The Washington Post Company Reports Second Quarter Earnings

Business Wire, August 1, 2008

WASHINGTON -- The Washington Post Company (NYSE:WPO) today reported a net loss of $2.7 million ($0.31 loss per share) for its second quarter ended June 29, 2008, compared to net income of $68.8 million ($7.19 per share) for the second quarter of last year.

Results for the second quarter of 2008 included charges of $87.4 million related to early retirement program expense at The Washington Post newspaper, the corporate office and Newsweek (after-tax impact of $52.9 million, or $5.58 per share). Results for the second quarter of 2008 also reflect a decline in equity in earnings (losses) of affiliates associated with $6.8 million in impairment charges at two of the Company's affiliates (after-tax impact of $4.1 million, or $0.43 per share).

Results for the second quarter of 2007 included additional net income tax expense of $9.2 million ($0.97 per share) as a result of a $15.5 million ($1.63 per share) increase in taxes associated with Bowater Mersey Paper Company Limited, the Company's 49%-owned affiliate based in Canada, and a tax benefit of $6.3 million ($0.66 per share) associated with changes in certain state income tax laws. Both of these were non-cash items in the second quarter of 2007, impacting the Company's long-term net deferred income tax liabilities.

Revenue for the second quarter of 2008 was $1,106.2 million, up 6% from $1,046.8 million in the second quarter of 2007. The increase is due to significant revenue growth at the education and cable television divisions. Revenues were down at the Company's newspaper publishing, magazine publishing and television broadcasting divisions.

Operating income declined in the second quarter of 2008 to $4.8 million, from $125.3 million in the second quarter of 2007, due largely to charges of $87.4 million associated with early retirement plan buyouts in the second quarter of 2008. The newspaper publishing and magazine publishing divisions reported losses in the second quarter of 2008. Operating results were also down at the television broadcasting division, while the education and cable divisions reported improved results for the quarter.

For the first six months of 2008, net income totaled $36.6 million ($3.77 per share), compared with $133.2 million ($13.89 per share) for the same period of 2007. Results for the first six months of 2008 included charges of $112.0 million related to early retirement program expense at The Washington Post newspaper, the corporate office and Newsweek (after-tax impact of $67.8 million, or $7.13 per share). Results for the first six months of 2008 also reflect a decline in equity in earnings (losses) of affiliates associated with $6.8 million in impairment charges at two of the Company's affiliates (after-tax impact of $4.1 million, or $0.43 per share). Results for the first six months of 2007 included additional net income tax expense of $6.6 million ($0.70 per share) as a result of a $12.9 million ($1.36 per share) increase in taxes associated with Bowater Mersey and a tax benefit of $6.3 million ($0.66 per share) associated with changes in certain state income tax laws. Both of these were non-cash items in 2007, impacting the Company's long-term net deferred income tax liabilities. Also included in the first six months of 2007 was a significant increase in equity in earnings of affiliates primarily from a gain on the sale of land at the Company's Bowater Mersey affiliate (after-tax impact of $6.5 million, or $0.68 per share).

Revenue for the first half of 2008 was $2,169.4 million, up 7% from $2,032.4 million in the first half of 2007, due to increased revenues at the Company's education and cable divisions, partially offset by revenue declines at the Company's newspaper publishing, magazine publishing and television broadcasting divisions. Operating income for the first half of 2008 decreased to $71.7 million, from $217.3 million in the first half of 2007, due largely to early retirement program expenses of $112.0 million and significant declines in operating results at the newspaper publishing and magazine publishing divisions. Operating results also declined at the television broadcasting division, while the education and cable divisions reported improved results for the first six months of 2008.

The Company's operating income for the second quarter and first six months of 2008 included $6.6 million and $13.2 million of net pension credits, respectively, compared to $5.8 million and $10.8 million of net pension credits, respectively, for the same periods of 2007, excluding charges related to early retirement programs.

Divisional Results

Education

Education division revenue totaled $576.5 million for the second quarter of 2008, a 14% increase over revenue of $503.5 million for the same period of 2007. Excluding revenue from acquired businesses, education division revenue increased 11% for the second quarter of 2008. Kaplan reported operating income of $47.4 million for the second quarter of 2008, up 26% from $37.5 million in the second quarter of 2007.