<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarterly
Period Ended October 3, 1999 Commission File Number 1-6714
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THE WASHINGTON POST COMPANY
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 53-0182885
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1150 15th Street, N.W. Washington, D.C. 20071
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(Address of principal executive offices) (Zip Code)
(202) 334-6000
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X . No .
------ ------
Shares outstanding at November 1, 1999:
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<S> <C>
Class A Common Stock 1,739,250 Shares
Class B Common Stock 8,305,323 Shares
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<PAGE> 2
2.
THE WASHINGTON POST COMPANY
INDEX TO FORM 10-Q
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<CAPTION>
PAGE
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statements of Income
(Unaudited) for the Thirteen and Thirty-nine
Weeks Ended October 3, 1999 and
September 27, 1998.......................................................................... 3
Condensed Consolidated Statements of Comprehensive
Income (Unaudited) for the Thirteen and
Thirty-nine Weeks Ended October 3, 1999 and
September 27, 1998.......................................................................... 4
Condensed Consolidated Balance Sheets
at October 3, 1999 (Unaudited) and January 3, 1999.......................................... 5
Condensed Consolidated Statements of Cash Flows
(Unaudited) for the Thirty-nine Weeks Ended
October 3, 1999 and September 27, 1998...................................................... 6
Notes to Condensed Consolidated Financial Statements
(Unaudited)................................................................................. 7
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition.......................................................... 12
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K..................................................................... 21
Signatures.................................................................................................... 22
Exhibit 11
Exhibit 27 (Electronic Filing Only)
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<PAGE> 3
3.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
The Washington Post Company
Condensed Consolidated Statements of Income (Unaudited)
<TABLE>
<CAPTION>
Thirteen Weeks Ended Thirty-nine Weeks Ended
--------------------------- ---------------------------
October 3, Sept 27, October 3, Sept 27,
(In thousands, except per share amounts) 1999 1998 1999 1998
-------- -------- -------- ------
<S> <C> <C> <C> <C>
Operating revenues
Advertising $311,891 $293,277 $ 953,494 $ 928,209
Circulation and subscriber 147,016 138,783 431,301 402,489
Other 80,673 77,221 232,376 188,296
------- ------- --------- ---------
539,580 509,281 1,617,171 1,518,994
------- ------- --------- ---------
Operating costs and expenses
Operating 293,948 278,241 874,765 822,226
Selling, general and administrative 118,198 107,533 351,546 328,468
Depreciation of property, plant
and equipment 26,265 22,058 76,687 63,169
Amortization of goodwill and other
intangibles 14,813 13,853 43,857 35,724
------- ------- --------- ---------
453,224 421,685 1,346,855 1,249,587
------- ------- --------- ---------
Income from operations 86,356 87,596 270,316 269,407
Other income (expense)
Equity in losses of affiliates, net (59) (4,060) (1,839) (3,143)
Interest income 186 217 646 809
Interest expense (6,473) (2,246) (18,728) (4,821)
Other 8,279 50,241 23,893 306,752
------- ------ --------- ---------
Income before income taxes 88,289 131,748 274,288 569,004
------- ------- --------- ---------
Provision for income taxes 36,600 49,900 109,500 215,500
------- ------- --------- ---------
Net income 51,689 81,848 164,788 353,504
Redeemable preferred stock dividends (237) (239) (950) (956)
------- ------- --------- ---------
Net income available for common shares $ 51,452 $ 81,609 $ 163,838 $ 352,548
======= ======= ========= =========
Basic earnings per common share $ 5.12 $ 8.09 $ 16.25 $ 34.95
======= ======= ========= =========
Diluted earnings per common share $ 5.10 $ 8.05 $ 16.18 $ 34.79
======= ======= ========= =========
Dividends declared per common share $ 1.30 $ 1.25 $ 5.20 $ 5.00
======= ======= ========= =========
Basic average number of common shares
outstanding 10,060 10,093 10,085 10,088
Diluted average number of common shares
outstanding 10,101 10,139 10,127 10,132
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<PAGE> 4
4.
The Washington Post Company
Condensed Consolidated Statements of Comprehensive Income (Unaudited)
<TABLE>
<CAPTION>
Thirteen Weeks Ended Thirty-nine Weeks Ended
--------------------------- ---------------------------
October 3, Sept 27, October 3, Sept 27,
(In thousands) 1999 1998 1999 1998
-------- -------- -------- ------
<S> <C> <C> <C> <C>
Net income $ 51,689 $ 81,848 $164,788 $353,504
------- ------- ------- -------
Other comprehensive loss
Foreign currency translation adjustment 811 736 (2,536) (749)
Change in unrealized gain on
available-for-sale securities (42,480) (13,246) (60,167) (10,139)
Less: reclassification adjustment
for realized gains included in
net income (11,430) -- (11,996) --
------- ------- ------- -------
(53,099) (12,510) (74,699) (10,888)
Income tax benefit related to
other comprehensive loss 21,025 5,166 28,138 3,955
------- ------- ------- -------
( 32,074) (7,344) (46,561) (6,933)
------- ------- ------- -------
Comprehensive income $ 19,615 $ 74,504 $118,227 $346,571
======= ======= ======= =======
</TABLE>
<PAGE> 5
5.
