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The Washington Post Company Reports Third Quarter Earnings

WASHINGTON--(BUSINESS WIRE)--Nov. 2, 2012-- The Washington Post Company (NYSE: WPO) today reported net income attributable to common shares of $93.8 million ($12.64 per share) for the third quarter ended September 30, 2012, compared to a net loss attributable to common shares of $6.2 million ($0.82 loss per share) for the third quarter of last year. However, net income includes $49.1 million ($6.61 per share) in income from discontinued operations and $18.8 million ($2.41 per share) in losses from discontinued operations for the third quarter of 2012 and 2011, respectively (refer to “Discontinued Operations” discussion below). Income from continuing operations attributable to common shares was $44.7 million ($6.03 per share) for the third quarter of 2012, compared to $12.6 million ($1.59 per share) for the third quarter of 2011.

Items included in the Company’s income from continuing operations for the third quarter of 2012:

  • $12.2 million in early retirement, severance and restructuring charges at the newspaper publishing division and Kaplan (after-tax impact of $7.6 million, or $1.02 per share); and
  • $3.1 million in non-operating unrealized foreign currency gains (after-tax impact of $1.9 million, or $0.26 per share).

Items included in the Company’s income from continuing operations for the third quarter of 2011:

  • $5.6 million in severance and restructuring charges at Kaplan (after-tax impact of $3.5 million, or $0.44 per share);
  • a $9.2 million impairment charge at one of the Company’s affiliates (after-tax impact of $5.7 million, or $0.72 per share);
  • a $23.1 million write-down of a marketable equity security (after-tax impact of $14.9 million, or $1.89 per share); and
  • $6.7 million in non-operating unrealized foreign currency losses (after-tax impact of $4.2 million, or $0.54 per share).

Excluding these items, income from continuing operations attributable to common shares was $50.4 million ($6.79 per share) for the third quarter of 2012, compared to $40.9 million ($5.18 per share) for the third quarter of 2011. (Non-GAAP measures are discussed below.)

Revenue for the third quarter of 2012 was $1,011.3 million, flat compared to $1,012.5 million in the third quarter of 2011. The Company reported operating income of $75.9 million in the third quarter of 2012, compared to operating income of $70.2 million in the third quarter of 2011. Revenues and operating income increased at the television broadcasting and cable television divisions, offset by declines at the education and newspaper publishing divisions.

For the first nine months of 2012, the Company reported net income attributable to common shares of $176.7 million ($23.39 per share), compared to $54.5 million ($6.81 per share) for the same period of 2011. However, net income includes $83.2 million ($11.01 per share) in income from discontinued operations and $28.8 million ($3.63 per share) in losses from discontinued operations for the first nine months of 2012 and 2011, respectively (refer to “Discontinued Operations” discussion below). Income from continuing operations attributable to common shares was $93.5 million ($12.38 per share) for the first nine months of 2012, compared to $83.3 million ($10.44 per share) for the first nine months of 2011. As a result of the Company’s share repurchases, there were 6% fewer diluted average shares outstanding in the first nine months of 2012.

Items included in the Company’s income from continuing operations for the first nine months of 2012:

  • $22.4 million in early retirement, severance and restructuring charges at the newspaper publishing division and Kaplan (after-tax impact of $13.9 million, or $1.85 per share);
  • a $5.8 million gain on sales of cost method investments (after-tax impact of $3.7 million, or $0.48 per share); and
  • $3.2 million in non-operating unrealized foreign currency gains (after-tax impact of $2.0 million, or $0.27 per share).

Items included in the Company’s income from continuing operations for the first nine months of 2011:

  • $19.6 million in severance and restructuring charges at Kaplan (after-tax impact of $12.2 million, or $1.52 per share);
  • a $9.2 million impairment charge at one of the Company’s affiliates (after-tax impact of $5.7 million, or $0.72 per share);
  • a $53.8 million write-down of a marketable equity security (after-tax impact of $34.6 million, or $4.34 per share); and
  • $3.7 million in non-operating unrealized foreign currency losses (after-tax impact of $2.3 million, or $0.29 per share).

