<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarterly
Period Ended June 28, 1998 Commission File Number 1-6714
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THE WASHINGTON POST COMPANY
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(Exact name of registrant as specified in its charter)
Delaware 53-0182885
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1150 15th Street, N.W. Washington, D.C. 20071
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(Address of principal executive offices) (Zip Code)
(202) 334-6000
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X . No .
------- -------
Shares outstanding at August 3, 1998:
Class A Common Stock 1,739,250 Shares
---------
Class B Common Stock 8,355,012 Shares
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<PAGE> 2
2.
THE WASHINGTON POST COMPANY
INDEX TO FORM 10-Q
<TABLE>
<CAPTION>
PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<S> <C>
Condensed Consolidated Statements of Income
(Unaudited) for the Thirteen and Twenty-six
Weeks Ended June 28, 1998 and
June 29, 1997....................................................3
Condensed Consolidated Balance Sheets
at June 28, 1998 (Unaudited) and December 28, 1997...............4
Condensed Consolidated Statements of Cash Flows
(Unaudited) for the Twenty-six Weeks Ended
June 28, 1998 and June 29, 1997..................................5
Notes to Condensed Consolidated Financial Statements
(Unaudited)......................................................6
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition...............................8
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders...................14
Item 6. Exhibits and Reports on Form 8-K......................................15
Signatures ......................................................................16
Exhibit 11
Exhibit 27 (Electronic Filing Only)
</TABLE>
<PAGE> 3
3.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
The Washington Post Company
Condensed Consolidated Statements of Income (Unaudited)
<TABLE>
<CAPTION>
Thirteen Weeks Ended Twenty-six Weeks Ended
------------------------ --------------------------
June 28, June 29, June 28, June 29,
(In thousands, except per share amounts) 1998 1997 1998 1997
------- ------- --------- -------
<S> <C> <C> <C> <C>
Operating revenues
Advertising $342,247 $327,949 $ 634,932 $606,477
Circulation and subscriber 133,365 128,901 263,705 252,575
Other 50,145 44,525 111,075 96,424
------- ------- --------- -------
525,757 501,375 1,009,712 955,476
------- ------- --------- -------
Operating costs and expenses
Operating 276,399 246,478 543,986 489,982
Selling, general and administrative 111,005 118,875 220,935 225,761
Depreciation and amortization of
property, plant and equipment 20,733 17,871 41,111 35,661
Amortization of goodwill and other
intangibles 11,127 8,214 21,870 16,167
------- ------- --------- -------
419,264 391,438 827,902 767,571
------- ------- --------- -------
Income from operations 106,493 109,937 181,810 187,905
Other income (expense)
Equity in earnings of affiliates (71) 3,331 917 3,456
Interest income 384 1,079 592 2,192
Interest expense (330) (158) (2,574) (323)
Other (1,594) 1,668 256,512 821
------- ------- --------- -------
Income before income taxes 104,882 115,857 437,257 194,051
------- ------- --------- -------
Provision for income taxes
Current 40,219 41,990 165,471 72,243
Deferred 881 2,510 129 2,757
------- ------- --------- -------
41,100 44,500 165,600 75,000
------- ------- --------- -------
Net income 63,782 71,357 271,657 119,051
Redeemable preferred stock dividends (239) (239) (717) (717)
------- ------- --------- -------
Net income available for common shares $ 63,543 $ 71,118 $ 270,940 $118,334
======= ======= ========= =======
Basic earnings per common share $ 6.30 $ 6.62 $ 26.86 $ 10.96
======= ======= ========= =======
Diluted earnings per common share $ 6.27 $ 6.60 $ 26.74 $ 10.94
======= ======= ========= =======
Dividends declared per common share $ 1.25 $ 1.20 $ 3.75 $ 3.60
======= ======= ========= =======
Basic average number of common shares
outstanding 10,088 10,743 10,086 10,797
Diluted average number of common shares
outstanding 10,136 10,772 10,132 10,819
</TABLE>
<PAGE> 4
4.