The Washington Post Company
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
(In thousands) October 3,
1999 January 3,
(unaudited) 1999
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<S> <C> <C>
Assets
Current assets
Cash and cash equivalents $ 19,769 $ 15,190
Investments in marketable equity securities 27,632 71,676
Accounts receivable, net 263,843 236,514
Federal and state income taxes receivable 18,908 35,395
Inventories 22,350 20,154
Other current assets 26,591 25,949
--------- ---------
379,093 404,878
Property, plant and equipment
Buildings 256,847 248,764
Machinery, equipment and fixtures 997,717 977,710
Leasehold improvements 50,982 50,556
--------- ---------
1,305,546 1,277,030
Less accumulated depreciation (617,722) (566,616)
--------- ---------
687,824 710,414
Land 41,474 41,191
Construction in progress 120,223 89,457
--------- ---------
849,521 841,062
Investments in marketable equity securities 164,000 184,440
Investments in affiliates 143,965 68,530
Goodwill and other intangibles,
less accumulated amortization 858,713 883,232
Prepaid pension cost 317,183 256,134
Deferred charges and other assets 129,477 91,385
--------- ---------
$2,841,952 $2,729,661
========= =========
Liabilities and Shareholders' Equity
Current liabilities
Accounts payable and accrued liabilities $ 259,159 $ 245,068
Deferred subscription revenue 77,866 85,649
Dividends declared 13,293 --
Short-term borrowings 65,492 58,362
--------- ---------
415,810 389,079
Other liabilities 272,330 261,896
Deferred income taxes 65,664 83,710
Long-term debt 397,555 395,000
--------- ---------
1,151,359 1,129,685
--------- ---------
Redeemable preferred stock 11,873 11,873
--------- ---------
Preferred stock -- --
--------- ---------
Common shareholders' equity
Common stock 20,000 20,000
Capital in excess of par value 106,131 46,199
Retained earnings 2,708,678 2,597,217
Accumulated other comprehensive income (losses)
Cumulative foreign currency translation
adjustment (4,136) (1,600)
Unrealized (loss) gain on available-for-sale
securities (2,045) 41,980
Cost of Class B common stock held in treasury (1,149,908) (1,115,693)
--------- ---------
1,678,720 1,588,103
--------- ---------
$2,841,952 $2,729,661
========= =========
</TABLE>
<PAGE> 6
6.
The Washington Post Company
Condensed Consolidated Statements of Cash Flows (Unaudited)
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<CAPTION>
Thirty-nine Weeks Ended
------------------------------
October 3, Sept 27,
(In thousands) 1999 1998
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<S> <C> <C>
Cash flows from operating activities:
Net income $164,788 $353,504
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation of property, plant and equipment 76,687 63,169
Amortization of goodwill and other intangibles 43,857 35,724
Net pension benefit (63,000) (47,100)
Gain on disposition of business -- (310,010)
Gain on sale of marketable equity securities (36,174) --
Provision for deferred income taxes 9,335 8,431
Equity in losses of affiliates, net of
distributions 1,839 3,805
Change in assets and liabilities:
Increase in accounts receivable, net (25,179) (23,943)
Increase in inventories (2,196) (8,727)
Increase in accounts payable and
accrued liabilities 7,337 35,421
Decrease in income taxes payable -- (11,500)
Decrease in income taxes receivable 16,487 --
(Increase) decrease in other assets and other
liabilities, net (18,247) 4,856
Other 11,830 8,510
-------- --------
Net cash provided by operating activities 187,364 112,140
-------- --------
Cash flows from investing activities:
Net proceeds from sale of business 2,000 376,677
Purchases of property, plant and equipment (92,198) (154,300)
Investments in certain businesses (48,491) (307,940)
Proceeds from sale of marketable equity securities 51,820 13,414
Purchase of marketable equity securities (23,332) (93,588)
Other (10,456) 269
--------- --------
Net cash used in investing activities (120,657) (165,468)
--------- ---------
Cash flows from financing activities:
Principal payments on debt (387,740) (296,394)
Issuance of debt 397,425 380,505
Dividends paid (40,034) (38,550)
Common shares repurchased (36,083) (14,890)
Proceeds from exercise of stock options 4,304 6,057
-------- --------
Net cash (used in) provided by financing activities (62,128) 36,728
-------- --------
Net increase (decrease) in cash and cash equivalents 4,579 (16,600)
Beginning cash and cash equivalents 15,190 21,117
-------- --------
Ending cash and cash equivalents $ 19,769 $ 4,517
======== ========
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<PAGE> 7
7.