Excluding these items, income from continuing operations attributable to common shares was $101.7 million ($13.48 per share) for the first nine months of 2012, compared to $138.1 million ($17.31 per share) for the first nine months of 2011. (Non-GAAP measures are discussed below.)

Revenue for the first nine months of 2012 was $2,967.6 million, down 4% from $3,090.7 million in the first nine months of 2011. Revenues were down at the education and newspaper publishing divisions, partially offset by increases at the television broadcasting and cable television divisions. The Company reported operating income of $159.0 million for the first nine months of 2012, compared to $216.6 million for the first nine months of 2011. Operating results were down at all of the Company’s divisions, except for the television broadcasting division.

Division Results

Education

Education division revenue totaled $552.6 million for the third quarter of 2012, an 8% decline from revenue of $601.6 million for the third quarter of 2011. Excluding revenue from acquired businesses, education division revenue declined 9% in the third quarter of 2012. Kaplan reported third quarter 2012 operating income of $14.7 million, down from $20.8 million in the third quarter of 2011.

For the first nine months of 2012, education division revenue totaled $1,652.1 million, a 9% decline from revenue of $1,823.7 million for the same period of 2011. Excluding revenue from acquired businesses, education division revenue declined 11% for the first nine months of 2012. Kaplan reported operating income of $6.5 million for the first nine months of 2012, compared to operating income of $65.4 million for the first nine months of 2011.

In light of recent revenue declines and other business challenges, Kaplan has formulated and implemented restructuring plans at its various businesses that have resulted in significant costs in 2012 and 2011, with the objective of establishing lower costs levels in future periods. Across all businesses, severance and restructuring costs totaled $4.3 million and $9.3 million in the third quarter and first nine months of 2012, respectively, compared to $5.6 million and $19.6 million in the third quarter and first nine months of 2011, respectively. Kaplan expects to incur significant additional restructuring costs in the fourth quarter of 2012 and in 2013 at Kaplan Higher Education and Kaplan International.

A summary of Kaplan’s operating results for the third quarter and the first nine months of 2012 compared to 2011 is as follows:

       
Three Months Ended Nine Months Ended
September 30,   October 2, September 30,   October 2,
(in thousands)   2012   2011   % Change   2012   2011   % Change
Revenue
Higher education $ 273,703 $ 330,856 (17 ) $ 872,948 $ 1,076,051 (19 )
Test preparation 81,151 79,630 2 223,767 236,192 (5 )
Kaplan international 197,858 192,609 3 555,899 513,760 8
Kaplan corporate 998 1,293 (23 ) 3,158 3,475 (9 )
Intersegment elimination   (1,125 )     (2,777 )   (3,705 )     (5,782 )
$ 552,585     $ 601,611   (8 ) $ 1,652,067     $ 1,823,696   (9 )
Operating Income (Loss)
Higher education $ 1,510 $ 25,083 (94 ) $ 16,329 $ 120,890 (86 )
Test preparation 3,446 (4,745 ) (4,067 ) (29,018 ) 86
Kaplan international 20,619 10,775 91 33,336 18,735 78
Kaplan corporate (6,617 ) (3,657 ) (81 ) (28,143 ) (28,898 ) 3
Amortization of intangible assets (4,489 ) (5,568 ) 19 (11,528 ) (15,023 ) 23
Intersegment elimination   224       (1,080 )   579       (1,293 )
$ 14,693     $ 20,808   (29 ) $ 6,506     $ 65,393   (90 )
 

Kaplan sold Kidum in August 2012, EduNeering in April 2012 and Kaplan Learning Technologies in February 2012. Consequently, the education division’s operating results exclude these businesses.

