WASHINGTON--(BUSINESS WIRE)--May 2, 2008--The Washington Post
Company (NYSE:WPO) today reported net income of $39.3 million ($4.08
per share) for its first quarter ended March 30, 2008, down from net
income of $64.4 million ($6.70 per share) in the first quarter of last
year.
Results for the first quarter of 2008 included charges of $24.6
million related to early retirement program expense at Newsweek
(after-tax impact of $15.3 million, or $1.60 per share). Results for
the first quarter of 2007 included a significant increase in equity in
earnings of affiliates primarily as a result of a large gain on the
sale of land at the Company's Bowater Mersey Paper Company Limited
affiliate (after-tax impact of $8.5 million, or $0.89 per share).
Revenue for the first quarter of 2008 was $1,063.1 million, up 8%
from $985.6 million in 2007. The increase is due to revenue growth at
the education and cable television divisions, while revenues were down
at the newspaper publishing, magazine publishing and television
broadcasting divisions. Operating income for the quarter declined 27%
to $66.9 million, from $92.0 million in 2007. Operating results were
down at the newspaper publishing, magazine publishing and television
broadcasting divisions, while the education and cable divisions
reported improved results for the quarter.
Excluding charges related to early retirement programs, the
Company's operating income for the first quarter of 2008 includes $6.6
million of net pension credits, compared to $5.0 million in the first
quarter of 2007.
Divisional Results
Education
Education division revenue totaled $543.3 million for the first
quarter of 2008, a 14% increase over revenue of $475.8 million for the
first quarter of 2007. Excluding revenue from acquired businesses,
education division revenue increased 9% for the first quarter of 2008.
Kaplan reported first quarter 2008 operating income of $46.7 million,
an increase from $34.3 million in the first quarter of 2007. Operating
income in the first quarter of 2008 includes a $6.7 million credit in
stock compensation expense in the first quarter of 2008, compared to
stock compensation expense of $10.3 million in the first quarter of
2007.
A summary of Kaplan's first quarter operating results compared to
2007 is as follows:
First Quarter
----------------------------
(In thousands)
2008 2007 % Change
--------- --------- --------
Revenue
Higher education $294,603 $248,021 19
Test prep 135,875 134,279 1
Professional 112,593 93,119 21
Kaplan corporate 384 362 6
Intersegment elimination (199) - -
------- -------- -------
$543,256 $475,781 14
======= ======== =======
Operating income (loss)
Higher education $ 44,203 $ 36,246 22
Test prep 9,139 14,631 (38)
Professional 735 5,831 (87)
Kaplan corporate (11,226) (9,829) (14)
Other* 3,842 (12,536) -
Intersegment elimination 38 - -
------- -------- -------
$ 46,731 $ 34,343 36
======= ======== =======
---------------------------------------------------
*Other includes credits (charges) for stock-based incentive
compensation and amortization of certain intangibles.
Higher education includes Kaplan's domestic and international
post-secondary education businesses, including fixed-facility colleges
as well as online post-secondary and career programs. Higher education
revenue grew 19% for the first quarter of 2008. Enrollments increased
17% to 94,200 at March 31, 2008, compared to 80,500 at March 31, 2007,
due primarily to enrollment growth in the online programs. Higher
education results in the first quarter of 2008 include additional
costs associated with the expansion of Kaplan's online high school and
international programs. Higher education results in the first quarter
of 2007 were adversely affected by $2.7 million in lease termination
charges.
Funds provided under student financial aid programs created under
Title IV of the Federal Higher Education Act account for a large
portion of Kaplan Higher Education (KHE) revenues; these funds are
provided in the form of federal loans and grants. In addition, some
KHE students also obtain non-Title IV private loans from lenders to
finance a portion of their education. In response to recent tightening
in the credit markets, certain lenders have announced that they will
apply more stringent lending standards for non-Title IV private
student loans. KHE estimates that approximately 9% of its domestic
revenues come from non-Title IV private loans obtained by its
students. To date, KHE has not been significantly impacted by the
changes in the student loan market; however, continued tightening of
the credit markets may result in financing difficulties for those
students who rely on non-Title IV loans. Legislative and
administrative efforts by both the U.S. Congress and the U.S.
Department of Education are currently pending to help enhance
stability in the U.S. student loan markets; however, the ultimate
outcome of these efforts is uncertain.
Test prep includes Kaplan's standardized test preparation and
English-language course offerings, as well as the K12 and Score!
businesses. Test prep revenue, excluding Score!, grew 7% in the first
quarter of 2008, largely due to growth in English-language programs.
