August 2, 2013 Last Updated 8:27 am

Washington Post Company reports decline in net income, but revenue grows 3%

Newspaper ad revenue declines only 1 percent in the quarter

WASHINGTON–(BUSINESS WIRE)–Aug. 2, 2013– The Washington Post Company (NYSE: WPO) today reported income from continuing operations attributable to common shares of $44.7 million ($6.02 per share) for the second quarter of 2013, compared to $36.1 million ($4.76 per share) for the second quarter of 2012. Net income attributable to common shares was $44.7 million ($6.02 per share) for the second quarter ended June 30, 2013, compared to $51.8 million ($6.84 per share) for the second quarter of last year. Net income for the second quarter of 2012 includes $15.8 million ($2.08 per share) in income from discontinued operations (refer to “Discontinued Operations” discussion below).

The results for the second quarter of 2013 and 2012 were affected by a number of significant items as described in the following paragraphs. Excluding these items, income from continuing operations attributable to common shares was $62.5 million ($8.47 per share) for the second quarter of 2013, compared to $42.8 million ($5.66 per share) for the second quarter of 2012. (Refer to the Non-GAAP Financial Information schedule at the end of this release for additional details.)

Items included in the Company’s income from continuing operations for the second quarter of 2013:

  • $14.0 million in early retirement, severance and restructuring charges at the newspaper publishing and education divisions (after-tax impact of $9.8 million, or $1.34 per share); and
  • $12.6 million in non-operating unrealized foreign currency losses (after-tax impact of $8.1 million, or $1.11 per share).

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

  • $8.4 million in early retirement, severance and restructuring charges at the newspaper publishing and education divisions (after-tax impact of $5.2 million, or $0.69 per share); and
  • $2.6 million in non-operating unrealized foreign currency losses (after-tax impact of $1.6 million, or $0.21 per share).

Revenue for the second quarter of 2013 was $1,021.9 million, up 3% from $989.1 million in the second quarter of 2012. The Company reported operating income of $93.1 million in the second quarter of 2013, compared to operating income of $63.0 million in the second quarter of 2012. Revenues increased at the cable television and television broadcasting divisions and in other businesses, offset by small declines at the education and newspaper publishing divisions. Operating results improved at the education, cable television and television broadcasting divisions. Excluding early retirement program expense, operating results also improved at the newspaper publishing division.

For the first six months of 2013, the Company reported income from continuing operations attributable to common shares of $50.8 million ($6.84 per share), compared to $49.5 million ($6.48 per share) for the first six months of 2012. Net income attributable to common shares was $49.4 million ($6.66 per share) for the first six months of 2013, compared to $82.9 million ($10.87 per share) for the same period of 2012. Net income includes $1.4 million ($0.18 per share) in losses from discontinued operations and $33.3 million ($4.39 per share) in income from discontinued operations for the first six months of 2013 and 2012, respectively (refer to “Discontinued Operations” discussion below). As a result of the Company’s share repurchases, there were 4% fewer diluted average shares outstanding in the first six months of 2013.

The results for the first half of 2013 and 2012 were affected by a number of significant items as described in the following paragraphs. Excluding these items, income from continuing operations attributable to common shares was $87.8 million ($11.93 per share) for the first six months of 2013, compared to $52.2 million ($6.83 per share) for the first six months of 2012. (Refer to the Non-GAAP Financial Information schedule at the end of this release for additional details.)

Items included in the Company’s income from continuing operations for the first six months of 2013:

  • $39.3 million in early retirement, severance and restructuring charges at the newspaper publishing division and Kaplan (after-tax impact of $26.0 million, or $3.57 per share); and
  • $17.2 million in non-operating unrealized foreign currency losses (after-tax impact of $11.0 million, or $1.52 per share).

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

  • $10.2 million in severance, early retirement and restructuring charges at Kaplan and the newspaper publishing division (after-tax impact of $6.4 million, or $0.84 per share); and
  • a $5.8 million gain on the sale of a cost method investment (after-tax impact of $3.7 million, or $0.48 per share).

Revenue for the first six months of 2013 was $1,981.0 million, up 2% from $1,944.6 million in the first six months of 2012. Revenues increased at the cable television and television broadcasting divisions and in other businesses, offset by declines at the education and newspaper publishing divisions. The Company reported operating income of $116.1 million for the first six months of 2013, compared to $84.3 million for the first six months of 2012. Operating results improved at the education, cable television and television broadcasting divisions. Excluding early retirement program expense, operating results also improved at the newspaper publishing division.

Newspaper Publishing

Newspaper publishing division revenue totaled $138.4 million for the second quarter of 2013, down 1% from revenue of $139.2 million for the second quarter of 2012; division revenue declined 2% to $265.7 million for the first six months of 2013, from $271.7 million for the first six months of 2012. Print advertising revenue at The Washington Post in the second quarter of 2013 was $54.5 million, down 4% from the second quarter of 2012; print advertising revenue was $103.1 million for the first six months of 2013, down 6% from the first six months of 2012. The decline is largely due to reductions in retail and general advertising. Revenue generated by the Company’s newspaper online publishing activities, primarily washingtonpost.com and Slate, increased 15% to $29.8 million for the second quarter of 2013 versus the second quarter of 2012; newspaper online revenues increased 12% to $55.6 million for the first six months of 2013 versus the first six months of 2012. Display online advertising revenue increased 25% and 21% for the second quarter and first six months of 2013, respectively. Online classified advertising revenue declined 7% for both the second quarter and first six months of 2013.

For the first six months of 2013, Post daily and Sunday circulation declined 7.1% and 7.6%, respectively, compared to the same periods of the prior year. For the six months ended June 30, 2013, average daily circulation at The Washington Post totaled 447,700 and average Sunday circulation totaled 646,700.

In February 2013, the Company announced a Voluntary Retirement Incentive Program (VRIP) which was offered to certain employees of the Post. The total VRIP expense was $20.4 million, which is being funded from the assets of the Company’s pension plan. Of this amount, $12.0 million was recorded in the first quarter of 2013 and $8.4 million was recorded in the second quarter of 2013. The Post also implemented a Separation Incentive Program in February 2013 that resulted in an additional $2.3 million in early retirement program expense in the first quarter of 2013, which is also being funded from the assets of the Company pension plan. In addition, voluntary severance and other early retirement expense of $0.7 million and $2.2 million was recorded at the newspaper publishing division in the second quarter and first six months of 2013, respectively, compared to $3.4 million and $5.3 million for the second quarter and first six months of 2012, respectively.

The newspaper publishing division reported an operating loss of $14.8 million in the second quarter of 2013, compared to an operating loss of $12.6 million in the second quarter of 2012. For the first six months of 2013, the newspaper publishing division reported an operating loss of $49.3 million, compared to an operating loss of $33.2 million for the first six months of 2012. These operating losses include noncash pension expense of $16.8 million and $7.7 million for the second quarter of 2013 and 2012, respectively, and $39.7 million and $16.3 million for the first six months of 2013 and 2012, respectively. The decline in operating results for the second quarter and first half of 2013 is due to the $5.7 million and $19.6 million increase in early retirement and severance expense, respectively, and revenue reductions discussed above, offset partially by a decline in other operating expenses. Newsprint expense was down 17% and 14% for the second quarter and first six months of 2013, respectively, primarily due to a decline in newsprint consumption.

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