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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended January 1, 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 St., N.W., Washington, D.C. 20071
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (202) 334-6000
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
------------------------ ------------------------
Class B Common Stock, par value New York Stock Exchange
$1.00 per share
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 .
------ ------
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. /X/
Aggregate market value of the Company's voting stock held by
non-affiliates on February 28, 1995, based on the closing price for the
Company's Class B Common Stock on the New York Stock Exchange on such date:
approximately $ 1,494,000,000.
Shares outstanding at February 28, 1995:
Class A Common Stock - 1,843,250 shares
Class B Common Stock - 9,305,870 shares
Documents partially incorporated by reference:
Definitive Proxy Statement for the Company's 1995 Annual
Meeting of Stockholders (incorporated in Part III to the
extent provided in Items 10, 11, 12 and 13 hereof).
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PART I
ITEM 1. BUSINESS.
The principal business activities of The Washington Post Company (the
"Company") consist of newspaper publishing (principally The Washington Post),
television broadcasting (through the ownership and operation of six
network-affiliated stations), the ownership and operation of cable television
systems, and magazine publishing (Newsweek magazine).
Information concerning the consolidated operating revenues, consolidated
income from operations and identifiable assets attributable to the principal
segments of the Company's business for the last three fiscal years is contained
in Note M to the Company's Consolidated Financial Statements appearing
elsewhere in this Annual Report on Form 10-K. (Revenues for each segment are
shown in such Note M net of intersegment sales, which did not exceed 0.2% of
consolidated operating revenues.)
During each of the last three years the Company's operations in
geographic areas outside the United States, consisting primarily of the
publication of the international editions of Newsweek and cable television
operations in the United Kingdom, accounted for less than 7% of the Company's
consolidated revenues and less than 1% of its consolidated income from
operations, and the identifi-able assets attributable to such operations
represented less than 7% of the Company's consolidated assets.
NEWSPAPER PUBLISHING
THE WASHINGTON POST
The Washington Post is a morning and Sunday newspaper primarily
distributed by home delivery in the Washington, D.C. metropolitan area,
including large portions of Virginia and Maryland.
The following table shows the average paid daily (including Saturday)
and Sunday circulation of The Post for the twelve-month periods ended September
30 in each of the last five years, as reported by the Audit Bureau of
Circulations ("ABC"):
<TABLE>
<CAPTION>
AVERAGE PAID CIRCULATION
---------------------------
DAILY SUNDAY
----- ------
<S> <C> <C>
1990 . . . . . . . . . . . . . . . . . . . . . . . . . . 794,822 1,145,393
1991 . . . . . . . . . . . . . . . . . . . . . . . . . . 807,129 1,154,138
1992 . . . . . . . . . . . . . . . . . . . . . . . . . . 815,225 1,158,329
1993 . . . . . . . . . . . . . . . . . . . . . . . . . . 823,752 1,152,272
1994 . . . . . . . . . . . . . . . . . . . . . . . . . . 821,956 1,152,441
</TABLE>
A price increase for home-delivered copies of the daily and Sunday
newspaper went into effect on January 9, 1995, raising the rate per four-week
period from $9.20 (which had been the rate since 1988) to $9.80. The rate
charged to subscribers for Sunday-only home-delivered copies of the newspaper
for each four-week period has been $6.00 since 1991. On April 6, 1992, the
newsstand price for the Sunday newspaper was increased from $1.25 (which price
had been in effect since 1986) to $1.50. The newsstand price for the daily
newspaper has been $0.25 since 1981.
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General advertising rates were increased by approximately 3.7% on
January 1, 1994, and approximately another 5.6% on January 1, 1995. Rates for
most categories of classified and retail advertising were increased by
approximately 4.1% on February 1, 1994, and approximately an additional 5.4% on
February 1, 1995.
The following table sets forth The Post's advertising inches (excluding
preprints) and number of preprints for the past five years:
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Total Inches (in thousands). . . . . . . . . . . 4,125 3,571 3,435 3,394 3,391
Full-Run Inches . . . . . . . . . . . . . . 3,938 3,376 3,215 3,165 3,133
Part-Run Inches . . . . . . . . . . . . . . 187 195 220 229 258
Preprints (in millions). . . . . . . . . . . . . 987 993 1,135 1,142 1,325
</TABLE>
The Post also publishes The Washington Post National Weekly Edition, a
tabloid which contains selected articles and features from The Washington Post
edited for a national audience. The National Weekly Edition has a basic
subscription price of $48.00 per year and is delivered by second class mail to
approximately 110,000 subscribers.
The Post has about 530 full-time editors, correspondents, reporters and
photographers on its staff, draws upon the news reporting facilities of the
major wire services and maintains correspondents in 20 news centers abroad and
in New York City, Los Angeles, Chicago, Miami, Richmond, Baltimore, Annapolis
and Austin, Texas.
THE HERALD
The Company owns The Daily Herald Company, publisher of The Herald in
Everett, Washington, about 30 miles north of Seattle. The Herald is published
mornings seven days a week and is primarily distributed by home delivery in
Snohomish County.
The Herald's average paid circulation as reported to ABC for the twelve
months ended September 30, 1994, was 50,663 daily (including Saturday) and
63,446 Sunday (down 3.2% and .4%, respectively, from the twelve months ended
September 30, 1993). Full-run advertising inches (excluding preprints)
increased 10.5% in 1994 to 982,228 inches, while zoned part-run advertising
decreased 41.2% to 63,263 inches. The number of preprints distributed decreased
5.7% to 94,455,511.
The Herald employs approximately 57 editors, reporters and photographers.
THE GAZETTE NEWSPAPERS
The Gazette Newspapers, Inc., a wholly owned subsidiary of the Company,
publishes one paid-circulation and 13 controlled-circulation weekly community
newspapers (collectively known as The Gazette Newspapers) in Montgomery County
and limited parts of Frederick and Carroll Counties, Maryland. During 1994 The
Gazette Newspapers had an aggregate average weekly circulation of more than
238,000 copies.
The Gazette Newspapers have approximately 57 editors, reporters and
photographers on their combined staffs.
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TELEVISION BROADCASTING
Through wholly owned subsidiaries the Company owns six VHF television
stations located in Detroit, Michigan; Houston, Texas; Miami, Florida;
Hartford, Connecticut; San Antonio,Texas; and Jacksonville, Florida; which are
respectively the 9th, 11th, 16th, 26th, 39th and 55th largest broadcasting
markets in the United States. Each of the Company's stations is affiliated
with a national network. Although network affiliation agreements generally
have limited terms, each of the Company's television stations has maintained
its network affiliation continuously for at least twenty years.
The Company's 1994 net operating revenues from national and local
television advertising and network compensation were as follows:
<TABLE>
<S> <C>
National . . . . . . . . . . . . . . . . . . . $ 123,950,000
Local . . . . . . . . . . . . . . . . . . . . . 117,875,000
Network . . . . . . . . . . . . . . . . . . . . 16,591,000
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Total . . . . . . . . . . . . . . . . . . . $ 258,416,000
</TABLE>
The following table sets forth certain information with respect to each
of the Company's television stations:
<TABLE>
<CAPTION>
STATION LOCATION
AND YEAR NATIONAL EXPIRATION EXPIRATION TOTAL COMMERCIAL
COMMERCIAL MARKET DATE OF DATE OF STATIONS IN DMA(b)
OPERATION RANKING NETWORK FCC NETWORK ---------------------
COMMENCED (a) AFFILIATION LICENSE AGREEMENT ALLOCATED OPERATING
--------- --- ----------- ------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
WDIV 9th NBC Oct. 1, June 30, VHF-4 VHF-4
Detroit, Mich. 1997 2004 UHF-6 UHF-5
1947
KPRC 11th NBC Aug. 1, June 30, VHF-3 VHF-3
Houston, Tx. 1998 2004 UHF-11 UHF-9
1949
WPLG 16th ABC Feb. 1, Dec. 31, VHF-5 VHF-4
Miami, Fla. 1997 2004 UHF-8 UHF-7
1961
WFSB 26th CBS Apr. 1, Apr. 10, VHF-2 VHF-2
Hartford, Conn. 1999 2002 UHF-6 UHF-4
1957
KSAT 39th ABC Aug. 1, Dec. 31, VHF-4 VHF-3
San Antonio, Tx. 1998 2004 UHF-7 UHF-5
1957
WJXT 55th CBS Feb. 1, July 10, VHF-2 VHF-2
Jacksonville, Fla. 1997 2001 UHF-6 UHF-4
1947
</TABLE>
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(a) Source: 1994/95 DMA Market Rankings, Nielsen Media Research,
Fall 1994, based on television homes in DMA (see note (b) below).
(b) Designated Market Area ("DMA") is a market designation of A.C.
Nielsen which defines each television market exclusive of another, based
on measured viewing patterns.
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On April 22, 1994, subsidiaries of the Company acquired the assets of
television stations KPRC-TV, in Houston, Texas, and KSAT-TV, in San Antonio,
Texas, for an aggregate cash purchase price of approximately $253 million.
REGULATION OF BROADCASTING AND RELATED MATTERS
The Company's television broadcasting operations are subject to the
jurisdiction of the FCC under the Communications Act of 1934, as amended.
Under authority of such Act the FCC, among other things, assigns frequency
bands for broadcast and other uses; issues, revokes, modifies and renews
broadcasting licenses for particular frequencies; determines the location and
power of stations and establishes areas to be served; regulates equipment used
by stations; and adopts and implements regulations and policies which directly
or indirectly affect the ownership, operations and profitability of
broadcasting stations.
Each of the Company's television stations holds a license valid for a
period of five years which is renewable upon application for a similar period.
The FCC is conducting proceedings dealing with such matters as the
standards to be applied to broadcast renewal applications, various broadcast
network regulations, multiple ownership restrictions, regulations pertaining to
cable television operations (discussed below under "Cable Television Division
Regulation of Cable Television and Related Matters"), whether to allocate
additional radio spectrum to existing broadcasting stations to enable them to
implement advanced television ("ATV") technologies, whether to adopt a uniform
ATV broadcast transmission standard for television and impose requirements on
existing television stations to activate ATV channels and ultimately to turn
back to the FCC their existing conventional television channels, and various
proposals to further the development of alternative video delivery systems that
would compete in varying degrees with both cable television and television
broadcasting operations. Various leaders in Congress have proposed to revamp
and relax the broadcast ownership restrictions and to permit broadcasters to
use part of their new ATV spectrum for ancillary services (subject to the
payment of fees to the federal government for services that are
subscriber-based). In addition, the Clinton Administration has suggested that
broadcasters be required to provide free time for political candidates. The
Company cannot predict the resolution of these and various other matters
although, depending upon their outcome, they could affect the Company's
television broadcasting interests either adversely or favorably.
CABLE TELEVISION DIVISION
As of the end of 1994 the Company (through subsidiaries) provided basic
cable service to approximately 498,000 subscribers (representing about 71% of
the 700,000 homes passed by the systems) and had in force more than 294,000
subscriptions to premium program services. The Company's cable systems are
located in 15 Midwestern, Southern and Western states and typically serve
smaller communities; thus 30 of the Company's systems pass fewer than 10,000
dwelling units, 13 pass 10,000-25,000 dwelling units, and only nine pass more
than 25,000 dwelling units, of which the two largest are in Modesto and Santa
Rosa, California, each serving more than 45,000 basic subscribers.
REGULATION OF CABLE TELEVISION AND RELATED MATTERS
The Company's cable operations are subject to various requirements
imposed by local, state and federal governmental authorities. The franchises
granted by local governmental authorities are typically
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nonexclusive and limited in time and generally contain various conditions and
limitations relating to payment of fees to the local authority, determined
generally as a percentage of revenues. Additionally, franchises often regulate
the conditions of service and technical performance, and contain various types
of restrictions on transferability. Failure to comply with such conditions and
limitations may give rise to rights of termination by the franchising
authority.
The Cable Television Consumer Protection and Competition Act of 1992
(the "1992 Cable Act"), requires or authorizes the imposition of a wide range
of regulations on cable television operations. The three major areas of
regulation are (i) the rates charged for certain cable television services,
(ii) required carriage ("must carry") of some local broadcast stations, and
(iii) retransmission consent rights for commercial broadcast stations.
Except in relatively rare instances of "effective competition" (defined
in the 1992 Cable Act as the presence of another cable operator or another
multichannel video service serving specified levels of customers in the same
community), monthly subscription rates for the basic tier of cable service may
be regulated by municipalities, subject to procedures and criteria established
by the FCC, and the FCC may regulate the rates charged for optional tiers of
service. Rates charged by cable television systems for pay-per-view service,
for per-channel premium program services and for advertising are all exempt
from regulation under the 1992 Cable Act. Cable television systems may also
add channels to an unregulated new product tier, but the channels must be new
to the system as of October 1, 1994. In April 1993 the FCC announced a
"freeze" on rate increases for regulated services (i.e., the basic and optional
tiers) and promulgated benchmarks for determining the reasonableness of rates
for such services. The FCC expected that these initial benchmarks, which took
effect on September 1, 1993, would produce an overall average reduction of 10%
in the rates charged for regulated services. The FCC's benchmarks were widely
criticized by some for being too stringent and by others for being too
permissive. On March 30, 1994, acting on petitions to reconsider the original
benchmarks, the FCC adopted revisions designed to reduce overall rates for
regulated services by, on average, an additional 7%. These revised regulations
took effect on May 15, 1994, when the freeze on rate increases expired. Under
the FCC's approach cable operators may exceed the benchmarks if they can show
in a cost-of-service proceeding that higher rates are needed to earn a
reasonable return on investment. Also on March 30, 1994, the FCC announced the
adoption of rules to implement the cost-of-service standard; among other things
these rules establish an interim industry-wide rate of return of 11.25%. More
recently, the FCC adopted so-called "going forward" rules which allow cable
operators to adjust rates for regulated services when new channels are added.
Various parties have sought judicial review of the FCC's rate regulation
decisions.
Pursuant to the "must-carry" rules a commercial television broadcast
station may, under certain circumstances, insist on carriage of its signal on
cable systems located within the station's market area, while a noncommercial
public station may insist on carriage of its signal on cable systems located
within either the station's predicted Grade B contour or 50 miles of the
station's transmitter. As a result of these obligations (the constitutionality
of which is presently under judicial review) certain of the Company's cable
systems have had to add broadcast stations that they might not otherwise have
elected to carry, and the freedom the Company's systems would otherwise have to
drop signals previously carried has been reduced.
Beginning in October 1993 and at three-year intervals thereafter
commercial broadcasters may elect to forego must-carry rights and insist
instead that their signals not be carried without the prior
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consent of the stations. Prior to October 1993 some of the broadcast stations
carried by the Company's cable television systems opted for retransmission
consent and initially took the position that they would not grant consent
without commitments by the Company's systems to make cash payments. As a
result of case-by-case negotiations, the Company's cable systems were able to
continue carrying virtually all of the stations insisting on retransmission
consent without having to agree to pay any stations for the privilege of
carrying their signals. However some commitments were made to carry other
program services offered by a station or an affiliated company, to provide
advertising availabilities on cable for sale by a station and to distribute
promotional announcements with respect to a station.
Various other matters addressed in the 1992 Cable Act may significantly
affect the costs or profits of cable television systems. These matters include
a prohibition on exclusive franchises, restrictions on the ownership of
competing video delivery services, restrictions on transfers of cable
television ownership, new consumer protection measures, new technical and
signal quality standards, and various regulations intended to facilitate the
development of competing video delivery services.
In contrast to the 1992 Cable Act, the Cable Communications Policy Act
of 1984 (the "1984 Cable Act") restricted regulation of cable television in
many significant respects. Important provisions of the 1984 Cable Act that
remain in effect after the 1992 Cable Act include a requirement that franchises
be granted for reasonable periods of time, various remedies and safeguards to
protect cable operators against arbitrary refusals to renew franchises, and a
limitation on franchise fees to 5% of revenues.
Apart from its authority under the 1992 Cable Act, the FCC regulates
various other aspects of cable television operations. Since 1990 cable systems
have been required to black out from the distant broadcast stations they carry
syndicated programs for which local stations have purchased exclusive rights
and request exclusivity. Other long-standing FCC rules require cable systems
to delete under certain circumstances duplicative network programs broadcast by
distant stations. The FCC also imposes certain technical standards on cable
television operators, exercises the power to license various microwave and
other radio facilities frequently used in cable television operations,
regulates the assignment and transfer of control of such licenses, and oversees
compliance with certain affirmative action and equal employment opportunity
obligations applicable to cable systems. In addition, pursuant to the Pole
Attachment Act the FCC exercises authority to disapprove unreasonable rates
charged to cable operators by telephone and power utilities for utilizing space
on utility poles or in underground conduits.
The Copyright Act of 1976 grants to cable television systems, under
certain terms and conditions, the right to retransmit the signals of television
stations pursuant to a compulsory copyright license. Those terms and
conditions include the payment of certain license fees set forth in the statute
or established by subsequent administrative regulations. The compulsory
license fees have been increased on several occasions since this Act went into
effect. In 1994 the availability of the compulsory copyright license was
extended to "wireless cable" and direct broadcast satellite operators, although
in the latter case the license right is limited to distant broadcast signals
imported into a local market. Some pending legislative proposals would modify
or eliminate the compulsory copyright licensing scheme, and the FCC and others
have urged that the compulsory license be phased out for local or distant
broadcast signals or both.
Currently telephone companies are generally prohibited by the 1984 Cable
Act and certain FCC rules from operating cable systems in areas in which they
provide telephone service. However Congress, the courts and the FCC are in
varying degrees revisiting this question. The U.S. Courts of
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Appeals for the Fourth and Ninth Circuits have held that this cross-ownership
restriction violates the First Amendment rights of telephone companies, and
U.S. District Courts in three other circuits have reached similar conclusions.
The FCC has recommended changes in the 1984 Cable Act to permit telephone
company ownership of co-located cable systems, and the agency has authorized a
"video-dial-tone" service in which telephone companies would provide video
programming supplied by others. In light of the federal court decisions, the
FCC has also recently proposed rules which would allow telephone companies to
supply the programming to be carried on their own video dialtone services. A
court consent decree that prohibited the former Bell regional operating
companies from offering certain information services, including acting as cable
television system operators, has been modified to eliminate those restrictions
as a result of which the former Bell regional operating companies are free to
provide cable television services outside of their home regions.
Litigation is pending in various courts in which prohibitions on cable
television operations without a franchise and various franchise requirements
are being challenged as unlawful under the First Amendment, the antitrust laws
and on other grounds. If successful, such litigation could foster the
development and operation of duplicative cable facilities that would compete
with existing cable systems.
