Washington Post Co.’s first-quarter earnings take hit as Kaplan enrollment slides

The Washington Post Co. reported a two-thirds drop in first-quarter earnings, hurt by falling enrollment numbers at its Kaplan Higher Education unit and by a $30.7 million write-down of an investment in the troubled Corinthian Colleges, a career-oriented post-secondary education firm.

The company said that “operating results declined at all of the Company’s divisions for the quarter, except for a small improvement at the newspaper publishing division.” Even there, lower costs were key; moreover, the division still recorded an operating loss.

The Post Co. reported overall corporate profits of $15.2 million, or $1.87 a share, down from $45.4 million, or $4.91 a share, in the first quarter of 2010. Revenue fell 7 percent to $1.06 billion from $1.14 billion a year earlier.

At The Post Co.’s Kaplan division, new enrollments in higher-education courses plunged 48 percent. It was the second straight quarter of sharp declines as the company made changes in response to Education Department regulations and a spate of negative publicity about recruiting techniques across the for-profit education industry.

The total number of students at Kaplan’s online and on-campus programs tumbled 23 percent to 92,293 as of March 31.

The Post Co., which has also become a target of investors who “short” or bet against a stock, spent $121.4 million buying back shares in the first quarter. It bought 281,754 shares, bringing the number of outstanding shares to 7.95 million.

For several years, the Kaplan division had been the engine of The Post Co. as its enrollments soared and the newspaper division faltered. But in the first quarter, Kaplan reported operating income of $15.5 million, down from $57.9 million in the first quarter of 2010. Revenue slid 10 percent to $640.6 million, still the largest segment of the overall Post Co. But the operating income was smaller than the Post’s cable or broadcast television divisions.

In a statement, the company said it expects Kaplan Higher Education’s operating income “to continue to decline very substantially for the remainder of 2011 . . . due to lower student enrollment levels.”

The Post Co. said it was continuing to implement its “Kaplan Commitment” program, offering students the chance to withdraw from classes after a month-long trial period without paying. The Post Co. earlier anticipated that the program would take a $140 million bite out of revenue in 2011; first-quarter revenue at the higher-education unit fell $88.5 million, though that includes other factors.

The Post Co. also owns 8 percent of Corinthian Colleges, whose shares have dropped 72 percent over the past year. The Post Co. has not sold the shares, but the write-down recognizes that Corinthian’s prospects for recovery are dim.

At the flagship newspaper, The Washington Post, troubles with sliding print ads and declining circulation continued, while higher sales at the company’s online edition of the newspaper and the Slate group of Web sites failed to make up the shortfall.

The newspaper division reported an operating loss of $12.8 million in the first quarter, usually one of the weakest for advertising.

Print advertising at The Washington Post decreased 8 percent to $63.2 million compared with the first quarter of 2010. Online publishing activities increased 8 percent to $25.7 million. Revenue from display ads online climbed 9 percent, and online classified ad revenue on washingtonpost.com was up 6 percent.

Circulation slid, but at less than half of last year’s steep rate. The Post’s daily circulation fell 2.9 percent to an average of 545,900 copies and Sunday circulation fell 3.4 percent to an average of 753,400 during the first three months of the year.

Profits and revenue at The Post Co.’s television and broadcasting divisions were relatively stable. Cable television operating income fell 11 percent to $37.7 million, and television broadcasting operating income slid 6 percent. Revenue was almost unchanged at both units. Cable television managers are pushing to convert homes to digital set-top boxes and move away from analog signals, and that has required some special capital expenditures.

Steven Mufson covers energy and other financial news.
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