Kaplan Higher Education (KHE) includes Kaplan’s domestic postsecondary education businesses, made up of fixed-facility colleges and online postsecondary and career programs. KHE also includes the domestic professional training and other continuing education businesses. In the third quarter and first nine months of 2012, higher education revenue declined 17% and 19%, respectively, due largely to declines in average enrollments that reflect weaker market demand over the past year. Operating income decreased 94% and 86% for the third quarter and first nine months of 2012, respectively. These declines were due primarily to lower revenue, offset by expense reductions associated with lower enrollments and recent restructuring efforts.

In September 2012, KHE finalized a plan to consolidate its market presence at certain of its fixed-facility campuses. Under this plan, KHE has ceased new enrollments at nine ground campuses as it considers alternatives for these locations, and is in the process of consolidating operations of four other campuses into existing, nearby locations. KHE will be teaching out the current students at these campuses. Revenues at these campuses represent approximately 4% of KHE’s total revenues. In connection with the plan, KHE expects to incur an estimated $18 million in restructuring costs from fixed asset write-downs and lease and severance obligations; $2.1 million of these restructuring costs were recorded in the third quarter of 2012, with the remainder to be recorded in the fourth quarter of 2012 and in 2013. In the third quarter and first nine months of 2012, KHE incurred $2.7 million and $6.5 million in total severance and restructuring costs, respectively, compared to $1.6 million and $7.1 million in the third quarter and first nine months 2011, respectively. KHE continues to assess and develop plans for both its fixed-facility and online programs and expects to incur significant additional restructuring costs in the fourth quarter of 2012 and in 2013.

Although revenues were down substantially compared to the first nine months of 2011, new student enrollments at Kaplan University and KHE Campuses increased 5% in the first nine months of 2012. For the third quarter of 2012, new student enrollments increased 9%. Total enrollments at September 30, 2012, were down 8% compared to September 30, 2011, but increased 8% compared to June 30, 2012.

     

Student Enrollments as of

September 30,   June 30,   September 30,
        2012   2012   2011
Kaplan University 49,132 44,756 53,473
KHE Campuses 24,129   22,849   26,184
73,261   67,605   79,657
 

Kaplan University enrollments included 6,822, 5,681 and 6,036 campus-based students as of September 30, 2012, June 30, 2012, and September 30, 2011, respectively.

Kaplan University and KHE Campuses enrollments at September 30, 2012, and September 30, 2011, by degree and certificate programs, are as follows:

     
As of September 30,
        2012     2011
Certificate 23.6 %     23.5 %
Associate’s 30.7 % 31.0 %
Bachelor’s 32.7 % 34.7 %
Master’s 13.0 %     10.8 %
100.0 %     100.0 %
 

Kaplan Test Preparation (KTP) includes Kaplan’s standardized test preparation and tutoring offerings. KTP revenue increased 2% in the third quarter of 2012, while revenues declined 5% for the first nine months of 2012. Enrollment increased 21% and 12% for the third quarter and first nine months of 2012, respectively, driven by strength in pre-college, medical and bar review programs. Enrollment increases were offset by competitive pricing pressure and a continued shift in demand to lower priced online test preparation offerings. The improvement in KTP operating results in the first nine months of 2012 is largely from lower operating expenses due to restructuring activities in prior years. Also, $3.5 million and $12.0 million in restructuring costs were recorded in the third quarter and first nine months of 2011, respectively.

Kaplan International includes English-language programs, and postsecondary education and professional training businesses outside the United States. In May 2011, Kaplan Australia acquired Franklyn Scholar and Carrick Education Group, national providers of vocational training and higher education in Australia. In June 2011, Kaplan acquired Structuralia, a provider of e-learning for the engineering and infrastructure sector in Spain. Kaplan International revenue increased 3% and 8% in the third quarter and first nine months of 2012, respectively. Excluding revenue from acquired businesses, Kaplan International revenue increased 2% in both the third quarter and the first nine months of 2012 due to enrollment growth in the English-language and Singapore higher education programs. Kaplan International operating income increased in the first nine months of 2012 due largely to strong results in Singapore, offset by combined losses from businesses acquired in 2011. These losses are primarily in Australia, where Kaplan is in the process of consolidating operations and expects to incur restructuring costs in the fourth quarter of 2012 and in 2013.

