Washington Post Co. reports fourth-quarter 2012 loss
By Steven Mufson,
The Washington Post Co. reported a fourth-quarter 2012 loss of $45.4 million, or $6.57 a share, as it took $113 million of after-tax charges for goodwill write-downs and restructuring, mostly in its Kaplan education subsidiary. A year earlier, the company earned $61.7 million, or $8.03 a share
But The Post Co. said that, after excluding those and other special items, net income from continuing operations rose to $78.8 million, up 15 percent from the fourth quarter of 2011. It also stressed that its cash flow and cash positions were strong.
For all of 2012, The Post Co. earned $131.2 million, or $17.39 a share, up 13 percent from $116.2 million, or $14.70 a share, in 2011.
Results at the company’s four main subsidiaries were mixed. The Kaplan education unit and the newspaper division continued to struggle; revenue at each dropped about 6 percent, and operating income fell sharply. But revenue and profits at The Post Co.’s regional TV broadcast stations surged thanks to a flood of political advertising. The company’s cable subsidiary also reported solid earnings.
Advertising and circulation trends at the company’s news division remained on a downward course, though, as a result of cost cutting. The division earned $2.6 million in the fourth quarter, down from $6.8 million in the fourth quarter of 2011. Cost cutting is expected to continue; in the past week, two media Web sites have reported cutbacks on the paper’s business and mobile-technology areas.
Print advertising at The Washington Post slid 12 percent in the fourth quarter, to $67.5 million. A 5 percent increase in ad revenue, to $33.1 million, from the company’s online operations — primarily washingtonpost.com and Slate — made up about half the print ad decline in the fourth quarter.
Daily circulation at The Washington Post declined 8.6 percent, to an average of 471,800 for all of 2012, and Sunday circulation dropped 6.2 percent, to an average of 687,200.
One benefit of the paper’s woes: lower newsprint costs. Those expenses were down 10 percent in 2012 and in the fourth quarter. The company also announced that it had sold its 49 percent interest in troubled Bowater Mersey Paper Co., a forestry and paper mill business based in Nova Scotia, for a nominal amount. No gain or loss was recorded; the investment had already been written down to zero.
The company said accounting charges for pension plans depressed the newspaper’s earnings, even though the company has made no cash contributions to the overfunded plans for many years. For all of 2012, the newspaper lost $53.7 million, compared with $21.2 million in 2011. But the non-cash pension charges amounted to $42.4 million in 2012 and $25.3 million in 2011.
The company’s big Kaplan education division, which accounted for 55 percent of The Post Co.’s revenue in 2012, continued to struggle, as well. Revenue fell 6 percent in the fourth quarter compared with the previous year and fell 9 percent for the year.
Restructuring costs and goodwill charges weighed heavily on Kaplan’s operating income as it continued to close campuses and reduce its online program’s workforce. The company took $111.6 million of charges in the fourth quarter for the impairment of goodwill and other assets at Kaplan Test Prep, as well as $35.9 million in restructuring charges as it closes facilities, mostly at Kaplan Higher Education. Overall, the entire Kaplan division lost $111.9 million in the fourth quarter.
Even without those charges, the once-high-flying division — which had operating income of $359.6 million in 2010 — earned a more modest $65.5 million in all of 2012, down 55 percent from the year before. And the company said it expects to incur about $25 million in additional restructuring costs in 2013.
The Kaplan Higher Education unit faces growing competition as well as pressure from federal Education Department requirements. New student enrollments at Kaplan University and Kaplan Higher Education campuses were down 1 percent in 2012, and the total number of students at the two programs was down 12 percent at the end of 2012, compared with the end of 2011.
Kaplan Test Prep trimmed its losses and produced a positive cash flow in 2012. Its enrollments grew 5 percent in the fourth quarter compared with the last three months of 2011 and 11 percent for the year. But it, too, faces competitive pricing pressures as more test preparation moves online, and the rate of growth slowed in the fourth quarter.
Kaplan International reported strong results in Singapore, offset in large part by troubles in Australia.
The bright spots for the company continued to be cable and broadcast television. TV broadcasting revenue jumped 32 percent in the fourth quarter and 25 percent for the year. Operating income vaulted 54 percent to $62.8 million in the fourth quarter and 64 percent to $191.6 million for all of 2012.
The television stations continued to benefit from political advertising.
Cable television remained steady, with revenue edging up 6 percent in the fourth quarter and 4 percent of the year. The division, facing competitive markets, still eked out $43.4 million in operating income, up about 4 percent, in the fourth quarter of 2012. For the year, operating income fell 1 percent to $154.6 million.
The company slowed its share buyback program, spending about $5.7 million buying its own stock in the fourth quarter. It finished 2012 with 7.4 million shares outstanding. The average shares outstanding dropped 6 percent because of company purchases.
The company also said it had an $18 million write-down of a marketable equity security. The Post Co. did not say which company, but a filing with the Securities and Exchange Commission in November said The Post Co. had a $14 million unrealized loss in Strayer Education, a publicly traded company.