1
This report (including all exhibits)
consists of a total of 13 pages, of which this
page is number 1. The exhibit index is on page 10.
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 April 2, 1995 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 May 3, 1995:
Class A Common Stock 1,843,250 Shares
Class B Common Stock 9,231,812 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 Weeks
Ended April 2, 1995 and April 3, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Condensed Consolidated Balance Sheets (Unaudited)
at April 2, 1995 and January 1, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Condensed Consolidated Statements of Cash Flows
(Unaudited) for the Thirteen Weeks Ended
April 2, 1995 and April 3, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 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 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Exhibit 11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Exhibit 27 (Electronic Filing Only) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3
3.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
The Washington Post Company
Consolidated Statements of Income (Unaudited)
Thirteen Weeks Ended
------------------------
April 2, April 3,
(In thousands, except per share amounts) 1995 1994
-------- --------
Operating revenues
Advertising $252,210 $212,195
Circulation and subscriber 108,466 109,165
Other 40,875 37,094
------- -------
401,551 358,454
------- -------
Operating costs and expenses
Operating 221,158 199,553
Selling, general and administrative 98,013 88,957
Depreciation and amortization of
property, plant and equipment 16,374 14,710
Amortization of goodwill and other intangibles 7,673 4,031
------- -------
343,218 307,251
------- -------
Income from operations 58,333 51,203
Other income (expense)
Equity in earnings (losses) of affiliates 772 (5,385)
Interest income 2,334 3,565
Interest expense (1,431) (1,435)
Other 14,395 2,604
------- -------
Income before income taxes 74,403 50,552
------- -------
Provision for income taxes
Current 28,500 22,962
Deferred 2,005 (1,222)
------- -------
30,505 21,740
------- -------
Net income $ 43,898 $ 28,812
======= =======
Earnings per share $ 3.91 $ 2.46
======= =======
Dividends declared per share $ 2.20 $ 2.10
======= =======
Average number of shares outstanding 11,220 11,720
4
4.
The Washington Post Company
Consolidated Balance Sheets (Unaudited)
(In thousands)
April 2, January 1,
Assets 1995 1995
---------- ----------
Current assets
Cash and cash equivalents $ 82,589 $ 117,269
Marketable securities 68,690 24,570
Accounts receivable, less estimated returns,
doubtful accounts and allowances 170,236 175,441
Inventories 25,666 20,378
Program rights 16,479 18,972
Other current assets 17,072 19,249
--------- ---------
380,732 375,879
Investments in affiliates 171,561 170,754
Property, plant and equipment
Buildings 185,231 185,193
Machinery, equipment and fixtures 632,717 629,043
Leasehold improvements 33,239 33,287
--------- ---------
851,187 847,523
Less accumulated depreciation and amortization (514,676) (499,172)
--------- ---------
336,511 348,351
Land 32,562 32,562
Construction in progress 41,483 30,483
--------- ---------
410,556 411,396
Goodwill and other intangibles,
less accumulated amortization 504,972 512,405
Deferred charges and other assets 223,162 226,434
--------- ---------
$1,690,983 $1,696,868
========= =========
Liabilities and Shareholders' equity
Current liabilities
Accounts payable and accrued liabilities $ 160,184 $ 186,129
Federal and state income taxes 35,314 6,593
Deferred subscription revenue 84,348 80,351
Current portion of long-term debt 50,277 -
Dividends declared 12,220 -
--------- ---------
342,343 273,073
Other liabilities 223,233 217,461
Long-term debt - 50,297
Deferred income taxes 32,311 29,104
--------- ---------
597,887 569,935
Shareholders' equity
Capital stock 20,000 20,000
Capital in excess of par value 24,261 21,273
Retained earnings 1,710,732 1,691,497
Unrealized gain on available-for-sale
securities 4,951 2,933
Cumulative foreign currency translation
adjustment 5,503 5,328
Cost of Class B common stock held in Treasury (672,351) (614,098)
--------- ---------
1,093,096 1,126,933
--------- ---------
$1,690,983 $1,696,868
========== ==========
5
5.
