<PAGE> 1
Filed pursuant to Rule 424(b)(3)
File No. 333-69671
THE INFORMATION CONTAINED IN THIS PRELIMINARY
PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED.
SUBJECT TO COMPLETION. DATED FEBRUARY 8, 1999.
Prospectus Supplement to Prospectus dated January 12, 1999.
$300,000,000
THE WASHINGTON POST COMPANY
% Notes due , 200
------------------------
The Washington Post Company will pay interest on and of
each year. The first interest payment will be made on , 1999. The
Notes will be issued only in denominations of $1,000 and integral multiples of
$1,000.
The Company has the option to redeem all or a portion of the Notes at any
time at a price based on the present value on the redemption date, using a
discount rate based on a U.S. Treasury security having a remaining life to
maturity comparable to the Notes, of the then remaining scheduled payments of
principal and interest on the Notes to be redeemed, plus basis points, plus
accrued interest. The redemption price will in no event be less than 100% of the
principal amount of the Notes to be redeemed.
------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY
BODY HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
<TABLE>
<CAPTION>
Per Note Total
<S> <C> <C>
Initial public offering price............................... % $
Underwriting discount....................................... % $
Proceeds, before expenses, to the Company................... % $
</TABLE>
The initial public offering price set forth above does not include accrued
interest, if any. Interest on the Notes will accrue from , 1999, and
must be paid by the purchaser if the Notes are delivered after , 1999.
------------------------
The Underwriters expect to deliver the Notes in book-entry form only
through the facilities of The Depository Trust Company against payment in New
York, New York, on , 1999.
GOLDMAN, SACHS & CO.
SALOMON SMITH BARNEY
MERRILL LYNCH & CO.
------------------------
Prospectus Supplement dated February , 1999.
<PAGE> 2
THE COMPANY
The information contained in this section is qualified in its entirety by
and should be read together with the more detailed information and financial
statements included or incorporated by reference in this Prospectus Supplement
and the accompanying Prospectus.
The Company is a diversified media organization whose principal operations
consist of newspaper publishing (primarily The Washington Post newspaper),
television broadcasting (through the ownership and operation of six
network-affiliated television stations), the ownership and operation of cable
television systems, and magazine publishing (primarily Newsweek magazine). The
Company also produces news and other information products and services for
electronic distribution and provides test preparation and related services.
The Company's executive offices are located at 1150 15th Street, N.W.,
Washington, D.C. 20071, and its telephone number is (202) 334-6000.
The following discussion provides more information about the businesses
included in each of the Company's business segments.
NEWSPAPER PUBLISHING DIVISION
The Washington Post is one of the most respected newspapers in the world
(it has won 31 Pulitzer Prizes) and is the dominant newspaper in the Washington,
D.C. market, among the most affluent and best-educated major markets in the
United States. The Washington Post's average 1998 circulation was 775,000 daily
and 1,095,000 Sunday. The Company believes The Post's primary market household
penetration of more than 45 percent daily and 60 percent Sunday is significantly
higher than that of other major-city newspapers in the country. This penetration
has made The Washington Post a highly effective medium for advertisers.
Over the past several years, the Company has invested substantial amounts
to meet the needs of readers and advertisers who increasingly live and work
outside of the District of Columbia. The Washington Post currently operates 11
suburban news bureaus and separately zones advertising and editorial content on
a weekly or more frequent basis in various sections of the paper.
In the beginning of 1999, the Company completed a major, $230 million
capital investment program to expand The Post's existing satellite printing
plant, construct a new satellite printing plant and replace all of the paper's
printing presses. The eight new presses will increase The Post's use of color
and provide expanded ability to zone editorial content and advertising. In
addition, the new facilities will offer significant operating efficiencies,
including a reduction (through attrition) of approximately 100 production
employees.
The Company also is serving readers and advertisers in the Washington
suburbs through its rapidly expanding Gazette Newspapers, a publisher of 31
community weekly newspapers with a combined controlled circulation of 420,000 in
the Maryland suburbs.
The Company also publishes The Herald in Everett, Washington, 30 miles
north of Seattle. This morning newspaper has a circulation of 54,000 daily and
63,000 Sunday.
In fiscal years 1997, 1996 and 1995, the newspaper publishing division
generated revenues of $812.9 million, $763.9 million and $729.2 million, and
segment operating income of $162.7 million, $116.8 million and $109.7 million,
respectively. The newspaper division contributed 42%, 41% and 42% of the
Company's consolidated revenues for fiscal 1997, 1996 and 1995, respectively.
The operating results of The Washington Post accounted for most of the newspaper
division's revenues and operating income.
BROADCASTING DIVISION
The Company, through subsidiaries, owns six network-affiliated VHF
television stations. Three of these stations are located in Florida (WPLG in
Miami, WKMG in Orlando and WJXT in Jacksonville), and two are located in Texas
(KPRC in Houston and
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KSAT in San Antonio). These are two of the fastest growing states in the
country. The sixth station, WDIV, is in Detroit, a large television market in
which the Company's station has a strong position as the NBC affiliate. The
Company's six stations are divided equally among the three major networks (ABC,
CBS and NBC). Detroit, Houston, Miami, Orlando, San Antonio and Jacksonville
are, respectively, the 9th, 11th, 16th, 22nd, 37th and 52nd largest broadcast
markets in the United States (1998/99 DMA market rankings, Nielsen Media
Research, Fall 1998).
The Company's broadcast division operates on a basic management premise
that has proven highly successful: leadership in local news ultimately results
in a leadership position in market viewership and, more importantly, revenue
share.
In the November 1998 Nielsen ratings book, WDIV, WJXT and KSAT all
continued to rank number one in audience share sign-on to sign-off, while WPLG
tied for first place. KPRC, although still ranked third in the market, has
narrowed the gap significantly and now challenges its closest competitors by as
little as two share points. WKMG, which the broadcast division took over in
September 1997, has remained in third place in Orlando while moving aggressively
to build a strong news franchise.
In 1997, 1996 and 1995, the broadcast division generated revenues of $338.4
million, $335.2 million and $306.1 million, and segment operating income of
$159.6 million, $155.0 million and $132.4 million, respectively. The broadcast
division contributed 17%, 18% and 18% to the Company's consolidated revenues for
1997, 1996 and 1995, respectively.
CABLE DIVISION
As of the end of 1998, subsidiaries of the Company provided basic cable
service to approximately 733,000 basic subscribers clustered geographically in
18 states (representing about 73% of the 1,000,800 homes passed by the systems)
and had in force more than 417,000 subscriptions to premium program services.
The Company's cable systems are located in 18 Midwestern, Southern and
Western states and typically serve smaller communities. The Company has chosen
to concentrate its cable operations in non-urban areas where capital
requirements are more predictable and where it has extensive experience in
operating cable systems. The Company believes the combination of the non-urban
market strategy, continued emphasis on customer satisfaction, and efforts to
build a strong brand image has favorably positioned its cable operations for
sustained growth. The Company has also undertaken a program to upgrade
substantially all of its cable systems to 550 MHz capacity and to make them data
ready with 1,500-home fiber-optic nodes. This program was more than half
completed at the end of 1998.
In 1997, 1996 and 1995, the cable division generated revenues of $257.7
million, $229.7 million and $194.1 million, and segment operating income of
$51.5 million, $56.0 million and $41.0 million, respectively. The cable division
contributed 13%, 12% and 11% of the Company's consolidated revenues for 1997,
1996 and 1995, respectively.
MAGAZINE PUBLISHING DIVISION
Newsweek is a weekly news magazine published both domestically and
internationally by Newsweek, Inc., a subsidiary of the Company. In gathering,
reporting and writing news and other material for publication, Newsweek
maintains news bureaus in 9 U.S. and 13 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's circulation of 3,100,000
ranks second among the three leading weekly news magazines (Newsweek, Time and
U.S. News & World Report). Internationally, Newsweek publishes three English-
language editions (Atlantic, Pacific and Latin America) as well as editions in
Japanese, Korean, Spanish and Russian. The foreign-language editions are
published through
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arrangements with local publishing companies which typically translate editorial
copy, sell local advertising and print and distribute the editions.
The Company's magazine division also includes Post-Newsweek Business
Information. This is a group of trade magazines and trade shows in three
technology sectors: government purchasers of information technology products and
services, providers of government systems integration services, and technology
entrepreneurs and financiers. The activities of this unit capitalize on
Washington's emergence as one of the country's most dynamic, rapidly growing
technology centers.
In 1997, 1996 and 1995, the magazine publishing division generated revenues
of $389.9 million, $377.1 million and $352.6 million, and segment operating
income of $38.0 million, $22.8 million and $15.0 million, respectively. The
magazine division contributed 20%, 20% and 21% to the Company's consolidated
revenues for 1997, 1996 and 1995, respectively.
OTHER BUSINESSES
For financial reporting purposes, the Company's "Other Businesses" segment
principally consists of the operations of Kaplan Educational Centers, Inc. and
Washingtonpost.Newsweek Interactive Company, each of which is a wholly owned
subsidiary of the Company.
The Company believes Kaplan Educational Centers, Inc. is one of the
nation's foremost educational and career services companies. Kaplan's
traditional business consists of preparing students for various admissions and
licensing examinations (including the SATs, LSATs, GMATs, GREs, and nursing and
medical boards), as well as publishing educational books and software. Over the
past few years, Kaplan has expanded its traditional business offerings through
acquisitions and internal development. As a result of these efforts, Kaplan now
provides computer-based learning and individualized tutoring services in 68
centers located in ten states to students in elementary school through high
school, delivers recruitment and training services for corporations and
individuals seeking to advance their careers, and provides customized assessment
and supplemental education programs to secondary schools and colleges. Notably,
Kaplan has been able to broaden its service offerings while achieving
double-digit revenue growth in its traditional test preparation business.
During 1998, Kaplan's test preparation business (which accounts for the
majority of its revenues) enrolled over 135,000 students and provided courses at
150 permanent centers located throughout the United States, Canada, Puerto Rico
and London. Through licensing agreements, Kaplan test preparation courses are
also delivered at 27 centers in 18 countries.
The Company believes the commercial educational and career services markets
will experience continued growth and that Kaplan is well positioned to profit
from such growth.
Like other companies which generate most of their revenue from the sale of
advertising, the Company recognizes that the growth of the Internet is impacting
the business environment in which it operates. Web-based information,
advertising, and transaction services offer both great opportunities as well as
potential challenges to the Company's traditional businesses. As a result, the
Company has been investing substantial amounts in new Internet services to
protect existing franchises and to develop new ones.
The Company's new media activities are being carried out primarily by
Washingtonpost.Newsweek Interactive Company ("WPNI"). Since July 1996, WPNI has
operated washingtonpost.com, a World Wide Web site that features the full
editorial text of The Washington Post and most of The Post's classified
advertising, as well as original content created by WPNI's staff and content
obtained from other sources. The washingtonpost.com site also features a
comprehensive city guide focusing on the Washington, D.C., area, including an
arts and entertainment section, a community section and an online yellow pages
directory. This site is currently generating 65 million page views per month and
the Company believes (based on data from Media Metrix) is among
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the top five national news sites on the web. WPNI is also gradually making
progress in the sale of both local and national online advertising on
washingtonpost.com. The Company is fully committed to remaining the prime
resource for classified advertising in the greater Washington D.C. market,
regardless of the medium.
Late last year, WPNI took over the operations of a second major site,
Newsweek.com, with the goal of establishing a presence for Newsweek on the web
commensurate with the reputation and readership enjoyed by the print edition.
In 1997, 1996 and 1995, other businesses generated revenues of $157.4
million, $147.6 million and $137.4 million, respectively, and segment operating
losses of $30.6 million, $13.5 million and $27.1 million, respectively. The
other businesses contributed 8% to the Company's consolidated revenues for each
of 1997, 1996 and 1995.
RECENT DEVELOPMENTS
On January 26, 1999, the Company issued a press release announcing its 1998
unaudited earnings.
1998 UNAUDITED CONSOLIDATED RESULTS
The Company reported net income of $417.3 million for its fiscal year ended
January 3, 1999, compared with net income of $281.6 million for the fiscal year
ended December 28, 1997. The Company's 1998 net income included $194.4 million
from the disposition of the Company's 28 percent interest in Cowles Media
Company, the sale of 14 small cable systems and the disposition of the Company's
interest in Junglee, a facilitator of internet commerce. The Company's 1997 net
income included $44.5 million from the sale of the Company's investments in Bear
Island Paper Company, L.P. and Bear Island Timberlands Company, L.P., and the
sale of the assets of its PASS regional cable sports network. Excluding the
effect of these one-time items, net income totaled $222.9 million in 1998, a
decrease of 6 percent from net income of $237.1 million in 1997.
Revenue for 1998 totaled $2,110.4 million, an increase of 8 percent from
$1,956.3 million in 1997. Operating income for 1998 decreased 1 percent to
$378.9 million, from $381.4 million in 1997. Excluding the effect of
acquisitions and dispositions completed in 1997 and 1998, revenue increased 4
percent and operating income increased 3 percent. The 3 percent increase in
operating income is attributable to operating income growth at the Company's
broadcast and cable companies and an increase in the Company's pension credit.
This growth was partially offset by increases in newsprint expense, new media
spending, and expenses arising from the expansion of the printing facilities of
The Washington Post.
