-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, M/Knkn6iCEHv2K+26gr5qbFh3SRvKpy7LweFxWRyKJTebpl8wI1WMw4OGg6PaX8i 2wQknTX0BgoK/iRT7bsR7g== 0000950133-94-000178.txt : 19940825 0000950133-94-000178.hdr.sgml : 19940825 ACCESSION NUMBER: 0000950133-94-000178 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19940703 FILED AS OF DATE: 19940816 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WASHINGTON POST CO CENTRAL INDEX KEY: 0000104889 STANDARD INDUSTRIAL CLASSIFICATION: 2711 IRS NUMBER: 530182885 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-06714 FILM NUMBER: 94544590 BUSINESS ADDRESS: STREET 1: 1150 15TH ST NW CITY: WASHINGTON STATE: DC ZIP: 20071 BUSINESS PHONE: 2023346000 10-Q 1 FORM 10-Q FOR WASHINGTON POST COMPANY 1 This report (including all exhibits) consists of a total of 15 pages, of which this page is number 1. The exhibit index is on page 13. FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Quarterly Period Ended July 3, 1994 Commission File Number 1-6714 -------------------------------------------------------------------- THE WASHINGTON POST COMPANY - - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 53-0182885 - - -------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1150 15th Street, N.W. Washington, D.C. 20071 - - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (202) 334-6000 - - -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X . No . -------- ------- Shares outstanding at July 31, 1994: Class A Common Stock 1,843,250 Shares Class B Common Stock 9,645,105 Shares 2 2. THE WASHINGTON POST COMPANY INDEX TO FORM 10-Q
PAGE PART I. FINANCIAL INFORMATION Item 1. Financial Statements Condensed Consolidated Statements of Income (Unaudited) for the Thirteen and Twenty-six Weeks Ended July 3, 1994 and July 4, 1993............................................. 3 Condensed Consolidated Balance Sheets (Unaudited) at July 3, 1994 and January 2, 1994...................... 4 Condensed Consolidated Statements of Cash Flows (Unaudited) for the Twenty-six Weeks Ended July 3, 1994 and July 4, 1993............................ 5 Notes to Condensed Consolidated Financial Statements (Unaudited).............................................. 6 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition....................... 7 PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders.............................................. 12 Item 6. Exhibits and Reports on Form 8-K.............................. 13 Signatures............................................................. 14 Exhibit 11............................................................. 15
3 3. PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS
THE WASHINGTON POST COMPANY CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED ------------------------- ------------------------- JULY 3, JULY 4, JULY 3, JULY 4, (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 1994 1993 1994 1993 -------- -------- -------- -------- OPERATING REVENUES ADVERTISING $261,682 $233,078 $473,877 $447,680 CIRCULATION AND SUBSCRIBER 110,098 112,779 219,263 226,207 OTHER 33,033 30,848 70,127 64,524 ------- ------- ------- ------- 404,813 376,705 763,267 738,411 ------- ------- ------- ------- OPERATING COSTS AND EXPENSES OPERATING 216,229 193,597 415,782 388,680 SELLING, GENERAL AND ADMINISTRATIVE 97,160 99,949 186,117 197,732 DEPRECIATION AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT 15,360 15,100 30,070 30,082 AMORTIZATION OF GOODWILL AND OTHER INTANGIBLES 6,502 4,058 10,533 8,125 ------- ------- ------- ------- 335,251 312,704 642,502 624,619 ------- ------- ------- ------- INCOME FROM OPERATIONS 69,562 64,001 120,765 113,792 OTHER INCOME (EXPENSE) EQUITY IN EARNINGS (LOSSES) OF AFFILIATES 2,211 (591) (3,174) (2,386) INTEREST INCOME 2,030 2,488 5,595 5,094 INTEREST EXPENSE (1,413) (985) (2,848) (2,431) OTHER 2 638 2,606 587 ------- ------- ------- ------- INCOME BEFORE INCOME TAXES AND CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE 72,392 65,551 122,944 114,656 ------- ------- ------- ------- PROVISION FOR INCOME TAXES CURRENT 31,763 28,237 54,725 49,228 DEFERRED (628) (677) (1,850) (1,068) ------- ------- ------- ------- 31,135 27,560 52,875 48,160 ------- ------- ------- ------- INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE 41,257 37,991 70,069 66,496 CUMULATIVE EFFECT OF CHANGE IN METHOD OF ACCOUNTING FOR INCOME TAXES - - - 11,600 ------- ------- ------- ------- NET INCOME $ 41,257 $ 37,991 $ 70,069 $ 78,096 ======= ======= ======= ======= EARNINGS PER SHARE: BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE $ 3.54 $ 3.23 $ 5.99 $ 5.65 CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE - - - .98 ------- ------- ------- ------- NET INCOME $ 3.54 $ 3.23 $ 5.99 $ 6.63 ======= ======= ======= ======= DIVIDENDS DECLARED PER SHARE $ - $ - $ 2.10 $ 2.10 ======= ======= ======= ======= AVERAGE NUMBER OF SHARES OUTSTANDING 11,667 11,755 11,693 11,775
4 4.
