Cost cuts lead Washington Post to big profit jump

NEW YORK - The Washington Post Co. increased its net income 69 percent in the third quarter, as the company cut costs to narrow losses at its newspapers and kept reaping profit from its cable TV and education divisions.

The company, which owns Newsweek magazine, Kaplan education services and television properties along with its namesake newspaper, said Friday it earned $17.1 million, or $1.81 per share. That compares with net income of $10.1 million, or $1.08 per share, in the same period a year earlier.

Revenue climbed 2 percent to $1.15 billion.

The earnings were higher in part because the company took fewer charges to account for the declining value of assets on its books. After taxes, it took roughly $41 million in charges in the most recent quarter, down from $63 million during the third quarter of 2008.

But the company also improved the results by slashing expenses. The newspaper division, which includes the Post, The Daily Herald in Everett, Wash., and dozens of local weeklies, whittled its operating losses through buyouts and cost-cutting to $23.6 million, down from $82.7 million a year ago.

That happened even though advertising revenue at the flagship newspaper took a steeper dive than the quarter before, falling 28 percent. The newspaper had seen a 20 percent drop in the second quarter and a 33 percent drop in the first.

The Post's decline was comparable to what has been reported by other big publishers — which also have managed to improve earnings by cutting labor and other expenses. The New York Times Co.'s advertising revenue plunged 27 percent in the most recent quarter. Ad revenue in Gannett Co.'s publishing division, which includes USA Today and more than 80 other newspapers, dropped 28 percent.

The Post Co.'s newspaper Web revenue, which comes mainly from Washingtonpost.com, also stalled. It fell 18 percent after showing a 9 percent decline in the previous quarter.

Newsweek posted a 48 percent drop in ad revenue, contributing to a $4.3 million operating loss for the magazine division. In February, Newsweek cut the U.S. circulation it guarantees to advertisers to 1.5 million from 2.6 million.

The company relies increasingly on its Kaplan and cable divisions for growth. Kaplan revenue climbed 14 percent in the quarter and cable revenue was up 4 percent.

Operating income fell 10 percent at Kaplan, however, largely because of an accounting charge. Cable TV operating income slid 3 percent.

The Post did not offer an outlook for the rest of the year and does not hold a conference call to discuss results with analysts.

The company's shares fell $20.08, or 4.4 percent, to close at $431.95.

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