For the fourth quarter of 1998, the Company's net income decreased 30
percent to $63.8 million, from $91.0 million in 1997. Fourth quarter 1997 net
income included the effect of the sale of the Bear Island partnership interests
in the amount of $28.5 million. Excluding this one-time item, fourth quarter net
income increased 2 percent.
Revenue for the fourth quarter of 1998 was $591.4 million, up 13 percent
over revenue of $522.4 million in the fourth quarter of 1997. Operating income
for the quarter increased 7 percent to $109.5 million, from $102.2 million.
Excluding the effect of acquisitions and dispositions completed in 1997 and
1998, revenue increased 8 percent and operating income increased 13 percent.
Operating income growth at the Company's broadcast and cable companies, and
improved operating results at Kaplan Educational Centers, Inc., accounted for
most of the 13 percent fourth-quarter increase in operating income.
1998 UNAUDITED DIVISIONAL RESULTS
In December 1998, the Company adopted Statement of Financial Accounting
Standards No. 131, "Disclosures about Segments of an Enterprise and Related
Information," which required the Company to change the manner in which it
reports its corporate office expenses. Previously the Company had apportioned
its corporate office expenses among
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its various divisions on the basis of divisional revenue. Subsequent to this
change all corporate office expenses are being reflected in the "Other
Businesses" segment. While this change does not affect the reporting of the
Company's consolidated results of operations or divisional revenue, it does
affect the reporting of the Company's divisional operating income. The
divisional operating income information contained in the preceding discussion
under the heading "The Company" has not been restated to reflect this change.
However, the 1998 and 1997 divisional operating income information contained in
the following discussion has been computed (or, in the case of 1997, restated)
in accordance with this accounting change.
Newspaper Division. At the newspaper division, 1998 included 53 weeks as
compared to 52 weeks in 1997. Newspaper division operating income in 1998
decreased 4 percent to $165.1 million, from $172.6 million in 1997. In 1998,
division revenue totaled $846.8 million, an increase of 4 percent over revenue
of $812.9 million in 1997. The decrease in operating income at the newspaper
division is due primarily to a 9 percent increase in newsprint expense and
additional costs associated with the expansion of the printing facilities of The
Washington Post, offset partially by growth in advertising revenue.
Broadcast Division. Broadcast division operating income in 1998 was $171.2
million, up 5 percent from $163.7 million in 1997. Division revenue for 1998
increased 6 percent to $357.6 million, from $338.4 million in 1997. The
improvement in 1998 operating income is primarily attributable to 1998 political
advertising and an increase in local advertising revenue.
Cable Division. Cash flow for the cable division in 1998 was $126.9
million, up 20 percent from $105.4 million in 1997. Cable division operating
income of $65.0 million in 1998 was 19 percent higher than operating income of
$54.7 million in 1997. Revenue for 1998 of $298.0 million represents a 16
percent increase over 1997. The increase in operating income is due primarily to
higher subscriber levels and a slight increase in rates, offset partially by
increased depreciation and amortization arising from acquisitions and capital
improvements. At the end of 1998, there were 733,000 basic subscribers, an
increase of 15 percent over 1997. Most of the basic subscriber increase resulted
from acquisitions and trades.
Magazine Division. Operating income at the magazine division totaled $44.5
million in fiscal 1998, an increase of 4 percent over $42.7 million in fiscal
1997. Revenue at the magazine division rose 2 percent to $399.5 million in 1998,
from $389.9 million in 1997. The 4 percent increase in operating income is
primarily attributable to the operating results of Newsweek. At Newsweek, growth
in pension credit and other favorable cost experience boosted operating income
by 14 percent, offsetting the adverse effects of two fewer special issues in
1998 versus 1997 and softness in advertising at the international edition of
Newsweek.
Other Businesses. Other businesses, which principally includes Kaplan
Educational Centers, Inc., Washingtonpost.Newsweek Interactive Company, and
(since the adoption of SFAS No. 131 as previously discussed) the Company's
corporate office, recorded a combined operating loss in 1998 of $66.9 million,
compared with a loss of $52.3 million in 1997. The increase in operating loss is
primarily attributable to the Company's investing activities in electronic media
offset in part by an improvement in Kaplan's operating performance. Revenues for
other businesses totaled $208.4 million in 1998, representing a 32 percent
increase over 1997; revenue growth at Kaplan accounted for substantially all of
the increase. At Kaplan, revenue increased $77.6 million, or 66 percent, with
acquisitions accounting for about two-thirds of the increase.
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USE OF PROCEEDS
The Company intends to use the net proceeds from the sale of the Notes to
refund a significant portion of its outstanding commercial paper. On February 5,
1999, the Company had $458.4 million in commercial paper outstanding on which it
was paying an average effective interest rate of 4.95%.
At the end of the first quarter of 1998 the Company had no commercial paper
or other indebtedness for borrowed money outstanding. Since that time, the
Company has used the proceeds from the sale of its commercial paper, together
with approximately $215 million in cash generated by operations and by the sale
of certain assets, to fund capital expenditures at The Washington Post news
paper and the Company's cable division aggregating about $220 million, to pay
approximately $290 million in the aggregate for acquisitions of cable television
systems by the Company's cable division and of various businesses by Kaplan
Educational Centers (the largest of which was Dearborn Publishing Group), and to
pay an aggregate of about $165 million for the purchase of shares of the common
stock of General Re Corporation (a holding company for global reinsurance and
related risk management operations which has entered into an agreement to be
merged into Berkshire Hathaway Inc.).
CAPITALIZATION
The following table sets forth as of September 27, 1998, the historical
capitalization of the Company and the as-adjusted capitalization of the Company
giving effect to the sale of the Notes and the application of the estimated net
proceeds to repay short-term debt. The table should be read in conjunction with
the Company's consolidated financial statements, the notes thereto and the other
financial data included or incorporated by reference in this Prospectus
Supplement and the accompanying Prospectus.
<TABLE>
<CAPTION>
AS OF SEPTEMBER 27, 1998
------------------------
ACTUAL AS ADJUSTED
---------- -----------
(IN THOUSANDS)
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Short-term debt.................................... $ 380,505
Long-term debt..................................... 0
Redeemable preferred stock......................... 11,873
Common shareholders' equity........................ 1,471,111
----------
Total capitalization..................... $1,863,489
==========
</TABLE>
SELECTED CONSOLIDATED FINANCIAL DATA
The table on the next page sets forth selected consolidated financial data
which have been derived from the Company's audited consolidated financial
statements as of December 28, 1997, and the five fiscal years then ended, and
the Company's unaudited condensed consolidated financial statements as of
September 27, 1998 and September 28, 1997, and for the thirty-nine week periods
then ended. The following financial data should be read in conjunction with and
is qualified in its entirety by reference to, the Company's consolidated
financial statements and notes thereto contained in Form 10-K and in the
Company's Quarterly Report on Form 10-Q for the period ended September 27, 1998,
each of which is incorporated herein by reference.
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<CAPTION>
THIRTY-NINE WEEKS
ENDED ON OR
NEAR SEPTEMBER 30, FISCAL YEAR ENDED ON OR NEAR DECEMBER 31,
------------------- ----------------------------------------------------
1998(a) 1997(b) 1997(c) 1996 1995 1994 1993(d)
------- ------- ------- ---- ---- ---- -------
(DOLLARS IN MILLIONS)
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INCOME STATEMENT DATA:
Operating revenues
Advertising................................. $ 928.2 $ 892.6 $1,236.9 $1,172.7 $1,094.6 $1,026.7 $ 913.5
Circulation and subscribers................. 402.5 386.8 519.6 491.0 453.3 438.5 444.4
Other....................................... 188.3 154.4 199.8 189.8 171.5 148.8 140.3
-------- -------- -------- -------- -------- -------- --------
Total operating revenues.................. 1,519.0 1,433.8 1,956.3 1,853.5 1,719.4 1,614.0 1,498.2
Operating Costs and Expenses
Operating................................... 822.2 743.5 1,019.9 1,007.1 948.1 861.4 790.3
Selling, general and administrative......... 328.5 332.9 450.0 414.3 403.1 390.3 393.2
Depreciation of property, plant and
equipment................................... 63.2 53.7 71.5 65.1 65.8 62.0 59.5
Amortization of goodwill and intangibles.... 35.7 24.6 33.5 29.8 31.4 25.4 16.2
-------- -------- -------- -------- -------- -------- --------
Total operating costs and expenses........ 1,249.6 1,154.7 1,574.9 1,516.3 1,448.4 1,339.1 1,259.2
Income from operations........................ 269.4 279.1 381.4 337.2 271.0 274.9 239.0
Equity in (losses) earnings of affiliates..... (3.1) 8.2 10.0 19.7 24.5 7.3 (2.0)
Net interest (expense) income................. (4.0) 2.4 2.2 3.8 2.4 3.6 6.1
Other income (expense) (a)(b)(c)(d)........... 306.7 24.3 69.5 (0.5) 13.5 1.1 20.4
-------- -------- -------- -------- -------- -------- --------
Income before income taxes.................... 569.0 314.0 463.1 360.2 311.4 286.9 263.5
Provision for income taxes.................... 215.5 123.4 181.5 139.4 121.3 117.2 109.7
-------- -------- -------- -------- -------- -------- --------
Income before cumulative effect of change in
accounting principle........................ 353.5 190.6 281.6 220.8 190.1 169.7 153.8
Cumulative effect of change in method of
accounting for income taxes................. -- -- -- -- -- -- 11.6
-------- -------- -------- -------- -------- -------- --------
Net income.................................... $ 353.5 $ 190.6 $ 281.6 $ 220.8 $ 190.1 $ 169.7 $ 165.4
======== ======== ======== ======== ======== ======== ========
BALANCE SHEET DATA:
Current assets................................ $ 320.4 $ 328.4 $ 308.5 $ 382.6 $ 406.6 $ 375.9 $ 625.6
Working capital............................... (408.5) (2.0) (300.3) 101.0 98.4 102.8 367.0
Property, plant and equipment, net............ 793.1 592.6 653.8 511.4 457.4 411.4 363.7
Total assets.................................. 2,505.4 1,983.1 2,077.3 1,870.4 1,732.9 1,696.9 1,622.5
Total debt.................................... 380.5 -- 296.4 -- 50.2 50.3 51.8
Common shareholders' equity................... $1,471.1 $1,373.7 $1,184.1 $1,322.8 $1,184.2 $1,126.9 $1,087.4
OTHER DATA:
EBITDA (e).................................... $ 368.3 $ 357.4 $ 486.4 $ 432.1 $ 368.3 $ 362.2 $ 314.7
EBITDA as a % of revenues..................... 24% 25% 25% 23% 21% 22% 21%
Current ratio (f)............................. 0.44 0.99 0.51 1.36 1.32 1.38 2.42
Percent of total debt to total
capitalization................................ 20% 0% 20% 0% 4% 4% 5%
</TABLE>
- ---------------
(a) Net income for the thirty-nine weeks ended September 27, 1998 included
approximately $194.4 million from non-recurring gain transactions
(representing approximately $309.6 million of pre-tax income included in
"Other income (expense)"), including the disposition of the Company's
investment interests in Cowles Media Company and Junglee Corporation and the
sale of 14 small cable television systems.
(b) Net income for the thirty-nine weeks ended September 28, 1997 included a
non-recurring gain of approximately $16.0 million (representing
approximately $24.8 million of pre-tax income included in "Other income
(expense)") from the sale of the assets of the Company's PASS regional cable
sports network.
(c) Net income for the fiscal year ended December 28, 1997 included
non-recurring gains of approximately $44.5 million (representing
approximately $74.8 million of pre-tax income included in "Other income
(expense)") from the sale of the assets of the Company's PASS regional cable
sports network and the Company's investment interests in Bear Island Paper
Company, L.P. and Bear Island Timberlands Company, L.P.
(d) Net income for the fiscal year ended January 2, 1994 included a
non-recurring gain of approximately $13.4 million (representing
approximately $20.2 million of pre-tax income included in "Other income
(expense)") from the sale of the Company's cable franchises in the United
Kingdom.
(e) Earnings before depreciation and amortization, interest and income taxes
("EBITDA") is not intended to represent cash flow or any other measure of
performance reported in accordance with generally accepted accounting
principles. The Company has included EBITDA as it understands that EBITDA is
used by certain investors as one measure of a Company's ability to service
debt.
(f) Current ratio equals current assets divided by current liabilities.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
The following is a discussion of the results of operations of the Company
for the 13 weeks and 39 weeks ended September 27, 1998, compared with the 13
weeks and 39 weeks ended September 28, 1997, and changes in financial condition
during the 39 weeks ended September 27, 1998.
This analysis should be read in conjunction with the consolidated financial
statements and the notes thereto contained in Form 10-K and in the Company's
Quarterly Report on Form 10-Q for the period ended September 27, 1998.
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.
THIRD QUARTER COMPARISONS
Net income for the third quarter of 1998 was $81.8 million, an increase of
14 percent from net income of $71.6 million in the third quarter last year.
Diluted earnings per share increased 21 percent to $8.05, from $6.64 in the
third quarter of 1997, with fewer average shares outstanding.
The Company's 1998 third quarter net income included $30.9 million ($3.05
per share - diluted basis) arising primarily from the sale of 14 small cable
systems in Texas, Missouri and Kansas and the disposition of the Company's
interest in Junglee, a facilitator of Internet commerce. Net income for the
third quarter of 1997 included $16.0 million ($1.49 per share - diluted basis)
from the sale of the assets of the Company's PASS regional cable sports network.