The Washington Post Company
Consolidated Statements of Cash Flows (Unaudited)
Thirteen Weeks Ended
------------------------
April 2, April 3,
(In thousands) 1995 1994
-------- --------
Cash flows from operating activities:
Net income $ 43,898 $ 28,812
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization of property, plant
and equipment 16,374 14,710
Amortization of goodwill and other intangibles 7,673 4,031
Amortization of program rights 5,887 4,661
Provision for doubtful accounts 12,667 15,276
Gain on sale of business (14,253) -
Increase (decrease) in interest and income
taxes payable 24,933 17,437
Provision for deferred income taxes 2,005 (1,222)
Change in assets and liabilities:
(Increase) in accounts receivable (7,462) (937)
(Increase) in inventories (5,288) (4,259)
(Decrease) in accounts payable and accrued
liabilities (22,158) (11,905)
(Increase) in other assets and other
liabilities, net (109) -
Other 5,565 5,202
------- -------
Net cash provided by operating activities 69,732 71,806
------- -------
Cash flows from investing activities:
Net proceeds from sale of business 32,743 -
Purchases of property, plant and equipment (16,259) (22,894)
Purchases of marketable securities (43,116) -
Proceeds from sales of marketable securities - 182,587
Investments in certain businesses - (8,750)
Payments for program rights (5,834) (4,526)
Other 33 456
------- -------
Net cash (used) provided by investing activities (32,433) 146,873
------- -------
Cash flows from financing activities:
Dividends paid (12,443) (12,300)
Common shares repurchased (59,536) -
------- ------
Net cash (used) by financing activities (71,979) (12,300)
------- -------
Net (decrease) increase in cash and cash equivalents (34,680) 206,379
Beginning cash and cash equivalents 117,269 171,512
------- -------
Ending cash and cash equivalents $ 82,589 $377,891
======= =======
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 first
quarters of 1995 and 1994 for the company's affiliates are as follows (in
thousands):
First Quarter
---------------------
1995 1994
-------- --------
Operating revenues $200,810 $167,142
Operating income 15,414 2,454
Net income (loss) 7,770 (4,204)
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 statement presents the company's unaudited pro forma
condensed consolidated income statement for the three months ended April 3,
1994, as if the acquisition of the television stations had occurred at the
beginning of the three 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 20 years. The revenues and results of operations
presented in the pro forma income statement does not necessarily reflect the
results of operations that would actually have been obtained if the acquisition
had occurred at the beginning of the three month period.
Pro Forma Income Statement
For the Three-months Ended
(in thousands, except per share amounts) April 3, 1994
-------------
Operating revenues $373,439
Net income 28,872
Earnings per share $2.46
In January 1995 the company sold substantially all of its 70 percent
limited partnership interest in American Personal Communications (APC) to its
partner APC, Inc., and others, for approximately $33 million. The proceeds
approximate the amounts The Washington Post Company had invested in the
partnership since it was formed in August 1990. The company's 1995
first-quarter net income includes $8.4 million ($.75 per share) from the sale.
Note 4: During the first three months of 1995 the company repurchased 244,906
shares of its Class B common stock at a cost of $59.5 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.
RESULTS OF OPERATION
Net income for the first quarter of 1995 was $43.9 million ($3.91 per
share), an increase of 52.4 percent from net income of $28.8 million ($2.46 per
share) last year. The company's 1995 first-quarter net income includes $8.4
million ($0.75 per share) from the sale, at its original cost, of substantially
all of the company's investment in American PCS, L.P. Excluding the effect of
the sale, net income increased 23.2 percent to $35.5 million in the first
quarter this year.
Revenues for the first three months of 1995 were $401.6 million, an
increase of 12.0 percent from $358.5 million in the first quarter of 1994.
Advertising revenues rose 18.9 percent and other revenues increased 10.2
percent while circulation and subscriber revenues were down less than one
percent. All divisions reported higher revenues in the first quarter of 1995
compared to the same period last year. The broadcast division had
exceptionally strong revenue gains, reflecting the results of the two
television stations acquired April 22, 1994 as well as higher revenues at the
original four stations.
Costs and expenses for the first quarter of 1995 increased 11.7
percent to $343.2 million , from $307.3 million in the first quarter of 1994.
Operating expenses and selling, general and administrative expenses increased
10.8 percent and 10.2 percent, respectively, over the same period last year.
Depreciation expense increased 11.3 percent compared to the first quarter of
1994 while amortization expense increased 90.3 percent. Approximately one-half
of the total increase in costs and expenses (and all of the amortization
increase) relates to additional expenses associated with new businesses,
principally the two television stations acquired in April of 1994. In
addition, a 21.7 percent increase in newsprint expense at The Post newspaper
had a significant negative impact on operating results versus last year. The
remainder of the increases reflect normal growth in operating expenses.
In the first quarter of 1995 operating income rose to $58.3 million, a
13.9 percent increase over $51.2 million in 1994. The improvement was due
principally to better results at the broadcast division.
8
8.
NEWSPAPER DIVISION. At the newspaper division, revenues increased 6.9 percent in
the first quarter of 1995. Advertising revenues for the division increased 7.3
percent, due primarily to strong classified and preprint advertising at The
Post. Retail lineage at The Post was down 6.4 percent; classified volume
increased 5.2 percent due to strong performance in recruitment advertising.