Corporate represents unallocated expenses of Kaplan, Inc.’s corporate office and other minor shared activities.

Cable Television

Cable television division revenue increased 6% in the third quarter of 2012 to $199.6 million, from $187.9 million for the third quarter of 2011; for the first nine months of 2012, revenue increased 3% to $585.4 million, from $569.4 million in the same period of 2011. The revenue increase for the first nine months of 2012 is due to continued growth of the division’s Internet and telephone service revenues and rate increases for many subscribers in June 2012, offset by an increase in promotional discounts and a decline in basic video subscribers.

Cable television division operating income increased 8% to $39.9 million, from $36.8 million in the third quarter of 2011, due to increased revenues, offset by higher programming costs. Cable division operating income for the first nine months of 2012 decreased 3% to $111.1 million, from $114.9 million for the first nine months of 2011, primarily due to higher programming costs.

At September 30, 2012, Primary Service Units (PSUs) were up slightly from the prior year due to growth in high-speed data and telephony subscribers, offset by a decrease in basic video subscribers. A summary of PSUs is as follows:

     
As of September 30,
        2012   2011
Basic video 605,057   627,659
High-speed data 462,808 448,143
Telephony 185,647   176,527
1,253,512   1,252,329
 

Newspaper Publishing

Newspaper publishing division revenue totaled $137.3 million for the third quarter of 2012, down 4% from revenue of $143.5 million for the third quarter of 2011; division revenue declined 7% to $419.6 million for the first nine months of 2012, from $450.4 million for the first nine months of 2011. Print advertising revenue at The Washington Post in the third quarter of 2012 declined 11% to $51.4 million, from $57.6 million in the third quarter of 2011, and declined 14% to $160.7 million for the first nine months of 2012, from $187.4 million for the first nine months of 2011. The decline is largely due to reductions in general and retail advertising. Revenue generated by the Company’s newspaper online publishing activities, primarily washingtonpost.com and Slate, increased 13% to $26.9 million for the third quarter of 2012, versus $23.8 million for the third quarter of 2011; newspaper online revenues increased 4% to $77.5 million for the first nine months of 2012, versus $74.3 million for the first nine months of 2011. Display online advertising revenue increased 18% and 5% for the third quarter and first nine months of 2012, respectively. Online classified advertising revenue increased 1% for the third quarter and decreased 1% for the first nine months of 2012.

For the first nine months of 2012, Post daily and Sunday circulation declined 9.2% and 6.5%, respectively, compared to the same periods of the prior year. For the nine months ended September 30, 2012, average daily circulation at The Washington Post totaled 471,200 and average Sunday circulation totaled 689,000.

The newspaper publishing division reported an operating loss of $21.8 million in the third quarter of 2012 and an operating loss of $10.8 million in the third quarter of 2011, including noncash pension expense of $16.2 million and $5.2 million, respectively. The newspaper publishing division reported an operating loss of $56.3 million for the first nine months of 2012 and an operating loss of $28.0 million for the first nine months of 2011, including noncash pension expense of $32.6 million and $17.2 million, respectively. Included in pension expense for the third quarter of 2012 was a $7.5 million Voluntary Retirement Incentive Program (VRIP) for certain employees.

The decline in operating results for the third quarter of 2012 is due to the revenue reductions discussed above and $7.8 million in early retirement and severance expense, offset partially by a decline in other operating expenses. The decline in operating results for the first nine months of 2012 is primarily due to the revenue reductions discussed above and $13.1 million in early retirement and severance expense, offset partially by a decline in other operating expenses. Newsprint expense was down 9% and 10% for the third quarter and first nine months of 2012, respectively, due to a decline in newsprint consumption.