Excluding these non-recurring items, net income decreased $4.7 million, or 8
percent; diluted earnings per share decreased 3 percent to $5.00, from $5.15 in
the third quarter of 1997.
Revenues for the third quarter of 1998 rose 6 percent to $509.3 million,
from $478.4 million in the same period last year. Advertising revenues and
circulation and subscriber revenues each increased 3 percent. Other revenues
increased 33 percent over the third quarter of 1997. Excluding the effect of
acquisitions and dispositions completed in 1997 and 1998, total third quarter
revenue increased 1 percent. Third quarter revenues for 1998 were adversely
affected by one less special Newsweek issue and a decline in advertising in
Newsweek and at the Company's television stations by General Motors Corporation
during the recent autoworkers' strike.
Costs and expenses for the third quarter of 1998 increased 9 percent to
$421.7 million, from $387.1 million in the third quarter of 1997. Third quarter
1998 operating expenses increased 10 percent, selling general and administrative
expenses remained flat, depreciation expense rose 22 percent and amortization
expense increased 65 percent. Excluding the effect of acquisitions and
dispositions completed in 1997 and 1998, total costs and expenses for the third
quarter increased 1 percent. The 1 percent increase in total costs and expenses
is due to normal expense growth, new media spending and expenses arising from
the expansion of the printing facilities of The Washington Post, offset
partially by an increase in the Company's pension credit.
In the third quarter of 1998, operating income declined to $87.6 million, a
4 percent decrease from $91.2 million in 1997. Excluding the effect of
acquisitions and dispositions completed in 1997 and 1998, operating income for
the third quarter of 1998 remained substantially unchanged as compared to the
third quarter of 1997.
Newspaper Division. At the newspaper division, revenues increased 3
percent in the third quarter of 1998. Advertising revenues for the division rose
3 percent in 1998 due principally to higher ad rates. Advertising volume at The
Washington Post totaled 734,600 inches in the third quarter of 1998 as compared
to 746,300 inches in 1997. Preprint advertising volume at The Post increased 3
percent to 382 million pieces, compared to 370 million pieces in 1997.
Circulation revenues for the division decreased 2 percent in
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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.
Newsprint expense at The Post increased 8 percent in the third quarter of
1998 compared to the third quarter of last year.
Broadcast Division. Revenues at the broadcast division increased 2 percent
in the third quarter of 1998. The increase in revenue is attributable to a 13
percent increase in local advertising revenue, partially offset by a 12 percent
decrease in both national advertising revenue and network compensation. The
decline in national advertising revenue reflects the previously mentioned third
quarter decline in automotive advertising.
Magazine Division. Revenues at the magazine division decreased 3 percent
in the third quarter of 1998. The decrease is primarily attributable to one less
special issue at Newsweek, as well as a decline in automotive advertising and
softness in advertising at the international editions of Newsweek. These revenue
declines were partially offset by increased revenue from the trade periodicals
acquired in the fourth quarter of 1997.
Cable Division. At the cable division, third quarter 1998 revenues were 18
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 third quarter, the number of basic subscribers totaled
approximately 730,000, 15 percent higher than the subscriber levels at the same
time last year.
Other Businesses. In the third quarter of 1998, revenues from other
businesses - principally Kaplan Educational Centers, Legi-Slate,
Washingtonpost.Newsweek Interactive, MLJ (Moffet, Larson & Johnson - sold in
July, 1998), and PASS Sports (1997 only) - increased 31 percent over the prior
year. Excluding PASS Sports and MLJ, which were sold in the third quarter of
1997 and 1998, respectively, revenue from other businesses increased 54 percent
over the third quarter of 1997. Growth at Kaplan Educational Centers produced
most of the increase, with acquisitions accounting for most of the gain.
Equity in (Losses) Earnings of Affiliates. The Company's equity in losses
of affiliates in the third quarter of 1998 was $4.1 million, compared with
income of $4.7 million in the third quarter of 1997. The decrease resulted
principally from increased spending at the Company's new media joint ventures
and 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 expense, net of interest income, was $2.0
million in the third quarter of 1998, compared with net interest income of $0.5
million in the third quarter of 1997. There were no borrowings outstanding
during the third quarter of 1997.
Included in other, net for the third quarter of 1998 are pre-tax gains of
$51.2 million related to the sale of cable systems in Texas, Missouri and Kansas
and the disposition of the Company's interest in Junglee, a facilitator of
internet commerce. For the third quarter of 1997, other, net includes pre-tax
gains of $24.8 million resulting from the sale of the assets of the Company's
PASS Sports subsidiary and the termination of its regional sports network.
Income taxes. The effective tax rate in the third quarter of 1998
decreased to 37.9 percent, from 40.4 percent in 1997. The decrease in the
effective tax rate is the result of certain one-time transactions in the third
quarter of 1998 being subject to state tax in jurisdictions with lower tax
rates.
NINE MONTH COMPARISONS
Net income for the first nine months of 1998 was $353.5 million, an
increase of $162.9 million from net income of $190.6 million in the first nine
months of 1997. Diluted earnings per share for the first three quarters of the
year were $34.79, compared to $17.57 in 1997.
The Company's 1998 net income included $193.7 million ($19.12 per
share - diluted basis) from non-recurring gain transactions which include the
first quarter disposition of
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the Company's 28 percent interest in Cowles Media Company and the previously
mentioned cable system and Junglee transactions. The Company's 1997 net income
includes $16.0 million ($1.49 per share - diluted basis) from the sale of the
assets of PASS Sports and termination of its regional sports network. Excluding
the effect of these dispositions, net income decreased 8 percent; diluted
earnings per share decreased 3 percent to $15.67, from $16.08 in the first nine
months of 1997, with fewer average shares outstanding.
Revenues for the first nine months of 1998 increased 6 percent to $1,519.0
million, from $1,433.9 million in the comparable period last year. Advertising
revenues increased 4 percent, circulation and subscriber revenues increased 4
percent and other revenues increased 22 percent. Excluding the effect of
acquisitions and dispositions completed in 1997 and 1998, total revenue for the
first nine months of 1998 increased 3 percent as compared to the same period in
1997.
Costs and expenses increased 8 percent during the first three quarters of
1998 to $1,249.6 million, from $1,154.7 million in the corresponding period of
1997. During the first nine months of 1998, operating expenses increased 11
percent, selling general and administrative expenses were flat, depreciation
expense increased 18 percent and amortization expense increased 46 percent.
Excluding the effect of acquisitions and dispositions completed in 1997 and
1998, total costs and expenses increased 4 percent. This 4 percent increase in
total costs and expenses was primarily attributable 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, offset in part by
an increase in the Company's pension credit.
In the first nine months of 1998 operating income declined 3 percent to
$269.4 million from $279.1 million in the same period last year. Excluding the
effect of acquisitions and dispositions completed in 1997 and 1998, operating
income for the first nine months of 1998 decreased 2 percent from the same
period in 1997.
Newspaper Division. Newspaper division revenues were up 4 percent in the
first nine months of 1998 over the comparable period of 1997. Advertising
revenues for the division rose 4 percent in the period due mainly to increased
rates. Advertising volume at The Washington Post totaled 2,312,800 inches,
declining 1 percent from 2,328,000 inches in the first nine months of 1997.
Circulation revenues at the newspaper division for the first nine months of 1998
declined 2 percent as compared to the same period in the prior year, principally
as a result of a 1 percent decline in both daily and Sunday circulation at The
Post.
Newsprint expense at The Post increased 11 percent in 1998 as compared to
the first nine months of 1997.
Broadcast Division. Revenues at the broadcast division increased 5 percent
over the first nine months of 1997. The overall increase in broadcast division
revenue is the result of a 6 percent increase in both national and local
advertising revenue partially offset by a 13 percent decrease in network
compensation.
Magazine Division. Magazine division revenue increased 3 percent in the
first nine months of the year. The increase is attributable to the trade
periodicals acquired in the fourth quarter of 1997, partially offset by a 6
percent decline in revenue at Newsweek. One less Newsweek special issue, lower
domestic edition ad pages and the continuing economic crisis in Asia resulted in
the Newsweek revenue decline.
Cable Division. Cable division revenues increased 14 percent in the first
nine months 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 - sold in July, 1998), and PASS Sports (for 1997
only) - revenues rose 14 percent in the first nine months of 1998. Excluding
PASS Sports and
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MLJ, which were sold in the third quarter of 1997 and 1998, respectively,
revenue from other businesses increased 41 percent. Growth at Kaplan Educational
Centers produced most of the increase, with acquisitions accounting for about
two-thirds of the gain.
Equity in (Losses) Earnings of Affiliates. The Company's equity in losses
of affiliates during the first three quarters of 1998 was $3.1 million, compared
with income of $8.2 million in the first nine months of 1997. The decline in
earnings of affiliates resulted principally from increased spending at the
Company's new media joint ventures and 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 $4.0
million in the first nine months of 1998, compared to net interest income of
$2.4 million in 1997. The increase in net interest expense is due to borrowings
outstanding for the majority of the first nine months of 1998. There were no
borrowings outstanding during the first nine months of 1997.
Included in 1998 other, net are gains of $258.4 million resulting from the
disposition of the Company's 28 percent interest in Cowles Media Company and
$51.2 million related to the sale of cable systems in Texas, Missouri and Kansas
and the disposition of the Company's interest in Junglee, a facilitator of
internet commerce. Other, net in 1997 includes gains of $24.8 million resulting
from the sale of the assets of the Company's PASS Sports subsidiary and the
termination of its regional sports network.
Income Taxes. The effective tax rate in 1998 was approximately 37.9
percent as compared to 39.3 percent in 1997. The lower state tax rate applicable
to the Cowles and Junglee transactions resulted in the overall decline in the
effective tax rate.
FINANCIAL CONDITION: CAPITAL RESOURCES AND LIQUIDITY
In the first nine months of 1998, the Company acquired various businesses
for approximately $303.0 million as detailed in Note 1 to the third quarter
condensed financial statements.
For the first nine months of 1998, the Company's capital expenditures
totaled $154.3 million, the majority of which related to the replacement of the
printing facilities at The Washington Post and plant upgrades at the Company's
cable subsidiary.
As discussed in Note 2 to the third quarter condensed financial statements,
the Company acquired 411,200 shares of General Re Corporation common stock
throughout the third quarter of 1998 for a total cost of approximately $93.6
million.
During the first nine months of 1998, the Company repurchased 30,260 shares
of its Class B common stock at a cost of approximately $14.9 million.
Approximately 785,000 Class B common shares remain available for repurchases
under a November 13, 1997 authorization by the Board of Directors.
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 and third quarters of 1998, the Company
sold 410,500 shares of the McClatchy stock for approximately $13.6 million; no
significant gain or loss was realized upon the liquidation of these shares.
In July 1998, the Company completed the sale of 14 small cable systems in
Texas, Missouri and Kansas serving approximately 29,000 subscribers for $41.9
million.
In August 1998, the Company received 202,961 shares of Amazon.com common
stock as a result of the merger of Amazon.com and Junglee. The market value of
the Amazon.com common stock received ap-
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proximated $25.2 million, based upon publicly quoted market prices.
At the end of the first quarter of 1998, the Company utilized the cash
generated from the previously mentioned Cowles transaction to repay its then
outstanding borrowings totaling $296.4 million. Since the end of the first
quarter the Company has made short-term borrowings to fund acquisitions and
certain capital expenditures.
During the third quarter and first nine months of 1998, the Company had
average short-term borrowings outstanding of approximately $260.0 million and
$182.0 million, respectively, at an average interest rate of 5.6 percent. At
September 27, 1998, $380.5 million in short-term borrowings were outstanding
that are supported by a 5-year, $500.0 million revolving credit facility.
YEAR 2000 UPDATE
The Company's assessment, remediation, testing and contingency planning
efforts surrounding Year 2000 readiness are proceeding on schedule with
completion of all project phases projected for the fall of 1999. To date, the
assessment of internal systems and equipment has been virtually completed and
the Company has made substantial progress in completing the remediation, testing
and contingency planning phases of its Year 2000 readiness project.
Most of the Company's significant internal systems and equipment, including
equipment with embedded controls, have been determined to be Year 2000
compliant. Certain critical internal systems, however, have been identified as
incapable of processing transactions beyond the Year 2000; the most significant
of which include some of the revenue related business systems at The Washington
Post and Newsweek. For each of the non-compliant systems, the remediation
efforts, which principally include systems replacement and software repair, are
well under way and are expected to be completed and tested in the summer of
1999. The majority of the non-compliant internal systems were scheduled to be
replaced prior to 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 established replacement timetable.
For critical internal systems and equipment determined to be compliant
during the assessment phase of the project, and for non-compliant equipment that
has been repaired or replaced, the Company has devised and commenced a testing
plan to provide additional compliance assurance. To date, the results of the
Company's Year 2000 compliance testing program have not revealed any new
problems, or ineffective remediation. The Year 2000 testing phase for internal
systems and equipment is estimated to be approximately 40 percent complete as of
the end of October 1998.
The Company's Year 2000 readiness project also includes procedures designed
to identify and assess Year 2000 business interruption which may occur as a
result of the Company's dependency on third parties. Vendors, suppliers, service
providers, customers and governmental entities that are believed to be critical
to the Company's business operations after January 1, 2000 ("key business
partners") have been identified and significant progress has been made in
ascertaining their stage of Year 2000 readiness. These efforts include, among
others, circularization of Year 2000 compliance confirmations and conducting
interviews and on-site reviews.