During the last several years the FCC has adopted various rule changes
intended to facilitate the development of so-called "wireless cable," a video
service capable of distributing as many as 30 television channels in a local
area by over-the-air microwave transmission.
Among the issues currently being considered by Congress are proposals to
relax the "effective competition" test and thereby reduce the number of cable
television systems subject to rate regulation, abolish rate regulation
altogether, and preempt state laws that prevent cable companies and others from
providing local telephone service.
The regulation of certain cable television rates pursuant to the 1992
Cable Act has negatively impacted the revenues of the Company's cable systems
as discussed above. The Company cannot predict whether or not the FCC's rate
regulation decisions will ultimately be upheld on judicial review. In addition,
the Company is unable to predict the outcome of the various other matters
discussed above or what effect such matters may ultimately have on its cable
television business.
U.K. CABLE TELEVISION OPERATIONS
In September 1993 the Company sold its entire interest in companies
constructing and operating cable television systems in the United Kingdom.
MAGAZINE PUBLISHING
Newsweek is a weekly news magazine published both domestically and
internationally. In gathering, reporting and writing news and other material
for publication, Newsweek maintains news bureaus in 10 U.S. and 16 foreign
cities.
The domestic edition of Newsweek is comprised of over 100 different
geographic or demographic editions which carry substantially identical news and
feature material but enable advertisers to direct messages to specific market
areas or demographic groups. Domestically, Newsweek ranks second in
circulation among the three leading weekly news magazines (Newsweek, Time and
U.S. News & World Report). Its average weekly domestic circulation rate base
and its percentage of the total weekly
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domestic circulation rate base of the three leading weekly news magazines for
the past five years are set forth in the following table:
<TABLE>
<CAPTION>
NEWSWEEK
AVERAGE WEEKLY PERCENTAGE OF
CIRCULATION THREE LEADING
RATE BASE NEWS MAGAZINES
--------- --------------
<S> <C> <C>
1990 . . . . . . . . . . . . . . . . . . 3,100,000 32.9%
1991 . . . . . . . . . . . . . . . . . . 3,100,000 34.1%
1992 . . . . . . . . . . . . . . . . . . 3,100,000 33.2%
1993 . . . . . . . . . . . . . . . . . . 3,100,000 32.7%
1994 . . . . . . . . . . . . . . . . . . 3,100,000 33.0%
</TABLE>
Newsweek is sold on newsstands and through subscription mail order sales
derived from a number of sources, principally direct mail promotion. The basic
one-year subscription price is $41.08. During 1994 most subscriptions were
sold at a discount from the basic price. Since January 1992 Newsweek's
newsstand price has been $2.95 per copy.
The total number of Newsweek's domestic advertising pages and gross
domestic advertising revenues as reported by Publishers' Information Bureau,
Inc., together with Newsweek's percentages of the total number of advertising
pages and total advertising revenues of the three leading weekly news
magazines, for the past five years have been as follows:
<TABLE>
<CAPTION>
NEWSWEEK
NEWSWEEK PERCENTAGE OF GROSS PERCENTAGE OF
ADVERTISING THREE LEADING ADVERTISING THREE LEADING
PAGES* NEWS MAGAZINES REVENUES* NEWS MAGAZINES
------ -------------- --------- --------------
<S> <C> <C> <C> <C>
1990 . . . . . . . . . . . . . . . . . 2,294 33.4% $ 252,447,000 32.5%
1991 . . . . . . . . . . . . . . . . . 1,948 32.5% 233,601,000 32.7%
1992 . . . . . . . . . . . . . . . . . 2,109 33.2% 258,396,000 32.4%
1993 . . . . . . . . . . . . . . . . . 2,102 33.3% 260,673,000 32.3%
1994 . . . . . . . . . . . . . . . . . 2,077 31.8% 278,948,000 32.0%
</TABLE>
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* Advertising pages and gross advertising revenues are those
reported by Publishers' Information Bureau, Inc. PIB computes gross
advertising revenues from basic one-time rates and the number of
advertising pages carried. PIB figures therefore exceed actual gross
advertising revenues, which reflect lower rates for multiple insertions.
Net revenues as reported in the Company's Consolidated Statements of
Income also exclude agency fees and cash discounts, which are included in
the gross advertising revenues shown above. Page and revenue figures
exclude affiliated advertising.
Newsweek's advertising rates are based on its average weekly circulation
rate base and are competitive with the other weekly news magazines. Effective
with the January 3, 1994 issue, national advertising rates were increased by an
average of 4.9%. Beginning with the issue dated January 9, 1995, national
advertising rates were increased again by an average of 6.0%.
Newsweek Business Plus, which is published 39 times a year, is a
demographic edition of Newsweek distributed to high-income professional and
managerial subscribers and subscribers in zip-code-defined areas. Advertising
rates for this edition, which has a circulation rate base of 1,000,000 copies,
were increased an average of 6.5% in January 1995.
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Newsweek's other demographic edition, Newsweek Woman, which was
published 13 times during 1994, has a circulation rate base of 700,000 selected
female subscribers. At the beginning of 1994 advertising rates for this
edition were increased by an average of 4.9%, with an additional average
increase of 6.0% instituted early in 1995.
Internationally, Newsweek is published in an Atlantic edition covering
the British Isles, Europe, the Middle East and Africa, a Pacific edition
covering Japan, Korea and Southeast Asia, and a Latin America edition, all of
which are in the English language. Editorial copy solely of domestic interest
is eliminated in the international editions and is replaced by other
international, business or national coverage primarily of interest abroad.
Since 1984 a 24-page section of Newsweek has been included in The Bulletin, an
Australian weekly news magazine which also circulates in New Zealand. In 1986
a Japanese-language edition of Newsweek, Nihon Ban, began publication in Tokyo
pursuant to an arrangement with a Japanese publishing company which translates
editorial copy, sells advertising in Japan and prints and distributes the
edition. A Korean-language edition of Newsweek, Hankuk Pan, began publication
in 1991 pursuant to a similar arrangement with a Korean publishing company.
The average weekly circulation rate base, advertising pages and gross
advertising revenues of Newsweek's international editions (including The
Bulletin insertions but not including the Japanese- or Korean-language editions
of Newsweek) for the past five years have been as follows:
<TABLE>
<CAPTION>
AVERAGE WEEKLY GROSS
CIRCULATION ADVERTISING ADVERTISING
RATE BASE PAGES* REVENUES*
--------- ------ ---------
<S> <C> <C> <C>
1990 . . . . . . . . . . . . . . . . . . . . . . 673,000 2,466 $ 67,131,000
1991 . . . . . . . . . . . . . . . . . . . . . . 705,000 2,296 68,405,000
1992 . . . . . . . . . . . . . . . . . . . . . . 730,000 2,549 76,765,000
1993 . . . . . . . . . . . . . . . . . . . . . . 745,000 2,128 68,347,000
1994 . . . . . . . . . . . . . . . . . . . . . . 748,000 2,351 76,674,000
</TABLE>
------------
* Advertising pages and gross advertising revenues are those
reported by LNA International. LNA computes gross advertising revenues
from basic one-time rates and the number of advertising pages carried.
LNA figures therefore exceed actual gross advertising revenues, which
reflect lower rates for multiple insertions. Net revenues as reported in
the Company's Consolidated Statements of Income also exclude agency fees
and cash discounts, which are included in the gross advertising revenues
shown above. Page and revenue figures exclude affiliated advertising.
For 1995 the average weekly circulation rate base for Newsweek's English
language international editions (including The Bulletin insertions) will be
750,000 copies. Newsweek's rate card estimates the average weekly circulation
for the Japanese-language and Korean-language editions for 1995 will be
145,000 and 150,000 copies, respectively.
In November 1994 Newsweek launched a weekly news magazine created for
online distribution. This magazine, known as Newsweek InterActive, combines
text, photos and audio and is available on the Prodigy service. Newsweek also
produced three multimedia CD-ROM's during 1994, each of which focused on
different topics. Both the online magazine and CD-ROM products include
interactive advertising.
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OTHER ACTIVITIES
KAPLAN EDUCATIONAL CENTERS
A subsidiary of the Company owns the Kaplan Educational Centers, which
are engaged in preparing students for a broad range of admissions tests and
licensing examinations including SAT's, LSAT's, GMAT's and GRE's, nursing and
medical boards, and the uniform certified public accountant examination. In
1994 the Kaplan Centers had nearly 150,000 enrollments and provided courses
through more than 150 permanent educational centers located throughout the
United States and in Canada, Puerto Rico and London.
LEGI-SLATE
Legi-Slate, Inc., another subsidiary of the Company, provides its
customers with access to a computerized data base containing detailed
information on the legislative and regulatory activities of the United States
government. The Legi-Slate data base includes both abstracts and the full text
of every bill and resolution introduced in Congress, the entire Congressional
Record and every document published in the Federal Register, as well as the
schedule of each Congressional committee and the voting record of each member
of Congress. Legi-Slate also offers the Current USC(TM) and Daily CFR(TM)
services, which provide online access to the current full text of the United
States Code and the Code of Federal Regulations.
PASS SPORTS
Pro Am Sports System, Inc. ("PASS") is a Detroit-based regional cable
sports network that provides programming to approximately 774,000 cable
television subscribers in Michigan and northwest Ohio. PASS programming
includes games of the Detroit Tigers baseball team, the Detroit Pistons
basketball team and the Detroit Red Wings hockey team.
INTERNATIONAL HERALD TRIBUNE
The Company beneficially owns 50% of the outstanding common stock of the
International Herald Tribune, S.A., a French company which publishes the
International Herald Tribune in Paris, France. This English-language newspaper
has an average daily paid circulation of almost 200,000 copies and is
distributed in over 180 countries.
COWLES MEDIA COMPANY
The Company owns approximately 28% of the outstanding common stock of
Cowles Media Company, most of which was acquired in 1985. Cowles owns the
Minneapolis-St. Paul Star Tribune and a number of smaller publications.
DIGITAL INK
In late 1993 the Company organized a new subsidiary, Digital Ink Co., to
develop news and information products for distribution by computers, fax and
telephone.
MAMMOTH MICRO PRODUCTIONS
During 1994 the Company acquired an 80% equity interest in Mammoth Micro
Productions, Inc., a producer and publisher of multimedia CD-ROM titles.
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MOFFETT, LARSON & JOHNSON
The Company owns 71% of the outstanding common stock of Moffet, Larson &
Johnson, Inc., a telecommunications engineering firm specializing in the design
and development of advanced mobile, broadcast and common carrier radio systems.
PERSONAL COMMUNICATIONS SERVICES
In late 1994 the FCC commenced auction proceedings that will result in
the award of licenses to operate new wireless telephone technologies generally
referred to as personal communications services or "PCS." PCS systems will use
transmitters that are smaller and closer together than those of conventional
cellular systems and other techniques to reduce the size and cost of portable
telephones. New PCS licensees will compete with cellular and landline
telephone companies, among others.
In September 1990 the Company formed a limited partnership with American
Personal Communications, Inc. ("APC"), a private company owned by individuals
with substantial prior experience in the cellular telephone industry, to
develop experimental and, eventually, commercial PCS systems in the Washington,
D.C./Baltimore, Maryland area. APC is the sole managing general partner of the
partnership. The Company was a limited partner in that venture and held a
majority of the partnership's equity.
On December 23, 1993, the FCC finalized the award of a "pioneer's
preference" to the partnership based on the partnership's research and
development efforts. The preference is for 30 MHz of PCS spectrum and covers
the Washington/Baltimore Major Trading Area, which consists of the District of
Columbia and 65 counties in Maryland, northern Virginia, West Virginia and
southern Pennsylvania with an aggregate population of nearly eight million
people. Under law existing at the time the partnership's preference was
finalized, neither Congress nor the FCC required pioneer preference applicants
to make auction-based payments for their licenses. The partnership thus was
entitled to file an application for a PCS commercial license subject only to
basic licensing qualifications. The partnership filed such an application on
January 18, 1994.
The finalization of APC's preference was challenged by cellular
companies, telephone companies and unsuccessful preference applicants in court
and at the FCC. In June 1994 legislation was introduced to require pioneer
preference recipients to pay 90% of the auction value of comparable licenses.
In August 1994 the FCC issued a decision requiring the partnership to pay 90%
of the auction price in the same or certain other markets. The partnership
challenged that decision in court. In legislation that was signed by the
President in December 1994, Congress has required the partnership to make a
license payment based on 85% of the average auction price paid for the 20
largest markets in which preferences were not granted or, if larger, a
specified minimum payment. Although this formula may result in the partnership
acquiring its license at less cost than may be incurred by bidders at auction,
it still will require the partnership to make a payment of approximately $100
million for a license that initially was to be issued without cost. Also, some
members of Congress believe that the pioneers' payment formula can and should
be reviewed and, if appropriate, adjusted in light of the actual auction
results.
Because of the changed circumstances, delays and increased costs
surrounding the partnership's opportunity to provide PCS services in the
Washington/Baltimore area, the Company decided to divest the majority of its
ownership interest in the partnership. On January 9, 1995, the Company sold
all but a 1.5% limited partnership interest in the partnership to APC (which
remains as sole managing general partner) and a consortium of communications
companies. The purchase price for the Company's interest was essentially equal
to the pro rata share of the Company's investments in the partnership.
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<PAGE> 13
PRODUCTION AND RAW MATERIALS
The Washington Post is produced at the newspaper's principal place of
business and plant in downtown Washington, D.C., and at its satellite printing
plants in Fairfax County, Virginia, and Southeast Washington, D.C. All
editions of The Herald are produced at its plant in Everett, Washington. The
Gazette Newspapers are produced by three independent contract printers.
Newsweek's domestic edition is produced in five independent printing plants;
advertising inserts and photo-offset films for the domestic edition are also
produced by independent contractors. The international editions of Newsweek
are printed in England, Hong Kong, Singapore, Switzerland and Hollywood,
Florida; insertions for The Bulletin are printed in Australia.
In 1994 The Washington Post consumed about 250,000 tons(*) of newsprint
purchased from a number of suppliers, including Bowater Incorporated, which
supplied approximately 30% of The Post's 1994 newsprint requirements. About
half of the newsprint The Post purchases from Bowater Incorporated is provided
by Bowater Mersey Paper Company Limited, 49% of the common stock of which is
owned by the Company (the majority interest being held by a subsidiary of
Bowater Incorporated). Bowater Mersey owns and operates a newsprint mill near
Halifax, Nova Scotia, and owns extensive woodlands that provide part of the
mill's wood requirements. In 1994 Bowater Mersey produced about 260,000 tons
of newsprint.
The Company, through a subsidiary, has a 35% limited partnership
interest in Bear Island Paper Company, which owns and operates a newsprint mill
in Doswell, Virginia, about 85 miles south of Washington, D.C. The general
partner, which has a 30% interest and manages the mill, is Brant-Allen
Industries, Inc., a firm experienced in the construction and operation of
similar mills; the other limited partner, also with a 35% interest, is a
subsidiary of Dow Jones & Company, Inc. The Paper Company and Bear Island
Timberlands Company, in which a subsidiary of the Company also has a 35%
limited partnership interest, own an aggregate of approximately 150,000 acres
of Virginia woodlands. These woodlands supply a portion of the wood
requirements of the Paper Company's mill. That mill produced about 225,000
tons of newsprint in 1994, and during that year The Post purchased about 20% of
its newsprint requirements from Bear Island Paper Company. In March 1994 Bear
Island Paper Company completed construction of a recycling plant that provides
20% of the pulp used by the mill.
The announced price of newsprint (excluding discounts which decreased
later in the year) was approximately $620 per ton throughout 1994, but several
price increases have been scheduled to take effect during 1995. The Post
believes it has adequate newsprint available through contracts with its various
suppliers. About 80% of the newsprint used by The Post includes some recycled
content. The Company owns 90% of the stock of Capitol Fiber Inc., which
handles and sells to recycling industries old newspapers and other paper
collected in Washington, D.C, Maryland and northern Virginia.
In 1994 The Herald consumed approximately 5,700 tons of newsprint
supplied by four different suppliers, the largest of which furnished about 33%
of the newspaper's total requirements. Approximately 70% of the newsprint used
by The Herald includes some recycled content.
The domestic edition of Newsweek consumed 30,388 tons of paper in 1994,
the bulk of which was purchased from eight major suppliers. The current cost
of body paper (the principal paper component of the magazine) is approximately
$850 per ton.
----------------
(*) All references in this report to newsprint tonnage and prices refer
to short tons (2,000 pounds) and not to metric tons (2,204.6 pounds) which are
often used in newsprint price quotations.
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Over 90% of the aggregate domestic circulation of Newsweek is delivered
by second class mail, and most subscriptions are solicited by either first or
third class mail. Thus substantial increases in postal rates for these classes
of mail may have a significant negative impact on Newsweek's operating income.
In December 1994 the Board of Governors of the U.S. Postal Service approved a
rate increase of 10.3% for first-class mail and 14% for second- and third-class
mail effective January 1, 1995. This action will increase Newsweek's annual
postage costs by approximately $4.7 million. On the other hand, since
advertising distributed by third class mail competes to some degree with
newspaper advertising, the Company believes the increase in third class rates
incorporated in the new rate structure could have a positive impact on the
advertising revenues of The Washington Post, The Herald and The Gazette
Newspapers, although the Company is unable to quantify the amount of such
impact.
COMPETITION
The Washington Times, a newspaper published since 1982 in Washington,
D.C., began publishing Saturday and Sunday editions in competition with The
Washington Post in 1991. The Post also encounters competition in varying
degrees from newspapers published in suburban and outlying areas, other
nationally circulated newspapers and from television, radio, magazines and
other advertising media, including direct mail advertising.
The Herald circulates principally in Snohomish County, Washington; its
chief competitors are the Seattle Times and the Seattle Post-Intelligencer,
which are daily and Sunday newspapers published in Seattle and whose Snohomish
County circulation is principally in the southwest portion of the county.
Since 1983 the two Seattle newspapers have consolidated their business and
production operations and combined their Sunday editions pursuant to a joint
operating agreement, although they continue to publish separate daily
newspapers. Although The Herald's principal circulation is in Snohomish
County, it is also distributed in two other nearby counties (including King
County where Seattle is located) in which its circulation is less than that of
the Seattle newspapers. Numerous weekly and semi-weekly newspapers and
shoppers are distributed in The Herald's principal circulation area.
The circulation of The Gazette Newspapers is limited to Montgomery
County and parts of Frederick and Carroll Counties, Maryland (areas where The
Washington Post also circulates). The Gazette Newspapers compete in varying
degrees with many advertising vehicles available in their service areas,
including The Potomac and Bethesda/Chevy Chase Almanacs and The Western
Montgomery Bulletin, weekly controlled- circulation community newspapers, The
Montgomery County Sentinel, a weekly paid-circulation community newspaper, and
The Montgomery County Journal, a daily paid-circulation community newspaper
(which also publishes two controlled-circulation weekly editions).