Television Broadcasting

Revenue for the television broadcasting division increased 44% to $106.4 million in the third quarter of 2012, from $73.8 million in the same period of 2011; operating income for the third quarter of 2012 more than doubled to $54.1 million, from $24.1 million in the same period of 2011. For the first nine months of 2012, revenue increased 23% to $283.5 million, from $231.0 million in the same period of 2011; operating income for the first nine months of 2012 increased 69% to $128.8 million, from $76.2 million in the same period of 2011.

The increase in revenue and operating income for the third quarter and first nine months of 2012 reflects improved advertising demand across many product categories. This includes a $15.6 million and $22.1 million increase in political advertising revenue in the third quarter and first nine months of 2012, respectively; $10.8 million in incremental summer Olympics-related advertising at the Company’s NBC affiliates in the third quarter of 2012; and increased retransmission revenues.

Other Businesses

Other businesses includes the operating results of Social Code, an agency specializing in paid advertising on social-media platforms, and WaPo Labs, a digital team focused on emerging technologies and new product development.

In September 2012, The Washington Post Company entered into a stock purchase agreement to acquire a controlling interest in Celtic Healthcare, Inc. (Celtic), a provider of home healthcare and hospice services in the northeastern and mid-Atlantic regions. The transaction is expected to close in November 2012. The operating results of Celtic will be included in other businesses.

Corporate Office

Corporate office includes the expenses of the Company’s corporate office as well as a net pension credit.

Equity in Earnings (Losses) of Affiliates

The Company holds a 49% interest in Bowater Mersey Paper Company, a 16.5% interest in Classified Ventures, LLC and interests in several other affiliates.

The Company’s equity in earnings of affiliates, net, was $4.1 million for the third quarter of 2012, compared to a loss of $1.5 million for the third quarter of 2011. For the first nine months of 2012, the Company’s equity in earnings of affiliates, net, totaled $11.3 million, compared to $5.4 million for the same period of 2011. In the third quarter of 2011, a $9.2 million impairment charge was recorded on the Company’s interest in Bowater Mersey Paper Company.

Other Non-Operating Income (Expense)

The Company recorded other non-operating income, net, of $4.2 million for the third quarter of 2012, compared to other non-operating expense, net, of $29.7 million for the third quarter of 2011. The third quarter 2012 non-operating expense, net, included $3.1 million in unrealized foreign currency gains and other items. The third quarter 2011 non-operating expense, net, included a $23.1 million write-down of a marketable equity security (Corinthian Colleges, Inc.), $6.7 million in unrealized foreign currency losses and other items.

The Company recorded non-operating income, net, of $12.1 million for the first nine months of 2012, compared to other non-operating expense, net, of $56.3 million for the same period of the prior year. The 2012 non-operating income, net, included a $7.3 million gain on sales of cost method investments, $3.2 million in unrealized foreign currency gains and other items. The 2011 non-operating expense, net, included a $53.8 million write-down of a marketable equity security (Corinthian Colleges, Inc.), $3.7 million in unrealized foreign currency losses and other items.

Net Interest Expense

The Company incurred net interest expense of $8.1 million and $24.4 million for the third quarter and first nine months of 2012, respectively, compared to $7.7 million and $21.6 million for the same periods of 2011. At September 30, 2012, the Company had $456.5 million in borrowings outstanding, at an average interest rate of 7.0%.

Provision for Income Taxes

The effective tax rate for income from continuing operations for the first nine months of 2012 was 40.3%, compared to 41.6% for the first nine months of 2011.

Discontinued Operations

Kaplan sold Kidum in August 2012, EduNeering in April 2012 and Kaplan Learning Technologies in February 2012. The Company also divested its interest in Avenue100 Media Solutions on July 31, 2012. Consequently, the Company’s income from continuing operations excludes these businesses, which have been reclassified to discontinued operations, net of tax.

The sale of Kaplan Learning Technologies resulted in a pre-tax loss of $3.1 million, which was recorded in the first quarter of 2012. The sale of EduNeering resulted in a pre-tax gain of $29.5 million, which was recorded in the second quarter of 2012. The sale of Kidum resulted in a pre-tax gain of $3.6 million, which was recorded in the third quarter of 2012.