The Company could potentially experience disruptions as a result of
non-compliant systems utilized by some of its key business partners or unrelated
third party governmental and business entities. Contingency plans are under
development to mitigate these potential disruptions to business operations.
These contingency plans include, but are not limited to, identification of
alternative suppliers, vendors and service providers and planned accumulation of
inventory to ensure production capability. The Company is also developing
contingency plans for its internal critical business systems. These contingency
planning activities are intended to reduce risk, but cannot eliminate the
potential for business disruption caused by third party failures.
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The Company now estimates that its total Year 2000 compliance costs will
approximate $25 million. Approximately $15 million of the estimated costs are
attributable to assessment, repair and testing activities and will be expensed
as incurred (approximately $7 million in 1998 and $8 million in 1999). The
remaining $10 million represents the estimated cost to replace non-compliant
systems and will be capitalized and amortized over periods ranging between five
to ten years. The Company anticipates that the funds needed to complete the Year
2000 compliance efforts and referenced system replacements will be provided
primarily from the Company's operating cash flows.
For the first nine months of 1998, the Company has recorded approximately
$5 million in expense related to Year 2000 compliance. Year 2000 project
expenses incurred prior to 1998 were not significant.
Based upon the activities described above, the Company does not believe
that the Year 2000 problem is likely to have a material adverse effect on the
Company's business or results of operations.
DESCRIPTION OF THE NOTES
Information in this section should be read in conjunction with the
statements under "Description of the Debt Securities" in the Prospectus.
GENERAL
The Notes:
- mature on , 200 .
- bear an interest rate of % per annum.
- are issued pursuant to an Indenture dated as of , 1999 between the
Company and The First National Bank of Chicago, as Trustee, and represent
a new and separate series under the Indenture.
- will be issued in U.S. dollars in denominations of $1,000 and integral
multiples of $1,000.
- represent unsecured and unsubordinated debt.
- will rank equally with the Company's other unsecured and unsubordinated
indebtedness (including pursuant to guarantees).
- are redeemable at the option of the Company as described under "Optional
Redemption".
- are not subject to any sinking fund.
- will be issued as Global Debt Securities in fully registered form, except
in certain limited circumstances (described in the "Book Entry System"
section below), without interest coupons attached.
- will be subject to defeasance and covenant defeasance as provided in
"Description of the Debt Securities - Satisfaction and Discharge;
Defeasance" in the Prospectus.
Interest:
- is payable semiannually in arrears on and of each
year to the persons in whose names the Notes are registered at the close
of business on and , as the case may be, prior to the
payment date.
- payments begin on , 1999 and interest begins to accrue from
, 1999.
- will be calculated on the basis of a 360-day year consisting of twelve
30-day months.
OPTIONAL REDEMPTION
The Notes will be redeemable, in whole or in part, at the option of the
Company at any time at a redemption price equal to the greater of (i) 100% of
the principal amount of such Notes or (ii) as determined by the Quotation Agent,
the sum of the present
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values of the remaining scheduled payments of principal and interest thereon
(not including any portion of such payments of interest accrued as of the date
of redemption) discounted to the redemption date on a semiannual basis (assuming
a 360-day year consisting of twelve 30-day months) at the Adjusted Treasury
Rate, plus basis points, plus, in each case, accrued interest thereon to
the date of redemption.
"Adjusted Treasury Rate" means, with respect to any redemption date, the
rate per annum equal to the semiannual equivalent yield to maturity of the
Comparable Treasury Issue, assuming a price for the Comparable Treasury issue
(expressed as a percentage of its principal amount) equal to the Comparable
Treasury Price for such redemption date.
"Comparable Treasury Issue" means the United States Treasury security
selected by the Quotation Agent as having a maturity comparable to the remaining
term of the Notes that would be utilized, at the time of selection and in
accordance with customary financial practice, in pricing new issues of corporate
debt securities of comparable maturity to the remaining term of the Notes.
"Comparable Treasury Price" means, with respect to any redemption date, the
average of the Reference Treasury Dealer Quotations for such redemption date.
"Quotation Agent" means the Reference Treasury Dealer appointed by the
Trustee after consultation with the Company.
"Reference Treasury Dealer" means (i) Goldman, Sachs & Co. or its
successor; provided, however, that if the foregoing shall cease to be a primary
U.S. Government securities dealer in New York City (a "Primary Treasury
Dealer"), the Company shall substitute therefor another Primary Treasury Dealer;
and (ii) any other Primary Treasury Dealer selected by the Trustee after
consultation with the Company.
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any redemption date, the average, as determined by
the Trustee; of the bid and asked prices for the Comparable Treasury issue
(expressed in each case as a percentage of its principal amount) quoted in
writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m. on the
third business day preceding such redemption date.
Notice of any redemption will be mailed at least 30 days but not more than
60 days before the redemption date to each holder of the Notes to be redeemed.
Unless the Company defaults in payment of the redemption price, on and
after the redemption date, interest will cease to accrue on the Notes or
portions thereof called for redemption.
BOOK-ENTRY SYSTEM
The Notes will be represented by one or more Global Debt Securities. Each
Global Debt Security will be deposited with, or on behalf of, The Depository
Trust Company, as U.S. Depositary ("DTC") and be registered in the name of DTC
or its nominee. Except under certain limited circumstances described below, the
Notes will not be issued in definitive form.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities Exchange
Act of 1934. DTC holds securities that its participants ("participants") deposit
with DTC. DTC also facilitates the settlement among participants of securities
transactions, such as transfers and pledges, in deposited securities through
electronic computerized book-entry changes in participants' accounts, thereby
eliminating the need for physical movement of securities certificates.
Participants include securities brokers and dealers, banks, trust companies,
clearing corporations, and certain other organizations. DTC is owned by a number
of its participants and by the New York Stock Exchange, Inc., the American Stock
Exchange, Inc., and the National Association of Securities Dealers, Inc.
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Access to the DTC system is also available to others such as securities brokers
and dealers, banks and trust companies that clear through or maintain a
custodial relationship with a participant, either directly or indirectly. The
Rules applicable to DTC and its participants are on file with the Securities and
Exchange Commission.
As long as DTC or its nominee is the registered owner of a Global Debt
Security, DTC or its nominee, as the case may be, will be considered the sole
owner or holder of the Notes represented by that Global Debt Security for all
purposes under the Indenture. Except under certain limited circumstances
described below, owners of beneficial interests in a Global Debt Security will
not be entitled to have Notes represented by that Global Debt Security
registered in their names, will not receive or be entitled to receive physical
delivery of the Notes in definitive form and will not be considered the owners
or holders of the Notes under the Indenture.
Upon the issuance of a Global Debt Security, DTC will credit the accounts
of persons designated by the Underwriters on its book-entry registration and
transfer system with the respective principal amounts of the Notes represented
by the Global Debt Security. Ownership of beneficial interests in a Global Debt
Security will be limited to participants or persons that clear through or
maintain a custodial relationship with a participant. Ownership of beneficial
interests in a Global Debt Security will be shown on, and the transfer of that
ownership will be effected only through, DTC's or its nominee's records (with
respect to interests of participants) and on participant's records (with respect
to interests of persons other than participants). The laws of some states
require that certain purchasers of securities take physical delivery of such
securities in definitive form. These laws and their limitations may impair the
ability to transfer beneficial interests in a Global Debt Security.
Principal and interest payments on Notes registered in the name of DTC or
its nominee will be made to DTC or its nominee, as the case may be, as the
registered owner of the relevant Global Debt Security. None of the Company, the
Trustee, any Paying Agent or the Security Registrar for the Notes will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial interests in a Global Debt Security or
for maintaining, supervising or reviewing any records relating to such
beneficial interests.
The Company expects that DTC or its nominee, upon receipt of any payment of
principal or interest, will immediately credit each participants' accounts with
payments in amounts proportionate to their respective beneficial interests in
the principal amount of the relevant Global Debt Security as shown on its
records. The Company also expects that payments by participants to owners of
beneficial interests in a Global Debt Security held through such participants
will be governed by standing instructions and customary practices, as is now the
case with securities held for the accounts of customers in bearer form or
registered in "street name", and will be the responsibility of such
participants.
If DTC is at any time unwilling or unable to continue as depository with
respect to any Global Debt Security and the Company does not appoint a successor
depository within 90 days, the Company will issue Notes in definitive form in
exchange for the entire Global Debt Security. In addition, the Company may at
any time and in its sole discretion determine not to have the Notes represented
by a Global Debt Security and, in such event, will issue Notes in definitive
form in exchange for the entire Global Debt Security. In any such instance, an
owner of a beneficial interest in a Global Debt Security will be entitled to
physical delivery of Notes in definitive form represented by such Global Debt
Security equal in principal amount to such beneficial interest and to have such
Notes registered in its name. Notes issued in definitive form will be issued as
registered Notes in denominations of $1,000 and integral multiples thereof,
unless otherwise specified by the Company.
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UNDERWRITING
The Company and the underwriters for the offering (the "Underwriters")
named below have entered into an underwriting agreement and a pricing agreement
dated , 1999, with respect to the Notes. Subject to certain
conditions, the Company has agreed to sell to each of the Underwriters, and each
of the Underwriters has severally agreed to purchase, the principal amount of
Notes set forth in the following table:
<TABLE>
<CAPTION>
Principal Amount
Underwriters of Notes
------------ ----------------
<S> <C>
Goldman, Sachs & Co.........................................
Salomon Smith Barney Inc. ..................................
Merrill Lynch, Pierce, Fenner & Smith Incorporated..........
------------
Total............................................. $300,000,000
============
</TABLE>
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The Underwriters are committed to take and pay for all the Notes if any are
taken.
Notes sold by the Underwriters to the public will initially be offered at
the initial public offering price set forth on the cover page of this Prospectus
Supplement. Any Notes sold by the Underwriters to securities dealers may be sold
at a discount from the initial public offering price of up to % of the
principal amount of the Notes. Any such securities dealers may resell any Notes
purchased from the Underwriters to certain other brokers or dealers at a
discount from the initial public offering price of up to % of the principal
amount of the Notes. If all the Notes are not sold at the initial offering
price, the Underwriters may change the offering price and other selling terms.
The Notes are a new issue of securities with no established trading market.
The Company has been advised by the Underwriters that the Underwriters intend to
make a market in the Notes but are not obligated to do so and may discontinue
market making at any time without notice. No assurance can be given as to the
liquidity of the trading market for the Notes.
In connection with the offering, the Underwriters may purchase and sell the
Notes in the open market. These transactions may include short sales,
stabilizing transactions and purchases to cover positions created by short
sales. Short sales involve the sale by the Underwriters of a greater number of
Notes than they are required to purchase in the offering. Stabilizing
transactions consist of certain bids or purchases for the purpose of preventing
or retarding a decline in the market price of the Notes while the offering is in
progress.
The Underwriters also may impose a penalty bid. This occurs when a
particular Underwriter repays to the Underwriters a portion of the underwriting
discount received by it because the representatives have repurchased Notes sold
by or for the account of such Underwriter in stabilizing or short covering
transactions.
These activities by the Underwriters may stabilize, maintain or otherwise
affect the market price of the Notes. As a result, the price of the Notes may be
higher than the price that might otherwise prevail in the open market. If these
activities are commenced, they may be discontinued at any time. These
transactions may be effected in the over-the-counter market or otherwise.
The Company estimates that its share of the total expenses of the offering
of the Notes, excluding underwriting discounts and commissions, will be
approximately $442,000.
In the ordinary course of their respective businesses certain of the
Underwriters and their affiliates have engaged and may in the future engage in
various banking and financial services for and commercial transactions with the
Company and its affiliates.
The Company has agreed to indemnify the several Underwriters against
certain liabilities, including liabilities under the Securities Act of 1933.
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LEGAL MATTERS
The validity of the Notes offered in this Prospectus Supplement, as well as
certain other legal matters, will be passed upon for the Company by Diana M.
Daniels, Vice President, General Counsel and Secretary of the Company. As of the
date of this Prospectus Supplement, Diana M. Daniels owns 2,847 shares of the
Company Class B Common Stock and options to acquire 4,000 shares of the Company
Class B Common Stock. Certain legal matters will be passed upon for the
Underwriters by Cravath, Swaine & Moore, New York, New York. Such firm from time
to time acts as counsel for the Company and its subsidiaries.
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<PAGE> 20
PROSPECTUS
THE WASHINGTON POST COMPANY
1150 15TH STREET, N.W. WASHINGTON, D.C. 20071
(202) 334-6000
$400,000,000
DEBT SECURITIES
The Washington Post Company may offer from time to time its unsecured debt
securities consisting of notes, debentures or other evidences of indebtedness.
Up to $400,000,000 principal amount, or the equivalent thereof in one or more
foreign currencies or currency units, may be issued.
The terms of each series of debt securities will be set forth in a
Prospectus Supplement. You should read this Prospectus and the Prospectus
Supplement carefully.
------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THE SECURITIES TO BE ISSUED UNDER THIS
PROSPECTUS OR DETERMINED IF THIS PROSPECTUS IS ACCURATE OR ADEQUATE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
The Washington Post Company may sell debt securities directly, through
agents or through underwriters or dealers.
The date of this Prospectus is January 12, 1999
<PAGE> 21
ABOUT THIS PROSPECTUS
This Prospectus is part of a Registration Statement that we filed with the
Securities and Exchange Commission (the "Commission") utilizing a "shelf"
registration process. Under this shelf process, we may, from time to time over
approximately the next two years, sell debt securities described in this
Prospectus in one or more offerings up to a total dollar amount of $400,000,000
or the equivalent of this amount in foreign currencies or foreign currency
units.
