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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 March 30, 1997 Commission File Number 1-6714
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THE WASHINGTON POST COMPANY
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(Exact name of registrant as specified in its charter)
Delaware 53-0182885
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1150 15th Street, N.W. Washington, D.C. 20071
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(Address of principal executive offices) (Zip Code)
(202) 334-6000
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(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 .
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Shares outstanding at May 2, 1997:
Class A Common Stock 1,779,250 Shares
Class B Common Stock 8,956,515 Shares
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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 March 30, 1997 and March 31, 1996 . . . . . . . . . . . . . . . . . . . . . . . . . 3
Condensed Consolidated Balance Sheets (Unaudited)
at March 30, 1997 and December 29, 1996 . . . . . . . . . . . . . . . . . . . . . . . . . 4
Condensed Consolidated Statements of Cash Flows
(Unaudited) for the Thirteen Weeks Ended
March 30, 1997 and March 31, 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 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
Exhibit 27 (Electronic Filing Only)
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
The Washington Post Company
Consolidated Statements of Income (Unaudited)
Thirteen Weeks Ended
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March 30, March 31,
(In thousands, except per share amounts) 1997 1996
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Operating revenues
Advertising $278,528 $252,807
Circulation and subscriber 123,674 117,070
Other 51,899 46,742
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454,101 416,619
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Operating costs and expenses
Operating 243,504 242,482
Selling, general and administrative 106,886 100,792
Depreciation and amortization of
property, plant and equipment 17,790 16,160
Amortization of goodwill and other intangibles 7,953 6,985
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376,133 366,419
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Income from operations 77,968 50,200
Other income (expense)
Equity in earnings of affiliates 125 7,353
Interest income 1,112 1,224
Interest expense (165) (1,083)
Other (846) 2,867
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Income before income taxes 78,194 60,561
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Provision for income taxes
Current 30,253 22,343
Deferred 247 1,276
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30,500 23,619
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Net income 47,694 36,942
Redeemable preferred stock dividends (478) (202)
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Net income available for common shares $ 47,216 $ 36,740
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Earnings per common share $ 4.35 $ 3.34
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Dividends declared per common share $ 2.40 $ 2.30
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Average number of common shares outstanding 10,866 11,011
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The Washington Post Company
Consolidated Balance Sheets (Unaudited)
(In thousands)
March 30, December 29,
Assets 1997 1996
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Current assets
Cash and cash equivalents $ 104,804 $ 102,278
Accounts receivable, less estimated returns,
doubtful accounts and allowances 209,489 233,063
Inventories 30,641 24,427
Other current assets 17,844 22,863
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362,778 382,631
Investments in affiliates 196,403 199,278
Property, plant and equipment
Buildings 188,461 188,527
Machinery, equipment and fixtures 762,379 768,509
Leasehold improvements 28,987 28,883
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979,827 985,919
Less accumulated depreciation and amortization (600,110) (594,195)
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379,717 391,724
Land 34,333 34,332
Construction in progress 120,974 85,307
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535,024 511,363
Goodwill and other intangibles,
less accumulated amortization 552,669 544,349
Deferred charges and other assets 237,181 232,790
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$1,884,055 $1,870,411
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Liabilities and Shareholders' Equity
Current liabilities
Accounts payable and accrued liabilities $ 180,782 $ 194,186
Federal and state income taxes 32,304 5,381
Deferred subscription revenue 85,011 82,069
Dividends declared 13,226 --
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311,323 281,636
Other liabilities 226,719 223,878
Deferred income taxes 29,588 30,147
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567,630 535,661
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Redeemable preferred stock 11,947 11,947
Preferred stock -- --
Common shareholders' equity
Common stock 20,000 20,000
Capital in excess of par value 30,297 26,455
Retained earnings 2,023,601 2,002,359
Cumulative foreign currency translation
adjustment 2,285 4,663
Unrealized gain on available-for-sale
securities 1,906 3,155