THE WASHINGTON POST COMPANY CONSOLIDATED BALANCE SHEETS (UNAUDITED) JULY 3, JANUARY 2, (IN THOUSANDS) 1994 1994 -------- ---------- ASSETS CURRENT ASSETS CASH AND CASH EQUIVALENTS $ 97,257 $ 171,512 MARKETABLE SECURITIES 14,785 258,412 ACCOUNTS RECEIVABLE, LESS ESTIMATED RETURNS, DOUBTFUL ACCOUNTS AND ALLOWANCES 172,307 140,518 INVENTORIES 18,203 16,419 PROGRAM RIGHTS 17,950 15,460 OTHER CURRENT ASSETS 15,734 23,253 --------- --------- 336,236 625,574 INVESTMENTS IN AFFILIATES 162,159 155,251 PROPERTY, PLANT AND EQUIPMENT BUILDINGS 180,768 166,433 MACHINERY, EQUIPMENT AND FIXTURES 611,423 579,423 LEASEHOLD IMPROVEMENTS 29,639 29,287 --------- --------- 821,830 775,143 LESS ACCUMULATED DEPRECIATION AND AMORTIZATION (493,742) (469,359) --------- --------- 328,088 305,784 LAND 32,416 28,799 CONSTRUCTION IN PROGRESS 57,540 29,135 --------- --------- 418,044 363,718 GOODWILL AND OTHER INTANGIBLES, LESS ACCUMULATED AMORTIZATION 528,795 309,157 DEFERRED CHARGES AND OTHER ASSETS 198,263 168,804 --------- --------- $ 1,643,497 $ 1,622,504 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES ACCOUNTS PAYABLE AND ACCRUED LIABILITIES $ 176,729 $ 163,553 FEDERAL AND STATE INCOME TAXES 17,206 15,726 DEFERRED SUBSCRIPTION REVENUE 76,775 79,254 --------- --------- 270,710 258,533 OTHER LIABILITIES 198,168 191,088 LONG-TERM DEBT 50,332 51,768 DEFERRED INCOME TAXES 35,958 33,696 --------- --------- 555,168 535,085 SHAREHOLDERS' EQUITY CAPITAL STOCK 20,000 20,000 CAPITAL IN EXCESS OF PAR VALUE 21,290 21,354 RETAINED EARNINGS 1,616,017 1,570,546 UNREALIZED GAIN ON AVAILABLE-FOR-SALE SECURITIES 5,451 -- CUMULATIVE FOREIGN CURRENCY TRANSLATION ADJUSTMENT 5,291 2,908 COST OF CLASS B COMMON STOCK HELD IN TREASURY (579,720) (527,389) --------- --------- 1,088,329 1,087,419 --------- --------- $ 1,643,497 $ 1,622,504 ========= =========
5 5.