This Prospectus provides you with a general description of the securities
we may offer. Each time we sell securities, we will provide a Prospectus
Supplement that will contain specific information about the terms of that
offering. The Prospectus Supplement may also add, update or change information
contained in this Prospectus. You should read both this Prospectus and any
Prospectus Supplement together with additional information described under the
heading "Where You Can Find More Information" beginning on page 2 of this
Prospectus.
You should rely only on the information provided in this Prospectus and in
any Prospectus Supplement, including the information incorporated by reference.
We have not authorized anyone to provide you with different information. We are
not offering the securities in any state where the offer is not permitted. You
should not assume that the information in this Prospectus, or any supplement to
this Prospectus, is accurate at any date other than the date indicated on the
cover page of these documents.
WHERE YOU CAN FIND MORE INFORMATION
The Company has filed with the Commission a Registration Statement under
the Securities Act that registers the distribution of the debt securities (the
"Registration Statement"). The Registration Statement, including the attached
exhibits and schedules, contains additional relevant information about the
Company and the Company's securities. The rules and regulations of the
Commission allow us to omit certain information included in the Registration
Statement from this Prospectus.
In addition, we file reports, proxy statements and other information with
the Commission under the Exchange Act. You may read and copy this information at
the following locations of the SEC.
<TABLE>
<S> <C> <C>
Public Reference Room New York Regional Office Chicago Regional Office
450 Fifth Street, N.W. 7 World Trade Center Citicorp Center
Room 1024 Suite 1300 500 West Madison Street
Washington, D.C. 20549 New York, New York 10048 Suite 1400
Chicago, Illinois 60661-2511
</TABLE>
You may also obtain copies of this information by mail from the Public
Reference Section of the Commission, 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549, at prescribed rates. You may obtain information on the
operation of the Public Reference Room by calling the Commission at
1-800-SEC-0330.
The Commission also maintains an Internet world wide website that contains
reports, proxy statements and other information about issuers, like the Company,
who file electronically with the Commission. The address of that site is
http://www.sec.gov.
You can also inspect reports, proxy statements and other information about
the Company at the offices of the New York Stock Exchange, 20 Broad Street, New
York, New York.
The Commission allows us to "incorporate by reference" information into
this Prospectus. This means that we can disclose important information to you by
referring you to another document filed separately with the Commission. The
information incorporated by reference is considered to be a part of this
Prospectus, except for any information that is superseded by information that is
included directly in this document.
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<PAGE> 22
This Prospectus incorporates by reference the documents listed below that
the Company has previously filed with the Commission. They contain important
information about us and our predecessors.
<TABLE>
<CAPTION>
COMPANY SEC FILINGS PERIOD
------------------- ------
<S> <C>
Annual Report on Form 10-K........ Year ended December 28, 1997
Quarterly Reports on Form 10-Q.... Quarters ended March 29, 1998, June 28, 1998
and September 27, 1998
Current Report on Form 8-K........ Dated March 20, 1998
</TABLE>
The Company incorporates by reference additional documents that it may file
with the Commission between the date of this Prospectus and the termination of
the offering of the debt securities. These documents include periodic reports,
such as Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current
Reports on Form 8-K, as well as proxy statements.
You can obtain any of the documents incorporated by reference in this
document through us, or from the Commission through the Commission's web site at
the address described above. Documents incorporated by reference are available
from us without charge, excluding any exhibits to those documents unless the
exhibit is specifically incorporated by reference as an exhibit in this
Prospectus. You can obtain documents incorporated by reference in this
Prospectus by requesting them in writing or by telephone from us at the
following addresses:
Investor Relations
The Washington Post Company
1150 15th Street N.W.
Washington, D.C. 20071
(202) 334-6000
If you request any incorporated documents from us, we will mail them to you
by first class mail, or another equally prompt means, within one business day
after we receive your request.
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<PAGE> 23
THE COMPANY
The Washington Post Company (the "Company") is a diversified media
organization whose principal operations consist of newspaper publishing
(primarily The Washington Post newspaper), television broadcasting (through the
ownership and operation of six network-affiliated television stations), the
ownership and operation of cable television systems, and magazine publishing
(primarily Newsweek magazine). The Company also produces news and other
information products for electronic distribution and provides test preparation
and related services.
The Company was incorporated in 1947 under the laws of the State of
Delaware. Its executive offices are located at 1150 15th Street, N.W.,
Washington, D.C. 20071, and its telephone number is (202) 334-6000.
USE OF PROCEEDS
The Company intends to use the net proceeds from the sale of the debt
securities offered by this Prospectus (the "Debt Securities") for general
corporate purposes. These may include:
- capital expenditures
- possible acquisitions
- repurchase of the Company's stock
- payment of other debt
- other purposes as may be stated in the Prospectus Supplement
The Company expects to engage in additional financings on a recurring
basis. The character and amount of financings will be determined as the need
arises.
RATIO OF EARNINGS TO FIXED CHARGES
The ratio of earnings to fixed charges has been computed by dividing
"earnings available for fixed charges" by "fixed charges." For purposes of
computing this ratio, "earnings available for fixed charges" principally
consists of (i) income before income taxes, the cumulative effect of changes in
accounting principles, and equity in earnings of unconsolidated subsidiaries,
plus (ii) "fixed charges" (excluding capitalized interest). "Fixed charges"
principally consists of interest expense and the portion of rental expense that
is representative of the interest factor (deemed by the Company to be
one-third).
<TABLE>
<CAPTION>
THIRTY-NINE WEEKS ENDED FISCAL YEAR ENDED
----------------------------- --------------------------------------------------------------------
SEPTEMBER 27, SEPTEMBER 28, DECEMBER 28, DECEMBER 29, DECEMBER 31, JANUARY 1, JANUARY 2,
1998 1997 1997 1996 1995 1995 1994
------------- ------------- ------------ ------------ ------------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed
charges................. 29.9(a) 33.1(b) 37.2(c) 32.3 22.9 22.5 22.7(d)
</TABLE>
- ---------------
(a) For the thirty-nine weeks ended September 27, 1998, the Company's pre-tax
income included non-recurring gains of approximately $308.5 million arising
from the disposition of the Company's investment interests in Cowles Media
Company and Junglee Corporation and the sale of the assets of 14 small cable
television systems. Excluding these gains, the ratio of earnings to fixed
charges would have been 14.0.
(b) For the thirty-nine weeks ended September 28, 1997, pre-tax income included
a non-recurring gain of approximately $24.8 million resulting from the sale
of the assets of the Company's PASS Sports subsidiary. Excluding this gain,
the ratio would have been 30.5.
(c) For the fiscal year ended December 28, 1997, pre-tax income included
non-recurring gains of approximately $71.1 million resulting from the sale
of the assets of the Company's PASS Sports subsidiary and the Company's
investment interests in Bear Island Paper Company, L.P. and Bear Island
Timberlands Company, L.P. Excluding these gains, the ratio would have been
31.5.
(d) For the fiscal year ended January 2, 1994, pre-tax income included a
non-recurring gain of approximately $20.5 million arising from the sale of
the Company's cable franchises in the United Kingdom. Excluding this gain,
the ratio would have been 21.0.
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<PAGE> 24
DESCRIPTION OF THE DEBT SECURITIES
The Debt Securities will be issued under an Indenture (the "Indenture")
between the Company and The First National Bank of Chicago, as Trustee (the
"Trustee"). The Indenture was filed as an exhibit to the Registration Statement
and will be dated on or prior to the date any Debt Securities are issued
thereunder. The Debt Securities may be issued from time to time in one or more
series. The particular terms of each series will be described in a Prospectus
Supplement. The following statements are subject to the detailed provisions of
the Indenture. The sections of the Indenture specifically referred to in the
following discussion are incorporated by reference. Capitalized terms that are
not defined in the following discussion have the meanings assigned to them in
the Indenture.
GENERAL
Debt Securities may be issued from time to time under the Indenture in an
unlimited aggregate principal amount and an unlimited number of series.
The Debt Securities are unsecured and will have the same rank as all other
unsecured and nonsubordinated debt of the Company.
The Prospectus Supplement relating to the series of Debt Securities which
it offers describes (Sections 202 and 301):
(1) the title of the Debt Securities of such series;
(2) any limit upon the aggregate principal amount of such Debt Securities;
(3) the person to whom the interest on a Debt Security of such series will
be payable if not the person in whose name that Debt Security is
registered on the regular record date;
(4) the date or dates on which such Debt Securities will mature or the
method of determination of such date or dates;
(5) the rate or rates, or the method of determination thereof, at which
such Debt Securities will bear interest, if any, the date or dates
from which such interest will accrue, the date or dates on which such
interest will be payable and, for Registered Debt Securities (as
defined below), the Regular Record Dates;
(6) the place or places where the principal of, and premium and interest,
if any, on, such Debt Securities will be payable;
(7) the periods, prices and terms and conditions upon which any such Debt
Security may be redeemed, in whole or in part, at the option of the
Company;
(8) any terms for redemption or repurchase pursuant to any sinking fund or
analogous provision or at the option of a Holder;
(9) any terms for conversion of the Debt Securities into other securities
of the Company or any other corporation at the option of a Holder;
(10) any terms for the attachment to such Debt Securities of warrants,
options or other rights to purchase or sell stock or other securities
of the Company;
(11) if other than the principal amount thereof, the portion of the
principal amount of such Debt Securities that will be payable upon
acceleration of maturity (Debt Securities subject to such provisions
being referred to as "Original Issue Discount Securities");
(12) any deletions or modifications of, or additions to, the Events of
Default or covenants of the Company under the Indenture with respect
to such Debt Securities (including whether the covenants described
below under "Certain Covenants of the Company" will not apply to such
Debt Securities);
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<PAGE> 25
(13) if other than U.S. dollars, the currency, currencies or currency unit
or units in which such Debt Securities will be denominated and in
which the principal of, and premium and interest, if any, on, such
Securities will be payable;
(14) whether, and the terms and conditions on which, the Company or a
Holder may elect that, or the other circumstances under which, payment
of principal of, or premium or interest, if any, on, such Debt
Securities is to be made in a currency or currencies or currency unit
or units other than that in which such Debt Securities are
denominated;
(15) any matter of determining the amount of principal of, or premium or
interest, if any, on, any such Debt Securities to be determined with
reference to an index based on a currency or currency unit or units
other than that in which such Debt Securities are stated to be payable
or an index based on any other method;
(16) whether such Debt Securities will be issued in fully registered form
without coupons ("Registered Debt Securities") or in bearer form with
or without coupons ("Bearer Debt Securities"), or any combination
thereof, whether such Debt Securities will be issued in the form of
one or more global securities (each a "Global Debt Security") and
whether such Debt Securities are to be issuable in temporary global
form or definitive global form;
(17) if such Debt Securities are to be issued upon the exercise of
warrants, the time, manner and place for such Debt Securities to be
authenticated and delivered;
(18) whether and under what circumstances the Company will pay additional
amounts to any holder of such Debt Securities who is not a United
States person (as defined below under "Temporary Global Securities")
in respect of any tax, assessment or governmental charge withheld or
deducted and, if so, whether and on what terms the Company will have
the option to redeem such Debt Securities rather than pay any
additional amounts; and
(19) any other terms of any of such Debt Securities not inconsistent with
the Indenture.
Most Debt Securities will be issued as Registered Debt Securities.
Registered Debt Securities denominated in U.S. dollars will be issued in
denominations of $1,000 or an integral multiple of $1,000. Bearer Debt
Securities denominated in U.S. dollars will be issued in denominations of
$5,000. Debt Securities may bear legends required by United States Federal tax
law and regulations. (Section 401)
If any series of the Debt Securities are sold for any foreign currency or
currency unit or if the principal of, or premium or interest on, any series of
the Debt Securities is payable in any foreign currency or currency unit, the
restrictions, elections, tax consequences, specific terms and other information
with respect to such series of the Debt Securities and such foreign currency or
currency unit will be set forth in the Prospectus Supplement relating to that
series.
CERTAIN COVENANTS OF THE COMPANY
Limitation on Merger, Consolidation and Certain Sales of Assets. The
Company will covenant that it will not merge into or consolidate with any other
corporation, or convey or transfer all or substantially all its properties and
assets as an entirety to, any person unless:
(a) the successor is a U.S. corporation, partnership, limited liability
company, trust or other entity,
(b) the successor assumes on the same terms and conditions all the
obligations under the Debt Securities and the Indenture, and
(c) immediately after giving effect to the transaction, there is no default
under the Indenture. (Section 901)
Upon such merger, consolidation, conveyance or transfer, the successor will
succeed to, and will be substituted in lieu of, the Company. (Section 902)
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<PAGE> 26
Event Risk. Except for the limitations on Secured Indebtedness and Sale
and Leaseback Transactions described below, the Indenture and Debt Securities do
not contain any covenants or other provisions designed to afford holders of the
Debt Securities protections in the event of a highly leveraged transaction
involving the Company.