Cost of Class B common stock held in treasury (773,611) (733,829)
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1,304,478 1,322,803
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$1,884,055 $1,870,411
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The Washington Post Company
Consolidated Statements of Cash Flows (Unaudited)
Thirteen Weeks Ended
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March 30, March 31,
(In thousands) 1997 1996
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Cash flows from operating activities:
Net income $ 47,694 $ 36,942
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization of property, plant
and equipment 17,790 16,160
Amortization of goodwill and other intangibles 7,953 6,985
Gain on disposition of business, net -- (3,112)
Equity in earnings of affiliates, net
of distributions 498 (2,569)
Increase in income taxes payable 26,923 19,626
Provision for deferred income taxes 247 1,276
Change in assets and liabilities:
Decrease in accounts receivable, net 23,574 3,284
(Increase) in inventories (6,214) (3,835)
(Decrease) increase in accounts payable and
accrued liabilities (13,405) 9,818
Decrease (increase) in other assets and other
liabilities, net 4,719 (16,700)
Other 4,925 6,099
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Net cash provided by operating activities 114,704 73,974
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Cash flows from investing activities:
Net proceeds from sale of business -- 3,517
Purchases of property, plant and equipment (35,206) (23,078)
Proceeds from sales of marketable securities -- 12,821
Investments in certain businesses (23,098) (83,638)
Other 391 72
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Net cash used in investing activities (57,913) (90,306)
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Cash flows from financing activities:
Principal payments on debt -- (50,209)
Issuance of redeemable preferred stock -- 11,947
Dividends paid (13,226) (12,645)
Common shares repurchased (41,039) (5,712)
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Net cash used in financing activities (54,265) (56,619)
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Net increase (decrease) in cash and cash
equivalents 2,526 (72,951)
Beginning cash and cash equivalents 102,278 146,901
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Ending cash and cash equivalents $104,804 $ 73,950
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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 1997 and 1996 for the company's affiliates are as follows (in
thousands):
First Quarter
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1997 1996
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Operating revenues $213,598 $235,473
Operating income 7,146 37,403
Net income 4,302 27,373
Note 3: In the first quarter of 1997 the company purchased a cable system in
Cleveland, Mississippi, serving about 16,000 subscribers for approximately $23
million.
In the first quarter of 1996 the company purchased two businesses for
approximately $60 million, a cable system in Texarkana serving about 24,000
subscribers and a commercial printing operation located in the Maryland suburbs
of Washington, D.C. The company also acquired a cable system in Columbus,
Mississippi, serving about 15,700 subscribers for approximately $23 million
consisting of cash and non-convertible, redeemable preferred stock of the
company.
The redeemable preferred stock issued in conjunction with the Columbus
cable acquisition has a par value of $1.00 per share and a redemption price and
liquidation preference of $1,000 per share. Dividends are payable four times a
year at the annual rate of $80 per share. Shares of the redeemable preferred
stock are redeemable by the company at any time on or after October 1, 2015.
In addition, holders of such stock have a right to require the company to
purchase their shares at the redemption price during an annual 60-day election
period, with the first such period beginning on February 23, 2001.
Note 4: In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, "Earnings Per Share,"
which is effective for periods ending after December 15, 1997, including
interim periods. The new standard requires disclosure of basic and diluted
earnings per share for income from continuing operations and net income. The
company intends to adopt this standard in the fourth quarter of its fiscal
year ending December 28, 1997. Adoption of this new standard will not have
a material impact on the company's computation of earnings per share.
Note 5: During the first three months of 1997 the company repurchased 122,000
shares of its Class B common stock at a cost of approximately $41 million.
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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
seasonal 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 OPERATIONS
Net income for the first quarter of 1997 was $47.7 million, an
increase of 29 percent from net income of $36.9 million in the first quarter of
last year. Earnings per share increased 30 percent to $4.35 per share,
compared to $3.34 per share in the same period in 1996.
Revenues for the first three months of 1997 were $454.1 million, up 9
percent from $416.6 million in 1996. Advertising revenues rose 10 percent, and
circulation and subscriber revenues increased 6 percent over the prior year.
Other revenues were up 11 percent over 1996. All divisions of the company
reported higher revenues in the first quarter of 1997.