The Washington Post Company
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
June 28, December 28,
1998 1997
(In thousands) (Unaudited)
--------- ---------
Assets
Current assets
<S> <C> <C>
Cash and cash equivalents $ 21,678 $ 21,117
Accounts receivable, less estimated returns,
doubtful accounts and allowances 267,343 244,203
Inventories 31,298 19,213
Other current assets 34,078 23,959
--------- ---------
354,397 308,492
Investments in affiliates 64,161 154,791
Property, plant and equipment
Buildings 189,604 188,836
Machinery, equipment and fixtures 824,169 800,435
Leasehold improvements 41,411 39,017
--------- ---------
1,055,184 1,028,288
Less accumulated depreciation and amortization (607,073) (577,445)
--------- ---------
448,111 450,843
Land 33,953 33,953
Construction in progress 232,068 168,954
--------- ---------
714,132 653,750
Goodwill and other intangibles,
less accumulated amortization 756,680 679,714
Deferred charges and other assets 327,064 280,570
--------- ---------
$2,216,434 $2,077,317
========= =========
Liabilities and Shareholders' Equity
Current liabilities
Accounts payable and accrued liabilities $ 221,906 $ 213,824
Federal and state income taxes 31,942 18,352
Deferred subscription revenue 83,456 80,186
Dividends declared 12,840 --
Short-term borrowings 156,984 296,394
--------- ---------
507,128 608,756
Other liabilities 249,718 241,234
Deferred income taxes 32,719 31,306
--------- ---------
789,565 881,296
--------- ---------
Redeemable preferred stock 11,873 11,947
--------- ---------
Preferred stock -- --
Common shareholders' equity
Common stock 20,000 20,000
Capital in excess of par value 36,431 33,415
Retained earnings 2,464,462 2,231,341
Accumulated other comprehensive income (losses)
Cumulative foreign currency translation adjustment (1,949) (464)
Unrealized gain on available-for-sale securities 1,927 31
Cost of Class B common stock held in treasury (1,105,875) (1,100,249)
--------- ---------
1,414,996 1,184,074
--------- ---------
$2,216,434 $2,077,317
========= =========
</TABLE>
<PAGE> 5
5.
The Washington Post Company
Condensed Consolidated Statements of Cash Flows (Unaudited)
<TABLE>
<CAPTION>
Twenty-six Weeks Ended
----------------------------
June 28, June 29,
(In thousands) 1998 1997
-------- ------
<S> <C> <C>
Cash flows from operating activities:
Net income $271,657 $119,051
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization of property, plant
and equipment 41,111 35,661
Amortization of goodwill and other intangibles 21,870 16,167
Gain on disposition of business (258,436) --
Provision for deferred income taxes 129 2,757
Equity in earnings of affiliates, net of
distributions (255) (2,171)
Change in assets and liabilities:
Increase in accounts receivable, net (23,140) (1,497)
Increase in inventories (12,085) (2,368)
Increase in accounts payable and
accrued liabilities 9,426 163
Increase (decrease) in income taxes payable 13,590 (1,492)
Increase in other assets and other
liabilities, net (18,763) (2,644)
Other 8,057 (630)
------- -------
Net cash provided by operating activities 53,161 162,997
------- -------
Cash flows from investing activities:
Net proceeds from sale of business 330,473 --
Purchases of property, plant and equipment (86,380) (86,920)
Investments in certain businesses (132,483) (23,141)
Proceeds from sale of marketable securities 5,009 --
Other (664) 9,825
------- -------
Net cash provided by (used in) investing activities 115,955 (100,236)
------- -------
Cash flows from financing activities:
Principal payments on debt (296,394) --
Short term borrowings 156,984 --
Dividends paid (25,695) (26,432)
Common shares repurchased (7,809) (75,480)
Other 4,359 --
-------- --------
Net cash used in financing activities (168,555) (101,912)
-------- --------
Net increase (decrease) in cash and cash equivalents 561 (39,151)
Beginning cash and cash equivalents 21,117 102,278
-------- -------
Ending cash and cash equivalents $ 21,678 $ 63,127
======== =======
</TABLE>
<PAGE> 6
6.
The Washington Post Company
Notes to Condensed Consolidated Financial Statements (Unaudited)
Results of operations, when examined on a quarterly basis, reflect the
seasonality of advertising that affects the newspaper, magazine and
broadcasting operations. Advertising revenues in the second and fourth
quarters are typically higher than first and third quarter revenues. All
adjustments reflected in the interim financial statements are of a normal
recurring nature.
Note 1: Acquisitions and Dispositions
Acquisitions. In January and June of 1998, the company acquired cable
systems in Grenada, Mississippi and Anniston, Alabama serving approximately
7,400 and 36,000 subscribers, respectively. The aggregate purchase price for
these cable system acquisitions totaled $78.0 million.