Limitation on Secured Indebtedness. The Indenture provides that the
Company will not, and will not permit any Restricted Subsidiary to, create,
assume, incur or guarantee any Secured Indebtedness without securing the Debt
Securities equally and ratably with, or prior to, such Secured Indebtedness
unless immediately thereafter the aggregate amount of all outstanding Secured
Indebtedness (exclusive of Secured Indebtedness if the Debt Securities are
secured equally and ratably with, or prior to, such Secured Indebtedness) and
the discounted present value determined as set forth in the Indenture of all net
rentals payable under existing leases entered into in connection with Sale and
Leaseback Transactions (as defined below) entered into after the date of the
Indenture (except any such leases entered into by a Restricted Subsidiary before
the time it became a Restricted Subsidiary) would not exceed 15% of Consolidated
Net Worth. (Section 1104)
Limitation on Sale and Leaseback Transactions. The Indenture provides that
the Company will not, and will not permit any Restricted Subsidiary to, enter
any lease longer than three years (excluding leases of newly acquired, improved
or constructed property) covering any Principal Property of the Company or any
Restricted Subsidiary that is sold to any other person in connection with such
lease (a "Sale and Leaseback Transaction"), unless either:
(a) immediately thereafter, the sum of:
(i) the discounted present value determined as set forth in the
Indenture of all net rentals payable under all such existing leases entered
into after the date of the Indenture (except any such leases entered into
by a Restricted Subsidiary before the time it became a Restricted
Subsidiary), and
(ii) the aggregate amount of all outstanding Secured Indebtedness
(exclusive of Secured Indebtedness if the Debt Securities are secured
equally and ratably with, or prior to, such Secured Indebtedness) does not
exceed 15% of Consolidated Net Worth; or
(b) an amount equal to the greater of:
(i) the net proceeds to the Company or a Restricted Subsidiary from
such sale, and
(ii) the discounted present value determined as set forth in the
Indenture of all net rentals payable thereunder
is applied within 180 days to the retirement of long-term debt of the
Company or a Restricted Subsidiary (other than such debt which is
subordinated to the Debt Securities or which is owing to the Company or a
Restricted Subsidiary). (Section 1105)
Certain Definitions Used in The Covenants. The Indenture defines some of
the terms used in the Covenants as follows:
"Secured Indebtedness" will mean indebtedness of the Company or any
Restricted Subsidiary for borrowed money secured by any lien upon (or in
respect of any conditional sale or other title retention agreement
covering) any Principal Property or any stock or indebtedness of a
Restricted Subsidiary, but excluding from such definition all
indebtedness: (i) outstanding on the date of the Indenture and secured
by liens (or arising from conditional sale or other title retention
agreements) existing on that date; (ii) incurred after the date of the
Indenture to finance the acquisition, improvement or construction of
property and either secured by purchase money mortgages or liens placed
on such property within 180 days of acquisition, improvement or
construction or arising from conditional sale or other title retention
agreements; (iii) secured by liens on Principal Property or on the stock
or indebtedness of Restricted Subsidiaries, and, in either case,
existing at the time of the acquisition thereof or incurred to finance
such acquisition; (iv) owing to the Company or any Restricted
Subsidiary; (v) secured by liens (or conditional sale or other title
retention agreements)
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<PAGE> 27
existing at the time a corporation became or becomes a Restricted
Subsidiary in the case of a corporation which shall have become or
becomes a Restricted Subsidiary after the date of the Indenture; (vi)
arising from any Sale and Leaseback Transaction; (vii) incurred to
finance the acquisition or construction of property secured by liens in
favor of any country or any political subdivision thereof; and (viii)
constituting any replacement, extension or renewal of any such
indebtedness (to the extent such indebtedness is not increased).
"Principal Property" will mean all land, land improvements, buildings,
machinery and equipment constituting a manufacturing facility, a
printing facility, a warehouse facility, a distribution facility, a
television broadcast facility, a cable television facility or an office
facility (including any portion thereof) which facility is owned by or
leased to the Company or a Restricted Subsidiary, is located within the
United States and has an acquisition cost plus capitalized improvements
in excess of 1% of Consolidated Net Worth as of the date of such
determination, other than any such facility financed through the
issuance of tax-exempt governmental obligations, or which the Board of
Directors determines is not of material importance to the Company and
its Restricted Subsidiaries taken as a whole, or in which the interest
of the Company and all its Subsidiaries does not exceed 50%.
"Consolidated Net Worth" will mean, at the date of any determination,
the consolidated stockholders' or owners' equity of the Company and its
subsidiaries, determined on a consolidated basis in accordance with
generally accepted accounting principles consistently applied.
"Restricted Subsidiary" will mean any Subsidiary of the Company which
has substantially all its property in the United States, which transacts
substantially all its business in the United States, and which owns or
is a lessee of any Principal Property. Subsidiaries organized or
acquired after the date of the Indenture for the purpose of acquiring
the stock, business or assets of any person other than the Company or
any Restricted Subsidiary and which (after giving effect to such
acquisition) have consolidated total assets of not more that 10% of the
consolidated total assets of the Company and its subsidiaries are
excluded from the definition of Restricted Subsidiary.
"Subsidiary" will mean any corporation a majority of the voting shares
of which are at the time owned or controlled, directly or indirectly, by
the Company or by one or more Subsidiaries, or by the Company and one or
more Subsidiaries.
The Indenture provides that the Company may omit to comply with the
restrictive covenants described above under "Limitation on Secured Indebtedness"
and "Limitation on Sale and Leaseback Transactions" if the holders of not less
than a majority in principal amount of all series of outstanding Debt Securities
affected thereby (acting as one class) waive compliance with such restrictive
covenants. (Section 1107)
EXCHANGE, REGISTRATION AND TRANSFER
Registered Debt Securities of any series will be exchangeable for other
Registered Debt Securities of the same series and of a like aggregate principal
amount and tenor of different authorized denominations. If Debt Securities of
any series are issuable as both Registered Debt Securities and Bearer Debt
Securities, the Bearer Debt Securities of such series (with all unmatured
coupons, except as provided below, and all matured coupons in default) will be
exchangeable for Registered Debt Securities of the same series of any authorized
denominations and of a like aggregate principal amount and tenor. If a Bearer
Debt Security with coupons appertaining thereto is surrendered in exchange for a
Registered Debt Security after a Regular Record Date or Special Record Date and
before the relevant date for payment of interest, such Bearer Debt Security
shall be surrendered without the coupon relating to such date for payment of
interest and interest will not be payable on such date in respect of the
Registered Debt Security issued in exchange for such Bearer Debt Security, but
will be payable only to the holder of such coupon when due in accordance with
the terms thereof and of the Indenture. Bearer Debt Securities will not be
issued in exchange for Registered Debt Securities (unless otherwise specified in
the applicable Prospectus Supplement and permitted by applicable rules and
regulations). No service charge will be made for any transfer or exchange of the
Debt Securities, but the Company
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<PAGE> 28
may require payment of a sum sufficient to cover any tax or other governmental
charge in connection therewith. (Section 404)
Debt Securities may be presented for exchange as provided above, and
Registered Debt Securities (other than U.S. Book-Entry Debt Securities (as
defined below under "Definitive Global Securities -- U.S. Book-Entry
Securities")) may be presented for registration of transfer (with the form of
transfer endorsed thereon duly executed), at the office of the Security
Registrar or at the office of any additional transfer agent designated by the
Company for such purpose with respect to any series of Debt Securities and
referred to in the applicable Prospectus Supplement. (Sections 404 and 1102) The
First National Bank of Chicago, currently located at 153 West 51st Street, New
York, New York 10019, will be the initial Security Registrar under the
Indenture. (Section 404) The Company may at any time designate, or rescind the
designation of, the Security Registrar or any additional transfer agent or
approve a change in the location through which the Security Registrar or any
such transfer agent acts, except that, if Debt Securities of a series are
issuable solely as Registered Debt Securities, the Company will be required to
maintain a transfer agent in each Place of Payment for such series and, if Debt
Securities of a series are issuable as both Registered Debt Securities and
Bearer Debt Securities or solely as Bearer Debt Securities, the Company will be
required to maintain (in addition to the Security Registrar) a transfer agent in
a Place of Payment for such series located outside of the United States. The
Company may at any time designate additional transfer agents with respect to any
series of Debt Securities. (Section 1102)
In the event of any redemption in part of any series of Debt Securities,
the Company will not be required to: (i) issue, register the transfer of, or
exchange, Debt Securities of any series during a period beginning at the opening
of business 15 Business Days before any selection of Debt Securities of that
series to be redeemed and ending at the close of business on (a) if Debt
Securities of the series are issuable only as Registered Debt Securities, the
day of mailing of the relevant notice of redemption and (b) if Debt Securities
of the series are issuable as Bearer Debt Securities, the day of the first
publication of the relevant notice of redemption or, if Debt Securities of the
series are also issuable as Registered Debt Securities and there is no
publication, the day of mailing of the relevant notice of redemption; (ii)
register the transfer of, or exchange, any Registered Debt Security selected for
redemption, in whole or in part, except the unredeemed portion of any Registered
Debt Security being redeemed in part; or (iii) exchange any Bearer Debt Security
selected for redemption, except to exchange such Bearer Debt Security for a
Registered Debt Security of that series and like tenor which is simultaneously
surrendered for redemption. (Section 404)
For a discussion of restrictions on the exchange, registration and transfer
of Global Debt Securities, see "Global Securities" below.
PAYMENT AND PAYING AGENTS
Payment of principal of, and premium and interest, if any, on, Registered
Debt Securities will be made in the designated currency or currency unit at the
office of such Paying Agent or Paying Agents as the Company may designate from
time to time. At the option of the Company, payment of any interest on
Registered Debt Securities may be made by check mailed to the address of the
person entitled thereto as such address shall appear in the Security Register.
Payment of any installment of interest on Registered Debt Securities will be
made to the person in whose name such Registered Debt Security is registered at
the close of business on the Regular Record Date for such interest. (Sections
406 and 410.)
Payment of principal of, and premium and interest, if any, on, Bearer Debt
Securities will be made in the designated currency unit at the offices of such
Paying Agents outside the United States as the Company may designate from time
to time. On the applicable payment date therefor, payments of principal of, and
premium, if any, on, Bearer Debt Securities will be made against surrender of
such Debt Securities, and payment of interest on Bearer Debt Securities with
coupons appertaining thereto on any Interest Payment Date will be made only
against surrender of the coupon relating to such Interest Payment Date.
(Sections 410 and 1102) No payment with respect to any Bearer Debt Security will
be made at any office or agency of the Company in the United States or by check
mailed to any address in the United States or by transfer to any account
maintained with a bank located in the United States. Notwithstanding the
foregoing, payments of principal of,
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<PAGE> 29
and premium and interest, if any, on, Bearer Debt Securities denominated and
payable in U.S. dollars will be made at the office of the Company's Paying Agent
in the Borough of Manhattan, The City of New York, if (but only if) payment of
the full amount thereof in U.S. dollars at all offices or agencies outside the
United States is illegal or effectively precluded by exchange controls or other
similar restrictions. (Section 1102)
The First National Bank of Chicago will be designated as the Company's
Paying Agent for payments with respect to Debt Securities that are issuable
solely as Registered Debt Securities and as the Company's Paying Agent in the
Borough of Manhattan, The City of New York for payments with respect to Debt
Securities (subject to the limitations described above in the case of Bearer
Debt Securities) that are issuable solely as Bearer Debt Securities or as both
Registered Debt Securities and Bearer Debt Securities. Any Paying Agents outside
the United States and any other Paying Agents in the United States initially
designated by the Company for the Debt Securities of a series will be named in
the applicable Prospectus Supplement. The Company may at any time designate
additional Paying Agents or rescind the designation of any Paying Agent or
approve a change in the office through which any Paying Agent acts, except that,
if Debt Securities of a series are issuable solely as Registered Debt
Securities, the Company will be required to maintain a Paying Agent in each
Place of Payment for such series and, if Debt Securities of a series are
issuable as both Registered Debt Securities or Bearer Debt Securities or solely
as Bearer Debt Securities, the Company will be required to maintain (i) a Paying
Agent in the Borough of Manhattan, The City of New York for payments with
respect to any Registered Debt Securities of the series (and for payments with
respect to Bearer Debt Securities of the series in the circumstances described
above, but not otherwise), and (ii) a Paying Agent in a Place of Payment located
outside the United States where Debt Securities of such series and any coupons
appertaining thereto may be presented and surrendered for payment; provided that
if the Debt Securities of such series are listed on any stock exchange located
outside the United States and such stock exchange shall so require, the Company
will maintain a Paying Agent in any required city located outside the United
States for the Debt Securities of such series. (Section 1102)
All moneys deposited with the Trustee or a Paying Agent, or then held by
the Company, in trust for the payment of principal of, and premium and interest,
if any, on, any Debt Security or coupon that remains unclaimed at the end of two
years after such principal, premium or interest shall have become due and
payable will be repaid to the Company, or, if then held by the Company,
discharged from such trust, and the holder of such Debt Security or coupon will
thereafter look only to the Company for payment thereof. (Section 1103)
GLOBAL SECURITIES
The Debt Securities of a series may be issued in whole or in part as one or
more Global Debt Securities in either registered or bearer form and in either
temporary or definitive form. The Global Debt Security or Securities of a series
will be deposited with, or on behalf of, a depositary located in the United
States (a "U.S. Depositary") or a common depositary located outside the United
States (a "Common Depositary") identified in the Prospectus Supplement relating
to such series. All temporary or definitive Global Debt Securities in bearer
form will be deposited with a Common Depositary.