Score! revenues declined 46% as a result of the restructuring
announced in the fourth quarter of 2007, which resulted in the closing
of 75 Score! centers. After closings and consolidations, Score!
operates 79 centers that focus on providing computer-assisted
instruction and small-group tutoring. Operating income for test prep
declined in the first quarter of 2008 due to higher sales and
marketing costs for the English-language and traditional test
preparation programs, along with continued weakness at Score!
Professional includes Kaplan's domestic and overseas professional
businesses. Professional revenue grew 21% in the first quarter of 2008
largely due to the March 2007 acquisition of EduNeering Holdings,
Inc., a Princeton, NJ-based provider of knowledge management solutions
for organizations in the pharmaceutical, medical device, healthcare,
energy and manufacturing sectors; and the August 2007 acquisition of
the education division of Financial Services Institute of Australasia.
Excluding revenue from acquired businesses, professional revenue grew
2% in the first quarter of 2008 due to revenue growth at Kaplan
Professional (U.K.) and Kaplan Professional (Asia-Pacific), and from
growth in the Schweser CFA exam course offerings, offset by continued
declines in professional's real estate book publishing and real estate
course offerings. Operating income is down largely due to continued
weakness in professional's real estate businesses, and severance and
other transition costs related to the restructuring of the Kaplan
Professional (U.S.) businesses, which was announced in the fourth
quarter of 2007. In connection with this restructuring, product
changes are being implemented and certain operations are being
decentralized, in addition to employee terminations. The restructuring
has largely been completed; $1.4 million in severance costs were
recorded in the first quarter of 2008, and additional severance costs
of an estimated $1.8 million are expected to be incurred during the
remainder of 2008.
Corporate represents unallocated expenses of Kaplan, Inc.'s
corporate office and other minor activities.
Other includes (credits) charges for incentive compensation
arising from equity awards under the Kaplan stock option plan, which
was established for certain members of Kaplan's management. Under the
plan, the amount of compensation (credit) expense varies directly with
the estimated fair value of Kaplan's common stock, which is based on a
comparison of operating results and public market values of other
education companies. In the first quarter of 2008, Kaplan reversed a
portion of the accrual related to this plan, resulting in a stock
compensation credit of $6.7 million, compared to stock compensation
expense of $10.3 million in the first quarter of 2007. The credit
reflects a decline in the estimated fair value of Kaplan's common
stock, due largely to an overall decrease in the public market values
of other education companies. In addition, Other includes amortization
of certain intangibles, which increased due to recent Kaplan
acquisitions.
Newspaper Publishing
Newspaper publishing division revenue totaled $206.1 million for
the first quarter of 2008, a 6% decline from revenue of $219.2 million
for the first quarter of 2007. Division operating income was $1.2
million, down from $14.9 million in 2007. The decrease in operating
income reflects the continued decline in division revenues, while
expenses were flat, despite a 13% reduction in newsprint expense.
Print advertising revenue at The Post decreased 11% to $111.6
million, from $125.1 million in 2007. This decline is primarily due to
a sharp reduction in classified advertising, along with declines in
general and retail.
For the first quarter of 2008, Post daily and Sunday circulation
declined 3.6% and 4.3%, respectively, compared to the first quarter of
2007. Average daily circulation totaled 638,300, and average Sunday
circulation totaled 886,000.
Revenue generated by the Company's online publishing activities,
primarily washingtonpost.com, increased 8% to $27.1 million for the
first quarter of 2008, versus $25.1 million for the first quarter of
2007. Display online advertising revenue grew 17%, and online
classified advertising revenue on washingtonpost.com increased 2%. A
small portion of the Company's online publishing revenues is included
in the magazine publishing division.
As previously announced, the Company offered a Voluntary
Retirement Incentive Program in March 2008 to some employees of The
Washington Post newspaper and the corporate office. The early
retirement program will be completed in the second quarter of 2008,
and the related cost will be funded primarily from the assets of the
Company's pension plans. Also as previously announced, The Post will
close its College Park, MD, printing plant in early 2010, after two
presses are moved to The Post's Springfield, VA, plant.
Television Broadcasting
Revenue for the broadcast division declined 4% in the first
quarter of 2008 to $77.7 million, from $80.8 million in 2007;
operating income for the first quarter of 2008 declined 10% to $26.6
million, from $29.4 million in 2007. The decrease in revenue and
operating income is primarily due to soft advertising demand overall,
offset by an increase of $2.8 million in political advertising
revenue.
Magazine Publishing
Revenue for the magazine publishing division totaled $53.4 million
for the first quarter of 2008, a 13% decrease from $61.2 million for
the first quarter of 2007. The decline is due to a 15% reduction in
advertising revenue at Newsweek due in part to fewer ad pages at the
domestic edition, but to a larger extent as a result of lower rates
due to the previously announced circulation rate base reduction, from
3.1 million to 2.6 million. Subscription revenue at the domestic
edition also declined due to the rate base reduction.