The Company's television stations compete for audiences and advertising
revenues with television and radio stations and cable television systems
serving the same or nearby areas and to a lesser degree with other media such
as newspapers and magazines. Both independent stations and stations affiliated
with the Fox Broadcasting Network and United Paramount Network are becoming
increasingly competitive, and cable television systems continue to expand their
operations in the Company's broadcast markets where they compete for television
viewing by importing out-of-market television signals and by distributing
pay-cable, advertiser-supported and other programming that is originated for
cable systems. During 1994 two direct broadcast satellite or "DBS" services,
Direct TV and United States Satellite Broadcasting, began providing nationwide
distribution of television programming using small receiving dishes and digital
transmission (although neither service includes the signals of local
independent or network-affiliated television stations). In addition, telephone
companies have shown
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increasing interest in providing cable television and other video services.
The Company's television stations may also become subject to increased
competition from low power television stations, wireless cable services,
satellite master antenna systems (which can carry pay-cable and similar program
material) and prerecorded video programming. Further, high definition and
other improved television technologies are being developed which in the future
may enhance the ability of some of these other video providers to compete for
viewers with the local television broadcasting stations owned by the Company.
Cable television systems operate in a highly competitive environment.
In addition to competing with the direct reception of television broadcast
signals by the viewer's own antenna, such systems (like existing television
stations) are subject to competition from other forms of television program
delivery such as DBS services, low power television stations, wireless cable
services, satellite master antenna systems and prerecorded video programming.
Various legislative and regulatory proposals may also increase the competition
faced by existing cable television systems by, among other things, facilitating
the provision of competing services by local telephone companies.
According to figures compiled by Publishers' Information Bureau, Inc.,
of the 187 magazines reported on by the Bureau, Newsweek ranked fifth in total
advertising revenues in 1994, when it received approximately 3.3% of all
advertising revenues of the magazines included in the report. The magazine
industry is highly competitive both within itself and with other advertising
media which compete for audience and advertising revenue.
The Company's publications and television broadcasting and cable
operations also compete for readers' and viewers' time with various other
leisure-time activities.
The future of the Company's various business activities depends on a
number of factors, including the general strength of the economy, population
growth, technological innovations and new entertainment, news and information
dissemination systems, overall advertising revenues, the relative efficiency of
publishing and broadcasting compared to other forms of advertising and,
particularly in the case of television broadcasting and cable operations, the
extent and nature of government regulations.
EXECUTIVE OFFICERS
The executive officers of the Company, each of whom is elected for a
one-year term at the meeting of the Board of Directors immediately following
the Annual Meeting of Stockholders held in May of each year, are as follows:
Donald E. Graham, age 49, has been Chairman of the Board of the Company
since September 1993 and Chief Executive Officer of the Company since May 1991.
Mr. Graham served as President of the Company from May 1991 until September
1993 and prior to that had been a Vice President of the Company for more than
five years. Mr. Graham also is Publisher of The Washington Post, having
occupied that position since 1979.
Alan G. Spoon, age 43, is President and Chief Operating Officer of the
Company. Mr. Spoon served as Executive Vice President and Chief Operating
Officer of the Company from May 1991 until September 1993 and had previously
been a Vice President of the Company since July 1987. Mr. Spoon also served as
the Company's Vice President-Finance from July 1987 until November 1989, and as
President of Newsweek, Inc. from September 1989 until May 1991.
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Katharine Graham, age 77, is Chairman of the Executive Committee of the
Company's Board of Directors. Mrs. Graham previously served as Chairman of the
Board of the Company from 1973 until September 1993 and as the Company's Chief
Executive Officer from 1973 until May 1991.
Martin Cohen, age 63, is a Vice President of the Company; from 1975 to
July 1987 he served as Vice President-Finance and Treasurer of the Company.
Diana M. Daniels, age 45, has been Vice President and General Counsel of
the Company since November 1988 and Secretary of the Company since September
1991. Ms. Daniels served as General Counsel of the Company from January 1988
to November 1988 and prior to that had been Vice President and General Counsel
of Newsweek, Inc. since 1979.
Boisfeuillet Jones, Jr., age 48, is a Vice President of the Company and
President of The Washington Post, a position he assumed in January 1995. Mr.
Jones had previously served as Vice President and Counsel of The Washington
Post since 1980.
Beverly R. Keil, age 48, has been Vice President-Human Resources of the
Company since 1986; from 1982 through 1985 she was the Company's Director of
Human Resources.
Thomas O. Might, age 43, is a Vice President of the Company and
President of the Company's Cable Television Division. Beginning in 1980, Mr.
Might held various executive positions at The Washington Post, most recently as
Vice President for Advertising and Marketing; in January 1993 he was named
President of the Cable Television Division and in January 1995 became the chief
executive officer of that Division.
John B. Morse, Jr., age 48, has been Vice President-Finance of the
Company since November 1989. He joined the Company as Vice President and
Controller in July 1989, and prior to that had been a partner of Price
Waterhouse for more than five years.
G. William Ryan, age 54, is a Vice President of the Company and since
March 1988 has been President of Post-Newsweek Stations, Inc.
Richard M. Smith, age 49, is a Vice President of the Company; he has
served as Editor-in-Chief of Newsweek since 1984 and in May 1991 also became
President of Newsweek, Inc.
EMPLOYEES
The Company and its subsidiaries employ approximately 6,800 persons on a
full-time basis.
The Washington Post has approximately 2,815 full-time employees. About
2,005 of The Post's full-time employees and about 485 part-time employees are
represented by one or another of nine unions. Collective bargaining agreements
are currently in effect with locals of the following unions covering the
full-time and part-time employees and expiring on the dates indicated: 1,325
employees in the editorial, newsroom and commercial departments represented by
the Washington-Baltimore Newspaper Guild (July 9, 1995); 146 paperhandlers and
general workers represented by the Printing Specialty and Paper Products Union
(March 31, 1995); 46 machinists represented by the International Association of
Machinists (January 13, 1996); 50 photoengravers-platemakers represented by the
Graphic Arts International Union (February 19, 1996); 118 building service
employees represented by the Service Employees International Union (April 30,
1996); 38 engineers, carpenters and painters represented by the International
Union of Operating Engineers (March 1, 1997); 373 mailers and 187 mailroom
helpers represented by the Washington Mailers' Union (June 15, 1997); and 187
typographers represented by
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the Columbia Typographical Union (October 2, 2000). The collective bargaining
agreement covering 32 electricians represented by the International Brotherhood
of Electrical Workers expired in August 1994; a new contract has been
negotiated with the union and is awaiting ratification.
Of the approximately 210 full-time and 90 part-time employees at The
Herald, about 61 full-time and 11 part-time employees are represented by one or
another of three unions. The newspaper's collective bargaining agreement with
the Graphic Communications International Union, which represents press
operators, expired on January 15, 1995, and a new agreement has been negotiated
and is awaiting ratification. Its agreement with the International Brotherhood
of Teamsters, which represents part-time bundle haulers, will expire on May 31,
1998, and its agreement with the Communications Workers of America, which
represents printers and mailers, will expire on October 31, 1998.
Newsweek has approximately 940 full-time employees (including about 210
editorial employees represented by the New York Newspaper Guild under a
collective bargaining agreement which expires in December 1995).
The Company's broadcasting operations have approximately 910 full-time
employees, of whom about 260 are union-represented. Of the ten collective
bargaining agreements covering union-represented employees, four have expired
and are being renegotiated. Three other collective bargaining agreements will
expire in 1995.
The Company's Cable Television Division has approximately 850 full-time
employees. Stanley H. Kaplan Educational Center Ltd. employs approximately 600
persons on full-time basis (which number does not include substantial numbers
of part-time employees who serve in instructional and clerical capacities).
The Gazette Newspapers have approximately 143 full-time and 45 part-time
employees. Robinson Terminal Warehouse Corporation (the Company's newsprint
warehousing and distribution subsidiary), Legi-Slate, Mammoth Micro Productions
and Moffet, Larson & Johnson each employ fewer than 125 persons. None of these
units' employees is represented by a union.
ITEM 2. PROPERTIES.
The Company owns the publishing plant and principal offices of The
Washington Post in downtown Washington, D.C., including both a seven-story
building in use since 1950 and a connected nine-story office building on
contiguous property completed in 1972 in which are located the Company's
principal executive offices. In 1980 the Company completed construction of a
satellite printing plant on 13 acres of land owned by the Company in Fairfax
County, Virginia, and in 1981 purchased the printing plant of the defunct
Washington Star located in Southeast Washington, D.C. The Company owns a
34-acre tract of undeveloped land in Prince George's County, Maryland, and a
39-acre tract of undeveloped land near Dulles Airport in Fairfax County,
Virginia, both of which are suitable for the construction of facilities for the
printing and distribution of copies of The Post to suburban locations. The
Company also owns 10 acres of undeveloped land in Montgomery County, Maryland.
Additionally, the Company owns land on the corner of 15th and L Streets,
N.W., in Washington, D.C., adjacent to The Washington Post plant and office
building. The Company has leased this property under a long-term ground lease
to The Prudential Insurance Company of America, which in 1982 completed
construction of a new multi-story office building on the site. The Company
rents a number of floors in this building. The Company also owns and occupies
a small office building on L Street which is next to The Post's downtown plant.
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The Herald owns its plant and office building in Everett, Washington; it
also owns two warehouses adjacent to its plant and a small office building in
Lynnwood, Washington, from which it manages its south Snohomish County
operations.
The Gazette Newspapers, Inc. owns the one-story brick building in
Gaithersburg, Maryland, that serves as headquarters for The Gazette Newspapers.
Satellite editorial and sales offices are located in leased premises.
The principal offices of Newsweek are located at 251 West 57th Street in
New York City, where Newsweek rents space on nine floors. The lease on this
space will expire in 2009 but is renewable for a 15-year period at Newsweek's
option at rentals to be negotiated or arbitrated. Newsweek's accounting,
production and distribution departments, and its subscription service
operations, are located in a facility Newsweek built in 1987 on a 16-acre tract
in Mountain Lakes, New Jersey. In December 1994 Newsweek signed a letter of
intent to sell its subscription service operations to Quad/Graphics, Inc., a
major commercial printing company. In connection with this transaction it is
anticipated that Quad/Graphics will lease a substantial portion of Newsweek's
Mountain Lakes facility.
The headquarters offices of the Company's broadcasting operations are
located in Hartford, Connecticut, in the same facilities that house the offices
and studios of WFSB. That facility and those that house the operations of each
of the Company's other television stations are all owned by the Company.
The headquarters offices of the Cable Television Division are located in
leased premises in Phoenix, Arizona. The majority of the offices and head-end
facilities of the Division's individual cable systems are located in buildings
owned by the Company. Substantially all the tower sites used by the Division
are leased.
Robinson Terminal Warehouse Corporation owns two wharves and several
warehouses in Alexandria, Virginia. These facilities are adjacent to the
business district and occupy approximately seven acres of land. Robinson also
owns two partially developed tracts of land in Fairfax County, Virginia,
aggregating about 22 acres. These tracts are near The Washington Post's
satellite printing plant and include several warehouses. In 1992 Robinson
purchased approximately 23 acres of undeveloped land on the Potomac River in
Charles County, Maryland, for the possible construction of additional warehouse
capacity.
Stanley H. Kaplan Educational Center Ltd. owns a six-story building
located at 131 West 56th Street in New York City, which serves as the Manhattan
Educational Center, and a one-story building in Brooklyn, New York, which
houses Kaplan's printing and production facilities. Kaplan's headquarters
offices are located at 810 Seventh Avenue in New York City, where Kaplan rents
space on two floors under leases which expire between 1995 and 1998. All
Kaplan educational centers outside of Manhattan occupy leased premises.
The offices of Legi-Slate, Mammoth Micro Productions and Moffet, Larson
& Johnson are located in Washington, D.C., Golden, Colorado, and Falls Church,
Virginia, respectively, and in each case occupy leased premises.
ITEM 3. LEGAL PROCEEDINGS.
The Company and its subsidiaries are parties to various civil lawsuits
that have arisen in the ordinary course of their businesses, including actions
for libel and invasion of privacy. Management
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does not believe that any litigation pending against the Company will have a
material adverse effect on its business or financial condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
The Company's Class B Common Stock is traded on the New York Stock
Exchange under the symbol "WPO." The Company's Class A Common Stock is not
publicly traded.
The high and low sales prices of the Company's Class B Common Stock
during the last two years were:
<TABLE>
<CAPTION>
1994 1993
---- ----
Quarter High Low High Low
------- ---- --- ---- ---
<S> <C> <C> <C> <C>
January - March . . . . . . . . . . . $ 284 $ 232 $ 242 $ 228
April - June . . . . . . . . . . . . 241 222 244 227
July - September . . . . . . . . . . 238 231 230 212
October - December . . . . . . . . . 248 234 257 219
</TABLE>
During 1994 the Company repurchased 366,500 shares of Class B Common
Stock in unsolicited transactions at prices no higher than the last sale price
on the New York Stock Exchange. Almost all of the repurchased shares were
included in trading volume reported on 1994's consolidated tape and accounted
for approximately 15 percent of such volume.
At February 28, 1995, there were 23 holders of record of the Company's
Class A Common Stock and 1,467 holders of record of the Company's Class B
Common Stock.
Both classes of the Company's Common Stock participate equally as to
dividends. Quarterly dividends were paid at the rate of $1.05 during 1994 and
1993.
ITEM 6. SELECTED FINANCIAL DATA.
See the information for the years 1990 through 1994 contained in the
table titled "Ten-Year Summary of Selected Historic Financial Data" which is
included in this Annual Report on Form 10-K and listed in the index to
financial information on page 22 hereof (with only the information for such
years to be deemed filed as part of this Annual Report on Form 10-K).
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
See the information contained under the heading "Management's Discussion
and Analysis of Results of Operations and Financial Condition" which is
included in this Annual Report on Form 10-K and listed in the index to
financial information on page 22 hereof.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
See the Company's Consolidated Financial Statements at January 1, 1995,
and for the periods then ended, together with the report of Price Waterhouse
LLP thereon and the information contained in Note N to said Consolidated
Financial Statements titled "Summary of Quarterly Operating Results
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(Unaudited)," which are included in this Annual Report on Form 10-K and listed
in the index to financial information on page 22 hereof.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information contained under the heading "Executive Officers" in Item
1 hereof, the information contained under the headings "Nominees for Election
by Class A Stockholders" and "Nominees for Election by Class B Stockholders,"
and the information contained in the last two paragraphs under the heading
"Stock Holdings of Certain Beneficial Owners and Management" in the definitive
Proxy Statement for the Company's 1995 Annual Meeting of Stockholders is
incorporated herein by reference thereto.
ITEM 11. EXECUTIVE COMPENSATION.
The information contained in the first paragraph after the list of
nominees under the heading "Nominees for Election by Class B Stockholders" and
under the headings "Executive Compensation," "Retirement Plans" and
"Compensation Committee Report on Executive Compensation" in the definitive
Proxy Statement for the Company's 1995 Annual Meeting of Stockholders is
incorporated herein by reference thereto.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information contained under the heading "Stock Holdings of Certain
Beneficial Owners and Management" in the definitive Proxy Statement for the
Company's 1995 Annual Meeting of Stockholders is incorporated herein by
reference thereto.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information contained under the heading "Certain Transactions" in
the definitive Proxy Statement for the Company's 1995 Annual Meeting of
Stockholders is incorporated herein by reference thereto.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) THE FOLLOWING DOCUMENTS ARE FILED AS PART OF THIS REPORT:
(i) Financial Statements and Financial Statement Schedules
As listed in the index to financial information on page
22 hereof.
(ii) Exhibits
As listed in the index to exhibits on page 46 hereof.
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(b) REPORTS ON FORM 8-K.
No reports on Form 8-K were filed during the last quarter of the
period covered by this report.
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SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) 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, ON MARCH 24, 1995.
THE WASHINGTON POST COMPANY
(Registrant)
By John B. Morse, Jr.
--------------------------
John B. Morse, Jr.
Vice President-Finance
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934,
THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES INDICATED ON MARCH 24, 1995:
<TABLE>
<S> <C>
Donald E. Graham Chairman of the Board and Chief
Executive Officer (Principal
Executive Officer) and Director
Alan G. Spoon President, Chief Operating Officer
and Director
Katharine Graham Chairman of the Executive
Committee of the Board and Director
John B. Morse, Jr. Vice President-Finance (Principal
Financial and Accounting Officer)
James E. Burke Director
Martin Cohen Director
George J. Gillespie, III Director
Ralph E. Gomory Director
Donald R. Keough Director
Barbara Scott Preiskel Director
William J. Ruane Director
Richard D. Simmons Director
George W. Wilson Director
</TABLE>
By John B. Morse, Jr.
--------------------
John B. Morse, Jr.
Attorney-in-Fact
An original power of attorney authorizing Donald E. Graham, Alan G.
Spoon, Katharine Graham and John B. Morse, Jr., and each of them, to sign all
reports required to be filed by the Registrant pursuant to the Securities
Exchange Act of 1934 on behalf of the above-named directors and officers has
been filed with the Securities and Exchange Commission.
21
<PAGE> 23
INDEX TO FINANCIAL INFORMATION
----------------------
THE WASHINGTON POST COMPANY
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Financial Statements and Schedules:
Report of Independent Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Consolidated Statements of Income for the Three Fiscal Years
Ended January 1, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Consolidated Balance Sheets at January 1, 1995 and January 2, 1994 . . . . . . . . . . . . . . 25
Consolidated Statements of Cash Flows for the Three Fiscal Years
Ended January 1, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Consolidated Statements of Changes in Shareholders' Equity for the Three Fiscal
Years Ended January 1, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Financial Statement Schedules for the Three Fiscal Years Ended January 1, 1995 . . . . . . . . 39
II - Valuation and Qualifying Accounts
Management's Discussion and Analysis of Results of Operations and Financial
Condition (Unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Ten-Year Summary of Selected Historical Financial Data (Unaudited) . . . . . . . . . . . . . . . . . . . 44
</TABLE>
---------------------
All other schedules have been omitted either because they are not
applicable or because the required information is included in the consolidated
financial statements or the notes thereto referred to above.