In connection with each of the sales of the Company’s stock in EduNeering and Kaplan Learning Technologies, in the first quarter of 2012, the Company recorded $23.2 million of income tax benefits related to the excess of the outside stock tax basis over the net book value of the net assets disposed.

In connection with the disposal of Avenue100 Media Solutions, Inc., the Company recorded a pre-tax loss of $5.7 million in the third quarter of 2012. An income tax benefit of $44.5 million was also recorded in the third quarter of 2012 as the Company determined that Avenue100 Media Solutions, Inc. had no value. The income tax benefit is due to the Company’s tax basis in the stock of Avenue100 exceeding its net book value, as a result of goodwill and other intangible asset impairment charges recorded in 2008, 2010 and 2011 for which no tax benefit was previously recorded.

Earnings (Loss) Per Share

The calculation of diluted earnings per share for the third quarter and first nine months of 2012 was based on 7,376,255 and 7,507,946 weighted average shares outstanding, respectively, compared to 7,882,709 and 7,978,520, respectively, for the third quarter and first nine months of 2011. In the first nine months of 2012, the Company repurchased 284,550 shares of its Class B common stock at a cost of $97.5 million. At September 30, 2012, there were 7,378,237 shares outstanding and the Company had remaining authorization from the Board of Directors to purchase up to 208,924 shares of Class B common stock.

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 OPERATIONS

(Unaudited)
       
Three Months Ended
September 30, October 2, %
(in thousands, except per share amounts)   2012   2011     Change  
Operating revenues $ 1,011,334 $ 1,012,498 0
Operating expenses (866,583 ) (874,350 ) (1 )
Depreciation of property, plant and equipment (63,739 ) (61,589 ) 3
Amortization of intangible assets   (5,091 )     (6,320 ) (19 )
Operating income 75,921 70,239 8
Equity in earnings (losses) of affiliates, net 4,099 (1,494 )
Interest income 648 994 (35 )
Interest expense (8,738 ) (8,667 ) 1
Other income (expense), net   4,163       (29,650 )
Income from continuing operations before income taxes 76,093 31,422
Provision for income taxes   31,200       18,600   68
Income from continuing operations 44,893 12,822
Income (loss) from discontinued operations, net of tax   49,054       (18,788 )
Net income (loss) 93,947 (5,966 )
Net loss (income) attributable to noncontrolling interests   71       (16 )
Net income (loss) attributable to The Washington Post Company 94,018 (5,982 )
Redeemable preferred stock dividends   (222 )     (226 ) (2 )

Net Income (Loss) Attributable to The Washington Post Company Common Stockholders

$ 93,796     $ (6,208 )
 

Amounts Attributable to The Washington Post Company Common Stockholders

Income from continuing operations $ 44,742 $ 12,580
Income (loss) from discontinued operations, net of tax   49,054       (18,788 )
Net income (loss) $ 93,796     $ (6,208 )
 

Per Share Information Attributable to The Washington Post Company Common Stockholders

Basic income per common share from continuing operations $

6.03

$ 1.59
Basic income (loss) per common share from discontinued operations  

6.61

      (2.41 )
Basic net income (loss) per common share $

12.64

    $ (0.82 )
Basic average number of common shares outstanding   7,272       7,802  
 
Diluted income per common share from continuing operations $

6.03

$ 1.59
Diluted income (loss) per common share from discontinued operations  

6.61

      (2.41 )
Diluted net income (loss) per common share $

12.64

    $ (0.82 )
Diluted average number of common shares outstanding   7,376       7,883  
   
THE WASHINGTON POST COMPANY

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)
   
