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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): April 22, 1994
THE WASHINGTON POST COMPANY
(Exact name of registrant as specified in its charter)
DELAWARE 1-6714 53-0182885
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
1150 15TH ST., N.W., WASHINGTON, D.C. 20071
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (202) 334-6000
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On April 22, 1994, the Registrant purchased from H&C Communications,
Inc. 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, (collectively the "Stations") for $253 million
in cash and the assumption of approximately $4 million in liabilities related
to the Stations' operations.
Funds for the foregoing acquisition were provided from existing cash
and marketable securities of the Registrant.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
Listed below are the financial statements, pro forma financial
information and exhibits, filed as part of this report.
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(a) Financial statements of businesses acquired.
(1) Report of independent accountants . . . . . . . . . . . . . . . . . . . 4
(2) Audited balance sheet of KPRC and KSAT Television
Stations (business units of H&C Communications, Inc.)
as of December 31, 1993 . . . . . . . . . . . . . . . . . . . . . . . 5
(3) Audited statement of income of KPRC and KSAT Television
Stations (business units of H&C Communications, Inc.)
for the year ended December 31, 1993 . . . . . . . . . . . . . . . . . 6
(4) Audited statement of cash flows of KPRC and KSAT Television
Stations (business units of H&C Communications, Inc.)
for the year ended December 31, 1993 . . . . . . . . . . . . . . . . 7
(5) Notes to financial statements of KPRC and KSAT Television
Stations (business units of H&C Communications, Inc.) . . . . . . . . 8
(b) Pro forma financial information.
(1) Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(2) Unaudited pro forma condensed balance sheet of
The Washington Post Company as of
January 2, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(3) Unaudited pro forma condensed statement of income of
The Washington Post Company for the fiscal
year ended January 2, 1994 . . . . . . . . . . . . . . . . . . . . . 15
(4) Notes to unaudited pro forma financial information
of The Washington Post Company . . . . . . . . . . . . . . . . . . . 16
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(c) Exhibits.
Exhibit
Number Description
------ -----------
2 Acquisition agreement among H&C Communications, Inc., Post-Newsweek Stations, Houston,
Inc., and Post-Newsweek Stations, San Antonio, Inc. dated January 31, 1994.
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REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Shareholders of H&C Communications, Inc. and
The Washington Post Company
In our opinion, the accompanying combined balance sheet and the related
combined statements of income and of cash flows present fairly, in all material
respects, the financial position of KPRC and KSAT Television Stations (business
units of H&C Communications, Inc.) at December 31, 1993, and the results of
their operations and their cash flows for the year in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Companies' management; our responsibility is to express
an opinion on these financial statements based on our audit. We conducted our
audit of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE
Washington, D.C.
April 22, 1994
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KPRC and KSAT Television Stations
(business units of H&C Communications, Inc.)
COMBINED BALANCE SHEET
DECEMBER 31, 1993
ASSETS
------
Current assets
Cash and cash equivalents $ 616,060
Accounts receivable, less allowance for doubtful
accounts of $137,500 14,902,358
Program rights 2,643,856
Prepaids and other 964,469
-----------
Total current assets 19,126,743
Property, plant and equipment, net 8,716,539
Program rights 634,162
Goodwill and other intangibles, net 89,324,302
Other assets 1,821,234
-----------
Total assets $119,622,980
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LIABILITIES AND INVESTMENT
--------------------------
Current Liabilities
Accounts payable $ 675,806
Accrued expenses 2,958,987
Program rights payable 2,911,357
Other 745,597
-----------
Total current liabilities 7,291,747
Program rights 522,223
-----------
Total liabilities 7,813,970
Commitments and contingent liabilities
H&C Communications, Inc. investment 111,809,010
-----------
Total liabilities and investment $119,622,980
===========
See accompanying notes to the combined financial statements.
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KPRC and KSAT Television Stations
(business units of H&C Communications, Inc.)
COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1993
Operating revenue, net $64,861,103
-----------
Operating expenses:
Television operating expenses, excluding
depreciation and amortization 26,683,662
Depreciation and amortization 4,295,466
Selling, general and administrative expenses 9,492,172
----------
Total operating expenses 40,471,300
----------
Income from operations 24,389,803
Other non-operating income, net 26,434
----------
Income before income taxes 24,416,237
Provision for state income taxes 1,192,827
----------
Net income $23,223,410
==========
See accompanying notes to the combined financial statements.
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KPRC and KSAT Television Stations
(business units of H&C Communications, Inc.)
COMBINED CASH FLOW STATEMENT
YEAR ENDED DECEMBER 31, 1993
Cash flow from operating activities:
Net income $23,223,410
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 4,259,612
Film amortization 3,790,193
Gain on sale of fixed assets 10,101
Increase in accounts receivable (1,366,760)
Increase in prepaid expenses and other assets (227,381)
Increase in accounts payable 301,187
Increase in accrued expenses 1,289,309
Decrease in program rights payable (522,568)
----------
Net cash provided by operating activities 30,757,103
----------
Cash flow from investing activities:
Purchases of program rights (3,262,572)
Purchases of furniture, fixtures and equipment (487,474)
Other (135,000)
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Net cash used by investing activities (3,885,046)
----------
Cash flow used in financing activities:
Net payments to H&C Communications, Inc. (26,398,397)
----------
Net increase in cash and cash equivalents 473,660
Cash and cash equivalents at beginning of year 142,400
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Cash and cash equivalents at end of year $ 616,060
==========
Noncash investing activity:
Program rights acquired $ 3,506,096
==========
See accompanying notes to the combined financial statements.
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KPRC and KSAT Television Stations
(business units of H&C Communications, Inc.)
NOTES TO COMBINED FINANCIAL STATEMENTS
NOTE 1 - THE COMPANIES AND SIGNIFICANT ACCOUNTING POLICIES
Combined Financial Statements
The financial statements combine the accounts of the following wholly-owned
unincorporated business units of H&C Communications, Inc.:
KPRC - NBC affiliated television station in Houston, Texas
KSAT - ABC affiliated television station in San Antonio, Texas
The above entities are herein referred to as "the Companies". All significant
intercompany accounts and transactions have been eliminated.
Cash and cash equivalents - For purposes of the statement of cash flows, the
Companies consider all highly liquid investments purchased with original
maturities of 90 days or less to be cash equivalents.
Advertising revenues and trade accounts receivable - Revenues are generated
principally from sales of commercial advertising and are recorded net of agency
and national representative commissions as the advertisements are broadcast.
Revenues applicable to commercial advertising availabilities "traded" to
advertisers in exchange for merchandise or services are recorded at the
estimated fair market value of the merchandise or services received.
Program rights - The Companies have entered into program rental contracts which
generally provide for rentals to be paid in installments. Payments made for
program rights which are currently available and the liability for future
payments under these contracts are included in the combined balance sheet.
Program rights are amortized primarily using the straight-line method over a
twelve month period. Certain program rights with lives greater than one year
are amortized using accelerated methods. Program rights expected to be
amortized in the succeeding year and amounts payable within one year are
classified as current assets and liabilities, respectively.
Property, plant and equipment - Property, plant and equipment are recorded at
cost. Maintenance and repairs are charged to expense as incurred; replacements
and major improvements are capitalized.
Depreciation expense is computed using the straight-line method for buildings
and accelerated methods for furniture, machinery and equipment. Leasehold
improvements are amortized using the straight-line method over the lesser of
the term of the related lease or the estimated useful lives of the assets. The
useful lives of property, plant and equipment for purposes of computing
depreciation and amortization expense are:
Buildings 15 - 45 years
Leasehold improvements 7 - 15 years
Furniture, machinery and equipment 3 - 20 years
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Goodwill and other intangible assets - Goodwill and other intangibles represent
the unamortized excess of the cost of acquiring the Companies over the fair
values of such Companies' net tangible assets at the dates of acquisition.