22
<PAGE> 24
REPORT OF INDEPENDENT ACCOUNTANTS
To The Board of Directors and Shareholders of
The Washington Post Company
In our opinion, the consolidated financial statements, including the financial
statement schedule, referred to under Item 14(a)(i) on page 19 and listed in
the index on page 22 present fairly, in all material respects, the financial
position of The Washington Post Company and its subsidiaries at January 1, 1995
and January 2, 1994, and the results of their operations and their cash flows
for each of the three fiscal years in the period ended January 1, 1995, in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits 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 audits provide a reasonable basis for the
opinion expressed above.
As discussed in Note E to the financial statements, the Company adopted,
effective at the beginning of 1993, Statement of Financial Accounting Standards
No. 109, "Accounting for Income Taxes."
PRICE WATERHOUSE LLP
Washington, D.C.
January 31, 1995
23
<PAGE> 25
THE WASHINGTON POST COMPANY
---------------------------
<TABLE>
<CAPTION>
CONSOLIDATED
STATEMENTS OF INCOME
====================
--------------------------------------------------------------------------------------------------------------------
Fiscal year ended
----------------------------------------------------
January 1, January 2, January 3,
(in thousands, except share amounts) 1995 1994 1993
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING REVENUES
Advertising . . . . . . . . . . . . . . . $1,026,672 $ 913,529 $ 895,645
Circulation and subscriber . . . . . . . . 438,500 444,385 436,193
Other . . . . . . . . . . . . . . . . . . 148,806 140,277 119,029
---------- ---------- ----------
1,613,978 1,498,191 1,450,867
---------- ---------- ----------
OPERATING COSTS AND EXPENSES
Operating . . . . . . . . . . . . . . . 861,464 790,256 787,256
Selling, general and administrative . . . 390,296 393,196 356,799
Depreciation and amortization of property,
plant, and equipment . . . . . . . . . 61,950 59,543 59,222
Amortization of goodwill and
other intangibles . . . . . . . . . . 25,393 16,216 15,478
---------- ---------- ----------
1,339,103 1,259,211 1,218,755
---------- ---------- ----------
INCOME FROM OPERATIONS . . . . . . . . . . . 274,875 238,980 232,112
Equity in earnings (losses) of affiliates 7,325 (1,994) (11,730)
Interest income . . . . . . . . . . . . 9,196 11,085 11,854
Interest expense . . . . . . . . . . . . (5,590) (4,983) (6,385)
Other income (expense), net . . . . . . 1,116 20,379 (1,655)
---------- --------- ----------
INCOME BEFORE INCOME TAXES AND
CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING PRINCIPLE . . . . . . . . 286,922 263,467 224,196
PROVISION FOR INCOME TAXES . . . . . . . . . 117,250 109,650 96,400
---------- --------- ---------
INCOME BEFORE CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING PRINCIPLE . . . . . 169,672 153,817 127,796
CUMULATIVE EFFECT OF CHANGE IN METHOD
OF ACCOUNTING FOR INCOME TAXES . . . . . -- 11,600 --
---------- ---------- ----------
NET INCOME . . . . . . . . . . . . . . . . . $ 169,672 $ 165,417 $ 127,796
========== ========== ==========
EARNINGS PER SHARE:
BEFORE CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING PRINCIPLE . . . . . . . $ 14.65 $ 13.10 $ 10.80
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE . . . . . . . . . -- .98 --
---------- ---------- ----------
NET INCOME . . . . . . . . . . . . . . . . . $ 14.65 $ 14.08 $ 10.80
========== ========== ==========
</TABLE>
The information on pages 29 through 38 is an integral part of the financial
statements.
24
<PAGE> 26
THE WASHINGTON POST COMPANY
---------------------------
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
===========================
--------------------------------------------------------------------------------------------
January 1, January 2,
(in thousands, except share amounts) 1995 1994
--------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents . . . . . . . . . . . . $ 117,269 $ 171,512
Investments in marketable debt securities . . . . 24,570 258,412
Accounts receivable, net . . . . . . . . . . . . 175,441 140,518
Inventories . . . . . . . . . . . . . . . . . . . 20,378 16,419
Program rights . . . . . . . . . . . . . . . . . 18,972 15,460
Other current assets . . . . . . . . . . . . . . 19,249 23,253
---------- ---------
375,879 625,574
INVESTMENTS IN AFFILIATES . . . . . . . . . . . . . 170,754 155,251
PROPERTY, PLANT, AND EQUIPMENT
Buildings . . . . . . . . . . . . . . . . . . . . 185,193 166,433
Machinery, equipment, and fixtures . . . . . . . 629,043 579,423
Leasehold improvements . . . . . . . . . . . . . 33,287 29,287
---------- ----------
847,523 775,143
Less accumulated depreciation and amortization . (499,172) (469,359)
---------- ----------
348,351 305,784
Land . . . . . . . . . . . . . . . . . . . . . . 32,562 28,799
Construction in progress . . . . . . . . . . . . 30,483 29,135
---------- ----------
411,396 363,718
GOODWILL AND OTHER INTANGIBLES, LESS ACCUMULATED AMORTIZATION
OF $155,161 AND $129,768 . . . . . . . . . . . . 512,405 309,157
DEFERRED CHARGES AND OTHER ASSETS . . . . . . . . . 226,434 168,804
---------- ----------
$1,696,868 $1,622,504
========== ==========
</TABLE>
The information on pages 29 through 38 is an integral part of the financial
statements.
25
<PAGE> 27
THE WASHINGTON POST COMPANY
---------------------------
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
===========================
--------------------------------------------------------------------------------------------------------------
January 1, January 2,
(in thousands, except share amounts) 1995 1994
--------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities . . . . . . . . . . . $ 186,129 $ 163,553
Federal and state income taxes . . . . . . . . . . . . . . . . 6,593 15,726
Deferred subscription revenue . . . . . . . . . . . . . . . . 80,351 79,254
---------- ----------
273,073 258,533
OTHER LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . 217,461 191,088
LONG-TERM DEBT . . . . . . . . . . . . . . . . . . . . . . . . 50,297 51,768
DEFERRED INCOME TAXES . . . . . . . . . . . . . . . . . . . . . 29,104 33,696
----------- ---------
569,935 535,085
----------- ---------
SHAREHOLDERS' EQUITY
Preferred stock, $1 par value, 1,000,000 shares authorized . . -- --
Common stock
Class A common stock, $1 par value, 7,000,000 shares
authorized; 1,843,250 shares issued and outstanding . . . 1,843 1,843
Class B common stock, $1 par value, 40,000,000 shares
authorized; 18,156,750 shares issued; 9,502,684 and
9,870,115 shares outstanding . . . . . . . . . . . . . . . 18,157 18,157
Capital in excess of par value . . . . . . . . . . . . . . . . 21,273 21,354
Retained earnings . . . . . . . . . . . . . . . . . . . . . . 1,691,497 1,570,546
Cumulative foreign currency translation adjustment . . . . . . 5,328 2,908
Unrealized gain on available-for-sale securities (net of taxes) 2,933 --
Cost of 8,654,066 and 8,286,635 shares of Class B
common stock held in treasury . . . . . . . . . . . . . . . (614,098) (527,389)
---------- ----------
1,126,933 1,087,419
---------- ----------
$1,696,868 $1,622,504
========== ==========
</TABLE>
The information on pages 29 through 38 is an integral part of the financial
statements.
26
<PAGE> 28
THE WASHINGTON POST COMPANY
---------------------------
<TABLE>
<CAPTION>
CONSOLIDATED
STATEMENTS OF CASH FLOWS
=========================
-----------------------------------------------------------------------------------------------------------
Fiscal year ended
--------------------------------------
January 1, January 2, January 3,
(in thousands) 1995 1994 1993
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income . . . . . . . . . . . . . . . . . . . . . . $ 169,672 $ 165,417 $ 127,796
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 . . . . . . . . . . . . . . . . 61,950 59,543 59,222
Amortization of goodwill and other intangibles . . . . 25,393 16,216 15,478
Amortization of program rights . . . . . . . . . . . . 21,888 18,927 20,308
Provision for doubtful accounts and returns . . . . . 57,983 56,631 57,629
Gain from sale of business . . . . . . . . . . . . . . -- (13,371) --
(Decrease) in accrued interest and income taxes payable (9,177) (5,141) (14,162)
Provision for deferred income taxes . . . . . . . . . (6,882) (1,669) (1,577)
Change in assets and liabilities:
(Increase) in accounts receivable . . . . . . . . . (92,526) (68,901) (47,393)
(Increase) decrease in inventories . . . . . . . . . (3,959) 3,839 (695)
Increase (decrease) in accounts payable
and accrued liabilities . . . . . . . . . . . . . 17,376 (17,054) 16,102
(Increase) in other assets and other liabilities, net (21,148) (9,628) (14,347)
Other . . . . . . . . . . . . . . . . . . . . . . . . 4,727 9,440 23,886
--------- --------- ---------
Net cash provided by operating activities . . . . 225,297 202,649 242,247
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net proceeds from sale of business . . . . . . . . . . -- 64,947 --
Purchases of property, plant, and equipment . . . . . (74,642) (79,139) (58,889)
Purchases of marketable debt securities . . . . . . . (38,994) (520,114) (533,082)
Maturities and sales of marketable debt securities . . 274,776 509,937 465,891
Investments in certain businesses . . . . . . . . . . (281,937) (1,591) (32,353)
Payments for program rights . . . . . . . . . . . . . (20,838) (20,232) (22,013)
Other . . . . . . . . . . . . . . . . . . . . . . . . (1,124) 663 978
--------- --------- ---------
Net cash (used) by investing activities . . . . . (142,759) (45,529) (179,468)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on debt . . . . . . . . . . . . . . . (1,400) -- (25,000)
Dividends paid . . . . . . . . . . . . . . . . . . . . (48,721) (49,376) (49,699)
Common shares repurchased . . . . . . . . . . . . . . . (86,660) (23,133) (7,484)
Other . . . . . . . . . . . . . . . . . . . . . . . . . -- 61 122
--------- --------- ---------
Net cash (used) by financing activities . . . . . (136,781) (72,448) (82,061)
--------- --------- ---------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS . . . (54,243) 84,672 (19,282)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR . . . . . . 171,512 86,840 106,122
--------- --------- ---------
CASH AND CASH EQUIVALENTS AT END OF YEAR . . . . . . . . . $ 117,269 $ 171,512 $ 86,840
========= ========= =========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the year for:
Income taxes . . . . . . . . . . . . . . . . . . . . . $ 134,700 $ 110,300 $ 110,700
Interest . . . . . . . . . . . . . . . . . . . . . . $ 5,200 $ 5,600 $ 7,200
NONCASH INVESTING ACTIVITIES:
Program rights acquired . . . . . . . . . . . . . . . . $ 30,200 $ 5,800 $ 25,200
</TABLE>
The information on pages 29 through 38 is an integral part of the financial
statements.
27
<PAGE> 29
THE WASHINGTON POST COMPANY
---------------------------
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF
CHANGES IN SHAREHOLDERS' EQUITY
===============================
------------------------------------------------------------------------------------------------------------------------------------
Cumulative Unrealized
Foreign Gain on
Class A Class B Capital in Currency Available-
Common Common Excess of Retained Translation For-Sale Treasury
(in thousands, except share amounts) Stock Stock Par Value Earnings Adjustment Securities Stock
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE DECEMBER 29, 1991 . . . . . . . . . . . . $1,843 $18,157 $18,725 $1,376,408 $6,870 -- $(497,718)
Net income for the year . . . . . . . . . . . . 127,796
Dividends -- $4.20 per share . . . . . . . . . . (49,699)
Repurchase of 33,949 shares of
Class B common stock . . . . . . . . . . . . . (7,484)
Issuance of 304 shares of Class B
common stock, net of restricted
stock award forfeitures . . . . . . . . . . . (52) 16
Change in foreign currency
translation adjustment . . . . . . . . . . . . (1,931)
Other . . . . . . . . . . . . . . . . . . . . . 74
------ ------- ------- ---------- ------ ------ ---------
BALANCE JANUARY 3, 1993 . . . . . . . . . . . . . 1,843 18,157 18,747 1,454,505 4,939 -- (505,186)
Net income for the year . . . . . . . . . . . . 165,417
Dividends -- $4.20 per share . . . . . . . . . . (49,376)
Repurchase of 99,800 shares of
Class B common stock . . . . . . . . . . . . . (23,133)
Issuance of 15,030 shares of
Class B common stock, net
of restricted stock award
forfeitures . . . . . . . . . . . . . . . . . 2,480 930
Change in foreign currency
translation adjustment . . . . . . . . . . . . (2,031)
Other . . . . . . . . . . . . . . . . . . . . . 127
------ ------- ------- ---------- ------ ------ ---------
BALANCE JANUARY 2, 1994 . . . . . . . . . . . . . 1,843 18,157 21,354 1,570,546 2,908 -- (527,389)
Net income for the year . . . . . . . . . . . . 169,672
Dividends -- $4.20 per share . . . . . . . . . . (48,721)
Repurchase of 366,500 shares
of Class B common stock . . . . . . . . . . . (86,660)
Restricted stock award
forfeitures of 931 shares, net
of issuance of Class B
common stock . . . . . . . . . . . . . . . . . (130) (49)
Change in foreign currency
translation adjustment . . . . . . . . . . . . 2,420
Unrealized gain on available-for-sale
securities (net of taxes) . . . . . . . . . . 2,933
Other . . . . . . . . . . . . . . . . . . . . . 49
------ ------- ------- ---------- ------ ------ ---------
BALANCE JANUARY 1, 1995 . . . . . . . . . . . . . $1,843 $18,157 $21,273 $1,691,497 $5,328 $2,933 $(614,098)
====== ======= ======= ========== ====== ====== =========
</TABLE>
The information on pages 29 through 38 is an integral part of the financial
statements.
28
<PAGE> 30
THE WASHINGTON POST COMPANY
---------------------------
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
=====================
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Washington Post Company ("the company") operates principally in four areas
of the media business: newspaper publishing, television broadcasting, magazine
publishing, and cable television. Segment data is set forth in Note M.
FISCAL YEAR. The company reports on a 52-53 week fiscal year ending on the
Sunday nearest December 31. The fiscal years 1994 and 1993, which ended January
1, 1995, and January 2, 1994, respectively, included 52 weeks, while 1992
included 53 weeks. With the exception of the newspaper publishing operations,
subsidiaries of the company report on a calendar-year basis.
PRINCIPLES OF CONSOLIDATION. The accompanying financial statements include the
accounts of the company and its subsidiaries; significant intercompany
transactions have been eliminated.
CASH EQUIVALENTS. Short-term investments with maturities of 90 days or less are
considered cash equivalents. The carrying amount reported approximates fair
value.
INVESTMENTS IN MARKETABLE SECURITIES. Marketable securities held to maturity
consist of debt instruments that mature over 90 days from the purchase date and
are stated at cost plus accrued interest. Other investments in marketable
equity securities available for sale are classified in "Deferred charges and
other assets" in the Consolidated Balance Sheets. In accordance with Statement
of Financial Accounting Standards No. 115 (SFAS No. 115), any unrealized gains
or losses (net of taxes) relating to such investments are included as a
separate component of Shareholders' Equity.
INVENTORIES. Inventories are valued at the lower of cost or market. Cost of
newsprint is determined by the first-in, first-out method, and cost of magazine
paper is determined by the specific-cost method.
INVESTMENTS IN AFFILIATES. The company uses the equity method of accounting for
its investments in and earnings or losses of affiliates.
PROPERTY, PLANT, AND EQUIPMENT. Property, plant, and equipment is recorded at
cost and includes interest capitalized in connection with major long-term
construction projects. Replacements and major improvements are capitalized;
maintenance and repairs are charged to operations as incurred.
Depreciation is calculated using the straight-line method over the estimated
useful lives of the property, plant, and equipment: 3 to 12 years for machinery
and equipment, 20 to 50 years for buildings, and 5 to 20 years for land
improvements. The costs of leasehold improvements are amortized over the lesser
of the useful lives or the terms of the respective leases.
GOODWILL AND OTHER INTANGIBLES. Goodwill and other intangibles represent the
unamortized excess of the cost of acquiring subsidiary companies over the fair
values of such companies' net tangible assets at the dates of acquisition.
Goodwill and other intangibles acquired prior to October 30, 1970, the
effective date of Accounting Principles Board Opinion No. 17, are not being
amortized because in the opinion of the company there has been no diminution of
the value of such assets. Goodwill and other intangibles acquired subsequently
are being amortized by use of the straight-line method over various periods up
to 40 years.
DEFERRED PROGRAM RIGHTS. The broadcast subsidiaries are parties to agreements
that entitle them to show syndicated and other programs on television. The
unamortized cost of these rights and the liability for future payments under
these agreements are included in the Consolidated Balance Sheets. The
unamortized cost is charged to operations using accelerated or straight-line
rates for syndicated programs and accelerated amortization rates for other
programs.
DEFERRED SUBSCRIPTION REVENUE AND MAGAZINE SUBSCRIPTION PROCUREMENT COSTS.
Deferred subscription revenue, which primarily represents amounts received from
customers in advance of magazine and newspaper deliveries, is included in
revenues over the subscription term. Deferred subscription revenue to be
earned after one year is included in "Other Liabilities" in the Consolidated
Balance Sheets. Subscription procurement costs are charged to operations as
incurred.
INCOME TAXES. The 1994 and 1993 provisions for income taxes have been
determined under Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" (SFAS No. 109), which requires the use of the
asset and liability approach. Under this approach, deferred taxes represent the
expected future tax consequences of temporary differences between the carrying
amounts and tax bases of assets and liabilities.
Prior to 1993 the provision for income taxes was determined under Accounting
Principles Board (APB) Opinion No. 11, which required use of the deferred
method.
29
<PAGE> 31
THE WASHINGTON POST COMPANY
---------------------------
Under that method, the provision for income taxes was based on pre-tax
financial income, which differed from taxable income because certain elements
of income and expense were reflected in different periods for financial
accounting and tax purposes. Deferred taxes were provided on these timing
differences using the tax rate in effect when the timing differences
originated, and the effects of reversing timing differences were reflected at
those historical tax rates.
FOREIGN CURRENCY TRANSLATION. Gains and losses on foreign currency transactions
and the translation of the accounts of the company's foreign operations where
the U.S. dollar is the functional currency are recognized currently in the
Consolidated Statements of Income. Gains and losses on translation of the
accounts of the company's foreign operations where the local currency is the
functional currency and the company's equity investments in its foreign
affiliates are accumulated and reported separately in the "Cumulative foreign
currency translation adjustment" in the Consolidated Balance Sheets.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS. The company provides certain
health care and life insurance benefits for retired employees. The expected
cost of providing these postretirement benefits is accrued over the years that
employees render services.