Costs and expenses for the first quarter of 1997 increased 3 percent
to $376.1 million, from $366.4 million in the first quarter of 1996. Selling,
general and administrative expenses increased 6 percent while operating
expenses did not vary significantly from 1996. A 21 percent decline in
newsprint expense was offset by additional expenses associated with newly
acquired businesses as well as normal increases in operating costs.
Depreciation and amortization increased 10 percent and 14 percent,
respectively, over 1996 due to recent acquisitions.
In the first quarter of 1997 operating income was $78.0 million
compared to $50.2 million in 1996. The increase primarily resulted from
strength at the company's print businesses.
NEWSPAPER DIVISION. At the newspaper division, revenues increased 8 percent
over the first quarter of 1996. Advertising revenues for the division rose 11
percent. At The Post, total advertising volume improved 7 percent over the
first three months of 1996 - retail lineage rose 4 percent, general lineage
increased 6 percent, and classified lineage, boosted by strong results for
recruitment advertising, was up 8 percent. Preprint volume did not vary
significantly from the prior year. Circulation revenues were essentially
unchanged from the first quarter of 1996, although daily
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and Sunday circulation at The Post both declined 1 percent compared to the same
period in 1996.
BROADCAST DIVISION. Revenues at the broadcast division increased 3 percent
over the first quarter of 1996. National advertising revenues increased 5
percent while local advertising revenues were essentially even with the first
quarter of 1996. Network compensation increased 5 percent in the first three
months of 1997.
MAGAZINE DIVISION. In the first quarter of 1997, Newsweek revenues rose 11
percent. Advertising revenues increased 20 percent due primarily to higher
advertising volume at both the domestic and international divisions.
Circulation revenues were flat compared to the first three months of 1996.
CABLE DIVISION. At the cable division, first quarter revenues were 12 percent
higher than in the comparable period in 1996. Higher subscriber levels,
resulting mainly from recent acquisitions, as well as higher rates accounted
for the increase. At the end of the quarter, there were approximately 610,000
basic subscribers.
OTHER BUSINESSES. Revenues from other businesses, principally Kaplan
Educational Centers, PASS Sports, Legi-Slate, Digital Ink, and MLJ (Moffet,
Larson & Johnson) increased 17 percent during the first three months of 1997.
The improvement was due mainly to growth at Kaplan Educational Centers.
EQUITY IN EARNINGS AND LOSSES OF AFFILIATES. The company's equity in earnings
of affiliates in the first quarter of 1997 was $0.1 million compared with $7.4
million in 1996. The decrease was due to declining results at the company's
affiliated newsprint mills, which were adversely affected by lower newsprint
prices.
NON-OPERATING ITEMS. Interest income, net of interest expense, was $0.9
million, compared with $0.1 million in the first quarter of 1996. Other
income (expense), net in the first quarter of 1997 was a loss of $0.8 million
compared with income of $2.9 million in the same period last year.
INCOME TAXES. The effective tax rate in both 1997 and 1996 was approximately
39 percent.
FINANCIAL CONDITION: CAPITAL RESOURCES AND LIQUIDITY
During the first quarter 1997 the company purchased a cable system in
Cleveland, Mississippi, serving about 16,000 subscribers for approximately $23
million. The company has also reached an agreement in principle to exchange
the assets of certain cable systems with Tele-Communications, Inc. (TCI).
According to the terms of the TCI
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agreement, the exchange will result in an aggregate increase of about 23,000
subscribers for the company. This transaction is expected to be completed in
the second quarter of 1997.
As of the end of 1996, the company had repurchased approximately
339,000 shares of the one million Class B common shares authorized for
repurchase by the Board of Directors in January 1995. In the first quarter of
1997, the company repurchased 122,000 shares of its Class B common stock for
approximately $41 million. Approximately 539,000 Class B common 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 1996.
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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 Earnings per Share of
Common Stock.
27 Financial Data Schedule (Electronic Filing Only).
(b) No reports on Form 8-K were filed during the period covered by
this report.
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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 13, 1997 /s/ Donald E. Graham
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Donald E. Graham, Chairman &
Chief Executive Officer
(Principal Executive Officer)
Date: May 13, 1997 /s/ John B. Morse, Jr.
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John B. Morse, Jr., Vice President-Finance
(Principal Financial Officer)