Nine Months Ended
September 30, October 2, %
(In thousands, except per share amounts)   2012   2011     Change
Operating revenues $ 2,967,557 $ 3,090,724 (4 )
Operating expenses (2,606,446 ) (2,670,703 ) (2 )
Depreciation of property, plant and equipment (188,763 ) (186,133 ) 1
Amortization of intangible assets   (13,392 )     (17,293 ) (23 )
Operating income 158,956 216,595 (27 )
Equity in earnings of affiliates, net 11,301 5,381
Interest income 2,492 2,973 (16 )
Interest expense (26,880 ) (24,588 ) 9
Other income (expense), net   12,116       (56,273 )
Income from continuing operations before income taxes 157,985 144,088 10
Provision for income taxes   63,600       59,900   6
Income from continuing operations 94,385 84,188 12
Income (loss) from discontinued operations, net of tax   83,177       (28,762 )
Net income 177,562 55,426
Net (income) loss attributable to noncontrolling interests   (10 )     10  
Net income attributable to The Washington Post Company 177,552 55,436
Redeemable preferred stock dividends   (895 )     (917 ) (2 )

Net Income Attributable to The Washington Post Company Common Stockholders

$ 176,657     $ 54,519  
 

Amounts Attributable to The Washington Post Company Common Stockholders

Income from continuing operations $ 93,480 $ 83,281 12
Income (loss) from discontinued operations, net of tax   83,177       (28,762 )
Net income $ 176,657     $ 54,519  
 

Per Share Information Attributable to The Washington Post Company Common Stockholders

Basic income per common share from continuing operations $ 12.38 $ 10.44 19
Basic income (loss) per common share from discontinued operations   11.01       (3.63 )
Basic net income per common share $ 23.39     $ 6.81  
Basic average number of common shares outstanding   7,405       7,900  
 
Diluted income per common share from continuing operations $ 12.38 $ 10.44 19
Diluted income (loss) per common share from discontinued operations   11.01       (3.63 )
Diluted net income per common share $ 23.39     $ 6.81  
Diluted average number of common shares outstanding   7,508       7,979  
 
THE WASHINGTON POST COMPANY

BUSINESS SEGMENT INFORMATION

(Unaudited)
           
Three Months Ended Nine Months Ended
September 30, October 2, % September 30, October 2, %
(in thousands)   2012   2011   Change   2012   2011   Change
Operating Revenues:
Education $ 552,585 $ 601,611 (8 ) $ 1,652,067 $ 1,823,696 (9 )
Cable television 199,625 187,892 6 585,414 569,403 3
Newspaper publishing 137,276 143,495 (4 ) 419,550 450,411 (7 )
Television broadcasting 106,411 73,830 44 283,499 230,953 23
Other businesses 15,834 5,764 27,779 16,617 67
Corporate office
Intersegment elimination   (397 )     (94 )   (752 )     (356 )
$ 1,011,334     $ 1,012,498   0 $ 2,967,557     $ 3,090,724   (4 )
Operating Expenses:
Education $ 537,892 $ 580,803 (7 ) $ 1,645,561 $ 1,758,303 (6 )
Cable television 159,712 151,097 6 474,278 454,476 4
Newspaper publishing 159,101 154,256 3 475,885 478,408 (1 )
Television broadcasting 52,329 49,757 5 154,690 154,718 0
Other businesses 21,082 7,509 44,445 22,288 99
Corporate office 5,694 (1,069 ) 14,494 6,292
Intersegment elimination   (397 )     (94 )   (752 )     (356 )
$ 935,413     $ 942,259   (1 ) $ 2,808,601     $ 2,874,129   (2 )
Operating Income (Loss):
Education $ 14,693 $ 20,808 (29 ) $ 6,506 $ 65,393 (90 )
Cable television 39,913 36,795 8 111,136 114,927 (3 )
Newspaper publishing (21,825 ) (10,761 ) (56,335 ) (27,997 )
Television broadcasting 54,082 24,073 128,809 76,235 69
Other businesses (5,248 ) (1,745 ) (16,666 ) (5,671 )
Corporate office   (5,694 )     1,069     (14,494 )     (6,292 )
$ 75,921     $ 70,239   8 $ 158,956     $ 216,595   (27 )
Depreciation:
Education $ 22,024 $ 20,338 8 $ 63,752 $ 61,635 3
Cable television 32,310 31,661 2 96,741 94,980 2
Newspaper publishing 6,274 6,453 (3 ) 18,792 19,893 (6 )
Television broadcasting 3,126 3,137 0 9,473 9,381 1
Other businesses 5 5
Corporate office             244  
$ 63,739     $ 61,589   3 $ 188,763     $ 186,133   1
Amortization of Intangible Assets:
Education $ 4,489 $ 5,568 (19 ) $ 11,528 $ 15,023 (23 )
Cable television 52 62 (16 ) 159 201 (21 )
Newspaper publishing 150 290 (48 ) 505 869 (42 )
Television broadcasting
Other businesses 400 400 1,200 1,200
Corporate office            
$ 5,091     $ 6,320   (19 ) $ 13,392     $ 17,293   (23 )
Pension Expense (Credit):
Education $ 3,522 $ 1,655 $ 7,883 $ 4,859 62
Cable television 694 455 53 1,738 1,470 18
Newspaper publishing 16,181 5,241 32,554 17,226 89
Television broadcasting 1,432 325 3,447 1,306
Other businesses 18 4 38 13
Corporate office   (9,021 )     (9,185 ) (2 )   (27,215 )     (27,729 ) (2 )
$ 12,826     $ (1,505 ) $ 18,445     $ (2,855 )
 