THE WASHINGTON POST COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) TWENTY-SIX WEEKS ENDED ---------------------------- JULY 3, JULY 4, (IN THOUSANDS) 1994 1993 -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: NET INCOME $ 70,069 $ 78,096 ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES: CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE -- (11,600) DEPRECIATION AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT 30,070 30,082 AMORTIZATION OF GOODWILL AND OTHER INTANGIBLES 10,533 8,125 AMORTIZATION OF PROGRAM RIGHTS 10,195 9,501 PROVISION FOR DOUBTFUL ACCOUNTS 29,428 26,913 (DECREASE) IN INTEREST AND INCOME TAXES PAYABLE (1,082) (3,476) PROVISION FOR DEFERRED INCOME TAXES (1,850) (1,068) CHANGE IN ASSETS AND LIABILITIES: (INCREASE) IN ACCOUNTS RECEIVABLE (60,837) (49,132) (INCREASE) DECREASE IN INVENTORIES (1,784) 991 INCREASE IN ACCOUNTS PAYABLE AND ACCRUED LIABILITIES 12,556 2,771 OTHER 2,565 (1,894) -------- -------- NET CASH PROVIDED BY OPERATING ACTIVITIES 99,863 89,309 CASH FLOWS FROM INVESTING ACTIVITIES: PURCHASES OF PROPERTY, PLANT AND EQUIPMENT (44,108) (44,732) PURCHASES OF MARKETABLE SECURITIES (14,657) (208,743) PROCEEDS FROM SALES OF MARKETABLE SECURITIES 256,617 261,200 INVESTMENTS IN CERTAIN BUSINESSES (284,207) -- PAYMENTS FOR PROGRAM RIGHTS (9,867) (10,704) OTHER 405 (1,558) -------- -------- NET CASH (USED) BY INVESTING ACTIVITIES (95,817) (4,537) CASH FLOWS FROM FINANCING ACTIVITIES: PRINCIPAL PAYMENTS ON DEBT (1,400) -- DIVIDENDS PAID (24,598) (24,741) COMMON SHARES REPURCHASED (52,303) (14,947) OTHER -- 61 -------- -------- NET CASH (USED) BY FINANCING ACTIVITIES (78,301) (39,627) -------- -------- NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (74,255) 45,145 BEGINNING CASH AND CASH EQUIVALENTS 171,512 86,840 ------- ------- ENDING CASH AND CASH EQUIVALENTS $ 97,257 $ 131,985 ====== =======
6 6. THE WASHINGTON POST COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 1: RESULTS OF OPERATIONS, WHEN EXAMINED ON A QUARTERLY BASIS, REFLECT THE SEASONALITY OF ADVERTISING THAT AFFECTS THE NEWSPAPER, MAGAZINE AND BROADCASTING OPERATIONS. ADVERTISING REVENUES IN THE SECOND AND FOURTH QUARTERS ARE TYPICALLY HIGHER THAN FIRST AND THIRD QUARTER REVENUES. ALL ADJUSTMENTS REFLECTED IN THE INTERIM FINANCIAL STATEMENTS ARE OF A NORMAL RECURRING NATURE. NOTE 2: SUMMARIZED COMBINED (UNAUDITED) RESULTS OF OPERATIONS FOR THE SECOND QUARTER AND YEAR-TO-DATE OF 1994 AND 1993 FOR THE COMPANY'S AFFILIATES ARE AS FOLLOWS (IN THOUSANDS):
SECOND QUARTER YEAR-TO-DATE -------------------------- -------------------------- 1994 1993 1994 1993 --------- --------- --------- --------- OPERATING REVENUES $199,742 $166,021 $360,661 $328,322 OPERATING INCOME 19,111 13,685 16,670 9,556 NET INCOME (LOSS) 6,152 4,275 (240) 952
NOTE 3: IN APRIL 1994 THE COMPANY ACQUIRED SUBSTANTIALLY ALL OF THE ASSETS COMPRISING THE BUSINESSES OF TELEVISION STATIONS KPRC- TV, AN NBC AFFILIATE IN HOUSTON, TEXAS, AND KSAT-TV, AN ABC AFFILIATE IN SAN ANTONIO, TEXAS, FOR $253 MILLION IN CASH. THE TRANSACTION WAS ACCOUNTED FOR AS A PURCHASE AND THE RESULTS OF OPERATIONS OF THE TELEVISION STATIONS WERE INCLUDED WITH THOSE OF THE COMPANY FOR THE PERIOD SUBSEQUENT TO THE DATE OF ACQUISITION. THE FOLLOWING STATEMENTS PRESENT THE COMPANY'S UNAUDITED PRO FORMA CONDENSED CONSOLIDATED INCOME STATEMENTS FOR THE SIX MONTHS ENDED JULY 3, 1994, AND JULY 4, 1993, AS IF THE ACQUISITION OF THE TELEVISION STATIONS HAD OCCURRED AT THE BEGINNING OF EACH SIX MONTH PERIOD. AMOUNTS REFLECT AN ALLOCATION OF THE PURCHASE PRICE TO THE ACQUIRED NET TANGIBLE ASSETS, WITH THE EXCESS BEING AMORTIZED OVER A PERIOD OF 15 YEARS. THE REVENUES AND RESULTS OF OPERATIONS PRESENTED IN THE PRO FORMA INCOME STATEMENTS DO NOT NECESSARILY REFLECT THE RESULTS OF OPERATIONS THAT WOULD ACTUALLY HAVE BEEN OBTAINED IF THE ACQUISITION HAD OCCURRED AT THE BEGINNING OF EACH SIX MONTH PERIOD.