The Washington Post Company
Notes to Condensed Consolidated Financial Statements (Unaudited)
Results of operations, when examined on a quarterly basis, reflect the
seasonality of advertising that affects the newspaper, magazine and
broadcasting operations. Advertising revenues in the second and fourth quarters
are typically higher than first and third quarter revenues. All adjustments
reflected in the interim financial statements are of a normal recurring nature.
Note 1: Acquisitions and Dispositions
Acquisitions. During the first nine months of 1999, the company acquired
various businesses for approximately $48.5 million, including an accredited
distance education institute that offers degrees in paralegal studies and legal
nurse consulting, a provider of test preparation services for the United States
Medical Licensing Exam, and a leading producer of interactive testing and
certification programs for information technology professionals.
During the first nine months of 1998, the company acquired cable systems
in Mississippi, Texas, Oklahoma and Alabama serving approximately 115,400
subscribers for $207.5 million, Dearborn Publishing Group, Inc., a publisher
and provider of licensing training for securities, insurance and real estate
professionals for $30.5 million, and various other small businesses for $69.9
million (principally consisting of various educational and career services
companies).
Dispositions. In June 1999, the company sold the assets of Legi-Slate, Inc.
No significant gain or loss arose from the sale.
In March 1998, Cowles Media Company ("Cowles") and McClatchy Newspapers,
Inc. ("McClatchy") completed a series of transactions resulting in the merger
of Cowles and McClatchy. In the merger, each share of Cowles common stock was
converted (based upon elections of Cowles stockholders) into shares of
McClatchy stock or a combination of cash and McClatchy stock. As of the date of
the Cowles and McClatchy merger transaction, a wholly-owned subsidiary of the
company owned 3,893,796 (equal to about 28%) of the outstanding common stock of
Cowles, most of which was acquired in 1985. As a result of this transaction,
the company's subsidiary received $330.5 million in cash from McClatchy and
730,525 shares of McClatchy Class A common stock. The market value of the
McClatchy stock received approximated $21.6 million. The gain resulting from
this transaction, which is included in "Other, net" in the Condensed
Consolidated Statements of Income, increased net income by approximately $162.8
million and basic and diluted earnings per share by $16.14 and $16.07,
respectively.
In July 1998, the company completed the sale of 14 small cable systems in
Texas, Missouri and Kansas serving approximately 29,000 subscribers for
approximately $41.9 million. The gain resulting from this transaction, which is
included in 1998 "Other, net" in the Condensed Consolidated Statements of
Income, increased net income by approximately $17.3 million and basic and
diluted earnings per share by $1.71.
Also in July 1998, the company completed the sale of its 80 percent
interest in Moffet, Larson and Johnson ("MLJ"), a telecommunications consulting
firm; no significant gain or loss was realized as a result of this transaction.
In August 1998, Junglee Corporation ("Junglee") merged with a wholly owned
subsidiary of Amazon.com Inc. ("Amazon.com"). As a result, each share of
Junglee common and preferred stock was converted into shares of Amazon.com. On
the date of the merger, a wholly-owned subsidiary of the company owned 750,000
common shares and 750,000 preferred shares of Junglee. As a result of the
merger, the company's subsidiary received 202,961 shares of Amazon.com common
stock. The market value of the Amazon.com stock received approximated $25.2
million on the date of the merger. The gain resulting from this transaction,
which is included in 1998 "Other, net" in
<PAGE> 8
8.
the Condensed Consolidated Statements of Income, increased net income by
approximately $14.3 million and basic and diluted earnings per share by $1.42
and $1.41, respectively.
Note 2: Investments in Marketable Securities
Investments in marketable equity securities at October 3, 1999 and January
3, 1999 consist of the following (in thousands):
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October 3, January 3,
1999 1999
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<S> <C> <C>
Total cost $194,984 $187,297
Gross unrealized (losses) gains (3,352) 68,819
------- -------
Total fair value $191,632 $256,116
======= =======
</TABLE>
During the third quarter and first nine months of 1999, proceeds from
sales of marketable equity securities were $24.4 million and $51.8 million,
respectively. Gross realized gains on such sales were $19.2 million and $36.2
million, respectively. There were no sales of marketable equity securities
during the first nine months of 1998. Gross realized gains upon the sale of
marketable equity securities are included in "Other, net" in the Condensed
Consolidated Statements of Income.
Note 3: Borrowings
On February 15, 1999, the company completed the issuance of $400.0 million
5.5 percent unsecured notes due February 15, 2009. The company is required to
pay interest related to these notes on February 15 and August 15 of each year.
During the third quarter and first nine months of 1999, the company had
average borrowings outstanding of approximately $446.4 million and $441.9
million, respectively, at average interest rates of approximately 5.7 percent
and 5.6 percent, respectively. During the third quarter and first nine months
of 1998, the company had average borrowings outstanding of approximately $260.0
million and $182.0 million, respectively, at an average interest rate of
approximately 5.6 percent.
During the first nine months of 1999 and 1998, the company incurred interest
costs on borrowings of $18.6 million and $7.6 million, respectively, of which
$1.7 million and $4.3 million was capitalized. Interest costs for construction
and upgrade of qualifying assets are capitalized.
