Ad weakness shows at Washington Post Co.


Q3 revenues were up 10% at the Washington Post Company, while some hefty charges took a toll on net income. What was telling was that revenues were up by percentages in the teens for the company’s segments that aren’t dependent on advertising, while television was the best performer of the ad-supported businesses – and it was only flat.

Post-Newsweek Stations, the TV group, saw revenues increase slightly to $78 million from $77.8 million a year earlier. Core business was down, but the group benefited from a $4.9 million increase in political advertising and $63 million from the Summer Olympics on its NBC stations. Operating income was down 16% to $30.1 million.

Newspaper revenues fell 7% to $196.2 million, with advertising revenues at the flagship Washington Post down 14% to $97.2 million. The newspaper division reported an operating loss of $82.7 million vs. operating income of $8.8 million a year earlier. During the quarter the company took a $59.7 million goodwill impairment charge for its community newspapers and accelerated depreciation of $12.5 million for the College Park, MD plant it closed.

Magazine revenues were down 4% to $60 million, due to advertising and subscription declines at Newsweek. Operating income, however, rose to $9 million from $7 million due to cost savings.

Cable television revenues rose 15% to $181.8 million and operating income shot up 40% to $41.6 million. The company credited growth in sales of digital TV services, broadband Internet and telephone services, along with rate increases.

Best of all, education revenues rose 17% to $602.7 million and operating income rose 36% to $51.1 million. Higher education, test prep, professional and Kaplan corporate all posted revenue gains.

On the bottom line, net income for the Washington Post Company was $10.3 million, or $1.08 per share, down from $72.5 million, or $7.60 per share, a year earlier.

RBR/TVBR observation: The Post Company’s diversification into non-ad-supported businesses was partly by design and partly accidental, but it has proved quite fortunate. The education division, led by Kaplan, seems to have some immunity to an economic downturn. And Cable One is growing revenues and profits nicely as cable subscribers move to higher-priced digital tiers and add broadband and telephone service.