PRO FORMA INCOME STATEMENTS FOR THE SIX-MONTHS ENDED JULY 3, JULY 4, (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 1994 1993 -------- -------- OPERATING REVENUES $782,634 $770,564 NET INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE $69,605 $67,087 AFTER CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE $69,605 $78,687 EARNINGS PER SHARE BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE $5.95 $5.70 AFTER CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE $5.95 $6.68
IN MAY 1994 THE COMPANY ACQUIRED AN 80 PERCENT INTEREST IN MAMMOTH MICRO PRODUCTIONS, A PRODUCER AND PUBLISHER OF MULTIMEDIA CD-ROM TITLES, FOR $23 MILLION IN CASH. THIS TRANSACTION WAS ACCOUNTED FOR AS A PURCHASE AND, ACCORDINGLY THE ASSETS AND LIABILITIES HAVE BEEN RECORDED AT THEIR ESTIMATED FAIR VALUES AT THE DATE OF ACQUISITION. THE EXCESS OF THE COST OVER THE FAIR VALUE OF NET ASSETS ACQUIRED IS BEING AMORTIZED OVER VARIOUS PERIODS UP TO 15 YEARS. RESULTS OF OPERATIONS OF THE ACQUIRED BUSINESS WERE INCLUDED WITH THOSE OF THE COMPANY FOR THE PERIOD SUBSEQUENT TO THE DATE OF ACQUISITION. NOTE 4: DURING THE SECOND QUARTER OF 1994 THE COMPANY REPURCHASED 224,600 SHARES OF ITS CLASS B COMMON STOCK AT A COST OF $52.3 MILLION. 7 7. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION This analysis should be read in conjunction with the consolidated financial statements and the notes thereto. Revenues and expenses in the first and third quarters are customarily lower than those in the second and fourth quarters because of significant fluctuations in advertising volume. For that reason, the results of operations for each quarter are compared with those of the corresponding quarter in the preceding year. SECOND QUARTER COMPARISONS Net income for the second quarter of 1994 was $41.3 million, an increase of 9 percent from net income of $38.0 million in the second quarter last year. Earnings per share increased 10 percent to $3.54 per share, from $3.23 per share in the second quarter of 1993, with a smaller number of shares outstanding. Revenues for the second quarter of 1994 rose 7 percent to $404.8 million, from $376.7 million in the same period last year. Advertising revenues rose 12 percent and other revenues increased 7 percent, while circulation and subscriber revenues fell 2 percent. The newspaper division, Newsweek and other businesses all posted higher revenue in the second quarter this year. The broadcast division had exceptionally strong revenue gains, primarily reflecting the results of the two television stations acquired on April 22. Costs and expenses for the second quarter of 1994 increased 7 percent to $335.3 million, from $312.7 million in the second quarter of 1993. Operating expenses increased 12 percent, while selling, general and administrative expenses decreased 3 percent compared with the second quarter last year. Approximately 50 percent of the total increase relates to additional expenses associated with the newly acquired businesses, while the remainder reflects normal increases in the costs of operations. In the second quarter of 1994 operating income rose to $69.6 million, a 9 percent increase over $64.0 million in 1993. NEWSPAPER DIVISION. At the newspaper division revenues increased 5 percent in the second quarter of 1994. Advertising revenues for the division rose 6.5 percent, with a 1.1 percent increase in advertising linage at The Washington Post. Classified volume grew 6 percent in the quarter with recruitment advertising remaining strong. Retail linage was down 6 percent, while general rose almost 9 percent compared with the same period last year. Preprint volume increased 22 percent over the second quarter of 1993; lower rates initiated at the beginning of the fourth quarter of 1993, have attracted advertisers to preprints from other forms of outside advertising. Circulation 8 8. revenues increased almost 1 percent compared with the first quarter of 1993. BROADCAST DIVISION. Revenues at the broadcast division, which include the results of the two Texas television stations purchased at the end of April, increased 39 percent over the second quarter of 1993. Local advertising revenues increased 49 percent and national advertising revenues rose 36 percent in the second quarter of 1994. Approximately 80 percent of the increase is