The Washington Post Co. reports higher earnings
By Steven Mufson,
The Washington Post Co. reported sharply higher earnings in the third quarter of this year, bolstered by cable television profits, political and summer Olympic Games advertising on its local television broadcast stations, and a one-time accounting benefit.
But the company’s flagship newspaper continued to lose circulation and print ad revenue at a steady pace, while revenue and operating income fell at the Kaplan education division.
The company warned that it expected “to incur significant additional restructuring costs” in the fourth quarter and next year at its once-lucrative Kaplan higher education unit, which recently said it was closing or consolidating 13 campuses.
Overall, The Post Co. reported net income of $93.8 million, or $12.64 a share, for the third quarter, compared with a loss of $6.2 million, or 82 cents a share, a year earlier. Revenue for the quarter was flat at $1.01 billion.
But after subtracting discontinued operations, one-time tax benefits and one-time charges such as early retirement and restructuring charges at the newspaper and Kaplan, the company had third-quarter net income of $50.4 million, or $6.79 a share — still more than the net income of $40.9 million, or $5.18 a share, for continuing operations in the third quarter of 2011.
The broadcast division fared best. Revenue jumped 44 percent, to $106.4 million, in the third quarter, and operating income more than doubled, to $54.1 million, compared with the third quarter of 2011. Political advertising revenue rose $15.6 million at the company’s three stations in Florida, two in Texas and one in Michigan. Advertising linked to the Olympics on the company’s NBC affiliates provided an additional $10.8 million. Even without those, the broadcast stations’ revenue increased.
The cable television division’s operating income climbed 8 percent from the year before, to $39.9 million, as increased revenue was partially offset by higher programming costs.
The newspaper division remained a drag on the company’s results. Newspaper and online news revenue slid 4 percent, to $137.3 million, in the third quarter. The division reported an operating loss of $21.8 million in the third quarter, although that figure included a non-cash pension expense of $16.2 million. The Post’s pension is fully funded, and the company need not make cash contributions at this time.
Print advertising tumbled 11 percent, to $51.4 million, but revenue from online activities, including Slate and washingtonpost.com, increased 13 percent, to $26.9 million. Online display ad revenue jumped 18 percent, while online classified edged up 1 percent in the third quarter compared with the year before.
Circulation continued to slide. The Post did not release third-quarter figures, but it said that during the first nine months of the year, daily circulation plunged 9.2 percent and Sunday circulation fell 6.5 percent compared with the same period last year. That pace is little changed from earlier quarters. For the first nine months of the year, circulation of The Washington Post averaged 471,200 on weekdays and 689,000 on Sundays.
The decline in advertising and circulation was partly offset by a 9 percent drop in newsprint costs in the third quarter.
The Post Co.’s Kaplan education division continued to struggle to comply with Education Department regulations while competing with other firms and institutions. Kaplan higher education revenue fell 17 percent, and its operating income plunged 94 percent, to $1.5 million, in the third quarter. That figure included just $2.1 million of an estimated $18 million in restructuring costs connected to closing or consolidating campuses.
Enrollment in Kaplan University and at Kaplan’s higher education campuses was up from June, but was still down 8 percent from the level of Sept. 30, 2011. The company said that the enrollment declines “reflect weaker market demand over the past year.”
Kaplan’s test preparation unit did better than last year and had 21 percent higher enrollment than it did in the third quarter of 2011. But the company said that enrollment increases “were offset by competitive pricing pressure and a continued shift in demand to lower priced online test preparation offerings.”
As a result of share buybacks, there were 6 percent fewer shares than a year earlier.
The biggest one-time item in the company’s third-quarter earnings this year was a $44.5 million income-tax benefit from the “disposal” of Avenue100 Media Solutions. But the benefit was the result of the unit’s poor past performance. The Post Co. has written off more than $100 million in goodwill and other intangible asset costs associated with the venture, and on July 31 it divested itself of the firm.