Goodwill and other intangibles acquired are being amortized by use of the
straight-line method over various periods up to 40 years.
Income taxes - The Companies are business units of H&C Communications, Inc.,
which has elected to be taxed as an S Corporation. Accordingly, the
shareholders of H&C Communications, Inc. include their pro rata share of the
Companies' net income in their individual income tax returns and therefore the
accompanying financial statements do not include a provision for federal income
tax. The state income tax provision represents the Texas Earned Surplus Tax.
NOTE 2 - TRANSACTIONS WITH RELATED PARTY
Interunit Transactions
The Companies are charged directly for certain costs that H&C Communications,
Inc. incurs on behalf of its business units. These costs primarily relate to
employee benefits; audit and legal services; insurance coverage; and, payroll
and sales and use taxes. Such charges by H&C Communications, Inc. are based on
a direct cost pass-through and have been included in these combined financial
statements. Costs associated with executive management and corporate overhead
are not allocated, as management believes these amounts to be insignificant.
Net corporate expenses charged to the Companies in 1993 approximated
$8,258,000. In the opinion of management, all allocations have been made on a
reasonable basis.
H&C Communications, Inc. Investment
Since the Companies are business units and not distinct legal entities, there
are no customary equity and capital accounts. Instead H&C Communications, Inc.
investment is maintained by the Companies to account for all interunit
transactions, including those described above. H&C Communications, Inc.
investment is comprised of net income and other transactions with H&C
Communications, Inc. as shown below:
Balance, beginning of year $114,983,997
Net income 23,223,410
Cash transfers out 34,656,239
Net interunit transactions 8,257,842
-----------
Balance, end of year $111,809,010
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NOTE 3 - PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following at December 31, 1993:
Buildings $10,211,193
Furniture, machinery and equipment 44,149,929
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54,361,122
Less accumulated depreciation (47,705,084)
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6,656,038
Land 1,936,897
Construction in progress 123,604
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$ 8,716,539
==========
Depreciation expense was $1,151,852 in 1993.
NOTE 4 - GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill and other intangible assets consist of the following at December 31,
1993:
Broadcast licenses and network affiliations $ 47,821,993
Other intangibles 33,653,544
Goodwill 27,670,503
-----------
109,146,040
Less accumulated amortization (19,821,738)
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$ 89,324,302
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Amortization expense was $3,143,614 in 1993.
NOTE 5 - RETIREMENT PLANS
H&C Communications, Inc. has a defined benefit pension plan which covers
substantially all of the Companies' employees and which is accounted for in
these financial statements as a multiemployer plan. Contributions to the plan
are made solely by H&C Communications, Inc., in amounts deemed necessary and to
the extent deductible for federal income tax purposes. For purposes of these
financial statements, the Companies are required to recognize as net pension
expense total contributions for the period. For the year ended December 31,
1993, pension expense was $459,000.
H&C Communications, Inc. also has a qualified savings plan under which
employees of the Companies can invest up to 16% of earnings. The Companies
will match one-fourth of the employee's contribution up to 6% of the employee's
total compensation. The Companies' contribution was $154,977 in 1993.
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NOTE 6 - COMMITMENTS AND CONTINGENT LIABILITIES
The Companies have entered into contractual commitments in the ordinary course
of business for the rights to acquire broadcast program material not yet
available for broadcast as of December 31, 1993. Under these agreements, the
Companies must make specific minimum payments which are approximately as
follows:
Year ending December 31,
- - -----------------------
1994 $ 754,000
1995 2,162,000
1996 851,000
1997 312,000
1998 312,000
1999 and thereafter 208,000
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$4,599,000
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The Companies have entered into various employment contracts. Commitments for
future payments under such contracts as of December 31, 1993 are approximately
as follows:
Year ending December 31,
- - -----------------------
1994 $2,012,000
1995 808,000
1996 61,000
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$2,881,000
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The Companies have commitments under operating leases for certain machinery,
equipment and facilities used in operations. Certain leases also contain
provisions for renewal or extension. Future minimum lease payments under
operating leases which have remaining noncancelable lease terms in excess of
one year as of December 31, 1993 are approximately as follows:
Year ending December 31,
- - -----------------------
1994 $486,000
1995 100,000
1996 34,000
1997 4,000
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$624,000
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Rental expense was $676,075 in 1993.