<PAGE> 9
9.
Note 4: Business Segments.
The following table summarizes financial information related to each of the
company's business segments. The 1999 and 1998 asset information is as of
October 3, 1999 and January 3, 1999.
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<CAPTION>
Third Quarter Period
- --------------------
(in thousands) Education Other
and Businesses
Newspaper Television Magazine Cable Career and Corporate
Publishing Broadcasting Publishing Television Services Office Consolidated
---------- ------------ ---------- ---------- -------- ------ ------------
1999
- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Operating revenues $211,963 $ 76,677 $ 91,850 $ 84,799 $ 73,795 $ 496 $ 539,580
Income (loss) from
operations $ 48,633 $ 34,166 $ 15,156 $ 17,584 $ (13,674) $(15,509) $ 86,356
Equity in losses of
affiliates (59)
Interest expense, net (6,287)
Other income, net 8,279
---------
Income before income
taxes $ 88,289
=========
Depreciation expense $ 7,844 $ 2,958 $ 1,219 $ 10,816 $ 2,505 $ 923 $ 26,265
Amortization expense $ 388 $ 3,570 $ 1,478 $ 7,501 $ 1,876 $ - $ 14,813
Identifiable assets $649,397 $421,326 $377,795 $714,645 $243,304 $ 99,888 $2,506,355
Investments in
marketable equity
securities 191,632
Investments in
affiliates 143,965
---------
Total assets $2,841,952
=========
</TABLE>
<TABLE>
<CAPTION>
Education Other
and Businesses
Newspaper Television Magazine Cable Career and Corporate
Publishing Broadcasting Publishing Television Services Office Consolidated
---------- ------------ ---------- ---------- ---------- ------------- ------------
1998
- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Operating revenues $199,782 $ 80,452 $ 88,186 $ 78,506 $ 60,944 $ 1,411 $ 509,281
Income (loss) from
operations $ 34,171 $ 34,718 $ 8,182 $ 16,384 $ 5,339 $(11,198) $ 87,596
Equity in losses of
affiliates (4,060)
Interest income, net (2,029)
Other income, net 50,241
---------
Income before income
taxes $ 131,748
=========
Depreciation expense $ 5,482 $ 2,777 $ 1,253 $ 10,240 $ 1,527 $ 779 $ 22,058
Amortization expense $ 378 $ 3,534 $ 1,474 $ 7,318 $ 1,149 $ - $ 13,853
Identifiable assets $634,882 $437,506 $355,176 $710,641 $196,702 $ 70,108 $2,405,015
Investments in
marketable equity
securities 256,116
Investments in
affiliates 68,530
---------
Total assets $2,729,661
=========
</TABLE>
<PAGE> 10
10.
<TABLE>
<CAPTION>
Nine Month Period
- -----------------
(in thousands) Education Other
and Businesses
Newspaper Television Magazine Cable Career and Corporate
Publishing Broadcasting Publishing Television Services Office Consolidated
---------- ------------ ---------- ---------- ---------- ------------- ------------
1999
- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Operating revenues $639,442 $247,995 $283,152 $248,718 $192,252 $ 5,612 $ 1,617,171
Income (loss) from
operations $138,202 $114,536 $ 41,845 $ 47,975 $(28,010) $(44,232) $ 270,316
Equity in losses of
affiliates (1,839)
Interest expense, net (18,082)
Other income, net 23,893
---------
Income before income
taxes $ 274,288
=========
Depreciation expense $ 23,103 $ 8,571 $ 3,726 $ 32,325 $ 6,510 $ 2,452 $ 76,687
Amortization expense $ 1,147 $ 10,689 $ 4,434 $ 22,394 $ 5,193 $ - $ 43,857
</TABLE>
<TABLE>
<CAPTION>
Education Other
and Businesses
Newspaper Television Magazine Cable Career and Corporate
Publishing Broadcasting Publishing Television Services Office Consolidated
---------- ------------ ---------- ---------- ---------- ------------- ------------
1998
- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Operating revenues $618,503 $254,932 $287,664 $216,698 $134,914 $ 6,283 $1,518,994
Income (loss) from
operations $121,455 $117,718 $ 31,470 $ 43,573 $ (6,111) $(38,698) $ 269,407
Equity in losses of
affiliates (3,143)
Interest expense, net (4,012)
Other income, net 306,752
---------
Income before income
taxes $ 569,004
=========
Depreciation expense $ 15,893 $ 8,391 $ 3,738 $ 28,793 $ 4,003 $ 2,351 $ 63,169
Amortization expense $ 993 $ 10,601 $ 4,424 $ 17,066 $ 2,637 $ 3 $ 35,724
</TABLE>
Newspaper publishing includes the publication of newspapers in the
Washington, D.C. area (The Washington Post and the Gazette community
newspapers) and Everett, Washington (The Everett Herald). This business
division also includes newsprint warehousing and recycling operations.