In January 1998, the company acquired an educational services company that
provides English language study programs. In June 1998, the company acquired
a provider of customized information technology training, consulting and
support services to law firms, financial institutions and other large
corporations. The aggregate purchase price for these two educational
services companies was $34.8 million.
The company also spent approximately $16.8 million during the first six
months of 1998 for other small businesses.
In February 1997, the company purchased a cable system in Cleveland,
Mississippi serving about 16,000 subscribers for approximately $23.0
million.
Dispositions. On March 20, 1998, Cowles Media Company ("Cowles") and
McClatchy Newspapers, Inc. ("McClatchy") completed a series of transactions
resulting in the merger of Cowles and McClatchy. In the merger, each share
of Cowles common stock was converted (based upon elections of Cowles
stockholders) into shares of McClatchy stock or a combination of cash and
McClatchy stock. As of the date of the Cowles and McClatchy merger
transaction, a wholly-owned subsidiary of the company owned 3,893,796 (equal
to about 28%) of the outstanding common stock of Cowles, most of which was
acquired in 1985. As a result of this transaction, the company's subsidiary
received $330.5 million in cash from McClatchy and 730,525 shares of McClatchy
Class A common stock. The market value of the McClatchy stock received
approximated $21.6 million. The gain resulting from this transaction, which is
included in "Other, net" in the Condensed Consolidated Statements of Income,
increased net income by approximately $162.8 million and basic and diluted
earnings per share by $16.14 and $16.07, respectively.
Note 2: Borrowings
During the second quarter and first half of 1998, the company had average
short-term borrowings outstanding of approximately $15.2 million and $143.6
million, respectively, at an average interest rate of approximately 5.6
percent. During the first half of 1998, the company incurred interest costs
on short-term borrowings of $4.1 million of which $2.2 million was
capitalized. Interest costs for construction and upgrade of qualifying
assets are capitalized. At June 28, 1998, $157.0 million in borrowings were
outstanding under the company's commercial paper program which is supported
by a five-year $500.0 million revolving credit facility.
<PAGE> 7
7.
Note 3: Stock Repurchases
During the first six months of 1998 and 1997 the company repurchased
16,010 and 217,590 shares of its Class B common stock at a cost of
approximately $7.8 and $75.5 million, respectively.
Note 4: Comprehensive Income
In June 1997, the Financial Accounting Standards Board issued SFAS No.
130, "Reporting Comprehensive Income." Comprehensive income is the change in
equity of a business enterprise during a period from transactions and other
events and circumstances from nonowner sources. It includes all changes in
equity during a period except those resulting from investments by owners and
distributions to owners. For the thirteen weeks ended June 28, 1998 and June
29, 1997, comprehensive income totaled $64.2 million and $69.1 million,
respectively. For the twenty-six weeks ended June 28, 1998 and June 29,
1997, comprehensive income totaled $272.1 million and $113.1 million,
respectively. Comprehensive income includes net income, foreign currency
translation adjustments and the change in unrealized gain on
available-for-sale securities.
Note 5: Subsequent Events
In July 1998, the company completed the acquisition of Dearborn Publishing
Group, Inc., a publisher and provider of licensing training for securities,
insurance and real estate professionals. In July 1998, the company also
completed the acquisition of cable systems in Mississippi, Texas and Oklahoma
serving approximately 72,000 subscribers. The aggregate purchase price for
these two acquisitions approximated $164.5 million.
In July 1998, the company completed the sale of 14 cable systems in Texas,
Missouri and Kansas serving approximately 29,000 subscribers for
approximately $40 million resulting in a pre-tax gain of about $30 million.
The company also completed the sale of its 80 percent interest in Moffet,
Larson & Johnson (MLJ), a telecommunications consulting firm; no significant
gain or loss is expected to be realized from the sale of MLJ.
In August 1998, the company and other shareholders of Junglee, a
facilitator of internet commerce, agreed to exchange their shares for shares
of Amazon.com. As a result of this merger transaction, the company will
receive approximately 203,000 shares of Amazon.com; these shares are
currently unregistered and there are limitations with respect to resale. At
current market rates, these shares would be worth approximately $23.9
million. The carrying value of the company's investment is $2.5 million.
<PAGE> 8
8.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
This analysis should be read in conjunction with the consolidated
financial statements and the notes thereto.
Revenues and expenses in the first and third quarters are customarily
lower than those in the second and fourth quarters because of significant
seasonal fluctuations in advertising volume. For that reason, the results of
operations for each quarter are compared with those of the corresponding quarter
in the preceding year.