attributable to the newly acquired stations. MAGAZINE DIVISION. Newsweek revenues in the second quarter of 1994 increased 1 percent. Advertising revenues rose almost 1 percent, primarily due to a slight increase in volume at the domestic edition and higher rates at the international editions. Circulation revenues were up 2 percent at Newsweek, with increased newsstand sales the major contributor to the improvement. In the second quarter Newsweek published the same number of weekly issues (13) as in 1993, but 1994 includes 1 additional newsstand-only special issue. CABLE DIVISION. At the cable division second quarter 1994 revenues were 4 percent lower than 1993, primarily as a result of an 8 percent decline in subscriber revenues. This decrease in subscriber revenues is a result of the decrease in subscriber rates attributable to the rate freeze and reductions enacted in the 1992 Cable Act and the results of operations in the United Kingdom, which were subsequently sold during 1993. Excluding foreign operations, cable division revenues decreased 1 percent in the second quarter of 1994. OTHER BUSINESSES. In the second quarter of 1994, revenues from other businesses, principally Stanley H. Kaplan Educational Center, Pro Am Sports System (PASS), and Legi-Slate, increased 8 percent. Revenues at Kaplan rose 5 percent over the second quarter of 1993, and enrollments increased 3 percent. EQUITY IN EARNINGS AND LOSSES OF AFFILIATES. The company's equity in earnings of affiliates in the second quarter of 1994 was income of $2.2 million, compared with a loss of $.6 million in the second quarter of 1993. Better results at the company's newspaper affiliates were the major factor contributing to the improvement. NON-OPERATING ITEMS. Interest income, net of interest expense, was $.6 million, compared with $1.5 million in the same period last year. The decrease was attributable to lower invested cash balances. SIX MONTH COMPARISONS Earnings for the first six months of 1994 were $70.1 million, an increase of 5 percent over net income of $66.5 million in the first half of 1993. Earnings per share increased 6 percent to $5.99 per 9 9. share, from $5.65 per share in the first six months last year, with a smaller number of shares outstanding. Net income in 1993 does not include a one-time credit of $11.6 million ($.98 per share) resulting from the adoption of Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes." Including this credit, net income in the first half of 1993 was $78.1 million ($6.63 per share). Total revenues for the first six months of 1994 increased 3 percent to $763.3 million, from $738.4 million in the comparable period last year. Advertising revenues, which include the results of the two new television stations in 1994, increased 6 percent, while circulation and subscriber revenues fell 3 percent. Other revenues increased 9 percent over the first half of 1993. Total costs and expenses increased 3 percent during the first six months of 1994 to $642.5 million, from $624.6 million in the corresponding period of 1993. Operating expenses increased 7 percent, while selling, general and administrative expenses decreased 6 percent compared with the first half of 1993. Normal increases in fixed costs, such as payroll and fringe benefits, and circulation related expenses, were partially offset by lower newsprint and magazine paper expense. Over 60 percent of the total increase relates to additional expenses associated with the newly acquired businesses. In the first half of 1994 operating income rose to $120.8 million, a 6 percent increase over $113.8 million in the same period last year. NEWSPAPER DIVISION. Newspaper division revenues were up 2 percent in the first half of 1994, over the comparable period of 1993. Although advertising volume at The Washington Post fell 1.2 percent in the first six months of 1994, advertising revenues for the division rose 3 percent in the period due to strong performances in general and classified advertising volume at The Post. Circulation revenues for the division increased almost 1 percent when compared with the first half of 1993. Daily circulation at The Post was essentially even with the prior year, while Sunday circulation was up by less than 1 percent. BROADCAST DIVISION. Revenues at the broadcast division, which include