Illinois
operations are not being consolidated and the pro rata operating
results are included in the Company’s equity in earnings of affiliates.
The increase in revenues for 2014 is due primarily to the inclusion
of revenues from the businesses acquired in 2014 and 2013. The
improvement in operating results in 2014 is due to improved results
at SocialCode. This improvement was partially offset by increased
amortization expense, and acquisition-related costs and other
integration expenses incurred in conjunction with the VNA-TIP
Healthcare acquisition.
Corporate Office. Corporate office includes the expenses of the
Company’s corporate office, the pension credit for the Company’s
traditional defined benefit plan and certain continuing obligations
related to prior business dispositions. In the first quarter of 2014, the
corporate office implemented a Separation Incentive Program that
resulted in early retirement program expense of $4.5 million, which
is being funded from the assets of the Company’s pension plan. In
the third quarter of 2014, the acceptance period for the Voluntary
Retirement Incentive Program (VRIP) ended and the Company
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