2Q Earnings Fall at Washington Post Co. -- As Flagship Slides

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By: The Associated Press and E&P Staff The Washington Post Co. reported a 13 percent drop in quarterly earnings Friday, as declining revenue from its flagship paper continued to outweigh gains in the company's education units.

For the second quarter, the company reported earnings of $68.6 million, or $7.19 per share, compared to $78.5 million, or $8.17 per share, in the year-ago quarter.

The results included several one-time tax-related items that cumulatively resulted in a loss of 31 cents per share. Setting those aside, earnings of $7.50 per share still came in lower than the $8.33 per share estimate of analysts surveyed by Thomson Financial.

Quarterly revenue was up 8 percent, from $969 million a year ago to $1.05 billion. That stemmed mostly from a 23 percent increase in revenue at the company's education division, which includes the Kaplan educational service. The education unit now accounts for about half of the company's revenues.

Newspaper publishing revenue fell 7 percent, and magazine revenue fell 13 percent.

For the first six months of the year, income was down 14 percent, from $155 million to $133 million. Revenue rose 6 percent, from $1.92 billion to $2.03 billion.

The details on the newspaper side from the company's press release follows.
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Newspaper publishing division revenue totaled $227.9 million for the second quarter of 2007, a decrease of 7% from $245.6 million in the second quarter of 2006; division revenue decreased 9% to $447.1 million for the first six months of 2007, from $489.0 million for the first six months of 2006. The newspaper division reported operating income of $17.8 million in the second quarter of 2007, compared to an operating loss of $15.4 million for the second quarter of 2006; operating income increased to $32.7 million for the first six months of 2007, compared to $16.7 million for the first six months of 2006.

The increase in operating results is due primarily to $46.8 million in pre-tax charges recorded in the second quarter of 2006 associated with early retirement plan buyouts at The Washington Post. Excluding this charge, operating income was down for the second quarter and the first six months of 2007 due to a decline in division revenues, partially offset by a reduction in newspaper division operating expenses, including newsprint expense declines of 22% and 19% for the second quarter and first six months of 2007, respectively.

Print advertising revenue at The Post in the second quarter declined 13% to $128.4 million, from $148.3 million in the second quarter of 2006, and decreased 15% to $253.6 million for the first six months of 2007, from $298.1 million in the same period of 2006. The declines are due to reductions in real estate, which was a strong category in the first six months of 2006, along with declines in classified, retail and zones. Classified recruitment advertising revenue declined 22% to $13.2 million for the second quarter of 2007, from $16.8 million in the second quarter of 2006, and was down 25% to $28.9 million in the first half of 2007, compared to $38.6 million in the first half of 2006.

For the first six months of 2007, Post daily and Sunday circulation both declined 2.9% compared to the same period of the prior year. For the six months ended July 1, 2007, average daily circulation at The Post totaled 652,200 and average Sunday circulation totaled 920,000.

Revenue generated by the Company's online publishing activities, primarily washingtonpost.com, increased 11% to $28.2 million for the second quarter of 2007, from $25.3 million for the second quarter of 2006; online revenues increased 11% to $53.2 million in the first six months of 2007, from $48.2 million for the first six months of 2006. Display online advertising revenues grew 13% and 16% for the second quarter and first six months of 2007, respectively. Online classified advertising revenue on washingtonpost.com increased 11% and 8% for the second quarter and first six months of 2007, respectively. A small portion of the Company's online publishing revenues is included in the magazine publishing division.

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