Television broadcasting operations are conducted through six VHF,
network-affiliated television stations serving the Detroit, Houston, Miami, San
Antonio, Orlando and Jacksonville television markets.
The magazine publishing division consists of the publication of a weekly
news magazine, Newsweek, which has one domestic and three international
editions, and the publication of business periodicals for the computer services
industry and the Washington-area technology community.
Cable television operations consist of over 54 cable systems offering
basic cable and pay television services to approximately 740,000 subscribers
(at October 31, 1999) in midwestern, western, and southern states.
Education and career services are provided through the company's wholly
owned subsidiary Kaplan Educational Center, Inc. Kaplan's six operating
divisions include Test Preparation and Admissions; Score! Educational Centers,
offering K-8 after-school programs; Kaplan Learning Services, providing
customized education services and professional development at schools and
universities; Publishing, which produces educational books and software; Kaplan
Professional, providing recruitment, assessment, training and certification
services; and Kaplan University, offering distance learning programs.
Other businesses and corporate office include a digital media and
electronic information services provider and the company's corporate office.
Through the first half of 1999, the other businesses and corporate office
segment also includes the result of Legi-Slate, Inc., which was sold in June
1999. The 1998 results for other businesses and corporate office include
Moffet, Larson & Johnson, which was sold in July 1998.
<PAGE> 11
11.
Income from operations includes actuarially determined net pension
credits, which are significant to the magazine and newspaper publishing
divisions. These pension credits totaled $12.2 million and $36.6 million for
the magazine division in the third quarter and first nine months of 1999,
respectively, compared to $9.6 million and $27.4 million during the third
quarter and first nine months of 1998. Net pension credits recorded by the
newspaper division totaled $6.9 million and $21.6 million during the third
quarter and first nine months of 1999, respectively, compared to $6.4 million
and $13.2 million during the third quarter and first nine months of 1998.
The company maintains stock option and stock appreciation right plans at
its Kaplan subsidiary that provide for the issuance of stock options
representing 10 percent of Kaplan's stock and the issuance of stock
appreciation rights to certain members of Kaplan's management. The options and
appreciation rights vest ratably over five years from issuance. For the third
quarter of 1999 and 1998, the education and career services operating results
include a non-cash charge of $1.8 and $1.5 million, respectively, related to
these plans; for the first nine months of 1999 and 1998, the charge related to
these plans was $5.5 million and $4.5 million, respectively.
Note 5: Subsequent Event.
On November 8, 1999, the company announced a tender offer by the company
to repurchase 500,000 shares of its own Class B Common Stock at a price of $575
per share. The company may purchase more than 500,000 shares if additional
shares are offered. The tender offer will commence on November 10, 1999 and
will expire at 5:00 pm (EST) on December 10, 1999. The company intends to fund
the repurchase of the shares through the issuance of short term borrowings.
<PAGE> 12
12.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
This analysis should be read in conjunction with the consolidated
financial statements and the notes thereto.
Revenues and expenses in the first and third quarters are customarily
lower than those in the second and fourth quarters because of significant
seasonal fluctuations in advertising volume. For that reason, the results of
operations for each quarter are compared with those of the corresponding
quarter in the preceding year.
THIRD QUARTER COMPARISONS
Net income for the third quarter of 1999 was $51.7 million ($5.10 per
share), a decrease of $30.1 million from net income of $81.8 million ($8.05 per
share) in the third quarter last year.
The company's 1999 third quarter results included a one-time after-tax
compensation charge of $8.0 million ($0.80 per share) arising from the
previously announced formation of BrassRing, Inc., a new job search and
recruiting business owned together by the company, The Tribune Company and
Accel Partners. The company's 1998 third quarter net income included one-time
after-tax gains of $30.9 million ($3.05 per share) resulting from the sale of
14 small cable systems and the disposition of the company's investment interest
in Junglee, a facilitator of Internet commerce. Excluding these non-recurring
items, net income for the third quarter of 1999 increased 17 percent to $59.7
million ($5.90 per share), from net income of $50.9 million ($5.00 per share)
in the third quarter of 1998.
Revenue for the third quarter of 1999 rose 6 percent to $539.6
million, from $509.3 million in the same period last year. Advertising,
circulation and subscriber revenues increased 6 percent as compared to last
year. Other revenues increased 5 percent over the third quarter of 1998. The
increase in advertising revenues is primarily attributable to The Washington
Post, where advertising volume increased 10 percent, and Newsweek. The increase
in circulation and subscriber revenues is due to growth at the cable division.
Growth at Kaplan Educational Centers accounted for the majority of the increase
in other operating revenues.