The specific terms of the depositary arrangement with respect to any Debt
Securities of a series issued in global form will be described in the Prospectus
Supplement relating to such series. For purposes other than making payments on a
definitive Global Debt Security, the Company may treat a person having a
beneficial interest in such definitive Global Debt Security as the holder of
such principal amount of Outstanding Debt Securities represented by such
definitive Global Debt Security as shall be specified in a written statement of
the holder of such definitive Global Debt Security, or, in the case of a
definitive Global Debt Security in bearer form, of Euro-clear or CEDEL (as
defined below), which is delivered to the Trustee by such person. (Section 411)
None of the Company, the Trustee, any Paying Agent or the Security Registrar
will have any responsibility or liability for any aspect of the records relating
to or payments made on account of beneficial ownership interests in a Global
Debt Security or for maintaining, supervising or reviewing any records relating
to such beneficial ownership interests. (Section 411) The Company anticipates
that the following provisions will apply to all depositary arrangements with a
U.S. Depositary or Common Depositary.
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TEMPORARY GLOBAL SECURITIES
All or any portion of a series of Bearer Debt Securities initially may be
represented by one or more temporary Global Debt Securities, without interest
coupons. Temporary Global Securities will be deposited with a Common Depositary
in London for Morgan Guaranty Trust Company of New York, Brussels Office, as
operator of the Euro-clear System ("Euro-clear"), and CEDEL S.A. ("CEDEL") for
credit to the respective accounts of the beneficial owners of such Debt
Securities (or to such other accounts as they may direct). On and after the
exchange date determined as provided in any such temporary Global Debt Security
and described in the applicable Prospectus Supplement, each such temporary
Global Debt Security will be exchangeable for definitive Debt Securities in
bearer form, registered form, definitive global bearer form or any combination
thereof, as specified in the applicable Prospectus Supplement. No Bearer Debt
Security (including a Debt Security in definitive global bearer form) delivered
in exchange for a portion of a temporary Global Debt Security will be mailed or
otherwise delivered to any location in the United States in connection with such
exchange. (Sections 402 and 403)
Interest on any portion of a temporary Global Debt Security payable in
respect of an Interest Payment Date occurring before definitive Debt Securities
are issued will be paid to each of Euro-clear and CEDEL with respect to the
portion of the temporary Global Debt Security held for its account. Prior to
making such interest payment, the Trustee must receive a signed certificate from
Euro-Clear or CEDEL in the form required by the Indenture dated no earlier than
such Interest Payment Date. The certificate must be based on statements provided
to Euro-Clear or CEDEL by its account holders who are beneficial owners of
interests in such temporary Global Debt Security to the effect that such portion
is not beneficially owned by a United States person, and has not been acquired
by or on behalf of a United States person or for offer to resell or for resale
to a United States person or any person inside the United States or, if a
beneficial interest in such portion has been acquired by a United States person,
(i) that such person is a financial institution, as defined in applicable
regulations promulgated under the Internal Revenue Code of 1986, as amended (the
"Code"), purchasing for its own account or has acquired such Debt Security
through a financial institution and (ii) that such Debt Securities are held by a
financial institution that has agreed in writing to comply with the requirements
of Section 165(j)(3)(A), (B) or (C) of the Code and the regulations thereunder
and that it did not purchase for offer to resell or for resale inside the United
States. Each of Euro-clear and CEDEL will in such circumstances credit the
interest received by it in respect of such temporary Global Debt Security to the
accounts of the beneficial owners thereof (or to such other accounts as they may
direct). (Section 403)
As used herein, "United States person" means a citizen or resident of the
United States, a corporation, partnership or other entity created or organized
in or under the laws of the United States or an estate or trust the income of
which is subject to United States Federal income taxation regardless of its
source, and "United States" means the United States of America (including the
States and the District of Columbia), its territories, its possessions and other
areas subject to its jurisdiction.
DEFINITIVE GLOBAL SECURITIES
Bearer Securities. If any Debt Securities of a series are issuable in
definitive global bearer form, the applicable Prospectus Supplement will
describe the circumstances, if any, under which beneficial owners of interests
in any such definitive global Bearer Debt Security may exchange such interests
for Debt Securities of such series and of like tenor and principal amount in any
authorized form and denomination. No Bearer Debt Security delivered in exchange
for a portion of a definitive Global Debt Security will be mailed or otherwise
delivered to any location in the United States in connection with such exchange.
(Section 404) Principal of, and premium and interest, if any, on, a definitive
global Bearer Debt Security will be payable in the manner described in the
applicable Prospectus Supplement.
U.S. Book-Entry Securities. If Debt Securities of a series are to be
represented by a definitive global Registered Debt Security to be deposited with
or on behalf of a U.S. Depositary, such Debt Securities ("U.S. Book-Entry Debt
Securities") will be represented by a definitive Global Debt Security registered
in the name of the U.S. Depositary or its nominee. Upon the issuance of a
definitive Global Debt Security registered in the name of the U.S. Depositary,
the U.S. Depositary will credit, on its book-entry registration
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<PAGE> 31
and transfer system, the respective principal amounts of the U.S. Book-Entry
Debt Securities represented by such Global Debt Security to the accounts of
institutions that have accounts with such depositary or its nominee
("participants"). The accounts to be credited shall be designated by the
underwriters or agents for the sale of such U.S. Book-Entry Debt Securities or
by the Company, if such Debt Securities are offered and sold directly by the
Company. Ownership of U.S. Book-Entry Debt Securities will be limited to
participants or persons that may hold interests through participants. Ownership
of U.S. Book-Entry Debt Securities will be shown on, and the transfer of that
ownership will be effected only through, records maintained by the U.S.
Depositary or its nominee for the applicable definitive Global Security or by
participants or persons that hold through participants. So long as the U.S.
Depositary, or its nominee, is the registered owner of such global Debt
Security, such depositary or such nominee, as the case may be, will be
considered the sole owner or holder of the U.S. Book-Entry Debt Securities
represented by such Global Debt Security for all purposes under the Indenture.
Payment of principal of, and premium and interest, if any, on, U.S. Book-Entry
Debt Securities will be made to the U.S. Depositary or its nominee, as the case
may be, as the registered owner or the holder of the Global Debt Security
representing such U.S. Book-Entry Debt Securities. Owners of U.S. Book-Entry
Debt Securities will not be entitled to have such Debt Securities registered in
their names in the Security Register, will not receive or be entitled to receive
physical delivery of such Debt Securities in definitive form and will not be
considered the owners or holders thereof under the Indenture. The laws of some
jurisdictions require that certain purchasers of securities take physical
delivery of such securities in definitive form. Such limits and such laws impair
the ability to purchase or transfer U.S. Book-Entry Debt Securities.
The Company expects that the U.S. Depositary for U.S. Book-Entry Debt
Securities of a series, upon receipt of any payment of principal of, or premium
or interest, if any, on, the related definitive Global Debt Security, will
immediately credit participants' accounts with payments in amounts proportionate
to their respective beneficial interests in the principal amount of such Global
Debt Security as shown on the records of such Depositary. The Company also
expects that payments by participants to owners of beneficial interests in such
Global Debt Security held through such participants will be governed by standing
instructions and customary practices, as is now the case with securities held
for the accounts of customers in bearer form or registered in "street name", and
will be the responsibility of such participants.
SATISFACTION AND DISCHARGE; DEFEASANCE
At the request of the Company, the Indenture will cease to be in effect as
to the Debt Securities of any series (except for certain obligations to register
the transfer or exchange of such Debt Securities and related coupons, if any,
and hold moneys for payment of such Debt Securities and coupons in trust) when
either (a) all such Debt Securities and coupons have been delivered to the
Trustee for cancellation or (b) all such Debt Securities and coupons have become
due and payable or will become due and payable at their stated maturity within
one year, or are to be called for redemption within one year, and the Company
has deposited with the trustee, in trust money, in the currency, currencies or
currency unit or units in which such Debt Securities are payable, in an amount
sufficient to pay all the principal of, and premium and interest, if any, on,
such Debt Securities on the dates such payments are due in accordance with the
terms of such Debt Securities. (Section 501)
The Company may defease any series of Debt Securities and, at its option,
either (a) be Discharged after 90 days from any and all obligations in respect
of such series of Debt Securities (except for certain obligations to register
the transfer or exchange of Debt Securities and related coupons, replace stolen,
lost or mutilated Debt Securities and coupons, maintain paying agencies and hold
moneys for payment in trust) or (b) eliminate the requirement to comply with
certain restrictive covenants of the Indenture in respect of such series
(including those described under "Certain Covenants of the Company"). In order
to exercise either defeasance option, the Company must deposit with the trustee
in trust, money, or, in the case of Debt Securities and coupons denominated in
U.S. dollars, U.S. Government Obligations or, in the case of Debt Securities and
coupons denominated in a foreign currency, Foreign Government Securities, which
through the payment of interest thereon and principal thereof in accordance with
their terms will provide money, in an amount sufficient to pay in the currency,
currencies or currency unit or units in which such Debt Securities are payable
all the principal (including any mandatory sinking fund payments) of, and
interest on, such series on
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the dates such payments are due in accordance with the terms of such series.
Among the conditions to the Company's exercising any such option, the Company is
required to deliver to the Trustee an opinion of counsel to the effect that the
deposit and related defeasance would not cause the holders of such series to
recognize income, gain or loss for United States Federal income tax purposes and
that the holders of such series will be subject to United States Federal income
tax in the same amounts, in the same manner and at the same times as would have
been the case if such option had not been exercised. (Section 503)
EVENTS OF DEFAULT, NOTICE AND WAIVER
The Indenture provides that, if an Event of Default specified therein with
respect to any series of Debt Securities shall have happened and be continuing,
either the Trustee or the holders of 25% in principal amount of the outstanding
Debt Securities of such series (in the case of certain events of bankruptcy,
insolvency and reorganization, voting as one class with all other outstanding
Debt Securities) may declare the principal of all the Debt Securities of such
series, together with accrued interest thereon, if any, to be immediately due
and payable by notice in writing to the Company (and to the Trustee if given by
the holders). (Section 602)
Events of Default in respect of any series are defined in the Indenture as
being:
- default for 30 days in payment of any interest installment when due;
- default in payment of principal of, or premium, if any, on, Debt
Securities of such series when due (other than any sinking fund
payments) at their stated maturity, by declaration, when called for
redemption or otherwise;
- default for 30 days in the making of any sinking fund payment when
due;
- default for 90 days after notice to the Company by the Trustee or by
holders of 25% in principal amount of the outstanding Debt
Securities of such series in the performance of any covenant in the
Debt Securities of such series or in the Indenture with respect to
Debt Securities of such series;
- certain events of bankruptcy, insolvency and reorganization.
No Event of Default with respect to a single series of indebtedness issued under
the Indenture (and any supplemental indentures) necessarily constitutes an Event
of Default with respect to any other series of indebtedness issued thereunder.