NON-GAAP FINANCIAL INFORMATION
THE WASHINGTON POST COMPANY
(Unaudited)
 

In addition to the results reported in accordance with accounting principles generally accepted in the United States (“GAAP”) included in this press release, the Company has provided information regarding income from continuing operations excluding certain items described below reconciled to the most directly comparable GAAP measures. Management believes these non-GAAP measures, when read in conjunction with the company‘s GAAP financials, provide useful information to investors by offering:

  • the ability to make meaningful period-to-period comparisons of the Company’s ongoing results;
  • the ability to identify trends in the Company’s underlying business; and
  • a better understanding of how management plans and measures the Company’s underlying business.

Income from continuing operations excluding certain items should not be considered a substitute or alternative to computations calculated in accordance with and required by GAAP. These non-GAAP financial measures should be read only in conjunction with financial information presented on a GAAP basis.

The following table reconciles the non-GAAP financial measures to the most directly comparable GAAP measures:

   
Three Months Ended   Nine Months Ended
September 30,   October 2, September 30,   October 2,
(in thousands, except per share amounts)   2012   2011   2012   2011

Amounts attributable to The Washington Post Company common stockholders

Income from continuing operations, as reported $ 44,742     $ 12,580   $ 93,480     $ 83,281
Adjustments:
Severance and restructuring charges 7,553 3,472 13,905 12,152
Marketable equity securities write-down 14,875 34,643
Gain on sales of cost method investments (3,657 )
Foreign currency (gain) loss (1,928 ) 4,239 (1,997 ) 2,323
Investment in affiliates impairment charges       5,703         5,703
Income from continuing operations, adjusted (non-GAAP) $ 50,367     $ 40,869   $ 101,731     $ 138,102
 

Per share information attributable to The Washington Post Company common stockholders

Diluted income per common share from continuing operations, as reported

$

6.03

    $ 1.59   $ 12.38     $ 10.44
Adjustments:
Severance and restructuring charges 1.02 0.44 1.85 1.52
Marketable equity securities write-down 1.89 4.34
Gain on sales of cost method investments (0.48 )
Foreign currency (gain) loss (0.26 ) 0.54 (0.27 ) 0.29
Investment in affiliates impairment charges       0.72         0.72

Diluted income per common share from continuing operations, adjusted (non-GAAP)

$

6.79

    $ 5.18   $ 13.48     $ 17.31
 
The adjusted diluted per share amounts may not compute due to rounding.

Source: The Washington Post Company

The Washington Post Company
Hal S. Jones, 202-334-6645