Costs and expenses for the third quarter of 1999 increased 7 percent
to $453.2 million, from $421.7 million in the third quarter of 1998. The
increase in costs and expenses is attributable to a $10.0 million non-recurring
pre-tax compensation charge arising from the formation of BrassRing, Inc.,
expenses arising from companies acquired after September 1998 (including
amortization expense), higher depreciation expense, and increased spending for
internet-related operations ($3.0 million increase) and new business
initiatives at the company's education and career services division ($5.5
million increase). These expense increases were partially offset by growth in
the company's pension credit and a 24 percent decline in newsprint expense at
the newspaper division. The increase in depreciation expense is principally due
to increased capital expenditures over the past two years, including the
recently completed expansion of The Washington Post's printing facilities.
In the third quarter of 1999, operating income of $86.4 million
declined 1 percent as compared to the third quarter of 1998. Excluding the
non-recurring charge related to the formation of BrassRing, Inc., operating
income for the third quarter of 1999 totaled $96.4 million, a 10 percent
increase over 1998.
The company's operating income for the third quarter of 1999 includes
$21.0 million of pension credits, compared to $15.7 million for the same period
of 1998.
<PAGE> 13
13.
NEWSPAPER DIVISION. At the newspaper division, revenues increased 6 percent in
the third quarter of 1999 to $212.0 million; division operating income for the
third quarter increased 42 percent to $48.6 million.
Advertising revenue for the division rose 9 percent for the third
quarter of 1999 due principally to higher advertising volume at The Washington
Post, and to a lesser extent, higher ad rates. Advertising volume at The
Washington Post totaled 806,900 inches in the third quarter of 1999, up 10
percent from 734,600 inches in the third quarter of 1998. Circulation revenue
for the division remained essentially unchanged in comparison to the same
period last year.
The newpaper division's third quarter operating expenses benefited
from a 24 percent decline in newsprint expense and additional pension credits.
These expense reductions were offset by higher depreciation expense (arising
from the recently completed expansion of The Post's printing facilities) and
other general expense increases including increased promotion and marketing
expenses.
BROADCAST DIVISION. Revenues at the broadcast division totaled $76.7 million
for the third quarter of 1999, a 5 percent decline from the third quarter of
1998. Division operating income for the quarter totaled $34.2 million, a
decrease of 2 percent from the prior year. The decline in third quarter 1999
operating results is primarily attributable to softness in national advertising
revenues offset in part by growth in local advertising revenues.
MAGAZINE DIVISION. Revenues at the magazine division were $91.9 million for the
third quarter of 1999, a 4 percent increase over the third quarter of 1998;
division operating income for the third quarter of 1999 improved 85 percent to
$15.2 million.
The 85 percent increase in third quarter operating income is due to an
increase in the number of advertising pages at the domestic edition of
Newsweek, increased pension credit and reductions in other operating expense.
CABLE DIVISION. At the cable division, third quarter 1999 revenues of $84.8
million were 8 percent higher than 1998; division operating income before
amortization expense for the third quarter of $25.1 million was 6 percent
higher than the same period last year.
Higher rates accounted for most of the increase in revenue and
operating income before amortization expense. At the end of the third quarter,
the number of basic subscribers totaled approximately 730,250.
EDUCATION AND CAREER SERVICES. The company provides education and career
services through its subsidiary Kaplan Educational Centers. Kaplan provides
test preparation programs in the U.S. and abroad for individuals taking
admissions and professional licensing exams. Kaplan also provides on-site
educational programs to students and teachers at elementary, secondary and
post-secondary institutions, and offers a growing number of distance learning
programs. In addition, Kaplan publishes books, software and other materials.
Kaplan also owns Score! Educational Centers, a provider of
after-school learning opportunities for students in kindergarten through the
eighth grade. Score! presently operates 80 Score! centers (most opened within
the last two years) and plans to open an additional 20 centers in the remainder
of 1999. In September 1999, Score! announced the launch of a new e-commerce
site, eSCORE.com, to provide customized online educational resources and
services for parents and children from birth to age 18. The site is planned to
launch this fall, with initial funding from Kaplan set at $25 million ($10
million in 1999), primarily for product development and marketing.
<PAGE> 14
14.
For the first nine months of 1999 and all of 1998, Kaplan, through its
career services division, was the leading provider of career fairs in North
America, bringing together technical, sales and diversity candidates with
corporate recruiters. Kaplan, through its subsidiary HireSystems, also provided
corporate clients with web-based tools to streamline the recruitment and hiring
process. On September 29, 1999, Kaplan contributed its ownership of these two
businesses to a newly formed company named BrassRing, Inc. (BrassRing) in
exchange for a 54 percent interest in BrassRing. Partnering with Kaplan in the
formation of this new business are The Tribune Company and Accel Partners,
which each contributed cash and/or other assets to BrassRing. In connection
with the formation of BrassRing, the company incurred a $10.0 million
non-recurring pre-tax compensation charge. Prospectively, the operating results
of the career fair businesses and HireSystems will be included in BrassRing, of
which the company will record its non-controlling 54 percent interest in
accordance with the equity method of accounting.