the results of the two Texas television stations purchased at the end of April, increased 28 percent over the first six months of 1993. In the first half of 1994 local advertising revenues rose 33 percent and national advertising revenues increased 26 percent. Approximately 65 percent of the increase is attributable to the newly acquired stations. MAGAZINE DIVISION. At Newsweek revenues decreased 3 percent in the first half of 1994. A major contributor to the decline was a 6 percent decrease in advertising revenues, which resulted from lower rates at the domestic edition and lower volume, despite the publication of one additional newsstand-only issue in 1994. In the 10 10. first six months of 1994, circulation revenues decreased 1 percent, primarily due to lower newsstand volume and less favorable currency rates at the international editions. CABLE DIVISION. Cable division revenues were down 3 percent in the first half of 1994. Subscriber revenues fell 8 percent in the first six months of 1994, principally due to a decrease in subscriber rates attributable to the rate freeze and reductions enacted in the Cable Act, which was partially offset by a 2 percent increase in basic subscribers. In 1993 results also included operations in the United Kingdom, which were subsequently sold. Excluding foreign operations, cable division revenues were even with the first six months of 1993. OTHER BUSINESSES. At the company's other businesses, revenues rose 9 percent in the first half of 1994. Improved results at Stanley H. Kaplan Educational Center was the major contributor to the increase over 1993. EQUITY IN EARNINGS AND LOSSES OF AFFILIATES. The company's equity in earnings of affiliates during the first half of 1994 was a loss of $3.2 million, compared with a loss of $2.4 million in the first six months of 1993. Lower results from the company's newsprint affiliates, which were partially offset by improved earnings at the newspaper affiliates, were the major contributors to the decrease. NON-OPERATING ITEMS. Interest income, net of interest expense, was even with the first six months of 1993, primarily due to lower invested cash balances and higher interest rates. In 1993 net interest income included the capitalization of interest, higher invested cash balances and lower interest rates. Other income in the first half of 1994 was $2.6 million, compared with $.6 million in the comparable period of 1993. In 1994 other income included a gain of $2.5 million resulting from a change in the company's ownership interest in one of its affiliates. FINANCIAL CONDITION In December 1993 the Federal Communications Commission (FCC) awarded a pioneer's preference for personal communications services (PCS) to American PCS, L.P. (known as American Personal Communications or APC), a limited partnership in which the company has a 70 percent interest. Under the terms of the initial award, the license was to be awarded at no cost to the pioneer. Pursuant to the award, in January 1994, APC filed an application for a PCS authorization with the FCC. APC has begun some operations, and immediately following receipt of authorization from the FCC, the company expects to substantially increase the level of capital investment in the business. On August 9, 1994, the FCC reversed its position with respect to awarding licenses to pioneers at no cost. Under the terms of the new 11 11. decision pioneers will now have to pay the lesser of either 90 percent of the winning bid for a similar license in the same market or 90 percent of the weighted average price of the top 10 winning bids nationwide. Such cost for APC will not be determinable until the conclusion of the auction process, but it will be in addition to the company's initial estimate of construction costs, which could approximate $200 million. In February 1994, the FCC issued new rules related to pricing and the reregulation of the cable industry, which took effect on July 14, 1994, and which will reduce cable revenues. The company has evaluated the rules and does not expect them to have a material effect on consolidated financial results. Post-Newsweek Stations now has six television stations, two each affiliated with ABC, CBS and NBC. Several of these stations have negotiated long-term affiliation agreements during the past 15 months. As