B. INVESTMENTS IN MARKETABLE DEBT SECURITIES
The company's marketable debt securities at January 1, 1995, and January 2,
1994, include the following (in thousands):
<TABLE>
<CAPTION>
---------------------------------------------------------------
1994 1993
---------------------------------------------------------------
<S> <C> <C>
U.S. Government and
Government agency
obligations . . . . . . . $ 9,844 $237,655
Commercial paper . . . . . 14,726 20,757
------- --------
$24,570 $258,412
======= ========
</TABLE>
C. ACCOUNTS RECEIVABLE AND ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts receivable at January 1, 1995, and January 2, 1994, consist of the
following (in thousands):
<TABLE>
<CAPTION>
----------------------------------------------------------------
1994 1993
----------------------------------------------------------------
<S> <C> <C>
Accounts receivable, less
estimated returns, doubtful
accounts and allowances
of $39,943 and $38,602 . . . . . . $165,352 $129,976
Other . . . . . . . . . . . . . . . 10,089 10,542
-------- --------
$175,441 $140,518
======== ========
</TABLE>
Accounts payable and accrued liabilities at January 1, 1995, and January 2,
1994, consist of the following (in thousands):
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
1994 1993
--------------------------------------------------------------------------------
<S> <C> <C>
Accounts payable and
accrued expenses . . . . . . . . . . . . $ 99,106 $ 91,831
Accrued payroll and
related benefits . . . . . . . . . . . . 40,143 31,747
Accrued interest expense . . . . . . . . . 4,246 4,437
Deferred tuition revenue . . . . . . . . . 14,752 12,564
Film contracts payable . . . . . . . . . . 18,408 14,978
Due to affiliates (newsprint) . . . . . . 9,474 7,996
-------- --------
$186,129 $163,553
======== ========
</TABLE>
D. INVESTMENTS IN AFFILIATES
The company's investments in affiliates at January 1, 1995, and January 2,
1994, include the following (in thousands):
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
1994 1993
--------------------------------------------------------------------------------
<S> <C> <C>
Cowles Media Company . . . . . . . . . . . $ 81,514 $ 80,786
Newsprint mills . . . . . . . . . . . . . 60,782 50,172
Other . . . . . . . . . . . . . . . . . . 28,458 24,293
-------- --------
$170,754 $155,251
======== ========
</TABLE>
The company's investments in affiliates includes a 28 percent interest in the
stock of Cowles Media Company, which owns and operates the Minneapolis Star
Tribune and several other smaller properties.
The company's interest in newsprint mills includes a 49 percent interest in the
common stock of Bowater Mersey Paper Company Limited, which owns and operates a
newsprint mill in Nova Scotia; a 35 percent limited partnership interest in
Bear Island Paper Company, which owns and operates a newsprint mill near
Richmond, Virginia; and a 35 percent limited partnership interest in Bear
Island Timberlands Company, which owns timberland and supplies Bear Island
Paper Company with a major portion of its wood requirements. In 1993 and 1992
the company's ownership of Bear Island Timberlands Company and Bear Island
Paper Company was a one-third limited partnership interest in each company.
Operating costs and expenses of the company include newsprint supplied by
Bowater, Inc. (parent to Bowater Mersey Paper Company), and Bear Island Paper
Company and used in operations, the cost of which was approximately $53,200,000
in 1994, $52,500,000 in 1993, and $51,000,000 in 1992.
The company's other investments represent a 50 percent common stock interest in
the International Herald Tribune newspaper, published near Paris, France, and a
50 percent common stock interest in the Los Angeles Times-Washington Post News
Service, Inc.
30
<PAGE> 32
THE WASHINGTON POST COMPANY
---------------------------
Summarized financial data for the affiliates' operations are as follows (in
thousands):
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------
1994 1993 1992
--------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FINANCIAL POSITION
Working capital . . . . . . . . . . . . . $(125,667) $ (67,923) $(119,505)
Property, plant,
and equipment . . . . . . . . . . . . . 407,235 422,606 436,620
Total assets . . . . . . . . . . . . . . 749,165 732,940 718,352
Long-term debt . . . . . . . . . . . . . 180,988 200,105 197,203
Net equity . . . . . . . . . . . . . . . 213,484 172,332 175,618
RESULTS OF OPERATIONS
Operating revenues . . . . . . . . . . . . $ 766,232 $ 610,617 $ 650,194
Operating income . . . . . . . . . . . . 46,741 43,569 20,500
Net income (loss) . . . . . . . . . . . . 29,235 7,218 (13,175)
</TABLE>
The following table summarizes the status and results of the company's
investments in affiliates (in thousands):
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------
1994 1993
-------------------------------------------------------------------------------------------
<S> <C> <C>
Beginning investment . . . . . . . . . . . $155,251 $162,410
Additional investment . . . . . . . . . . 8,750 --
Equity in earnings (losses) . . . . . . . 7,325 (1,994)
Dividends and
distributions received . . . . . . . . . (2,992) (2,743)
Foreign currency translation . . . . . . . 2,420 (2,422)
-------- --------
Ending investment . . . . . . . . . . . . $170,754 $155,251
======== ========
</TABLE>
At January 1, 1995, the unamortized excess of the company's investments over
its equity in the underlying net assets of its affiliates at the dates of
acquisition was approximately $84,900,000. Amortization included in "Equity in
earnings (losses) of affiliates" in the accompanying Consolidated Statements of
Income was $2,600,000 for the years ended January 1, 1995, January 2, 1994, and
January 3, 1993.
E. INCOME TAXES
In 1994 and 1993 income taxes are based on the provisions of SFAS No. 109,
"Accounting for Income Taxes," which was adopted at the beginning of 1993. The
cumulative effect of adopting this standard was an increase in 1993 net income
of $11,600,000 and is shown on the Consolidated Statements of Income as the
cumulative effect of a change in accounting principle. Financial statements for
years prior to 1993 were not restated, and the 1992 information shown below was
determined under the provisions of APB Opinion No. 11.
The provision for income taxes consists of the following (in thousands):
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
Current Deferred
----------------------------------------------------------------------------
<S> <C> <C>
1994
U.S. Federal . . . . . . . . . . . . . . $103,182 $(6,356)
Foreign . . . . . . . . . . . . . . . . . 509 323
State and local . . . . . . . . . . . . . 20,441 (849)
-------- -------
$124,132 $(6,882)
======== =======
1993
U.S. Federal . . . . . . . . . . . . . . $ 85,082 $ (535)
Foreign . . . . . . . . . . . . . . . . . 6,913 (657)
State and local . . . . . . . . . . . . . 19,324 (477)
-------- -------
$111,319 $(1,669)
======== =======
1992
U.S. Federal . . . . . . . . . . . . . . $ 79,380 $ (295)
Foreign . . . . . . . . . . . . . . . . . 488 (1,219)
State and local . . . . . . . . . . . . . 18,109 (63)
-------- -------
$ 97,977 $(1,577)
======== =======
</TABLE>
During 1993 the company sold its cable franchises in the United Kingdom. This
transaction increased 1993 foreign taxes by approximately $6,800,000.
The provision for income taxes exceeds the amount of income tax determined by
applying the U.S. Federal statutory rate of 35 percent in 1994 and 1993 and 34
percent in 1992 to income before taxes as a result of the following (in
thousands):
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------
1994 1993 1992
-------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Federal
statutory taxes . . . . . . . . . . . . $100,423 $ 92,213 $76,226
State and local taxes
net of U.S. Federal
income tax
benefit . . . . . . . . . . . . . . . . 12,735 12,251 11,911
Amortization of goodwill
not deductible
for income tax
purposes . . . . . . . . . . . . . . . 3,146 2,433 2,922
Other . . . . . . . . . . . . . . . . . . 946 2,753 5,341
Provision for -------- -------- -------
income taxes . . . . . . . . . . . . . $117,250 $109,650 $96,400
======== ======== =======
</TABLE>
31
<PAGE> 33
THE WASHINGTON POST COMPANY
---------------------------
Deferred income taxes at January 1, 1995, and January 2, 1994, consists of the
following (in thousands):
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------
1994 1993
-------------------------------------------------------------------------------------------
<S> <C> <C>
Accrued postretirement
benefits . . . . . . . . . . . . . . . $45,568 $42,336
Other benefit obligations . . . . . . . . 22,903 17,760
Accounts receivable . . . . . . . . . . . 6,559 6,368
Other . . . . . . . . . . . . . . . . . . 7,664 3,855
------- -------
Deferred tax asset . . . . . . . . . . . $82,694 $70,319
------- -------
Property, plant,
and equipment . . . . . . . . . . . . . $44,250 $48,275
Prepaid pension cost . . . . . . . . . . 48,732 39,769
Affiliate operations . . . . . . . . . . 12,671 12,211
Investment tax credit . . . . . . . . . . 3,013 3,760
Other . . . . . . . . . . . . . . . . . . 3,132 --
------- -------
Deferred tax liability . . . . . . . . . 111,798 104,015
------- -------
Deferred income taxes . . . . . . . . . . $29,104 $33,696
======= =======
</TABLE>
In 1992 the deferred tax benefit resulted principally from the excess of
financial statement depreciation over tax depreciation, $1,738,000, and accrued
postretirement benefit expense, $4,138,000. These amounts were offset by
deferred tax expense of $7,469,000 resulting from net pension credits in excess
of contributions.
F. DEBT
Long-term debt of the company as of January 1, 1995, and January 2, 1994, is
summarized as follows (in thousands):
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------
1994 1993
------------------------------------------------------------------------------------------
<S> <C> <C>
10.1 percent unsecured
European Currency Unit notes,
$50,000,000 face amount
due in 1996 . . . . . . . . . . . . . . $50,297 $50,368
10.875 percent unsecured
Eurodollar notes, $1,400,000
face amount due in 1995 . . . . . . . . -- 1,400
------- -------
$50,297 $51,768
======= =======
</TABLE>
G. CAPITAL STOCK, STOCK OPTIONS AND STOCK AWARDS
CAPITAL STOCK. Each share of Class A common stock and Class B common stock
participates equally in dividends. The Class B stock has limited voting rights
and as a class has the right to elect 30 percent of the Board of Directors; the
Class A stock has unlimited voting rights including the right to elect a
majority of the Board of Directors.
During 1994 and 1993 the company purchased a total of 366,500 and 99,800
shares, respectively, of its Class B common stock at a cost of approximately
$86,660,000 and $23,133,000.
STOCK OPTIONS. The Employee Stock Option Plan, which was adopted in 1971 and
amended in 1993, reserves 1,900,000 shares of the company's Class B common
stock for options to be granted under the plan. The purchase price of the
shares covered by an option cannot be less than the fair value on the granting
date. At January 1, 1995, there were 662,950 shares reserved for issuance under
the Stock Option Plan, of which 164,500 shares were subject to options
outstanding and 498,450 shares were available for future grants.
Changes in options outstanding for the years ended January 1, 1995, and January
2, 1994, were as follows:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------
1994 1993
------------------------------------------------
Number Average Number Average
Of Option Of Option
Shares Price Shares Price
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Beginning
of year . . . . . . . . . . . . . . . . 155,000 $255.95 143,000 $256.88
Granted . . . . . . . . . . . . . . . . 12,000 242.00 12,500 239.88
Exercised . . . . . . . . . . . . . . . -- (500) 121.50
Canceled . . . . . . . . . . . . . . . (2,500) 231.70 -- --
------- ------- -------
End of year . . . . . . . . . . . . . . 164,500 $255.35 155,000 $255.95
======= =======
</TABLE>
Of the shares covered by options outstanding at the end of 1994, 77,750 are now
exercisable, 16,750 will become exercisable in 1995, 10,875 will become
exercisable in 1996, 6,125 will become exercisable in 1997, 3,000 will become
exercisable in 1998, and 50,000 will become exercisable in 1999.
STOCK AWARDS. In 1982 the company adopted a Long-Term Incentive Compensation
Plan that, among other provisions, authorizes the awarding of stock to key
employees. Stock awards made under the Incentive Compensation Plan are subject
to the general restriction that stock awarded to a participant will be
forfeited and revert to company ownership if the participant's employment
terminates before the end of a specified period of service to the company. At
January 1, 1995, there were 138,597 shares reserved for issuance under the
Incentive Compensation Plan. Of this number, 26,860 shares were subject to
awards outstanding and 111,737 shares were available for future awards.
Activity related to stock awards for the years ended January 1, 1995, and
January 2, 1994, was as follows:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------
1994 1993
-------------------------------------------------
Number Average Number Average
Of Award Of Award
Shares Price Shares Price
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Awards Outstanding
Beginning
of year . . . . . . . . . . . . . . . . 27,955 $214.61 24,765 $202.99
Awarded . . . . . . . . . . . . . . . . 472 237.84 15,437 228.67
Vested . . . . . . . . . . . . . . . . (284) 201.79 (11,340) 209.05
Forfeited . . . . . . . . . . . . . . . (1,283) 222.05 (907) 206.35
------ ------
End of year . . . . . . . . . . . . . . . 26,860 $214.79 27,955 $214.61
====== ======
</TABLE>
32
<PAGE> 34
THE WASHINGTON POST COMPANY
---------------------------
For the share awards outstanding at January 1, 1995, the aforementioned
restriction will lapse in January 1995 for 12,144 shares and in January 1997
for 14,716 shares.
AVERAGE NUMBER OF SHARES OUTSTANDING. Earnings per share are based on the
weighted average number of shares of common stock outstanding during each year,
adjusted for the dilutive effect of shares issuable under outstanding stock
options, and awards made under the Incentive Compensation Plan. The average
number of shares outstanding was 11,582,000 for 1994, 11,750,000 for 1993, and
11,830,000 for 1992.
H. RETIREMENT PLANS
The company and its subsidiaries have various funded and unfunded pension and
incentive savings plans and in addition contribute to several multi-employer
plans on behalf of certain union-represented employee groups. Substantially all
of the company's employees, including some located in foreign countries, are
covered by these plans. Pension (benefit) cost for all retirement plans
combined was $(1,600,000) in 1994, $(2,300,000) in 1993, and $5,200,000 in
1992. Included in 1992 are costs of $8,300,000 related to a new deferred
compensation arrangement at The Washington Post newspaper.
The costs for the company's defined benefit pension plans are actuarially
determined and include amortization of prior service costs over various
periods, generally not exceeding 20 years. The company's policy is to fund the
costs accrued for its defined benefit plans.
The following table sets forth the funded status of the defined benefit plans
and amounts recognized in "Deferred charges and other assets" in the
Consolidated Balance Sheets at January 1, 1995, and January 2, 1994 (in
thousands):
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------
1994 1993
-------------------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of
accumulated plan benefits
including vested benefits of
$162,068 and $142,706 . . . . . . . . . $ 167,341 $ 151,200
========= =========
Plan assets at fair value,
primarily listed securities . . . . . . $ 455,456 $ 454,741
Projected benefit
obligation for service
rendered to date . . . . . . . . . . . (206,870) (187,490)
--------- ---------
Plan assets in excess
of projected
benefit obligation . . . . . . . . . . 248,586 267,251
Prior service cost not
yet recognized in periodic
pension cost . . . . . . . . . . . . . 13,317 15,697
Less unrecognized net
gain from past
experience different
from that assumed . . . . . . . . . . . (79,795) (114,212)
Less unrecognized net
asset (transition amount)
being recognized over
approximately 17 years . . . . . . . . (61,268) (68,933)
--------- ---------
Prepaid pension cost . . . . . . . . . . $ 120,840 $ 99,803
========= =========
</TABLE>
The net pension credit for the years ended January 1, 1995, January 2, 1994,
and January 3, 1993, includes the following components (in thousands):
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------
1994 1993 1992
---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost for
benefits earned
during the period . . . . . . . . . . . $ 9,117 $ 8,805 $ 8,312
Interest cost on
projected benefit
obligation . . . . . . . . . . . . . . 14,022 12,683 11,700
Actual return on
plan assets . . . . . . . . . . . . . . (7,211) (35,086) (29,388)
Net amortization
and deferral . . . . . . . . . . . . . (36,751) (5,839) (8,185)
-------- -------- --------
Net pension credit . . . . . . . . . . . $(20,823) $(19,437) $(17,561)
======== ======== ========
</TABLE>
The weighted average discount rate and rate of increase in future compensation
levels used for 1994, 1993, and 1992 in determining the actuarial present value
of the projected benefit obligation were 7.5 percent and 4 percent,
respectively. The expected long-term rate of return on assets was 9 percent in
1994, 1993, and 1992.
Contributions to multi-employer pension plans, which are generally based on
hours worked, amounted to $1,700,000 in 1994, $1,900,000 in 1993, and
$1,500,000 in 1992.
The costs of unfunded retirement plans are charged to expense when accrued. The
company's liability for such plans, which is included in "Other Liabilities" in
the Consolidated Balance Sheets, was $48,700,000 at January 1, 1995, and
$45,000,000 at January 2, 1994.
I. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The company and its subsidiaries provide health care and life insurance
benefits to certain retired employees. These employees become eligible for
benefits after meeting minimum age and service requirements.
The following table sets forth the amounts included in "Other Liabilities" in
the Consolidated Balance Sheets at January 1, 1995, and January 2, 1994 (in
thousands):
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
1994 1993
-------------------------------------------------------------------------------
<S> <C> <C>
Accumulated postretirement
benefit obligation:
Retirees . . . . . . . . . . . . . . . . . $ 50,737 $46,987
Fully eligible active
plan participants . . . . . . . . . . . . 6,936 6,423
Other active plan participants . . . . . . 44,194 40,927
-------- -------
101,867 94,337
Unrecognized prior service costs
arising from plan amendments . . . . . . . 2,143 2,357
Unrecognized net gain from
past experience different
from that assumed. . . . . . . . . . . . . 739 739
------- -------
Accrued postretirement
benefit cost . . . . . . . . . . . . . . . $104,749 $97,433
======== =======
</TABLE>
33
<PAGE> 35
THE WASHINGTON POST COMPANY
---------------------------
Net periodic postretirement benefit cost for the years ended January 1, 1995,
January 2, 1994, and January 3, 1993, includes the following components (in
thousands):
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------
1994 1993 1992
---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost for
benefits earned
during the period . . . . . . . . . . . . . $ 3,373 $ 2,894 $ 3,029
Interest cost on
accumulated post-
retirement benefit
obligation . . . . . . . . . . . . . . . . 7,419 6,880 6,853
Amortization of prior
service costs . . . . . . . . . . . . . . . (214) (214) (61)
Curtailment gain . . . . . . . . . . . . . . -- -- (5,963)
------- ------- -------
Net periodic post-
retirement
benefit cost . . . . . . . . . . . . . . . $10,578 $ 9,560 $ 3,858
======= ======= =======
</TABLE>
The curtailment gain of $6,000,000 relates to the termination in December 1992
of one of the company's health care plans at The Washington Post newspaper. The
terminated plan has been replaced by a deferred payment arrangement and a
related expense of $8,300,000 was recognized as a result of this change (see
Note H).