Excluding the operating results of the career fair and HireSystems
businesses, the third quarter 1999 revenues for the education and career
services division totaled $67.3 million, a 28 percent increase from 1998. On
the same basis of presentation, operating losses for the third quarter of 1999
totaled $0.1 million, compared to operating income of $5.7 million for the
third quarter of 1998. The decline in 1999 third quarter operating income is
primarily attributable to the opening of new Score! centers, start-up costs
associated with eSCORE! and various distance learning initiatives.
Including the results of the career fair businesses and HireSystems,
the education and career services third quarter 1999 revenues totaled $73.8
million, a 21 percent increase over the same period in the prior year. Division
operating losses of $13.7 million in the third quarter of 1999 represent a
$19.0 million decline from $5.3 million in operating income for the third
quarter of 1998. The $19.0 million decline in the third quarter operating
results is primarily attributable to the $10.0 million non-recurring charge
related to the formation of BrassRing, start-up costs associated with the
opening of new Score! centers and the launch of the eSCORE! web site, as well
as increased spending for HireSystems and various distance learning
initiatives.
OTHER BUSINESSES AND CORPORATE OFFICE. Revenues for other businesses totaled
$0.5 million and $1.4 million in the third quarter of 1999 and 1998,
respectively. Operating losses for other businesses and corporate office were
$15.5 million for the third quarter of 1999 and $11.2 million for the third
quarter of 1998. The increase in operating losses in the third quarter of 1999
is due to additional spending for Internet-related operations.
The 1998 operating results include Moffet, Larson & Johnson, which was
sold in July 1998. In June 1999 the company sold Legi-Slate. No significant
gain or loss arose from the sale of these businesses.
EQUITY IN LOSSES OF AFFILIATES. The company's equity in losses of affiliates in
the third quarter of 1999 totaled $0.1 million, compared to losses of $4.1
million for the third quarter of 1998. The company's affiliate investments
consist primarily of a 50 percent interest in the International Herald Tribune
(IHT) and a 49 percent interest in Bowater Mersey Paper Company Limited.
NON-OPERATING ITEMS. Interest expense, net of interest income, was $6.3
million, compared to net interest expense of $2.0 million for the third
quarters of 1999 and 1998, respectively.
The company recorded other non-operating income of $8.3 million for
the third quarter of 1999, compared to $50.2 million for the same period in
1998. The company's 1999 other non-operating income consists principally of
gains on the sale of marketable securities (mostly various Internet-related
securities). The
<PAGE> 15
15.
company's 1998 other non-operating income consists mostly of the non-recurring
gains resulting from the company's sale of 14 small cable systems and
disposition of its investment interest in Junglee.
INCOME TAXES. The effective tax rate in the third quarter of 1999 was 41.5
percent, compared to 38.0 percent in 1998. The increase in the effective tax
rate in the third quarter of 1999 is primarily due to the non-deductibility of
a portion of the $10.0 million charge incurred in the formation of BrassRing,
Inc.
NINE MONTH COMPARISONS
For the first nine months of 1999 net income was $164.8 million (16.18
per share), compared with net income of $353.5 million ($34.79 per share) for
the same period of 1998. The company's 1999 net income included the
non-recurring after-tax charge of $8.0 million ($0.79 per share) related to the
formation of BrassRing. The company's 1998 net income includes $194.4 million
($19.12 per share) in gains from non-recurring transactions which included 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 investment
interest in Junglee. Excluding the effect of these one-time items, net income
totaled $172.8 million for the first nine months of 1999, an increase of 9
percent from net income of $159.1 million for the same period in 1998; earnings
per share increased 8 percent to $16.97 in 1999, from $15.67 in 1998.
Revenues for the first nine months of 1999 were $1,617.2 million, up 6
percent over revenue of $1,519.0 million in the first nine months of 1998.
Advertising revenues increased 3 percent, circulation and subscriber revenues
increased 7 percent and other revenues increased 23 percent. The increase in
advertising revenues is due principally to increased advertising at The
Washington Post, where advertising volume increased 2 percent in the 1999 nine
month period. The increase in circulation and subscriber revenues is due to
growth at the cable division, resulting mostly from acquisitions, and to a
lesser extent, higher rates. Growth at Kaplan Educational Centers accounted for
the majority of the increase in other operating revenues.
Costs and expenses increased 8 percent during the first nine months of
1999 to $1,346.9 million from the corresponding period of 1998. The increase in
costs and expenses is attributable to the $10.0 million non-recurring charge
resulting from the formation of BrassRing, expenses arising from companies
acquired during 1998 and 1999 (including amortization expense), increased
spending for Internet-related operations and new business initiatives at the
company's education and career services division, and higher depreciation
expense. These expense increases were offset in part by an increase in the
company's pension credit and lower newsprint expense.
Operating income for the first nine months of 1999 totaled $270.3
million, essentially unchanged compared to operating income of $269.4 million
for the same period of 1998. The company's 1999 other income, net, consists
principally of gains on the sale of marketable securities (mostly various
Internet-related securities). Included in other income, net, for the first nine
months of 1998 is $309.6 million in pre-tax gains resulting 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 investment
interest in Junglee.