As previously announced, Newsweek offered a Voluntary Retirement
Incentive Program to certain employees in February 2008 and 115
employees have accepted the offer. The early retirement program
expense is estimated at $33.0 million, which will be funded primarily
from the assets of the Company's pension plans. Of this amount, $24.6
million was recorded in the first quarter of 2008 and the remainder
will be recorded in the second quarter of 2008.
The division had an operating loss of $32.3 million in the first
quarter of 2008, compared to an operating loss of $6.0 million in the
first quarter of 2007, with the decline due primarily to $24.6 million
in early retirement program expense and the revenue reductions
discussed above, offset by a decline in subscription, manufacturing
and distribution expenses at the domestic edition of Newsweek.
Cable Television
Cable division revenue of $174.3 million for the first quarter of
2008 represents a 17% increase from $149.0 million in the first
quarter of 2007. The 2008 revenue increase is due to continued growth
in the division's cable modem, telephone and digital revenues, as well
as the $3.05 monthly rate increase in September 2007 for most
high-speed data subscribers, and the January 2008 basic video cable
service rate increase of $3.50 per month at nearly all of its systems.
In January 2008, the cable division purchased approximately 6,600
subscribers in Winona, MS, which also had a favorable impact on
revenue growth for the quarter.
Cable division operating income increased 22% to $34.3 million in
the first quarter of 2008, versus $28.0 million in the first quarter
of 2007. The increase in operating income is due to the division's
revenue growth, offset by higher depreciation and programming expenses
and increases in Internet and telephony costs.
At March 31, 2008, Revenue Generating Units (RGUs) grew 10% due to
continued growth in high-speed data and telephony subscribers and
increases in the basic video and digital video subscriber categories.
The cable division began offering telephone service on a very limited
basis in the second quarter of 2006; as of March 31, 2008, telephone
service is being offered in all or part of systems representing 90% of
homes passed. A summary of RGUs is as follows:
March 31, March 31,
Cable Television Division Subscribers 2008 2007
-------------------------------------------------- --------- ---------
Basic 711,049 703,190
Digital 227,104 220,542
High-speed data 356,543 308,089
Telephony 73,786 10,009
--------- ---------
Total 1,368,482 1,241,830
========= =========
Other Businesses and Corporate Office
In October 2007, the Company acquired the outstanding stock of
CourseAdvisor, Inc., a premier online lead generation provider,
headquartered in Wakefield, MA. Through its search engine marketing
expertise and proprietary technology platform, CourseAdvisor generates
student leads for the post-secondary education market. CourseAdvisor
operates as an independent subsidiary of The Washington Post Company.
In the first quarter of 2008, other businesses and corporate
office included the expenses associated with the Company's corporate
office and the operating results of CourseAdvisor. In the first
quarter of 2007, other businesses and corporate office included the
expenses of the Company's corporate office.
Revenue for other businesses (CourseAdvisor) totaled $9.5 million
in the first quarter of 2008. Operating expenses were $19.0 million
for the first quarter of 2008, from $8.7 million in the first quarter
of 2007. The increase in expenses for 2008 is due to expenses from
CourseAdvisor.
Equity in (Losses) Earnings of Affiliates
The Company's equity in losses of affiliates for the first quarter
of 2008 was $3.2 million, compared to earnings of $9.1 million in the
first quarter of 2007. In the first quarter of 2007, $8.9 million of
the equity in earnings of affiliates was due to a gain on the sale of
land at the Company's Bowater Mersey Paper Company Limited affiliate.
The Company holds a 49% interest in Bowater Mersey Paper Company.
Other Non-Operating Income (Expense)
The Company recorded other non-operating income, net, of $4.1
million for the first quarter of 2008, compared to other non-operating
income, net, of $0.8 million for the first quarter of 2007. The 2008
non-operating income, net, included $4.4 million in foreign currency
gains.
Net Interest Expense
The Company incurred net interest expense of $4.4 million for the
first quarter of 2008, compared to $2.6 million for the first quarter
of 2007. The increase is due to a decline in interest income, as well
as higher average borrowings in the first quarter of 2008 versus the
same period of the prior year. At March 30, 2008, the Company had
$467.1 million in borrowings outstanding, at an average interest rate
of 5.0%.
Provision for Income Taxes
The effective tax rate for the first quarter of 2008 was 37.9%,
compared to 35.1% for the same period of 2007. The 2007 effective rate
was impacted by lower taxes provided on the gain on the sale of land
at the Company's Bowater Mersey Paper Company Limited affiliate
investment. Excluding this gain, the effective tax rate for the first
quarter of 2007 was 38.0%.