For both 1994 and 1993 the accumulated postretirement benefit obligation was
determined using a discount rate of 8 percent and a health care cost trend rate
of approximately 14 percent for pre-age-65 benefits, decreasing to 6.5 percent
in the year 2022 and thereafter; and rates of approximately 11 to 14 percent
for post-age-65 benefits, decreasing to 6.5 percent in the year 2022 and
thereafter.
The company's policy is to fund the above-mentioned benefits as claims and
premiums are paid.
The effect on the accumulated postretirement benefit obligation at January 1,
1995, of a 1 percent increase each year in the health care cost trend rate used
would result in increases of approximately $16,800,000 in the obligation and
$2,000,000 in the aggregate service and interest components of the 1994
expense.
The cash expenditures for postretirement benefits were $3,262,000 for 1994,
$2,830,000 in 1993, and $2,560,000 in 1992.
J. LEASE COMMITMENTS
The company leases primarily real property under operating agreements. Many of
the leases contain renewal options and escalation clauses that require payments
of additional rent to the extent of increases in the related operating costs.
At January 1, 1995, future minimum rental payments under noncancelable
operating leases are as follows (in thousands):
<TABLE>
<CAPTION>
------------------------------------------------
<S> <C>
1995 . . . . . . . . $ 18,105
1996 . . . . . . . . 15,498
1997 . . . . . . . . 12,766
1998 . . . . . . . . 9,858
1999 . . . . . . . . 8,295
Thereafter . . . . . 37,617
--------
$102,139
========
</TABLE>
Minimum payments have not been reduced by minimum sublease rentals of
$5,300,000 due in the future under noncancelable subleases.
Rent expense under operating leases included in operating costs and expenses
was approximately $22,600,000 in 1994, $22,200,000 in 1993, and $21,500,000 in
1992. Sublease income was approximately $1,500,000 in 1994, and 1,300,000 in
1993 and 1992.
In 1993 the company entered into a lease agreement under which certain costs
were paid for through a restricted funding mechanism. At January 2, 1994,
$6,900,000 included in "Cash and cash equivalents" in the accompanying
Consolidated Balance Sheets was restricted under the provisions of the funding
arrangement. The provisions of this funding arrangement were satisfied during
1994 and, accordingly, there are no such restrictions on cash at January 1,
1995.
K. ACQUISITIONS AND DISPOSITIONS
In April 1994 the company acquired substantially all of the assets comprising
the businesses of television stations KPRC-TV, the NBC affiliate in Houston,
Texas, and KSAT-TV, the ABC affiliate in San Antonio, Texas, for approximately
$253,000,000 in cash, including related expenses. 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 years ended January 1, 1995, and January
2, 1994, as if the acquisition of the television stations had occurred at the
beginning of each year. 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.
34
<PAGE> 36
THE WASHINGTON POST COMPANY
---------------------------
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 year.
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
Pro Forma Income Statements
For the Year Ended
--------------------------------
(in thousands, except
per share amounts) January 1, 1995 January 2, 1994
---------------------------------------------------------------------------------
<S> <C> <C>
Operating revenues . . . . . . . . . . . . $1,633,345 $1,563,052
Net income . . . . . . . . . . . . . . . . $169,865 $168,614
Earnings per share . . . . . . . . . . . . $14.67 $14.35
</TABLE>
In May 1994 the company acquired an 80 percent interest in Mammoth Micro
Productions, a producer and publisher of multimedia CD-ROM titles for
approximately $23,000,000 in cash, including related expenses. The 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 cost over the fair value of net assets acquired is being
amortized over a period of 5 years. Results of operations of the acquired
business were included with those of the company for the period subsequent to
the date of acquisition.
In September 1993 the company sold its cable franchises in the United Kingdom.
The related gain of $20,175,000 before giving effect to taxes of $6,804,000 is
included in "Other income (expense), net" in the accompanying Consolidated
Statements of Income. This transaction increased earnings by $1.14 per share in
1993.
During 1992 the company expended approximately $32,000,000, including related
expenses, for investments in new businesses. These included a cable system in
Mississippi; PASS Sports, a company that provides sports programming in the
Detroit area; and continued investment in personal communications services
(PCS) technology development. The company also made additional investments in
The Gazette Newspapers, Inc., which increased the company's ownership to 84
percent in 1992 and 100 percent in 1993. The acquisitions were accounted for
using the purchase method, as described above, with the excess of the cost over
the fair value of net assets acquired being amortized over periods up to 40
years.
In January 1995 the company sold substantially all of its 70 percent limited
partnership interest in American Personal Communications (APC) to APC, Inc.,
and others, for approximately $33,000,000, retaining a 1.5 percent limited
partnership interest. APC net assets of approximately $19,000,000 are included
in "Deferred charges and other assets" in the January 1, 1995 Consolidated
Balance Sheet.
L. CONTINGENCIES
The company and its subsidiaries are parties to various civil lawsuits that
have arisen in the ordinary course of their businesses, including actions for
libel and invasion of privacy. Management does not believe that any litigation
pending against the company will have a material adverse effect on its business
or financial condition.
M. BUSINESS SEGMENTS
The company operates principally in four areas of the communications industry:
newspaper publishing, television broadcasting, magazine publishing and cable
television.
Newspaper operations involve the publication of newspapers in the Washington,
D.C., area and Everett, Washington, and newsprint warehousing and recycling
facilities.
Broadcast operations are conducted primarily through six VHF television
stations. All stations are network-affiliated, with revenues derived primarily
from sales of advertising time.
Magazine operations consist of the publication of a weekly news magazine,
Newsweek, which has one domestic and three international editions. Revenues
from both newspaper and magazine publishing operations are derived from
advertising and, to a lesser extent, from circulation.
Cable television operations consist of over 50 cable systems offering basic
cable and pay television services to more than 498,000 subscribers in 15
midwestern, western, and southern states. Prior to September 1993, cable
television operations also included services provided in the United Kingdom.
The principal source of revenues is monthly subscription fees charged for
services.
Other Businesses include the operations of a database publishing company, a
regional sports cable system, a wireless telephone system, educational centers
engaged in preparing students for admissions tests and licensing examinations
(including the preparation and publishing of training materials), and a
producer and publisher of CD-ROM titles.
Income from operations is the excess of operating revenues over operating
expenses including corporate expenses, which are allocated to operations of the
segments. In computing income from operations by segment, the effects of equity
in earnings of affiliates, interest income, interest expense, other income and
expense items, and income taxes are not included.
Identifiable assets by segment are those assets used in the company's
operations in each business segment. Investments in affiliates are discussed in
Note D. Corporate assets are principally cash and cash equivalents and
investments in marketable debt securities.
35
<PAGE> 37
THE WASHINGTON POST COMPANY
---------------------------
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------------
Newspaper Magazine Cable Other
(in thousands) Publishing Broadcasting Publishing Television Businesses Consolidated
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1994
Operating revenues . . . . . . . . . . . . $717,280 $260,252 $337,602 $182,140 $116,704 $1,613,978
==========
Income from operations . . . . . . . . . . $134,415 $107,656 $ 14,159 $ 41,464 $(22,819) $ 274,875
Equity in earnings of affiliates . . . . . 7,325
Interest expense . . . . . . . . . . . . . (5,590)
Other income, net . . . . . . . . . . . . . 10,312
----------
Income before income taxes . . . . . . . . $ 286,922
==========
Identifiable assets . . . . . . . . . . . . $349,194 $425,789 $187,052 $326,645 $100,028 $1,388,708
Investments in affiliates . . . . . . . . . 170,754
Corporate assets . . . . . . . . . . . . . 137,406
----------
Total assets . . . . . . . . . . . . . . $1,696,868
==========
Depreciation and amortization
of property, plant,
and equipment . . . . . . . . . . . . . . $ 18,086 $ 8,123 $ 5,075 $ 26,912 $ 3,754 $ 61,950
Amortization of goodwill
and other intangibles . . . . . . . . . . $ 800 $ 7,725 $ 12,149 $ 4,719 $ 25,393
Capital expenditures . . . . . . . . . . . $ 20,681 $ 8,881 $ 23,028 $ 18,860 $ 3,192 $ 74,642
1993
Operating revenues . . . . . . . . . . . . $692,287 $177,415 $332,506 $185,721 $110,262 $1,498,191
==========
Income (loss) from operations . . . . . . . $123,151 $ 65,306 $ 18,011 $ 41,618 $ (9,106) $ 238,980
Equity in losses of affiliates . . . . . . (1,994)
Interest expense . . . . . . . . . . . . . (4,983)
Other income, net . . . . . . . . . . . . . 31,464
----------
Income before income taxes . . . . . . . . $ 263,467
==========
Identifiable assets . . . . . . . . . . . . $329,799 $144,622 $152,462 $416,589 $ 71,059 $1,114,531
Investments in affiliates . . . . . . . . . 155,251
Corporate assets . . . . . . . . . . . . . 352,722
----------
Total assets . . . . . . . . . . . . . . $1,622,504
==========
Depreciation and
amortization of property,
plant, and equipment . . . . . . . . . . $ 16,768 $ 5,276 $ 6,266 $ 28,052 $ 3,181 $ 59,543
Amortization of goodwill
and other intangibles . . . . . . . . . . $ 800 $ 670 $ 12,247 $ 2,499 $ 16,216
Capital expenditures . . . . . . . . . . . $ 24,422 $ 6,599 $ 4,472 $ 38,802 $ 4,844 $ 79,139
1992
Operating revenues . . . . . . . . . . . . $677,645 $162,154 $347,067 $174,098 $ 89,903 $1,450,867
==========
Income (loss) from operations . . . . . . . $120,794 $ 54,568 $ 23,882 $ 38,967 $ (6,099) $ 232,112
Equity in losses of affiliates . . . . . . (11,730)
Interest expense . . . . . . . . . . . . . (6,385)
Other income, net . . . . . . . . . . . . . 10,199
----------
Income before income taxes . . . . . . . . $ 224,196
==========
Identifiable assets . . . . . . . . . . . . $315,522 $143,357 $141,008 $397,504 $ 77,365 $1,074,756
Investments in affiliates . . . . . . . . . 162,410
Corporate assets . . . . . . . . . . . . . 330,955
----------
Total assets . . . . . . . . . . . . . . $1,568,121
==========
Depreciation and
amortization of property,
plant, and equipment . . . . . . . . . . $ 16,724 $ 6,289 $ 6,252 $ 26,994 $ 2,963 $ 59,222
Amortization of goodwill
and other intangibles . . . . . . . . . . $ 745 $ 664 $ 11,574 $ 2,495 $ 15,478
Capital expenditures . . . . . . . . . . . $ 13,653 $ 2,844 $ 2,732 $ 36,900 $ 2,760 $ 58,889
</TABLE>
36
<PAGE> 38
THE WASHINGTON POST COMPANY
---------------------------
N. SUMMARY OF QUARTERLY OPERATING RESULTS (UNAUDITED)
Quarterly results of operations for the years ended January 1, 1995, and
January 2, 1994, are as follows (in thousands, except per share amounts):
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
-------------------------------------------------------------------------------------------------------------------------------
1994
<S> <C> <C> <C> <C>
Operating revenues
Advertising . . . . . . . . . . . . . . . . . . . . . . . . . $212,195 $261,682 $245,042 $307,752
Circulation and subscriber . . . . . . . . . . . . . . . . . 109,165 110,098 107,522 111,715
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37,094 33,033 47,262 31,417
-------- -------- -------- --------
358,454 404,813 399,826 450,884
-------- -------- -------- --------
Operating costs and expenses
Operating . . . . . . . . . . . . . . . . . . . . . . . . . . 199,553 216,229 215,295 230,386
Selling, general and administrative . . . . . . . . . . . . . 88,957 97,160 95,045 109,134
Depreciation and amortization of
property, plant and equipment . . . . . . . . . . . . . . . 14,710 15,360 15,663 16,217
Amortization of goodwill and other intangibles . . . . . . . 4,031 6,502 7,570 7,290
--------- -------- --------- --------
307,251 335,251 333,573 363,027
--------- -------- -------- --------
Income from operations . . . . . . . . . . . . . . . . . . . . 51,203 69,562 66,253 87,857
Other income (expense)
Equity in earnings (losses) earnings of affiliates . . . . . (5,385) 2,211 11,091 (592)
Interest income . . . . . . . . . . . . . . . . . . . . . . . 3,565 2,030 1,427 2,174
Interest expense . . . . . . . . . . . . . . . . . . . . . . (1,435) (1,413) (1,332) (1,410)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,604 2 508 (1,998)
-------- -------- -------- --------
Income before income taxes. . . . . . . . . . . . . . . . . . . 50,552 72,392 77,947 86,031
Provision for income taxes. . . . . . . . . . . . . . . . . . . 21,740 31,135 30,495 33,880
-------- -------- -------- --------
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . $ 28,812 $ 41,257 $ 47,452 $ 52,151
======== ======== ======== ========
Earnings per share . . . . . . . . . . . . . . . . . . . . . . $ 2.46 $ 3.54 $ 4.13 $ 4.56
======== ======== ======== ========
Average number of shares outstanding . . . . . . . . . . . . . 11,720 11,667 11,492 11,447
</TABLE>
The sum of the four quarters may not necessarily be equal to the annual amounts
reported in the Consolidated Statements of Income due to rounding.
37
<PAGE> 39
THE WASHINGTON POST COMPANY
---------------------------
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1993
Operating revenues
Advertising . . . . . . . . . . . . . . . . . . . . . . . . . $214,602 $233,078 $208,972 $256,877
Circulation and subscriber . . . . . . . . . . . . . . . . . 113,428 112,779 110,091 108,087
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33,676 30,848 45,059 30,694
--------- --------- --------- ---------
361,706 376,705 364,122 395,658
--------- --------- --------- ---------
Operating costs and expenses
Operating . . . . . . . . . . . . . . . . . . . . . . . . . . 195,083 193,597 199,287 202,289
Selling, general and administrative . . . . . . . . . . . . . 97,783 99,949 92,224 103,240
Depreciation and amortization of property,
plant and equipment . . . . . . . . . . . . . . . . . . . . 14,982 15,100 14,773 14,688
Amortization of goodwill and other intangibles . . . . . . . 4,067 4,058 4,058 4,033
--------- --------- --------- ---------
311,915 312,704 310,342 324,250
Income from operations . . . . . . . . . . . . . . . . . . . . 49,791 64,001 53,780 71,408
--------- --------- --------- ---------
Other income (expense)
Equity in earnings (losses) of affiliates . . . . . . . . . . (1,795) (591) (11) 403
Interest income . . . . . . . . . . . . . . . . . . . . . . . 2,606 2,488 2,653 3,338
Interest expense . . . . . . . . . . . . . . . . . . . . . . (1,446) (985) (1,029) (1,523)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . (51 638 20,500 (708)
--------- --------- --------- ---------
Income before income taxes and cumulative
effect of change in accounting principle . . . . . . . . . . 49,105 65,551 75,893 72,918
Provision for income taxes . . . . . . . . . . . . . . . . . . 20,600 27,560 31,050 30,440
--------- --------- --------- ---------
Income before cumulative effect of change in
accounting principle . . . . . . . . . . . . . . . . . . . . 28,505 37,991 44,843 42,478
Cumulative effect of change in method of
accounting for income taxes . . . . . . . . . . . . . . . . . 11,600 -- -- --
--------- --------- --------- ---------
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . $ 40,105 $ 37,991 $ 44,843 $ 42,478
========= ========= ========= =========
Earnings per share:
Before cumulative effect of change in
accounting principle . . . . . . . . . . . . . . . . . . . $ 2.42 $ 3.23 $ 3.82 $ 3.63
Cumulative effect of change in accounting principle . . . . . .98 -- -- --
--------- --------- --------- ---------
Net income . . . . . . . . . . . . . . . . . . . . . . . . . $ 3.40 $ 3.23 $ 3.82 $ 3.63
========= ========= ========= =========
Average number of shares outstanding . . . . . . . . . . . . . 11,796 11,755 11,731 11,718
</TABLE>
38
<PAGE> 40
SCHEDULE II
THE WASHINGTON POST COMPANY
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
------------------------------------------------------------------------------------------------------------------------------------
ADDITIONS --
BALANCE AT CHARGED TO BALANCE AT
BEGINNING COSTS AND END OF
DESCRIPTION OF PERIOD EXPENSES DEDUCTIONS PERIOD
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Year Ended January 3, 1993
Allowance for doubtful accounts and returns..................... $28,161,000 $48,140,000 $48,006,000 $28,295,000
Allowance for advertising rate adjustments and discounts 7,481,000 9,493,000 9,969,000 7,005,000
----------- ---------- ----------- -----------
$35,642,000 $57,633,000 $57,975,000 $35,300,000
=========== =========== =========== ===========
Year Ended January 2, 1994
Allowance for doubtful accounts and returns..................... $28,295,000 $47,558,000 $45,005,000 $30,848,000
Allowance for advertising rate adjustments and discounts 7,005,000 9,073,000 8,324,000 7,754,000
----------- ----------- ----------- -----------
$35,300,000 $56,631,000 $53,329,000 $38,602,000
=========== =========== =========== ===========
Year Ended January 1, 1995
Allowance for doubtful accounts and returns..................... $30,848,000 $51,383,000 $48,795,000 $33,436,000
Allowance for advertising rate adjustments and discounts 7,754,000 6,600,000 7,847,000 6,507,000
----------- ---------- ----------- -----------
$38,602,000 $57,983,000 $56,642,000 $39,943,000
=========== =========== =========== ===========
</TABLE>
39
<PAGE> 41
THE WASHINGTON POST COMPANY
---------------------------
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.
RESULTS OF OPERATIONS--1994 COMPARED TO 1993
Net income in 1994 was $169.7 million, an increase of 3 percent over net income
of $165.4 million last year. Earnings per share rose 4 percent to $14.65, from
$14.08 in 1993. Earnings in 1994 included an after-tax gain of $8.1 million
($.70 per share) from the sale of a large tract of land at the company's
Canadian newsprint affiliate. The company's 1993 earnings included a one-time
credit of $11.6 million ($.98 per share) related to a change in accounting for
income taxes and an after-tax gain of $13.4 million ($1.14 per share) from the
sale of the company's cable franchises in the United Kingdom. Excluding these
items, net income and earnings per share increased 15 percent and 17 percent,
respectively, in 1994.
