Washington Post Co. posts $6.2 million loss in third quarter
By Steven Mufson,
The Washington Post Co. lost $6.2 million, or 82 cents a share, in the third quarter of 2011 as a result of one-time charges, a sharp contraction in its education business, and continued deterioration in its newspaper and online publishing division.
In the third quarter last year, The Post Co. reported a profit of $60.9 million, or $6.84 a share. Third-quarter revenue fell to $1.03 billion in 2011, down 13 percent from $1.18 billion in the same period of 2010.
The company, which last year sold its money-losing Newsweek magazine, said that, excluding one-time accounting charges, it earned $41.8 million, or $5.27 a share, in the third quarter from continuing operations, down 61 percent from $106 million, or $11.90 a share, from those operations a year earlier.
The main reason for the decline was the shrinking of the Kaplan education division, which has revamped its admissions policy to comply with Education Department regulations and has implemented a risk-free trial period for enrollees in response to criticism of its recruiting practices.
Operating income at Kaplan’s higher-education unit plunged by 79 percent, to $25.1 million. In the third quarter, enrollments fell 30 percent from the year before, and enrollments fell 42 percent in the first nine months of the year compared with 2010.
Overall enrollment at the largely online Kaplan University, including Kaplan’s higher-education campuses, totaled 79,657 as of Sept. 30, down 29 percent from a year earlier but up about 1 percent from June 30 this year.
The much smaller but well-known Kaplan test-preparation unit lost $4.7 million. Higher enrollments were offset by reduced prices to meet competition and to move more customers to online offerings. Kaplan closed more of its test-prep centers, whose numbers are down about 60 percent from peak levels.
The WashingtonPost Co.’s newspaper division continued to struggle. Print advertising revenue in the third quarter slid to $57.6 million, 20 percent lower than in the year-ago period. For the year, print ad revenue is down 13 percent. Classified, zoned and general advertising revenue all fell.
Circulation at the newspaper also fell, at a slower pace than last year but with the rate accelerating since the beginning of this year. The Post’s daily circulation declined 5.4 percent in the first nine months of 2011 compared with the same period last year, and Sunday circulation dropped 4.4 percent. The Post did not disclose the third-quarter rate alone. For the nine months that ended Oct. 2, weekday circulation averaged 518,700, and Sunday circulation averaged 736,800.One benefit of smaller circulation: The newspaper cut its newsprint expenses by 15 percent.
Online activities didn’t fare much better. Revenue generated by online news — including washingtonpost.com and Slate — fell 14 percent, to $23.3 million, in the third quarter. The drop was sharpest for online display advertising, down 17 percent; online classified ad revenue fell 5 percent.
Overall, the newspaper division reported an operating loss of $9.9 million in the third quarter of 2011, compared with an operating loss of $1.7 million a year earlier. For the first nine months of 2011, the division posted $25.6 million in operating losses, compared with $29.8 million in losses a year earlier.
The company’s other two main divisions — cable television and broadcast television — were relatively stable. Revenue was flat at the cable division, and operating income was off 9 percent; the number of Internet and telephone subscribers rose, but the company offered promotional discounts and lost some basic video subscribers. Revenue and profits were down modestly at the broadcast television division, but that, in part, was because the TV stations — in Florida, Michigan and Texas — all benefited last year from a surge in political and Olympics-related advertising.
The special charges against earnings included a variety of ill-fated investments.
In the third quarter, The Post Co. took a $23.1 million write-down on its 8 percent stake in Corinthian Colleges, a career-
oriented for-profit education company whose stock price has tumbled. That brought the write-down on Corinthian stock to $53.8 million in the first nine months of the year.
The Post also took a $9.2 million charge in the third quarter for its share of a newsprint affiliate.
And it took an $11.9 million goodwill impairment charge for what is now known as Avenue100 Media Solutions, a generator of leads for online businesses. That charge brings the write-offs for Avenue100 Media to more than $100 million in recent years.The company has never disclosed the purchase price for the unit, originally known as Course Advisor.
“There are so many good competitors in the student lead aggregation business, and Avenue100 and Course Advisor will never be worth what we paid” for them, Post chief executive Donald Graham said in response to a question at a Sept. 9 session for shareholders.
The Post Co. continues to buy back its own shares. In the third quarter, it purchased 137,534 shares for $47.9 million, or an average of $348.28 a share. The number of shares outstanding dropped 12 percent from the previous year.