General lineage at The Post was down 3.4 percent while preprint volume improved
20 percent. Circulation revenues increased 2.1 percent for the division compared
to the first quarter of 1994. Daily and Sunday circulation at The Post were down
1.5 percent and 0.8 percent, respectively, compared to last year.
BROADCAST DIVISION. Revenues at the broadcast division, which include the
results of the two Texas television stations purchased on April 22, 1994,
increased 61.1 percent over the first quarter of 1994. Local advertising
revenues increased 56.5 percent and national advertising revenues rose 49.7
percent in the first quarter of 1995 compared to the same period last year.
Approximately 70 percent of the total increase in revenue is attributable to the
new television stations. Costs and expenses at the broadcast division increased
65.3 percent compared to the first quarter of 1994. The increase was due almost
entirely to the new television stations.
MAGAZINE DIVISION. Newsweek revenues in the first quarter of 1995 increased
2.5 percent. Advertising revenues increased 11.1 percent on higher advertising
volume at both the domestic and international divisions. Circulation revenues
were down 6.0 percent as a result of one less regular issue and one less
newsstand-only issue at the domestic edition.
CABLE DIVISION. At the cable division, first quarter revenues were 2.5 percent
higher than in the comparable period in 1994. A 3.5 percent increase in the
number of basic subscribers was offset by lower subscriber rates as a result of
the second round of cable industry regulation effective in July 1994. At the
end of the quarter, there were approximately 504,000 basic subscribers.
OTHER BUSINESSES. In the first quarter of 1995, revenues from other businesses
increased 10.8 percent led by a 13.7 percent improvement at Kaplan Educational
Centers. Revenues at the remaining other businesses, principally PASS Sports,
Legi-Slate, Digital Ink, Mammoth Micro Productions and Moffet, Larson &
Johnson, increased 4.6 percent.
EQUITY IN EARNINGS AND LOSSES OF AFFILIATES. The company's equity in earnings
of affiliates in the first three months was $0.8 million compared with a loss
of $5.4 million in 1994. The improvement was due to better results at the
company's affiliated newsprint mills, which are benefiting from higher
newsprint prices.
NON-OPERATING ITEMS. Interest income, net of interest expense, was $0.9
million, compared with $2.1 million in the first quarter of 1994.
9
9.
The company had lower invested cash balances due mainly to the acquisition of
two television stations in April 1994 and the repurchase of company stock.
Other income in the first quarter of 1995 was $14.4 million compared
with $2.6 million in the same period last year. The increase is due to the
sale of substantially all of the company's interest in American PCS, LP in
January 1995. The first quarter of 1994 included a gain of $2.5 million
resulting from a change in the company's ownership interest in another of it's
affiliates.
INCOME TAXES. The effective tax rate in 1995 decreased to 41 percent, from 43
percent in 1994.
FINANCIAL CONDITION: CAPITAL RESOURCES AND LIQUIDITY
The company has completed its assessment of the need for a new
production facility at The Washington Post newspaper. On May 17, 1995, the
company announced a contract to purchase new press equipment as part of a three
year $250 million capital project beginning later in 1995. The company expects
to fund all of these expenditures from operating cash flows.
As indicated previously, the newspaper division has experienced
significant increases in newsprint prices in the first quarter and anticipates
further increases during the year. These increases have and will impact the
company's operating results significantly. As a result of the company's
investment in newsprint paper mills, which are included in equity in income of
affiliates, the company expects that a significant portion of the increased
costs will be offset by increased profits at the newsprint affiliates.
As of the end of 1994, the company had repurchased approximately
885,000 shares of the one million Class B shares authorized for repurchase by
the Board of Directors in May 1990. In January 1995 the Board of Directors
authorized the company to repurchase an additional one million Class B shares,
primarily through block purchases. In the first quarter of 1995, the company
repurchased 244,906 shares of its Class B common stock for $59.5 million. This
completed the repurchase under the May 1990 authorization; approximately
870,000 Class B shares remain to be repurchased under the January 1995
authorization.
The company has experienced no other significant changes in its
financial condition since the end of 1994.
10
10.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) The following documents are filed as exhibits to this report:
EXHIBIT
NUMBER DESCRIPTION
11 Calculation of average number of
shares outstanding
27 Financial Data Schedule (Electronic Filing Only)
(b) No reports on Form 8-K were filed during the period covered by
this report.
11
11.
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: May 17, 1995 /s/ Donald E. Graham
------------ ------------------------------------
Donald E. Graham, Chairman &
Chief Executive Officer
(Principal Executive Officer)
Date: May 17, 1995 /s/ John B. Morse, Jr.
------------ -------------------------------------------
John B. Morse, Jr., Vice President-Finance
(Principal Financial Officer)