Earnings Per Share
The calculation of diluted earnings per share for the first
quarter of 2008 was based on 9,512,966 weighted average shares
outstanding, compared to 9,547,097 for the first quarter of 2007. The
Company repurchased 2,604 shares of its Class B common stock at a cost
of $1.8 million during the first quarter of 2008.
Forward-Looking Statements
This report contains certain forward-looking statements that are
based largely on the Company's current expectations. Forward-looking
statements are subject to certain risks and uncertainties that could
cause actual results and achievements to differ materially from those
expressed in the forward-looking statements. For more information
about these forward-looking statements and related risks, please refer
to the section titled "Forward-Looking Statements" in Part I of the
Company's Annual Report on Form 10-K.
THE WASHINGTON POST COMPANY
CONSOLIDATED STATEMENTS OF INCOME
----------------------------------------------------------------------
(Unaudited)
(In thousands, except share and per share amounts)
First Quarter %
-----------------------
2008 2007 Change
----------- ----------- ------
Operating revenues $1,063,140 $ 985,608 8
Operating expenses (931,201) (837,432) 11
Depreciation (60,460) (53,449) 13
Amortization of intangibles (4,610) (2,732) 69
----------- -----------
Operating income 66,869 91,995 (27)
Equity in (losses) earnings of
affiliates, net (3,243) 9,083 --
Interest income 2,096 3,276 (36)
Interest expense (6,534) (5,925) 10
Other income (expense), net 4,079 801 --
----------- -----------
Income before income taxes 63,267 99,230 (36)
Provision for income taxes (24,000) (34,800) (31)
----------- -----------
Net income 39,267 64,430 (39)
Redeemable preferred stock dividends (473) (485) (2)
----------- -----------
Net income available for common stock $ 38,794 $ 63,945 (39)
=========== ===========
Basic earnings per share $ 4.09 $ 6.72 (39)
=========== ===========
Diluted earnings per share $ 4.08 $ 6.70 (39)
=========== ===========
Basic average shares outstanding 9,483,799 9,513,307
Diluted average shares outstanding 9,512,966 9,547,097
THE WASHINGTON POST COMPANY
BUSINESS SEGMENT INFORMATION
----------------------------------------------------------------------
(Unaudited)
(In thousands)
First Quarter %
---------------------
2008 2007 Change
----------------------------
Operating Revenues:
Education $ 543,256 $475,781 14
Newspaper publishing 206,090 219,154 (6)
Television broadcasting 77,668 80,834 (4)
Magazine publishing 53,388 61,243 (13)
Cable television 174,257 148,975 17
Other businesses and corporate office 9,459 -- --
Intersegment elimination (978) (379) --
----------------------------
$1,063,140 $985,608 8
----------------------------
Operating Expenses:
Education $ 496,525 $441,438 12
Newspaper publishing 204,932 204,228 0
Television broadcasting 51,064 51,423 (1)
Magazine publishing 85,718 67,226 28
Cable television 139,972 120,956 16
Other businesses and corporate office 19,038 8,721 --
Intersegment elimination (978) (379) --
----------------------------
$ 996,271 $893,613 11
----------------------------
Operating Income:
Education $ 46,731 $ 34,343 36
Newspaper publishing 1,158 14,926 (92)
Television broadcasting 26,604 29,411 (10)
Magazine publishing (32,330) (5,983) --
Cable television 34,285 28,019 22
Other businesses and corporate office (9,579) (8,721) (10)
----------------------------
$ 66,869 $ 91,995 (27)
----------------------------
Depreciation:
Education $ 16,299 $ 14,053 16
Newspaper publishing 10,484 9,244 13
Television broadcasting 2,198 2,358 (7)
Magazine publishing 524 541 (3)
Cable television 30,824 26,888 15
Other businesses and corporate office 131 365 (64)
----------------------------
$ 60,460 $ 53,449 13
----------------------------
Amortization of intangibles:
Education $ 2,840 $ 2,268 25
Newspaper publishing 174 292 (40)
Television broadcasting -- -- --
Magazine publishing -- -- --
Cable television 66 172 (62)
Other businesses and corporate office 1,530 -- --
----------------------------
$ 4,610 $ 2,732 69
----------------------------
Pension (Expense) Credit:
Education $ (878) $ (842) 4
Newspaper publishing (2,240) (2,599) (14)
Television broadcasting 284 306 (7)
Magazine publishing (12,699) 8,489 --
Cable television (359) (319) 13
Other businesses and corporate office (17) -- --
----------------------------
$ (15,909) $ 5,035 --
----------------------------
CONTACT: The Washington Post Company
John B. Morse, Jr., 202-334-6662
SOURCE: The Washington Post Company