(Section 601)
The Indenture provides that the trustee will, within 90 days after the
occurrence of a default with respect to the Debt Securities of any series, give
to the holders of the Debt Securities of such series notice of all uncured and
unwaived defaults known to it; provided that, except in the case of default in
the payment of principal of, or premium or interest, if any, on, or a sinking
fund installment, if any, with respect to any of the Debt Securities of such
series, the Trustee will be protected in withholding such notice if it in good
faith determines that the withholding of such notice is in the interest of the
holders of the Debt Securities of such series. The term "default" for the
purpose of this provision only means the happening of any of the Events of
Default specified above, except that any grace period or notice requirement is
eliminated. (Section 702)
The Indenture contains provisions entitling the Trustee, subject to the
duty of the Trustee during an Event of Default to act with the required standard
of care, to be indemnified by the holders of the Debt Securities before
proceeding to exercise any right or power under the Indenture at the request of
holders of the Debt Securities. (Section 703)
The Indenture provides that the holders of a majority in principal amount
of the outstanding Debt Securities of any series may in certain circumstances
direct the time, method and place of conducting proceedings for remedies
available to the Trustee or exercising any trust or power conferred on the
Trustee in respect of such series. (Section 612)
The Indenture includes a covenant that the Company will file annually with
the Trustee an Officers' Certificate stating whether any default exists and
specifying any default that exists. (Section 1106)
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<PAGE> 33
In certain cases, the holders of a majority in principal amount of the
outstanding Debt Securities of any series may on behalf of the holders of all
Debt Securities of such series waive any past default or Event of Default with
respect to the Debt Securities of such series or compliance with certain
provisions of the Indenture, except, among other things, a default not
theretofore cured in payment of the principal of, or premium or interest, if
any, on, any of the Debt Securities of such series. (Section 613) The holders of
a majority in principal amount of a series of outstanding Debt Securities also
have certain rights to rescind any declaration of acceleration with respect to
such series after all Events of Default with respect to such series not arising
from such declaration shall have been cured. (Section 602)
MODIFICATION OF THE INDENTURE
The Indenture allows the Company and the Trustee, without the consent of
any holders of Debt Securities, to enter into supplemental indentures for the
purposes, among other things, of:
- adding to the Company's covenants,
- adding additional Events of Default,
- establishing the form or terms of any series of Debt Securities
issued under such supplemental indentures or curing ambiguities or
inconsistencies in the Indenture,
- making other provisions that do not adversely affect the interests
of the holders of any series of Debt Securities in any material
respect. (Section 1001)
The Indenture allows the Company and the Trustee, with the consent of the
holders of not less than a majority in principal amount of the outstanding Debt
Securities of all affected series (acting as one class), to execute supplemental
indentures adding any provisions to or changing or eliminating any of the
provisions of the Indenture or modifying the rights of the holders of the Debt
Securities of such series. But, no supplemental indenture may, without the
consent of the holders of all the outstanding Debt Securities affected thereby,
among other things:
(1) change the Stated Maturity of the principal of, or any installment
of principal of or interest on, any Debt Security;
(2) reduce the principal amount of, the rate of interest on, or any
premium payable upon the redemption of, any Debt Security;
(3) reduce the amount of the principal of an Original Issue Discount
Security that would be due and payable upon acceleration of the Maturity
thereof;
(4) change any Place of Payment where, or the currency, currencies or
currency unit or units in which, any Debt Security or any premium or
interest thereon is payable;
(5) impair the right to institute suit for the enforcement of any such
payment on or after the Stated Maturity thereof (or, in the case of
redemption, on or after the Redemption Date);
(6) affect adversely the terms, if any, of conversion of any Debt
Security into stock or other securities of the Company or of any other
corporation;
(7) reduce the percentage in principal amount of the outstanding Debt
Securities of any series, the consent of whose holders is required for any
such supplemental indenture, or the consent of whose holders is required
for any waiver (of compliance with certain provisions of the Indenture or
certain defaults thereunder and their consequences) provided for in the
Indenture;
(8) change any obligation of the Company, with respect to outstanding
Debt Securities of a series, to maintain an office or agency in the places
and for the purposes specified in the Indenture for such series;
(9) modify any of the foregoing provisions or the provisions for the
waiver of certain covenants and defaults, except to increase any applicable
percentage of the aggregate principal amount of outstanding Debt Securities
the consent of the holders of which is required or to provide with respect
to any particular
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series the right to condition the effectiveness of any supplemental
indenture as to that series on the consent of the holders of a specified
percentage of the aggregate principal amount of outstanding Debt Securities
of such series or to provide that certain other provisions of the Indenture
cannot be modified or waived without the consent of the holder of each
outstanding Debt Security affected thereby. (Section 1002)
MEETINGS
The Indenture contains provisions for convening meetings of the holders of
Debt Securities of any series. (Section 1401) A meeting may be called at any
time by the Trustee under the Indenture, and also, upon request, by the Company
or the holders of at least 10% in principal amount of the outstanding Debt
Securities of such series, in any such case upon notice given in accordance with
"Notices" below. (Section 1402) Persons entitled to vote a majority in principal
amount of the outstanding Debt Securities of a series will constitute a quorum
at a meeting of holders of Debt Securities of such series, except that in the
absence of a quorum, if the meeting was called by the Company or the Trustee, it
may be adjourned for a period of not less than 10 days, and in the absence of a
quorum at any such adjourned meeting, the meeting may be further adjourned for a
period of not less than 10 days.
Except for any consent which must be given by the holder of each
outstanding Debt Security affected thereby, as described above under
"Modification of the Indenture", and subject to the provisions described in the
last sentence under this subheading, any resolution presented at a meeting or
adjourned meeting duly reconvened at which a quorum is present may be adopted by
the affirmative vote of the holders of a majority in principal amount of the
outstanding Debt Securities of that series. Any resolution with respect to any
request, demand, authorization, direction, notice, consent, waiver or other
action which may be made, given or taken by the holders of a specified
percentage, which is equal to or less than a majority, in principal amount of
outstanding Debt Securities of a series may be adopted at a meeting or an
adjourned meeting duly reconvened at which a quorum is present by the
affirmative vote of the holders of such specified percentage in principal amount
of the outstanding Debt Securities of that series. Any resolution passed or
decision taken at any meeting of holders of Debt Securities of any series duly
held in accordance with the Indenture will be binding on all holders of Debt
Securities of that series and the related coupons. With respect to any consent,
waiver or other action which the Indenture expressly provides may be given by
the holders of a specified percentage of outstanding Debt Securities of all
series affected thereby (acting as one class), only the principal amount of
outstanding Debt Securities of any series represented at a meeting or an
adjourned meeting duly reconvened at which a quorum is present as aforesaid and
voting in favor of such action will be counted for purposes of calculating the
aggregate principal amount of outstanding Debt Securities of all series affected
thereby favoring such action. (Section 1404)
NOTICES
Except as otherwise provided in the Indenture, notices to holders of Bearer
Debt Securities will be given by publication at least once in a daily newspaper
in The City of New York and in London and in such other city or cities as may be
specified in such Bearer Debt Securities. Notices will also be mailed to such
persons whose names and addresses were previously filed with the Trustee, within
the time prescribed for the giving of such notice. Notices to holders of
Registered Debt Securities will be given by mail to the addresses of such
holders as they appear in the Security Register. (Section 106)
TITLE
Title to any Bearer Debt Securities and any coupons appertaining thereto
will pass by delivery. The Company, the Trustee and any agent of the Company or
the Trustee may treat the bearer of any Bearer Debt Security or related coupon
and, prior to due presentment for registration of transfer, the registered owner
of any Registered Debt Security (including Registered Debt Securities in global
registered form), as the absolute owner thereof (whether or not such Debt
Security or coupon shall be overdue and notwithstanding any notice to the
contrary) for the purpose of making payment and for all other purposes. (Section
407)
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REPLACEMENT OF SECURITIES COUPONS
Any mutilated Debt Security and any Debt Security with a mutilated coupon
appertaining thereto will be replaced by the Company at the expense of the
holder upon surrender of such mutilated Debt Security or Debt Security with a
mutilated coupon to the Security Registrar. Debt Securities or coupons that
become destroyed, stolen or lost will be replaced by the Company at the expense
of the holder upon delivery to the Security Registrar of evidence of the
destruction, loss or theft thereto satisfactory to the Company and the Security
Registrar; in the case of any coupon which becomes destroyed, stolen or lost,
such coupon will be replaced (upon surrender to the Security Registrar of the
Debt Security with all appurtenant coupons not destroyed, stolen or lost) by
issuance of a new Debt Security in exchange for the Debt Security to which such
coupon appertains. In the case of a destroyed, lost or stolen Debt Security or
coupon, an indemnity satisfactory to the Security Registrar and the Company may
be required at the expense of the holder of such Debt Security or coupon before
a replacement Debt Security will be issued. (Section 405)
GOVERNING LAW
The Indenture, the Debt Securities and the coupons will be governed by, and
construed in accordance with, the laws of the State of New York.
CONCERNING THE TRUSTEE
The Company may from time to time maintain lines of credit, and have other
customary banking relationships, with The First National Bank of Chicago, the
Trustee under the Indenture, or with its affiliates. The First Chicago Trust
Company of New York, an affiliate of the Trustee, acts as the stock transfer
agent and registrar with respect to the Company's common stock.
PLAN OF DISTRIBUTION
The Company may sell the Debt Securities in any of three ways: (i) through
underwriters, (ii) through agents or (iii) directly to a limited number of
institutional purchasers or to a single purchaser. The Prospectus Supplement
with respect to each series of Debt Securities will set forth the terms of the
offering of the Debt Securities of such series, including the name or names of
any underwriters, the purchase price and the proceeds to the Company from such
sale, any underwriting discounts and other items constituting underwriters'
compensation, any initial public offering price and any discounts or concessions
allowed or reallowed or paid to dealers and any securities exchanges on which
the Debt Securities of such series may be listed.
If underwriters are used in the sale, the Debt Securities will be acquired
by the underwriters for their own account and may be resold from time to time in
one or more transactions, including negotiated transactions, at a fixed public
offering price or at varying prices determined at the time of sale. The Debt
Securities may be either offered to the public through underwriting syndicates
represented by managing underwriters or by underwriters without a syndicate.
Unless otherwise set forth in the Prospectus Supplement, the obligations of the
underwriters to purchase Debt Securities will be subject to certain conditions
precedent and the underwriters will be obligated to purchase all the Debt
Securities of a series if any are purchased. Any initial public offering price
and any discounts or concessions allowed or reallowed or paid to dealers may be
changed from time to time.
Debt Securities may be sold directly by the Company or through agents
designated by the Company from time to time. Any agent involved in the offer or
sale of the Debt Securities in respect of which this Prospectus is delivered
will be named, and any commissions payable by the Company to such agent will be
set forth, in the Prospectus Supplement. Unless otherwise indicated in the
Prospectus Supplement, any such agent will be acting on a best efforts basis for
the period of its appointment.
The Company may authorize agents or underwriters to solicit offers by
certain types of institutions to purchase Debt Securities from the Company at
the public offering price set forth in the Prospectus Supplement pursuant to
delayed delivery contracts providing for payment and delivery on a specified
date in
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<PAGE> 36
the future. Such contracts will be subject only to those conditions set forth in
the Prospectus Supplement, and the Prospectus Supplement will set forth the
commissions payable for solicitation of such contracts.
Agents and underwriters may be entitled under agreements entered into with
the Company to indemnification by the Company against certain civil liabilities,
including liabilities under the Securities Act of 1933, or to contribution with
respect to payments which the agents or underwriters may be required to make in
respect thereof. Agents and underwriters may be customers of, engage in
transactions with, or perform services for, the Company in the ordinary course
of business.
Each series of Debt Securities will be a new issue of securities with no
established trading market. Any underwriters to whom Debt Securities are sold by
the Company for public offering and sale may make a market in such Debt
Securities, but such underwriters will not be obligated to do so and may
discontinue any market making at any time without notice. No assurance can be
given as to the liquidity of the trading market for any Debt Securities.
EXPERTS
The consolidated financial statements of the Company incorporated in this
Prospectus by reference to the Company's Annual Report on Form 10-K for the year
ended December 28, 1997 have been so incorporated in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
NOTE REGARDING FORWARD-LOOKING STATEMENTS
Sections 27A of the Securities Act and 21E of the Exchange Act provide a
"safe harbor" for forward-looking statements to encourage companies to provide
prospective information about their businesses and other matters as long as
those statements are identified as forward-looking and are accompanied by
meaningful cautionary statements identifying important factors that could cause
actual results to differ materially from those discussed in the statements. All
statements contained in this Prospectus, in each Prospectus Supplement and in
any document incorporated by reference herein that the Company expects or
anticipates something will or may occur in the future, including statements
about the Company's business strategies, competitive strengths and the expansion
and growth of the Company's business and operations, are forward-looking
statements and the Company wishes to take advantage of the "safe-harbor"
provisions referred to above in connection with such statements. These
forward-looking statements are and will be based on certain assumptions and
analyses made by the Company in light of its experience and its perception of
historical trends, current conditions and expected future developments, as well
as other factors the Company believes are appropriate under the circumstances.
However forward-looking statements are subject to various risks and
uncertainties that could cause actual results or events to differ materially
from those anticipated in such statements. Specific factors identified by the
Company that might cause such a difference include, among other things, the
factors noted in "Item 1. Business" in the Company's Annual Report on Form 10-K
for the fiscal year ended December 28, 1997 ("Annual Report"), and "Management's
Discussion and Analysis of Financial Condition and Results of Operation" in the
Annual Report and in the Company's Quarterly Report on Form 10-Q for the fiscal
quarter ended September 27, 1998. Other risk factors include the following:
changes in prevailing economic conditions, particularly in the specific
geographic and other markets served by the Company; actions of competitors,
including competitive pricing and competitive service offerings; changes in the
preferences of readers, viewers and advertisers; changes in communication and
broadcast technologies and markets; changes in laws and regulations, including
changes in television broadcast and cable television laws and regulations and
changes in taxation and accounting standards; the effects of changing cost or
availability of raw materials, including changes in the cost or availability of
newsprint and magazine body paper; changes in postal rates; changes in the
extent to which standardized tests are used in the admissions process by
colleges and graduate schools; the inability of computer systems or equipment to
process transactions for the year 2000 or beyond, including non-compliance of
the Company's critical internal systems and equipment due to failure to identify
non-compliance or incomplete or inadequate remediation efforts by vendors,
suppliers, service providers, customers or governmental entities that are
critical to the Company's business operations; and the effectiveness of the
Company's marketing and sales programs.
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No dealer, salesperson or other person is authorized to give any
information or to represent anything not contained in this prospectus supplement
or the accompanying prospectus. You must not rely on any unauthorized
information or representations. This prospectus supplement and the accompanying
prospectus is an offer to sell only the Notes offered hereby, but only under
circumstances and in jurisdictions where it is lawful to do so. The information
contained in or incorporated by reference in this prospectus supplement or the
accompanying prospectus is current only as of its date.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C>
Prospectus Supplement
The Company.......................... S- 1
Recent Developments.................. S- 4
Use of Proceeds...................... S- 6
Capitalization....................... S- 6
Selected Consolidated Financial
Data............................... S- 6
Management's Discussion and Analysis
of Results of Operations and
Financial Condition................ S- 8
Description of the Notes............. S-13
Underwriting......................... S-16
Legal Matters........................ S-17
Prospectus
About this Prospectus................ 2
Where You Can Find More Information.. 2
The Company.......................... 4
Use of Proceeds...................... 4
Ratio of Earnings to
Fixed Charges...................... 4
Description of the Debt Securities... 5
Plan of Distribution................. 16
Experts.............................. 17
Note Regarding Forward-Looking
Statements......................... 17
</TABLE>
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$300,000,000
THE WASHINGTON POST
COMPANY
% Notes due , 200
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PROSPECTUS SUPPLEMENT
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GOLDMAN, SACHS & CO.
SALOMON SMITH BARNEY
MERRILL LYNCH & CO.
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