Revenues for 1994 totaled $1.614 billion, an increase of 8 percent from $1.498
billion in 1993. Advertising revenues increased 12 percent in 1994, while
circulation and subscriber revenues decreased 1 percent. Other revenues
increased 6 percent. Advertising revenues in the broadcast division, which
included two additional television stations in Houston and San Antonio acquired
in April of 1994, rose 47 percent in 1994. The Washington Post newspaper also
contributed to the improvement in advertising revenues with a 4.5 percent
increase over 1993. Circulation and subscriber revenues decreased, principally
due to rate reregulation affecting the cable division in late-1993 and again in
mid-1994.
Operating costs and expenses for the year increased 6 percent to $1.339
billion, from $1.259 billion in 1993. Approximately two-thirds of the increase
is attributable to new businesses, while the remainder of the increase reflects
normal increases in the costs of operations as well as continued investment in
personal communications services (PCS) during the year.
Operating income rose 15 percent to $274.9 million, from $239.0 million in
1993.
NEWSPAPER DIVISION. Newspaper division revenues increased 4 percent to $717.3
million, from $692.3 million. Advertising revenue at the newspaper division
rose 5 percent over last year. Most of the improvement was at The Washington
Post, where advertising revenues increased 4.5 percent. Retail revenues at The
Washington Post declined 2 percent as a result of a 6 percent decline in
inches. Classified revenues rose 9 percent, primarily as a result of improved
recruitment-related volume during the year. Other advertising revenues
increased 8 percent; general advertising inches and preprint volume at The
Washington Post increased 8 percent and 16 percent, respectively, over 1993.
Circulation revenues for the newspaper division remained at 1993 levels. For
the 12-month period ended September 30, 1994, daily and Sunday circulation at
The Washington Post were essentially unchanged. The Washington Post maintained
its share of the market with just over 50 percent household penetration by its
daily editions and 66 percent household penetration by its Sunday editions.
Newspaper division operating margin in 1994 was 19 percent, up from 18 percent
in the prior year. The previously mentioned increases in advertising revenues
were offset partially by normal increases in payroll and fringe benefits and
higher distribution costs. Average newsprint prices and total newsprint
expense remained unchanged from last year. However, newsprint prices have been
increasing steadily since mid-1994 and are expected to continue to rise
throughout 1995. These increases will have an adverse impact on the operating
results at the newspaper division in 1995.
BROADCAST DIVISION. Revenues at the broadcast division increased 47 percent
over last year. National and local advertising revenues, which included
approximately $13 million in political advertising and significantly improved
auto and truck advertising, increased 45 percent and 46 percent, respectively.
Approximately two-thirds of these increases were attributable to the stations
acquired in April 1994. Network revenues more than doubled in 1994 as a result
of the addition of the new stations and renegotiation of network affiliation
contracts.
Viewership remained strong for the original four television stations. These
stations were ranked number one in the latest ratings period, sign-on to
sign-off, in their respective markets. The newly acquired television station in
San Antonio was also ranked number one, sign-on to sign-off, while the station
acquired in Houston was ranked number three.
Operating margin at the broadcast division increased to 41 percent, from 37
percent in 1993. Excluding amortization of goodwill and intangibles, operating
margins for
40
<PAGE> 42
THE WASHINGTON POST COMPANY
---------------------------
1994 and 1993 were 44 percent and 37 percent, respectively. Increases in
advertising, particularly political advertising, along with increases in
network compensation accounted for most of the improvement in margins.
MAGAZINE DIVISION. Newsweek revenues in 1994 increased almost 2 percent due
primarily to increased advertising revenues at the international editions.
Advertising revenues rose 1 percent overall, with a 9 percent increase at the
international editions offset partially by a 2 percent decrease at the domestic
edition. Although the weakened dollar had a negative impact on overall
operating results, the international editions had increases in both page volume
and rates. The decrease at the domestic edition was due primarily to lower
rates. Circulation revenues increased 2 percent, with better rates at both
domestic and international editions offset partially by lower volumes. In 1994
the domestic edition published the same number of weekly issues (52) and
published one additional special newsstand-only issue, compared with 1993. The
international edition included 52 weekly issues in 1994, compared to 51 issues
in 1993.
At Newsweek the operating margin decreased slightly to 4 percent from 5 percent
in 1993, due primarily to higher subscription acquisition costs and general
operating expense offset partially by lower advertising costs.
CABLE DIVISION. Revenues at the cable division decreased 2 percent in 1994.
However, the prior year included the operations in the United Kingdom that were
sold in September 1993. Excluding these operations from 1993 results, revenues
for the cable division remained essentially unchanged in 1994. The number of
domestic basic subscribers increased 3 percent to 498,000, all of which were
from internal growth. Increases in revenues from pay, pay-per-view,
advertising, and other revenues were offset by reduced basic and tier revenue
resulting from two rounds of industry reregulation. Rate reductions, effective
under reregulation, went into effect on September 1, 1993, and again on July
14, 1994.
Operating margin at the cable division was 23 percent, compared to almost 25
percent in 1993, excluding United Kingdom operations from 1993 results.
Domestic cable cash flow decreased almost 3 percent to $83.6 million, from
$85.9 million in 1993. Programming costs continued to increase due to the
increased number of subscribers and continued license fee increases by
programming suppliers.
OTHER BUSINESSES. In 1994 revenues from other businesses, including Kaplan
Educational Centers (Kaplan), PASS Sports, Legi-Slate, Digital Ink, and Mammoth
Micro Productions, increased 6 percent to $116.7 million, from $110.3 million
in 1993, due principally to Kaplan, which experienced an 8 percent increase in
revenues from pre-college and pre-graduate school courses.
Other businesses recorded an operating loss in 1994 of $22.8 million, compared
with a loss of $9.1 million in 1993. The increased losses were primarily
attributable to American Personal Communications (APC), as well as the
company's investments in the development of electronic technologies, including
CD-ROM and computer on-line businesses.
On January 9, 1995, the company sold substantially all of its interest in APC,
retaining a 1.5 percent limited partnership interest. As a result of this
transaction, the 1995 consolidated results of the company will not reflect
operations of APC.
EQUITY IN EARNINGS AND LOSSES OF AFFILIATES. The company's equity in earnings
of affiliates for 1994 was $7.3 million, compared with a loss of $2.0 million
in 1993. The improved results were primarily related to an $8.1 million
after-tax gain from the sale of land at one of the company's newsprint
affiliates.
NON-OPERATING ITEMS. Interest income, net of interest expense, was $3.6
million, compared with $6.1 million in 1993. The decrease was a result of lower
invested cash balances partially offset by higher interest rates. Other income
in 1994 was $1.1 million, compared with income of $20.4 million in 1993. In
1993 other income included a $20.2 million gain on the sale of the company's
cable franchises in the United Kingdom.
INCOME TAXES. The effective tax rate in 1994 decreased to 40.9 percent, from
41.6 percent in 1993.
RESULTS OF OPERATIONS--1993 COMPARED TO 1992
Net income in 1993 was $165.4 million, an increase of 29 percent over net
income of $127.8 million in 1992. Earnings per share rose 30 percent to $14.08,
from $10.80 in 1992. Earnings in 1993 included a one-time credit of $11.6
million ($.98 per share) related to the adoption of Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" and an after-tax
gain of $13.4 million ($1.14 per share) from the sale of the company's cable
franchises in the United Kingdom. Excluding these two items, 1993 net income
and earnings per share increased 10 percent and 11 percent, respectively.
Revenues for 1993 totaled $1,498 million, an increase of 3 percent, from $1,451
million in 1992. Both advertising revenues and circulation and subscriber
revenues rose 2 percent, while other revenues increased 18 percent. Full year
revenues from businesses acquired at the end of 1992, principally PASS Sports,
a regional sports cable network, contributed to the improvement in other
revenues in 1993. Results for 1993 include 52 weeks at The Washington Post and
The Herald newspapers; 1992 included 53 weeks.
41
<PAGE> 43
THE WASHINGTON POST COMPANY
---------------------------
Costs and expenses for the year increased 3 percent to $1,259 million, from
$1,219 million in 1992. Approximately 40 percent of the total increase relates
to additional expenses associated with businesses that were acquired at the end
of 1992, while the remainder reflects normal increases in the costs of
operations and the continued investment in personal communications services
(PCS). Nonrecurring charges included in 1992 costs were expenses related to a
restructuring at Kaplan and net costs associated with the termination of one of
the health care plans at The Washington Post newspaper. In 1993 operating
income rose to $239.0 million, a 3 percent increase over $232.1 million in
1992.
NEWSPAPER DIVISION. Results at the newspaper division included 52 weeks in
1993, compared with 53 weeks in 1992, and also included full-year results at
The Gazette Newspapers (formerly known as The Gaithersburg Gazette) in 1993,
compared with ten months in 1992.
At the newspaper division, revenues increased 2 percent in 1993. Advertising
revenue for the division rose 3 percent. At The Washington Post, advertising
revenues increased 2 percent as rate increases more than offset a 1 percent
decline in advertising inches. Retail inches at The Post decreased by less than
1 percent, and general volume was down 2 percent. Classified inches were 3
percent below 1992, primarily due to the continued softness in the Washington,
D.C., real estate market. Preprint volume remained strong in 1993. Circulation
revenues for the newspaper division decreased 1 percent, principally due to the
inclusion of the 53rd week in 1992. For the 12-month period ended September 30,
1993, daily circulation at The Washington Post rose 1 percent, while Sunday
circulation decreased almost 1 percent from 1992 levels, reflecting the
introduction of several competing Sunday newspapers in the Washington, D.C.,
market. The Post maintained its share of the market with 51 percent penetration
daily, while Sunday penetration declined to 66 percent.
Newspaper division operating margin was 18 percent, unchanged from 1992. The
previously mentioned increases in advertising revenues were offset by normal
increases in payroll and fringe benefit costs. A slight increase in average
newsprint prices accounted for the 3 percent rise in newsprint expense.
BROADCAST DIVISION. Revenues at the broadcast division increased 9 percent over
1992. National advertising revenues increased 10 percent during the year, while
local advertising revenues rose 8 percent. These increases were primarily due
to a surge in automobile advertising in 1993.
Viewership remained strong in all four markets in 1993. In the latest ratings
period in 1993, all four television stations were ranked number one, sign-on to
sign-off, in their markets.
Operating margin at the broadcast division increased to 37 percent, from 34
percent in 1992. Results in 1992 included the impact of Hurricane Andrew on
WPLG in Miami and lower revenues from sports programming at WDIV in Detroit,
which were partially offset by higher political advertising revenues.
MAGAZINE DIVISION. Newsweek revenues in 1993 decreased 4 percent, principally
due to an 8 percent decline in advertising revenues at both the domestic and
international editions. Lower rates and fewer pages were responsible for the
decrease. Circulation revenues increased 1 percent at Newsweek, with higher
volume and rates at the international editions being the major contributors to
the increase. In 1993 Newsweek Domestic published the same number of weekly
issues as in 1992 (52), with two special newsstand issues in 1993, compared
with one special issue in 1992. At Newsweek International 51 weekly issues were
published in 1993, the same as in 1992.
At Newsweek the operating margin decreased to 5 percent, from 7 percent in
1992, principally as a result of the decrease in advertising revenues and
certain costs related to the relocation of the New York City operations in
1994.
CABLE DIVISION. Revenues at the cable division in 1993 increased 7 percent over
1992 (excluding the operations in the United Kingdom, which were sold in
September 1993, revenues also increased 7 percent). The number of basic
subscribers rose 4 percent, primarily due to the 10,000 subscribers acquired
from Coast TV Cable, Inc., in Long Beach, Mississippi. Also affecting the
change in division revenues were higher advertising revenues at the domestic
systems, an approximately $3 million negative impact of rate reregulation, and
the sale of the company's cable operations in the United Kingdom.
Operating margin in 1993 remained flat at 22 percent, compared to 1992.
Excluding the operations in the United Kingdom, 1993 operating margin was 25
percent, the same as in 1992. Domestic cable cash flow rose 5 percent to $85.9
million, from $82.0 million last year. Total costs at the domestic systems
increased 9 percent, reflecting the continued rise in programming costs and the
larger number of subscribers.
OTHER BUSINESSES. In 1993 revenues from other businesses increased 23 percent.
Revenues from PASS Sports, acquired at the end of 1992, were the major
contributor to the increase. Revenues at Kaplan Educational Centers rose 3
percent over 1992, and enrollments increased 2 percent, principally in the
lower priced courses.
42
<PAGE> 44
THE WASHINGTON POST COMPANY
---------------------------
The company's other businesses recorded an operating loss of $9.1 million in
1993, compared with an operating loss of $6.1 million in 1992, principally due
to the expansion of established businesses, the continuing investment in PCS,
and lower operating results at Kaplan. This decline at Kaplan was a result of
additional costs related to a change in its operating structure, implemented at
the end of 1992.
EQUITY IN EARNINGS AND LOSSES OF AFFILIATES. The company's equity in earning of
affiliates for 1993 was a loss of $2.0 million, compared with a loss of $11.7
million in 1992. Better results at the company's newsprint affiliates, which
included gains on the sale of land in 1993, contributed to the improvement.
NON-OPERATING ITEMS. Interest income, net of interest expense, was $6.1 million
in 1993, compared with $5.5 million in 1992. This increase was a result of
higher invested cash balances, which were partially offset by lower interest
rates.
Other income in 1993 was $20.4 million, compared with other expense of $1.7
million in 1992. In 1993 other income included a $20.2 million gain on the sale
of the company's cable franchises in the United Kingdom. In 1992 other expense
included the recognition of unrealized losses on the company's forward foreign
currency contracts, in addition to the costs associated with the disposition of
certain plant, property, and equipment.
INCOME TAXES. The effective tax rate decreased to 41.6 percent in 1993, from 43
percent in 1992, exclusive of the cumulative effect of the change in accounting
principle. During 1993 the company adjusted the provision for income taxes to
reflect the increase in the federal income tax rate, which was retroactive to
the beginning of the year. Offsetting the rate increase was the lower effective
rate for foreign taxes recorded on the sale of the company's cable operations
in the United Kingdom.
FINANCIAL CONDITION:
CAPITAL RESOURCES AND LIQUIDITY
During the period 1992 through 1994, the company spent approximately $646
million on purchases of additional plant, property, and equipment, the
repurchase of Class B common stock, and investments in new businesses. With
respect to the latter, in April 1994 the company acquired substantially all the
assets of television stations KPRC-TV, the NBC affiliate in Houston, Texas, and
KSAT-TV, the ABC affiliate in San Antonio, Texas, for approximately $253
million in cash. Additionally, in May 1994 the company acquired an 80 percent
interest in Mammoth Micro Productions, a producer and publisher of multimedia
CD-ROM titles, for approximately $23 million in cash. In September 1993 the
company sold its cable franchises in the United Kingdom for approximately $65
million. At January 1, 1995, the company had $117 million in cash and cash
equivalents, $25 million in marketable debt securities, and $50 million in
long-term debt.
During 1994 and 1993 the company repurchased 366,500 and 99,800 shares,
respectively, of its Class B common stock at a cost of $86.7 million and $23.1
million, respectively. Sixty-three thousand of these shares were purchased from
The Washington Post Company Profit Sharing Plan in 1993. As of the end of 1994,
the company had repurchased approximately 885,000 shares of the one million
shares authorized by the Board of Directors in May 1990. In addition, in
January 1995 the Board of Directors authorized the company to repurchase an
additional one million shares, primarily through block purchases. The annual
dividend rate for 1995 was increased to $4.40 per share, from $4.20 per share
in 1994.
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 estimates that in 1995 it will spend approximately $100 million for
plant and equipment, principally for the completion of various projects at the
newspaper and magazine divisions and the continued development of electronic
technologies in its new media businesses. In addition, the company continues to
assess the need for construction of a new production facility at The Washington
Post newspaper and anticipates making a decision in early 1995. The cost of
such a facility, should the company decide to proceed, would be approximately
$250 million over a three-year period, with $50 million to $75 million to be
incurred in 1995. The company expects to fund all of these expenditures from
cash flows from operations.
As indicated previously, the newspaper division anticipates a significant
increase in newsprint prices during 1995, which will impact its results
significantly. As a result of the company's investments 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.
In management's opinion, the company will have ample liquidity to meet the
various cash needs in 1995 as outlined above.
43
<PAGE> 45
THE WASHINGTON POST COMPANY
---------------------------
TEN-YEAR SUMMARY OF SELECTED
HISTORICAL FINANCIAL DATA
============================
See Notes to Consolidated Financial Statements for the summary of significant
accounting policies and additional information relative to the years 1992-1994.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------
(in thousands, except per share amounts) 1994 1993 1992
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
RESULTS OF OPERATIONS
Operating revenues . . . . . . . . . . . . . . . . . $1,613,978 $1,498,191 $1,450,867
Income from operations . . . . . . . . . . . . . . . $ 274,875 $ 238,980 $ 232,112
Income before cumulative effect of changes in
accounting principle . . . . . . . . . . . . . . . $ 169,672 $ 153,817 $ 127,796
Cumulative effect of change in method of accounting
for income taxes . . . . . . . . . . . . . . . . . -- 11,600 --
Cumulative effect of change in method of accounting for
postretirement benefits other than pensions . . . . -- -- --
---------- ---------- ----------
Net income . . . . . . . . . . . . . . . . . . . . . $ 169,672 $ 165,417 $ 127,796
========== ========== ==========
PER SHARE AMOUNTS
Earnings per share
Income before cumulative effect of changes in
accounting principle . . . . . . . . . . . . . . $ 14.65 $ 13.10 $ 10.80
Cumulative effect of change in method of
accounting for income taxes . . . . . . . . . . . -- 0.98 --
Cumulative effect of change in method of accounting
for postretirement benefits other than pensions . -- -- --
---------- ---------- ----------
Net income . . . . . . . . . . . . . . . . . . . . $ 14.65 $ 14.08 $ 10.80
========== =========== ==========
Cash dividends . . . . . . . . . . . . . . . . . . . $ 4.20 $ 4.20 $ 4.20
Shareholders' equity . . . . . . . . . . . . . . . . $ 99.32 $ 92.84 $ 84.17
AVERAGE NUMBER OF SHARES OUTSTANDING . . . . . . . . . 11,582 11,750 11,830
FINANCIAL POSITION
Current assets . . . . . . . . . . . . . . . . . . . $ 375,879 $ 625,574 $ 524,975
Working capital . . . . . . . . . . . . . . . . . . . 102,806 367,041 242,627
Property, plant, and equipment . . . . . . . . . . . 411,396 363,718 390,804
Total assets . . . . . . . . . . . . . . . . . . . . 1,696,868 1,622,504 1,568,121
Long-term debt . . . . . . . . . . . . . . . . . . . 50,297 51,768 51,842
Shareholders' equity . . . . . . . . . . . . . . . . 1,126,933 1,087,419 993,005
</TABLE>
44
<PAGE> 46
THE WASHINGTON POST COMPANY
---------------------------
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------
1991 1990 1989 1988 1987 1986 1985
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$1,380,261 $1,438,640 $1,444,094 $1,367,613 $1,315,422 $1,215,064 $1,078,650
$ 192,866 $ 281,768 $ 313,691 $ 233,290 $ 257,073 $ 228,986 $ 204,186
$ 118,721 $ 174,576 $ 197,893 $ 269,117 $ 186,743 $ 100,173 $ 114,261
-- -- -- -- -- -- --
(47,897) -- -- -- -- -- --
---------- --------- ---------- ---------- ---------- ---------- ----------
$ 70,824 $ 174,576 $ 197,893 $ 269,117 $ 186,743 $ 100,173 $ 114,261
========== ========== ========== ========== ========== ========== ==========
$ 10.00 $ 14.45 $ 15.50 $ 20.91 $ 14.52 $ 7.80 $ 8.66
-- -- -- -- -- -- --
(4.04) -- -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ---------- -----------
$ 5.96 $ 14.45 $ 15.50 $ 20.91 $ 14.52 $ 7.80 $ 8.66
========== ========== ========== =========== ========== ========== ===========
$ 4.20 $ 4.00 $ 1.84 $ 1.56 $ 1.28 $ 1.12 $ 0.96
$ 78.12 $ 76.31 $ 75.40 $ 67.50 $ 47.80 $ 34.04 $ 27.26
11,876 12,081 12,768 12,873 12,861 12,842 13,194
$ 472,219 $ 471,669 $ 553,188 $ 493,736 $ 226,523 $ 219,422 $ 359,174
183,959 175,807 283,118 235,698 (50,290) (22,647) 150,397
390,313 394,979 370,597 352,113 371,080 343,702 219,310
1,487,661 1,496,509 1,532,211 1,422,267 1,194,196 1,145,227 885,079
51,915 126,988 152,061 154,751 155,791 336,140 222,392
924,285 905,112 941,522 868,240 614,009 436,590 349,548
</TABLE>
45
<PAGE> 47
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------ -----------
<S> <C>
3.1 --- Certificate of Incorporation of the Company as amended through May 12, 1988
(incorporated by reference to Exhibit 3 to the Company's Current Report on
Form 8-K dated May 12, 1988).