a result of these agreements, Post-Newsweek Stations will receive significantly improved network compensation over the life of the contracts, which together with the acquisition of the Texas stations, is projected to increase materially broadcast division operating income. The full effect of the increases will be felt beginning in the third quarter of 1994 and in subsequent periods. In July 1994, Katharine Graham, chairman of the executive committee, announced her intention to resign as a trustee of certain trusts holding Class A shares and to relinquish her right to vote certain other Class A shares held in trust. These changes are subject to the approval of the FCC because of the company's ownership of television properties. If effected these changes will reduce the percentage of Class A shares voted by Mrs. Graham, from 52.4 percent to 29.1 percent and the combined percentage of Class A shares voted by Mrs. Graham and Donald E. Graham, chairman and chief executive officer, from 66.6 percent to 56.8 percent. During the first half of 1994 the company repurchased 224,600 shares of its Class B common stock at a cost of approximately $52.3 million. The company has experienced no other significant changes in its financial condition since the end of 1993. 12 12. PART II - OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS At the Company's May 12, 1994, Annual Meeting of Stockholders, the stockholders elected each of the nominees to its Board of Directors named in the Company's proxy statement dated March 31, 1994. The voting results are set forth below: Election of the nominees to the Board of Directors: CLASS A DIRECTORS
BROKER NOMINEE FOR WITHHELD NON-VOTES ------- --- -------- --------- Cohen 1,843,250 - 0 - - 0 - Gillespie 1,843,250 - 0 - - 0 - D. Graham 1,843,250 - 0 - - 0 - K. Graham 1,843,250 - 0 - - 0 - Ruane 1,843,250 - 0 - - 0 - Simmons 1,843,250 - 0 - - 0 - Spoon 1,843,250 - 0 - - 0 - Wilson 1,843,250 - 0 - - 0 -
CLASS B DIRECTORS
BROKER NOMINEE FOR WITHHELD NON-VOTES ------- --- -------- --------- Burke 8,018,824 13,532 - 0 - Gomory 8,019,790 12,566 - 0 - Keough 8,019,720 12,636 - 0 - Preiskel 8,017,838 14,518 - 0 -
13 13. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) The following document is filed as an exhibit to this report:
EXHIBIT FILING NUMBER DESCRIPTION PAGE NUMBER 11 Calculation of average number of shares outstanding................................... 15
(b) During the period covered by this report the Company filed a Current Report on Form 8-K dated April 22, 1994, which (i) described under Item 2 ("Acquisition or Disposition of Assets.") the Company's purchase of substantially all of the assets comprising the businesses of television stations KPRC-TV, an NBC affiliate in Houston, Texas, and KSAT-TV, an ABC affiliate in San Antonio, Texas, and (ii) included under Item 7 ("Financial Statements and Exhibits.") the financial information required by the instructions to such Item. 14 14. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. THE WASHINGTON POST COMPANY (Registrant) Date: August 16, 1994 /s/ Donald E. Graham --------------- -------------------------------------- Donald E. Graham, Chairman & Chief Executive Officer (Principal Executive Officer) Date: August 16, 1994 /s/ John B. Morse, Jr. --------------- ----------------------------------------- John B. Morse, Jr., Vice President-Finance (Principal Financial Officer) EX-11 2 CALCULATION OF AVERAGE NO. OF SHARES OUTSTANDING 1 15. Exhibit 11 CALCULATION OF AVERAGE NUMBER OF SHARES OUTSTANDING (In thousands of shares)
Thirteen Weeks Ended Twenty-Six Weeks Ended -------------------- ---------------------- July 3, July 4, July 3, July 4, 1994 1993 1994 1993 -------- ---------- --------- ---------- Number of shares of Class A and Class B stock outstanding at beginning of period 11,713 11,750 11,713 11,798 Issuance of shares of Class B common stock (weighted), net of forfeiture of re- stricted stock awards --- --- --- 15 Repurchase of Class B common stock (weighted) (50) --- (25) (43) Unexercised stock option equivalent shares com- puted under the "treasury stock method" 4 5 5 5 ------ ------ ------ ------ Average number of shares outstanding during the period 11,667 11,755 11,693 11,775 ====== ====== ====== ======
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