SECOND QUARTER COMPARISONS
Net income for the second quarter of 1998 was $63.8 million, a decrease of
11 percent from net income of $71.4 million in the second quarter last year.
Diluted earnings per share decreased 5 percent to $6.27, from $6.60 in the
second quarter of 1997, with fewer average shares outstanding.
Revenues for the second quarter of 1998 rose 5 percent to $525.8 million,
from $501.4 million in the same period last year. Advertising revenues and
circulation and subscriber revenues increased 4 percent and 3 percent,
respectively. Other revenues increased 13 percent over the second quarter of
1997.
Costs and expenses for the second quarter of 1998 increased 7 percent to
$419.3 million, from $391.4 million in the second quarter of 1997. Operating
expenses increased 12 percent due to normal expense growth and increases in
newsprint expense, new media spending and expenses arising from the expansion of
the printing facilities of The Washington Post. Selling, general and
administrative expenses decreased 7 percent, with an increase in the company's
pension credit contributing to the net decrease in expense. Depreciation expense
increased 16 percent and amortization expense rose 35 percent compared to the
second quarter of 1997 due to acquisitions in 1997 and 1998.
In the second quarter of 1998, operating income declined to $106.5
million, a 3 percent decrease from $109.9 million in 1997.
NEWSPAPER DIVISION. At the newspaper division, revenues increased 4 percent in
the second quarter of 1998. Advertising revenues for the division rose 4 percent
in 1998 due principally to higher ad rates. Advertising volume at The Washington
Post totaled 814,600 inches in the second quarter of 1998 as compared to 818,500
inches in 1997. Preprint advertising volume at The Post increased 4 percent to
394 million pieces, compared to 380 million pieces in 1997. Circulation revenues
for the division decreased 2 percent in comparison to the same period last year
as a result of a 1 percent decrease in both Sunday and daily circulation at The
Washington Post.
<PAGE> 9
9.
Newsprint expense at the Post increased 14 percent in the second quarter
of 1998 compared to the second quarter of last year.
BROADCAST DIVISION. Revenues at the broadcast division increased 5 percent in
the second quarter of 1998. The increase in revenue is attributable to a 22
percent increase in national advertising revenue, partially offset by a 4
percent and 11 percent decrease in local advertising revenue and network
compensation, respectively.
MAGAZINE DIVISION. Revenues at the magazine division increased 3 percent in the
second quarter of 1998. The increase is due to the trade periodicals acquired in
the fourth quarter of 1998 partially offset by a 4 percent decrease in
Newsweek's revenues, which declined as a result of lower domestic ad pages and
lower revenues at the international edition resulting from the continuing
economic crisis in Asia.
CABLE DIVISION. At the cable division, second quarter 1998 revenues were 12
percent higher than 1997. Higher subscriber levels, resulting mainly from recent
acquisitions, as well as slightly higher rates accounted for the increase. At
the end of the second quarter, the number of basic subscribers totaled
approximately 686,000, 8 percent higher than the subscriber levels at the same
time last year.
OTHER BUSINESSES. In the second quarter of 1998, revenues from other businesses
- -- principally Kaplan Educational Centers, Legi-Slate, Washingtonpost.Newsweek
Interactive, MLJ (Moffet, Larson & Johnson), and PASS Sports (1997 only) --
increased 8 percent over the prior year. Excluding PASS Sports, which was sold
in the third quarter of 1997, revenue from other businesses increased 29 percent
over the second quarter of 1997. Growth at Kaplan Educational Centers, from
acquisitions as well as existing businesses, produced most of the gain.
EQUITY IN EARNINGS AND LOSSES OF AFFILIATES. The company's equity in earnings of
affiliates in the second quarter of 1998 was a loss of $0.1 million, compared
with income of $3.3 million in the second quarter of 1997. The decrease resulted
from the company's sale of its 35 percent interest in Bear Island Paper Company
and Bear Island Timberlands Company in November 1997 and the disposition of the
company's 28 percent interest in Cowles Media Company, which occurred in March
1998.
NON-OPERATING ITEMS. Interest income, net of interest expense, was $0.1 million
and $0.9 million for the second quarters of 1998 and 1997, respectively.
INCOME TAXES. The effective tax rate in the second quarter of 1998 increased to
39.2 percent, from 38.4 percent in 1997.
