Washington Post shares fall on education sector worries

By IBTimes Staff Reporter | August 06 2010 2:16 PM

The Washington Post Co's quarterly profits quadrupled, but its shares dived as much as 8 percent as the company said the proposed U.S. Department of Education regulations could hurt its Kaplan education unit, which accounts more than 60 percent of its revenue.

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The Washington Post said the regulation on gainful employment, which aims to ensure that students do not graduate with an unwieldy debt burden, could adversely affect Kaplan's ability to retain admissions and financial aid.

However, it said it cannot currently predict with reasonable accuracy the impact the proposed regulation will have on its program offerings if it (the proposed regulation) were enacted in its current form.

Kaplan helps students to prepare for entrance exams for colleges, universities, business school and graduate schools, as well as English language and US medical licensing exams.

Under the proposed rules, the federal government would not lend to programs if over 65 percent of former students failed to pay the principal on federal loans, and if their graduates' debt was more than 30 percent of discretionary income and 12 percent of total income.

The Department of Education would need to issue final rules by November 1, 2010 for them to be effective July 31, 2011.

Shares of Washington Post were down about 11 percent at $364.68 in midday trade on the New York Stock Exchange.

The S&P 1500 education services sub-industry index <.15GSPEDUS> was down 5 percent. It shed about 12 percent of its value in the last two weeks on regulation uncertainties.

Q2 PROFIT JUMPS

The company's quarterly profits were mainly driven by strength in its broadcasting and education segment.

For the second quarter, the newspaper publisher's net income from continued operations rose to $94.2 million, or $10.25 per share, from $21.2 million or $2.25 per share, a year ago.

Net income for the quarter excludes Newsweek results.

Earlier this week, the company said it would sell Newsweek to 91-year-old audio equipment magnate Sidney Harman, who promised to retain most of the U.S. weekly's 350 employees and give it a couple of years to reverse losses.

Revenue grew 11 percent to $1.2 billion. Revenue for the television broadcasting division increased 24 percent to $82.6 million.

Revenue at its educational unit rose 15 percent to $747.3 million.

The newspaper publishing division's revenue rose 2 percent to $172.7 million during the quarter. Print advertising revenue however fell 6 percent to $75.2 million.

(Reporting by Mansi Dutta and Bijoy Koyitty in Bangalore; Editing by Saumyadeb Chakrabarty, Roshni Menon)