3.2 --- By-Laws of the Company as amended through September 9, 1993 (incorporated
by reference to Exhibit 3 to the Company's Quarterly Report on Form 10-Q
for the quarter ended October 3, 1993).
In accordance with Item 601(b)(4)(iii)(A) of Regulation S-K, the Company
hereby agrees to furnish to the Securities and Exchange Commission upon
request a copy of any instrument defining the rights of holders of long-term
debt of the Company or any subsidiary which is not required to be filed herewith
because the total amount of securities authorized thereunder does not exceed 10
percent of the total consolidated assets of the Company.
10.1 --- The Washington Post Company Annual Incentive Compensation Plan (adopted January
9, 1974) as amended through January 4, 1982 (incorporated by reference to Exhibit
10.10 to the Company's Annual Report on Form 10-K for the fiscal year ended
January 3, 1982).*
10.2 --- The Washington Post Company Long-Term Incentive Compensation Plan (adopted
December 11, 1981) as amended through March 13, 1992 (incorporated by reference
to Exhibit 10.2 to the Company's Annual Report on Form 10-K for the fiscal year
ended December 29, 1991).*
10.3 --- The Washington Post Company Stock Option Plan as amended and restated through
May 13, 1993 (incorporated by reference to Exhibit 10 to the Company's Quarterly
Report on Form 10-Q for the quarter ended April 4, 1993).*
10.4 --- The Washington Post Company Supplemental Executive Retirement Plan as amended and
restated effective December 31, 1993 (incorporated by reference to Exhibit 10.4
to Company's Annual Report on Form 10-K for the fiscal year ended January 2, 1994).*
10.5 --- Letter Agreement between the Company and Richard D. Simmons dated May 9, 1991,
and the amendment thereto dated June 30, 1994.*
11 --- Calculation of earnings per share of common stock.
21 --- List of subsidiaries of the Company.
23 --- Consent of independent accountants.
24 --- Power of attorney dated March 10, 1994 (incorporated by reference to Exhibit
24 to the Company's Annual Report on Form 10-K for the fiscal year ended
January 2, 1994).
27 --- Financial Data Schedule.
</TABLE>
------------
* A management contract or compensatory plan or arrangement required to
be included as an exhibit hereto pursuant to Item 14(c) of Form 10-K.
46
<PAGE> 1
EXHIBIT 10.5
[Letterhead of The Washington Post Company]
May 9, 1991
Richard D. Simmons
Box 242
Sperryville, Virginia 22740
Dear Dick:
In view of your belief that the time has come to hand over the reins of
The Washington Post Company to a new generation, you have expressed your desire
to step down as President of the Company on May 9, 1991, and to resign
effective June 30, 1991. During your ten years with the Company you have
accomplished much and contributed significantly to the success of the Company.
Fortunately for the Company, you have agreed on a consulting basis to provide
your management skills, leadership and advice on business matters affecting the
Company and to assist in managing the International Herald Tribune, S.A., in
which the Company has a 50% ownership interest. This letter is intended to
express our agreement with respect to your resignation and related matters.
1. On June 30, 1991, the effective date of your resignation, you shall
cease to be an employee of the Company.
2. For a period of three years commencing July 1, 1991, and ending
June 30, 1994, you have agreed (i) to consult and advise on business matters
affecting the Company and (ii) to assist in managing the Company's interest in
the International Herald Tribune, S.A., including being the person designated
by the Company to hold the office of President and directeur de la publication,
as provided in the Shareholders' Agreement dated as of April 26, 1991, among
the Company, The New York Times Company and I.H.T. Corporation. As
consideration for providing such consulting services and assistance, the
Company will pay you a fee of $300,000 a year, to be paid in equal quarterly
installments of $75,000 each, payable at the beginning of each quarter. For
purposes of tax withholding and reporting, such fee shall be deemed to be
compensation. In no event, however, shall you be entitled to any benefits
generally afforded employees of the Company. In addition the Company will
provide you with office space and secretarial services as needed and will
reimburse you upon submission of appropriate documentation for all reasonable
travel and entertainment expenses incurred in providing such consulting
services.
3. (a) Ownership of the 458 restricted shares of Class B Common Stock
of the Company ("Stock") awarded to you in January 1991 under the Long-Term
Incentive Compensation Plan of the Company (the "Plan") will revert to the
Company
<PAGE> 2
Richard D. Simmons
May 9, 1991
Page 2
on June 30, 1991. The restrictions on 273 (30/48ths of 436) Shares
awarded to you under the Plan in January 1989 will terminate upon your
resignation in accordance with the terms of the Plan and ownership of the
remaining 163 Shares will revert to the Company.
(b) With respect to 4,494 Performance Units awarded to you in January
1991 under the Plan, such Units will be effectively extinguished upon your
resignation. However, with respect to 4,176 Performance Units awarded to you
under the Plan in January 1989, the value of those Performance Units multiplied
by 30/48 less any applicable deductions will be paid to you as soon as
practicable after determination of the Payout Value for such Units (i.e.,
90-120 days after the end of the Company's fiscal year 1992).
(c) To the extent an annual incentive award would have been payable to
you under the Company's Annual Incentive Compensation Plan had you remained an
employee through December 31, 1991, a pro rata portion (6/12ths) of that award
will be paid to you as soon as practicable after determination (i.e., February
1992) of the amount of such award based on the Company's financial performance
for 1991.
4. (a) Except as provided herein, during the term of this consulting
agreement, you shall refrain from directly or indirectly engaging in any
activity which may be deemed competitive with, or rendering any services in any
capacity to or on behalf of any person, firm or corporation directly or
indirectly engaged in any business then conducted by the Company or any of its
subsidiaries or affiliates. At no time, whether before or after June 30, 1991,
shall you knowingly or intentionally take any action detrimental to the best
interests of the Company, its subsidiaries or affiliates, including but not
limited to disclosures to third parties of information confidential to the
Company, its subsidiaries and affiliates.
(b) The obligations of the Company hereunder are expressly conditioned
on your full and faithful performance of your agreement contained in paragraph
4 (a) above.
5. In consideration of the undertakings contained in paragraph 4(a)
above, the Company will (i) continue to credit all amounts credited to the
Deferred Account established pursuant to your original employment agreement
with the Company dated August 31, 1981, with interest in the same manner as is
currently being done until the earlier of June 30, 1994, or your death, with
the payout of such Deferred Account to be done in ten equal annual installments
adjusted proportionately to commence on July 15, 1994, and (ii) subject to both
Board of Directors' approval and Class A shareholder approval of an amendment
to the Company's Stock Option Plan, extend the periods for exercising (A) the
non-qualified stock option to acquire
<PAGE> 3
Richard D. Simmons
May 9, 1991
Page 3
5,000 Shares granted on December 13, 1988 and (B) the non-qualified stock
option to acquire 5,000 shares granted on December 12, 1989, to December 13,
1998 and December 12, 1999, respectively, which dates coincide with the
original expiration dates of the options.
6. In the event of your death prior to receiving the appropriate
monies due as outlined in paragraphs 3(b) and 5 above, any monies due will be
paid to your wife, if she survives you; otherwise such payments shall be made
to your estate. All other benefits due under various benefit plans of the
Company will be distributed in accordance with standard Company policy and
applicable federal and state laws.
7. The arrangements provided for in this letter include all vacation,
severance or other entitlements in full to which you might otherwise be
entitled upon termination of your employment at the Company. This letter
contains the entire agreement between you and the Company concerning your
employment with the Company, your resignation therefrom and any claims you may
have with respect thereto and constitutes your release of the Company
concerning any and all such claims.
If the foregoing correctly sets forth our agreement, please so indicate
by signing and returning the enclosed copy of this letter.
Sincerely,
/s/ Katharine Graham
Acknowledged and Agreed:
/s/ Richard D. Simmons
-----------------------
Richard D. Simmons
<PAGE> 4
[Letterhead of The Washington Post Company]
June 30, 1994
Mr. Richard D. Simmons
President
International Herald Tribune S.A.
1150 15th Street N.W.
Washington, D.C. 20071
Dear Dick:
This is to confirm that you have agreed to an extension through March
31, 1996, of your consulting agreement dated May 9, 1991, on the same terms as
conditions as set forth therein except with regard to your compensation for
providing such services which shall be reduced to $100,000 on an annualized
basis starting July 1, 1994.
Sincerely,
/s/ Donald E. Graham
Acknowledged and agreed:
/s/ Richard D. Simmons
----------------------
Richard D. Simmons
<PAGE> 1
EXHIBIT 11
THE WASHINGTON POST COMPANY
AND SUBSIDIARIES
CALCULATION OF EARNINGS PER SHARE OF COMMON STOCK
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FISCAL YEAR
--------------------------------------------------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Weighted average shares outstanding
Class A Common 1,843 1,843 1,843
Class B Common (excludes shares
issuable upon exercise of
stock options - accounted
for below) 9,734 9,903 9,984
-------- -------- --------
11,577 11,746 11,827
-------- -------- --------
Add - Shares assumed issuable upon
exercise of stock options 79 69 52
Deduct - Shares assumed to be
purchased for Treasury with proceeds
from exercise of stock options (74) (65) (49)
-------- -------- --------
5 4 3
-------- -------- --------
Shares used in computation of
primary earnings per share 11,582 11,750 11,830
Adjustment to reflect fully
diluted computation (1) -- -- --
-------- -------- --------
11,582 11,750 11,830
======== ======== ========
Net income $169,672 $165,417 $127,796
======== ======== ========
Primary earnings per share $ 14.65 $ 14.08 $ 10.80
======== ======== ========
Fully diluted earnings per
share (1) $ 14.65 $ 14.08 $ 10.80
======== ======== ========
</TABLE>
(1) This computation is submitted although it is not required by Accounting
Principles Board Opinion No. 15 since it results in dilution of less than
3%.
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF THE COMPANY
<TABLE>
<CAPTION>
Jurisdiction % of
of Voting Stock
Incorporation or Partnership
or Interest Owned
Name of Subsidiary Organization by Company
------------------ ------------ --------------
<S> <C> <C>
American PCS, L.P. . . . . . . . . . . . . . . . . . . . . . . . . . . Delaware 1.5% (a)
Bisbee Cable TV, Inc. . . . . . . . . . . . . . . . . . . . . . . . . Arizona 100%
Bowater Mersey Paper Company Limited . . . . . . . . . . . . . . . . . Nova Scotia 49%
Capitol Fiber, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . Maryland 90%
Coast TV Cable, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . Mississippi 100%
Coastal Bend Cablevision Corp. . . . . . . . . . . . . . . . . . . . . Texas 100%
Digital Ink Co. . . . . . . . . . . . . . . . . . . . . . . . . . . . Delaware 100%
The Gazette Newspapers, Inc. . . . . . . . . . . . . . . . . . . . . . Maryland 100%
I.H.T. Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . Delaware 50%
International Herald Tribune S.A. . . . . . . . . . . . . . . . France 33-1/3%
International Herald Tribune S.A. . . . . . . . . . . . . . . . . . . France 33-1/3%
Legi-Slate, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . Delaware 100%
Los Angeles Times-Washington Post News Service,
Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . D.C. 50%
Mammoth Micro Productions, Inc. . . . . . . . . . . . . . . . . . . . . Washington 80%
Marks Cablevision of Green, Incorporated . . . . . . . . . . . . . . . Ohio 100%
Newsprint, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . Virginia 100%
Bear Island Paper Company . . . . . . . . . . . . . . . . . . . Virginia 35% (a)
Bear Island Timberlands Company . . . . . . . . . . . . . . . . Virginia 35% (a)
Newsweek, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . New York 100%
Newsweek Services, Inc. . . . . . . . . . . . . . . . . . . . . Delaware 100%
Newsweek Services (Canada), Inc. . . . . . . . . . . . . . . . . Delaware 100%
Oklahoma Broadcasting Company . . . . . . . . . . . . . . . . . . . . Oklahoma 100%
Omnicom Cablevision of Illinois, Inc. . . . . . . . . . . . . . . . . Illinois 100%
Post-Newsweek Cable, Inc. . . . . . . . . . . . . . . . . . . . . . . Delaware 100%
Post-Newsweek Cable of California, Inc. . . . . . . . . . . . . . . . California 100%
Post-Newsweek Cable of Indiana, Inc. . . . . . . . . . . . . . . . . . Indiana 100%
---------------
(a) Limited partnership interest.
</TABLE>
<PAGE> 2
SUBSIDIARIES OF THE COMPANY
(Continued)
<TABLE>
<CAPTION>
Jurisdiction % of
of Voting Stock
Incorporation or Partnership
or Interest Owned
Name of Subsidiary Organization by Company
------------------ ------------ --------------
<S> <C> <C>
Post-Newsweek Cable of North Dakota, Inc. . . . . . . . . . . . . . . Delaware 100%
Post-Newsweek Cable of Oklahoma, Inc. . . . . . . . . . . . . . . . Oklahoma 100%
Post-Newsweek Pacific Cable, Inc. . . . . . . . . . . . . . . . . . California 100%
Post-Newsweek Stations, Inc. . . . . . . . . . . . . . . . . . . . Delaware 100%
Post-Newsweek Stations, Connecticut, Inc. . . . . . . . . . . Delaware 100%
Post-Newsweek Stations, Florida, Inc. . . . . . . . . . . . . Florida 100%
Post-Newsweek Stations, Houston, Inc. . . . . . . . . . . . . Delaware 100%
Post-Newsweek Stations, Michigan, Inc. . . . . . . . . . . . Delaware 100%
Pro Am Sports System, Inc. . . . . . . . . . . . . . . Delaware 100%
Post-Newsweek Stations, San Antonio, Inc. . . . . . . . . . . Delaware 100%
Robinson Terminal Warehouse Corporation . . . . . . . . . . . . . . Delaware 100%
Sandoval County Cable Television Company . . . . . . . . . . . . . . New Mexico 100%
Stanley H. Kaplan Educational Center Ltd. . . . . . . . . . . . . . Delaware 100%
Stanley H. Kaplan Educational Center of
Canada Ltd. . . . . . . . . . . . . . . . . . . . . . . . Ontario 100%
Stanley H. Kaplan Educational Center of
Puerto Rico, Inc. . . . . . . . . . . . . . . . . . . . . . Puerto Rico 100%
The Daily Herald Company . . . . . . . . . . . . . . . . . . . . . . Washington 100%
WPC Telecommunications, Inc. . . . . . . . . . . . . . . . . . . . . Delaware 100%
Moffet, Larson & Johnson, Inc. . . . . . . . . . . . . . . . Delaware 71%
</TABLE>
----------------
As permitted by Item 601(b)(22) of Regulation S-K, the foregoing
list omits certain subsidiaries which, if considered in the aggregate as a
single subsidiary, would not constitute a "significant subsidiary" as that term
is defined in Rule 1-02(v) of Regulation S-X.
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (Registration No. 2-42170) of The Washington Post
Company, and in the Prospectus constituting a part thereof, of our report dated
January 31, 1995 appearing on page 23 of this Annual Report on Form 10-K, and
to the reference to us under the heading "Experts" in such Prospectus.
PRICE WATERHOUSE LLP
Washington, D.C.
March 24, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Statement of Income for the year ended January 1, 1995 and the
Consolidated Balance Sheet as of January 1, 1995 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-01-1995
<PERIOD-END> JAN-01-1995
<CASH> 117,269
<SECURITIES> 24,570
<RECEIVABLES> 215,384
<ALLOWANCES> 39,943
<INVENTORY> 20,378
<CURRENT-ASSETS> 375,879
<PP&E> 910,568
<DEPRECIATION> 499,172
<TOTAL-ASSETS> 1,696,868
<CURRENT-LIABILITIES> 273,073
<BONDS> 50,297
<COMMON> 20,000
0
0
<OTHER-SE> 1,106,933
<TOTAL-LIABILITY-AND-EQUITY> 1,696,868
<SALES> 0
<TOTAL-REVENUES> 1,613,978
<CGS> 0
<TOTAL-COSTS> 861,464
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 57,983
<INTEREST-EXPENSE> 5,590
<INCOME-PRETAX> 286,922
<INCOME-TAX> 117,250
<INCOME-CONTINUING> 169,672
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 169,672
<EPS-PRIMARY> 14.65
<EPS-DILUTED> 14.65
</TABLE>
