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WPO Earnings

Anjelica Tan/MEDILL

Washington Post Co. reported first quarter earnings of $15.2 million, a 67 decline from last year's first quarter. Poor performance in its education division contributed to lower-than-expected results.

Washington Post Co. profit falls with drop in Kaplan enrollment

by Anjelica Tan
May 06, 2011

Dragged by disappointing results in its Kaplan education division, Washington Post Co. reported lower earnings, falling well below Wall Street expectations.

The media conglomerate had net income of $15.2 million, or $1.87 per diluted share, in its first quarter ended April 3, a 67 percent decrease from $45.4 million, or $4.91 per diluted share, in the year-earlier period. The sole analyst was expecting $4.35 per diluted share.

The fall in profit was associated with a drop in enrollment in Kaplan Higher Education, one of the company’s flagship subsidiaries. Fewer students taking Kaplan classes reduced education division revenue to $640.6 million, a 10 percent decrease from $711.4 million in the first quarter last year.

Kaplan’s operating income in the quarter fell 73 percent to $15.5 million, compared with $57.9 million last year.

In the fourth quarter of 2010, Kaplan implemented a marketing strategy in which students who withdraw or are subject to academic dismissal during a risk-free trial have no financial obligation. The subsidiary has also made admissions policy changes to help it comply with the U.S. Department of Education’s proposed crackdown on for-profit colleges such as University of Phoenix, DeVry University and Career Education Corp.

“These changes, along with improving economic conditions and falling unemployment, which generally reduces demand, have resulted in a 48 percent decline in enrollment,” Washington Post Co. management said in its earnings release.

Although Post Co.’s cable television segment reported a 5 percent increase in subscribers, it reported a decline of 11 percent in operating income to $37.7 million from $42.5 million in the first quarter last year. Operating income from the company’s broadcast division fell 6 percent to $19.6 million, compared with $20.9 million one year ago.

Post Co.’s newspaper division posted an operating loss of $12.8 million in the first quarter, compared with a loss of $13.8 million in the same period last year. Revenue from online publishing, primarily and Slate, increased 8 percent to $25.7 million, compared with $23.7 million in the first quarter last year.

In April, Post Co. launched, a personalized news website that uses algorithms to organize stories based on user activity and the latest headlines.

The sole analyst is expecting Post Co. to earn $5.91 per share for the second quarter, compared with actual diluted earnings per share of $10 in the same period last year.

The company’s stock closed Friday at $412.30, down $20.26.