Washington Post Co. reports nearly eightfold rise in second-quarter earnings

By Frank Ahrens
Saturday, August 7, 2010

Second-quarter earnings at The Washington Post Co. rose nearly eightfold, compared with the same period of 2009, as profits soared at the company's education division and advertising rebounded at The Post Co.'s six television stations.

The company earned $91.9 million ($10 a share) on $1.2 billion in second-quarter revenue this year, compared with $12.2 million ($1.30) in profit on $1.1 billion in revenue in the second quarter of 2009.

Kaplan, the company's education division and revenue leader, was responsible for 62 percent of The Post Co.'s total second-quarter revenue and 67 percent of the company's earnings. Second-quarter revenue at Kaplan was up 15 percent, compared with the same period of 2009, and operating income soared 88 percent.

Kaplan and 14 other for-profit colleges were criticized by the Government Accountability Office and the Senate this week after an investigation that showed the schools used deceptive practices when recruiting students and helping them apply for government loans. Post Co. Chairman Donald E. Graham called the actions at the Kaplan schools "sickening" and pledged to clean up the operation.

Kaplan faces further challenges from proposed Education Department rules that would require for-profit schools to show that their courses lead to the "gainful employment" of graduates, who would have to achieve certain debt-to-income ratios in order for the schools to remain eligible for government grants. If the rules are enacted, The Post Co. says, they "may have a material effect on the future operations and results of Kaplan."

The Washington Post newspaper would have swung back to profitability in the second quarter if not for the anticipated $17.7 million cost of withdrawing from a multi-employer pension plan. The Post Co. will pay to get out of the multi-employer plan and move the affected employees into The Post's plan or another pension plan.

The $17.7 million charge pushed the newspaper division -- mainly The Post -- to an operating loss of $14.3 million in the second quarter. Without the charge, however, the newspaper division was $3.4 million in the black for the second quarter, compared with $32.6 million in the red during the same period of 2009. (The division's operating losses of $89.4 million in the year-ago quarter included a charge of $56.8 million for early retirements, or buyouts, of Post employees; without the buyouts, the operating loss was $32.6 million.)

Second-quarter newspaper division revenue was up 2 percent for the quarter, although print ad revenue at The Post was down 6 percent. Online newspaper ad revenue was up 14 percent.

Daily circulation at The Post during the first six months of the year declined 10.7 percent, and Sunday circulation was down 9.5 percent. Daily average circulation now stands at 556,300, with Sunday at 776,900.

Second-quarter revenue at The Post Co.'s TV stations jumped 24 percent, and operating income more than doubled, thanks to a general increase in ad spending and the biennial boost of Olympics-related advertising at the company's NBC affiliates.

The Post Co.'s Cable One -- a small cable company whose subscribers are concentrated in the Gulf States, the Plains and the Northwest -- continued its steady performance. Second-quarter Cable One revenue was up 2 percent, and operating income was up 10 percent. Cable One provided 16 percent of Post Co. revenue, the second-highest amount in the company, ahead of the newspaper division.

The Post Co. sold its money-losing Newsweek magazine last week and took an $8.5 million loss from its discontinued operations in the quarter.

On Friday, shares of Post Co. stock fell $31.05, or 7.6 percent, to $377.56.

© 2010 The Washington Post Company