<PAGE> 10
10.
SIX MONTH COMPARISONS
Net income for the first six months of 1998 was $271.7 million, an
increase of $152.6 million from net income of $119.1 million in the first half
of 1997. Diluted earnings per share for the first half of the year were $26.74
compared to $10.94 in 1997.
The company's net income included $162.8 million ($16.07 per share -
diluted basis) from the disposition of its 28 percent interest in Cowles Media
Company. The disposition resulted from the merger of Cowles and McClatchy
Newspapers, Inc., which was completed in March of 1998. Excluding the effect of
the disposition, net income decreased $10.2 million, or 9 percent; diluted
earnings per share decreased 2 percent to $10.67, from $10.94 in the first half
of 1997, with fewer average shares outstanding.
Revenues for the first half of 1998 increased 6 percent to $1,009.7
million, from $955.5 million in the comparable period last year. Advertising
revenues increased 5 percent, circulation and subscriber revenues increased 4
percent and other revenues increased 15 percent.
Costs and expenses increased 8 percent during the first half of 1998 to
$827.9 million, from $767.6 million in the corresponding period of 1997.
Operating expenses increased 11 percent due mainly to increased newsprint
expense, new media spending and expenses arising from expansion of the printing
facilities of The Washington Post. Selling, general and administrative expenses
decreased 2 percent, with an increase in the company's pension credit, partially
offset by normal growth in expenses, accounting for the net decrease in expense.
Depreciation expense and amortization expense increased 15 percent and 35
percent, respectively, resulting from acquisitions completed in 1998 and 1997.
In the first half of 1998 operating income declined 3 percent to $181.8
million from $187.9 million in the same period last year.
NEWSPAPER DIVISION. Newspaper division revenues were up 4 percent in the first
half of 1998 over the comparable period of 1997. Advertising revenues for the
division rose 5 percent in the period due mainly to increased rates. Advertising
volume at The Washington Post totaled 1,578,200 inches, substantially unchanged
from 1,581,700 inches in the first half of 1997. Circulation revenues for the
division declined 1 percent as compared to the same period in the prior year.
Daily and Sunday circulation at The Post both declined 1 percent from the prior
year.
Newsprint expense at The Post increased 12 percent in 1998 as compared to
the first six months of 1997.
<PAGE> 11
11.
BROADCAST DIVISION. Revenues at the broadcast division increased 6 percent over
the first six months of 1997. The overall increase in broadcast division revenue
is the result of a 16 percent and 2 percent increase in national and local
advertising revenue, respectively, partially offset by a 13 percent decrease in
network compensation.
MAGAZINE DIVISION. Magazine division revenue increased 6 percent in the first
half of the year. The increase is attributable to the trade periodicals acquired
in the fourth quarter of 1997, partially offset by a 3 percent decline in
revenue at Newsweek. Lower domestic edition ad pages and the continuing economic
crisis in Asia resulted in the Newsweek revenue decline.
CABLE DIVISION. Cable division revenues increased 11 percent in the first half
of 1998. Higher subscriber levels, resulting mainly from system acquisitions and
exchanges, as well as slightly higher rates, accounted for the increase.
OTHER BUSINESSES. At the company's other businesses - principally Kaplan
Educational Centers, Legi-Slate, Washingtonpost. Newsweek Interactive, MLJ
(Moffet, Larson & Johnson), and PASS Sports (for 1997 only) -- revenues rose 4
percent in the first half of 1998. Excluding PASS Sports, which was sold in the
third quarter of 1997, revenue from other businesses increased 23 percent.
Growth at Kaplan Educational Centers, from acquisitions as well as existing
businesses, produced most of the gain.
EQUITY IN EARNINGS AND LOSSES OF AFFILIATES. The company's equity in earnings of
affiliates during the first half of 1998 was $0.9 million, compared with $3.5
million in the first six months of 1997. The decline in earnings of affiliates
resulted from the company's sale of its 35 percent interest in Bear Island Paper
Company and Bear Island Timberlands Company in November 1997 and the disposition
of the company's 28 percent interest in Cowles Media Company, which occurred in
March of 1998.
NON-OPERATING ITEMS. Interest expense, net of interest income, was $2.0 million
in the first six months of 1998, compared to net interest income of $1.9 million
in 1997 due to borrowings outstanding for the majority of the first quarter of
1998. There were no borrowings outstanding during the first six months of 1997.
Included in other, net is a $258.4 million pre-tax gain resulting from the
disposition of the company's 28 percent interest in Cowles Media Company.