The Companies currently and from time to time are involved in litigation
incidental to the conduct of its business. The Companies are not a party to a
lawsuit or proceedings which, in the opinion of management, is likely to have a
material adverse effect on the Companies.
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NOTE 7 - SUBSEQUENT EVENT
In 1994, H&C Communications, Inc. entered into an agreement to sell
substantially all of the assets of the Companies to The Washington Post Company
for $253,000,000 in cash and the assumption of approximately $4 million in
liabilities related to the Companies' operations. The transaction was
completed on April 22, 1994.
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THE WASHINGTON POST COMPANY
Introduction to Unaudited Pro Forma Financial Information
The accompanying unaudited pro forma financial information is based on
the purchase method of accounting utilizing the Registrant's consolidated
financial statements for the fiscal year ended January 2, 1994 and the combined
financial statements of KPRC and KSAT Television Stations (business units of
H&C Communications, Inc.) for the year ended December 31, 1993. The unaudited
pro forma condensed balance sheet at January 2, 1994 has been prepared as if
the acquisition had occurred on that date, and the unaudited pro forma
condensed statement of income for the fiscal year then ended has been prepared
as if the acquisition had occurred at the beginning of the year.
The unaudited pro forma financial information is not intended to
reflect the results of operations or financial position which would have
actually resulted had the acquisition been effective on the dates indicated or
the results of operations or financial position which may be obtained in the
future.
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THE WASHINGTON POST COMPANY
UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
AS OF JANUARY 2, 1994
(IN THOUSANDS)
KPRC & KSAT TV STATIONS PRO FORMA
THE WASHINGTON (BUSINESS UNITS OF H&C PRO FORMA THE WASHINGTON
POST COMPANY COMMUNICATIONS, INC.) ADJUSTMENTS POST COMPANY
-------------- ---------------------- ----------- --------------
ASSETS
CURRENT ASSETS
Cash and marketable securities $429,924 $616 $(253,616) (a) $176,924
Accounts receivable, net 140,518 14,902 (14,902) (b) 140,518
Inventories 16,419 16,419
Program rights 15,460 2,644 371 (c) 18,475
Other current assets 23,253 965 (965) (b) 23,253
---------- ---------- ----------- ----------
625,574 19,127 (269,112) 375,589
INVESTMENTS IN AFFILIATES 155,251 155,251
PROPERTY, PLANT AND EQUIPMENT, NET 363,718 8,717 30,592 (c) 403,027
GOODWILL AND OTHER INTANGIBLES, NET 309,157 89,324 121,583 (c) 520,064
DEFERRED CHARGES AND OTHER ASSETS 168,804 2,455 1,445 (c) 172,704
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$1,622,504 $119,623 $(115,492) $1,626,635
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LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities $163,553 $7,292 $(3,798) (b,c) $167,047
Federal and state income taxes 15,726 15,726
Deferred subscription revenue 79,254 79,254
---------- ---------- ----------- ----------
258,533 7,292 (3,798) 262,027
OTHER LIABILITIES 191,088 522 115 (c) 191,725
LONG-TERM DEBT 51,768 51,768
DEFERRED INCOME TAXES 33,696 33,696
---------- ---------- ----------- ----------
535,085 7,814 (3,683) 539,216
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SHAREHOLDERS' EQUITY
Common stock 20,000 20,000
Capital in excess of par value 21,354 21,354
Retained earnings 1,570,546 1,570,546
Cumulative foreign currency
translation adjustment 2,908 2,908
Treasury stock (527,389) (527,389)
H&C Communications, Inc. investment 111,809 (111,809)(d)
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1,087,419 111,809 (111,809) 1,087,419
---------- ---------- ----------- ----------
$1,622,504 $119,623 $(115,492) $1,626,635
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See accompanying notes to unaudited pro forma financial information.