INCOME TAXES. The effective tax rate in 1998 was approximately 37.9 percent as
compared to 39.0 percent in 1997. The lower state tax rate applicable to the
Cowles transaction resulted in the overall decline in the effective tax rate.
<PAGE> 12
12.
FINANCIAL CONDITION: CAPITAL RESOURCES AND LIQUIDITY
In the first half of 1998, the company acquired various businesses for
approximately $130 million. These acquisitions included, among others, a cable
system in Grenada, Mississippi serving approximately 7,400 subscribers, a cable
system in Anniston, Alabama serving approximately 36,000 subscribers, an
educational services company that provides English language study programs, and
a provider of customized information technology training and consulting.
In March 1998, the company received approximately $330.5 million in cash
and 730,525 shares of McClatchy Class A common stock as a result of the Cowles
and McClatchy merger transaction, as previously described. The market value of
the McClatchy stock received approximated $21.6 million, based upon publicly
quoted market prices. During the second quarter of 1998, the company sold
167,000 shares of the McClatchy stock for approximately $5 million; no
significant gain or loss was realized upon the liquidation of these shares.
During the first six months of 1998, the company repurchased 16,010 shares of
its Class B common stock at a cost of approximately $7.8 million. Approximately
800,000 Class B common shares remain available for repurchases under a November
13, 1997 authorization by the Board of Directors.
During the second quarter and first half of 1998, the company had average
short-term borrowings outstanding of approximately $15.2 million and $143.6
million, respectively, at an average interest rate of 5.6 percent. At June 28,
1998, $157 million in short-term borrowings were outstanding under the company's
commercial paper program that is supported by a 5-year, $500.0 million revolving
credit facility.
In July 1998, subsequent to the end of the second quarterly period ended
June 28, 1998, the company completed the acquisition of Dearborn Publishing
Group, Inc., a publisher and professional licensing training provider, and the
acquisition of the assets of cable systems in Mississippi, Texas and Oklahoma
serving approximately 72,000 subscribers. The company also completed the sale of
certain assets of 14 cable systems in Texas, Missouri and Kansas serving
approximately 29,000 subscribers and the sale of MLJ (Moffet, Larson & Johnson),
a telecommunications consulting firm. The net cost of these transactions was
approximately $120 million.
The company has experienced no other significant changes in its financial
condition since the end of 1997.
<PAGE> 13
13.
Year 2000
The company continues its assessment, remediation, testing, and
contingency planning efforts surrounding the Year 2000 readiness of its computer
systems and non-computer equipment deemed to be susceptible to Year 2000
interruption. The company has substantially completed the assessment of its
internal systems and equipment and is in the process of obtaining Year 2000
compliance confirmation from key vendors and customers.
Most of the company's internal systems and equipment have been determined
to be Year 2000 compliant. Certain critical internal systems, however, have been
identified as incapable of accurately processing transactions beyond the year
2000, the most significant of which include some of the revenue related
operating systems at The Washington Post and Newsweek. For each of the systems
noted to be noncompliant, the company's replacement or remediation efforts are
well under way and expected to be completed and tested before the summer of
1999. The majority of the noncompliant internal systems were scheduled to be
replaced prior to the year 2000 for operating efficiency reasons, and although
the approaching year 2000 increases the importance of replacing such systems, it
has not caused a significant acceleration in the system replacement timetable.
To-date the company's vendor and customer Year 2000 confirmation
procedures have not discovered any matters that would cause the company to
believe it will experience a material business interruption. As previously
stated, however, these assessment procedures are ongoing.
Notwithstanding the substantive work efforts described above, the company
could potentially experience disruptions to some aspects of its various
activities and operations as a result of noncompliant systems utilized by
unrelated third party governmental and business entities. Contingency plans are
therefore under development in order to mitigate the extent of such potential
disruption to business operations.
The company does not believe based upon present facts that the cost of
achieving Year 2000 compliance will have a material effect on the company's
results of operations or financial condition.
<PAGE> 14
14.