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THE WASHINGTON POST COMPANY
UNAUDITED PRO FORMA CONDENSED STATEMENT OF INCOME
FOR THE FISCAL YEAR ENDED JANUARY 2, 1994
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
KPRC & KSAT TV STATIONS PRO FORMA
THE WASHINGTON (BUSINESS UNITS OF H&C PRO FORMA THE WASHINGTON
POST COMPANY COMMUNICATIONS, INC.) ADJUSTMENTS POST COMPANY
-------------- ----------------------- ----------- --------------
OPERATING REVENUES
Advertising $ 913,529 $64,861 $ $978,390
Circulation and subscriber 444,385 444,385
Other 140,277 140,277
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1,498,191 64,861 1,563,052
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OPERATING COSTS AND EXPENSES
Operating 790,256 26,684 816,940
Selling, general and administrative 393,196 9,492 402,688
Depreciation and amortization
of property, plant and equipment 59,543 1,152 2,964 (e) 63,659
Amortization of goodwill and
other intangibles 16,216 3,143 10,917 (f) 30,276
---------- ---------- ------------ ----------
1,259,211 40,471 13,881 1,313,563
---------- ---------- ------------ ----------
INCOME FROM OPERATIONS 238,980 24,390 (13,881) 249,489
Equity in losses of affiliates (1,994) (1,994)
Interest income 11,085 (7,919) (g) 3,166
Interest expense (4,983) (4,983)
Other income, net 20,379 26 (33) 20,372
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INCOME BEFORE INCOME TAXES AND
CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING PRINCIPLE 263,467 24,416 (21,833) 266,050
PROVISION FOR INCOME TAXES 109,650 1,193 196 (h) 111,039
---------- ---------- ------------ ----------
INCOME BEFORE CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING PRINCIPLE $153,817 $23,223 $(22,029) $155,011
========== ========== =========== ==========
EARNINGS PER SHARE BEFORE
CUMULATIVE EFFECT OF CHANGES
IN ACCOUNTING PRINCIPLE $13.10 $13.19
========== ==========
AVERAGE NUMBER OF OUTSTANDING SHARES 11,750 11,750
See accompanying notes to unaudited pro forma financial information.
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THE WASHINGTON POST COMPANY
Notes to Unaudited Pro Forma Financial Information
(a) Adjustment to reduce cash by the purchase price of $253,000,000 and to
eliminate the cash of the Stations of $616,000 not purchased by the
Registrant.
(b) Adjustment to eliminate trade receivables and payables and other
assets and accrued liabilities of the Stations not purchased or
assumed by the Registrant.
(c) Adjustment to reflect the allocation of the purchase price to tangible
and intangible assets based on the estimated fair values of the assets
acquired and to eliminate the goodwill of the Stations.
(d) Adjustment to eliminate the equity of the Stations.
(e) Adjustment to reflect the depreciation expense that would have been
incurred based on the estimated fair value of the acquired property,
plant and equipment and the assumed useful lives of 5 to 30 years.
(f) Adjustment to amortize, over a period of 15 years, the excess of the
purchase price over the estimated fair values of the acquired tangible
assets and to eliminate the amortization of goodwill and other
intangibles recorded by the Stations.
(g) Adjustment to reflect the estimated decrease in interest income that
would have been incurred if the purchase for $253,000,000 had occurred
at the beginning of the year with an average interest rate of 3.13%.
(h) Adjustment to reflect the estimated increase in the Registrant's tax
provision.
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SIGNATURES
Pursuant to the requirements of the Security Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
THE WASHINGTON POST COMPANY
(Registrant)
Date: May 6, 1994 By: John B. Morse, Jr.
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Title: Vice President - Finance
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