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Company's May 14, 1998, Annual Meeting of Stockholders, the
stockholders elected each of the nominees to its Board of Directors named in the
Company's proxy statement dated March 27, 1998. The voting results are set forth
below:
<TABLE>
<CAPTION>
Class A Directors
-----------------
Votes Votes Broker
Nominee For Withheld Non-Votes
------- --- -------- ---------
<S> <C> <C> <C>
Warren E. Buffett 1,739,250 -0- -0-
Martin Cohen 1,739,250 -0- -0-
George J. Gillespie III 1,739,250 -0- -0-
Donald E. Graham 1,739,250 -0- -0-
Katharine Graham 1,739,250 -0- -0-
William J. Ruane 1,739,250 -0- -0-
Richard D. Simmons 1,739,250 -0- -0-
Alan G. Spoon 1,739,250 -0- -0-
George W. Wilson 1,739,250 -0- -0-
</TABLE>
<TABLE>
<CAPTION>
Class B Directors
-----------------
Votes Votes Broker
Nominee For Withheld Non-Votes
------- --- -------- ---------
<S> <C> <C> <C>
Daniel B. Burke 6,585,492 13,106 -0-
James E. Burke 6,584,918 13,680 -0-
Ralph E. Gomory 6,586,118 12,480 -0-
Donald R. Keough 6,586,064 12,534 -0-
Barbara Scott Preiskel 6,584,552 14,046 -0-
</TABLE>
<PAGE> 15
15.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) The following documents are filed as exhibits to this report:
EXHIBIT
NUMBER DESCRIPTION
11 Calculation of Earnings Per Share of
Common Stock
27 Financial Data Schedule (Electronic Filing Only)
(b) No reports on Form 8-K were filed during the period covered by this
report.
<PAGE> 16
16.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE WASHINGTON POST COMPANY
(Registrant)
Date: August 7, 1998 /s/ Donald E. Graham
-------------- --------------------------------------
Donald E. Graham, Chairman &
Chief Executive Officer
(Principal Executive Officer)
Date: August 7, 1998 /s/ John B. Morse, Jr.
-------------- --------------------------------------
John B. Morse, Jr., Vice President-Finance
(Principal Financial Officer)
<PAGE> 1
EXHIBIT 11
CALCULATION OF EARNINGS
PER SHARE OF COMMON STOCK
(In thousands of shares)
<TABLE>
<CAPTION>
Thirteen Weeks Ended Twenty-Six Weeks Ended
----------------------------- -----------------------------
June 28, June 29, June 28, June 29,
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Number of shares of
Class A and Class B
Common stock outstanding
at beginning of
period 10,081 10,805 10,089 10,910
Issuance of shares of
Class B common stock
(weighted), net of
forfeiture of re-
stricted stock awards 10 2 8 19
Repurchase of Class B
common stock (weighted) (3) (64) (11) (132)
----- ------ ------ ------
Shares used in the computation
of basic earnings per share 10,088 10,743 10,086 10,797
Adjustment to reflect
dilution from common stock
equivalents 48 29 46 22
------ ------ ------ -------
Shares used in the computation
Of diluted earnings per share 10,136 10,772 10,132 10,819
------ ------ ------ -------
Net income available for
common shares $63,543 $71,118 $270,940 $118,334
------ ------ ------- -------
Basic earnings per common
share $6.30 $ 6.62 $26.86 $10.96
---- ----- ----- -----
Diluted earnings
per common share $6.27 $ 6.60 $26.74 $10.94
---- ----- ----- -----
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Condensed Consolidated Statement of Income for the twenty-six weeks ended June
28, 1998 and the Condensed Consolidated Balance Sheet as of June 28, 1998 and is
qualified in its entirety by the reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-03-1999
<PERIOD-END> JUN-28-1998
<CASH> 21,678
<SECURITIES> 0
<RECEIVABLES> 319,192
<ALLOWANCES> 51,849
<INVENTORY> 31,298
<CURRENT-ASSETS> 354,397
<PP&E> 1,321,205
<DEPRECIATION> 607,073
<TOTAL-ASSETS> 2,216,434
<CURRENT-LIABILITIES> 507,128
<BONDS> 0
11,873
0
<COMMON> 20,000
<OTHER-SE> 1,394,996
<TOTAL-LIABILITY-AND-EQUITY> 2,216,434
<SALES> 0
<TOTAL-REVENUES> 1,009,712
<CGS> 0
<TOTAL-COSTS> 543,986
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 32,241
<INTEREST-EXPENSE> 2,574
<INCOME-PRETAX> 437,257
<INCOME-TAX> 165,600
<INCOME-CONTINUING> 271,657
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 271,657
<EPS-PRIMARY> 26.86
<EPS-DILUTED> 26.74
</TABLE>