The company's operating income for the first nine months of 1999
includes $63.0 million of pension credits, compared to $47.1 million for the
same period of 1998.
NEWSPAPER DIVISION. Newspaper division revenues of $639.4 million for the first
nine months of 1999 were up 3 percent over the comparable periods of 1998;
division
<PAGE> 16
16.
operating income for the first nine months of 1999 totaled $138.2 million, a 14
percent increase over the prior year.
Advertising revenues for the division rose 5 percent in the period due
an increase in advertising volume and higher rates. Advertising volume at The
Washington Post totaled 2,366,300 inches, a 2 percent increase from 2,312,800
inches in the first nine months of 1998. Circulation revenues for the division
declined 1 percent for the first nine months of 1999 as compared to the same
period in the prior year. Daily circulation at The Post remained essentially
unchanged, while Sunday circulation declined 1 percent.
Operating expenses at the newspaper division benefited from a 17
percent decline in newsprint expense and increased pension credits as compared
to the first nine months of 1998. The decrease in newsprint expense is due to a
decline in newsprint prices, and to a lesser extent, a reduction in newsprint
consumed. These benefits were partially offset by an increase in depreciation
expense due to the recently completed expansion of the printing facilities of
The Washington Post.
BROADCAST DIVISION. Revenues at the broadcast division of $248.0 million were 3
percent less than revenues for the first nine months of 1998. Division
operating income totaled $114.5 million for the first nine months of 1999, a 3
percent decline compared to the same period in 1998. The overall decrease in
the broadcast division operating results is due to softness in national
advertising revenues partially offset by an increase in local advertising
revenues.
MAGAZINE DIVISION. Magazine division revenues totaled $283.2 million for the
first nine months of 1999, a 2 percent decrease compared to the same period in
the prior year; division operating income increased 33 percent to $41.8 million
for the first nine months of 1999.
The 33 percent increase in operating income is primarily attributable
to increased revenues at the domestic edition of Newsweek, increased pension
credit and reductions in other operating expenses.
CABLE DIVISION. Cable division revenues of $248.7 million increased 15 percent
during the first nine months of 1999; division operating income before
amortization expense of $70.4 million increased 16 percent over 1998. Division
operating income after amortization expense improved 10 percent over the first
nine months of 1998. The increase in operating income after amortization
expense is due to higher subscriber levels, resulting mainly from acquisitions,
and slightly higher rates, offset in part by increased expenses from systems
acquired in 1998 (including amortization expense).
EDUCATION AND CAREER SERVICES. Excluding the operating results of the career
fair and HireSystems businesses, revenue for the first nine months of 1999
increased 56 percent to $174.8 million compared to the same period in 1998. On
the same basis of presentation, operating losses for the first nine months of
1999 totaled $6.7 million versus $4.7 million for the same period in 1998.
Including the operating results of the career fair and HireSystems
businesses, revenue for the first nine months of 1999 increased 42 percent to
$192.3 million. Approximately two-thirds of the revenue increase is
attributable to businesses acquired in 1998 and 1999. The remaining increase in
revenue is mostly due to growth in test preparation revenues and Score!.
Operating losses totaled $28.0 million for the first nine months of 1999,
compared to losses of $6.1 million in 1998. The reduced operating results for
the first nine months of 1999 is primarily attributable to the $10.0 million
non-recurring charge related to the formation of BrassRing, start-up costs
associated with opening of new Score! centers and the launch of the eSCORE! web
site, as well as increased spending for HireSystems and various distance
learning initiatives.
<PAGE> 17
17.
OTHER BUSINESSES AND CORPORATE OFFICE. Revenues for other businesses totaled
$5.6 million for the first nine months of 1999, compared to $6.3 million for
the same period of 1998. Operating losses for other businesses and corporate
office were $44.2 million for the first nine months of 1999, compared to $38.7
million for the comparable period of 1998. The increase in operating losses is
primarily due to additional spending for Inernet-related operations.
The 1998 operating results include Moffet, Larson & Johnson, which was
sold in July 1998. In June 1999, the company sold Legi-Slate. No significant
gain or loss arose from the sale of these businesses.
EQUITY IN LOSSES OF AFFILIATES. The company's equity in losses of affiliates
for the first nine months of 1999 was $1.8 million, compared to losses of $3.1
million in the comparable period of 1998.
NON-OPERATING ITEMS. Interest expense, net of interest income, was $18.1
million, compared to $4.0 million for the same period of 1998. The increase in
net interest expense is attributable to borrowings executed by the company
after the third quarter of 1998 to fund capital improvement and acquisition
activities.
The company's 1999 other non-operating income consists principally of
gains on the sale of marketable securities (mostly various Internet-related
securities). The company's 1998 other non-operating income is comprised
principally of the non-recurring gains resulting from the company's disposition
of its 28 percent interest in Cowles Media Company, sale of 14 small cable
systems and disposition of its investment interest in Junglee.
INCOME TAXES. The effective tax rate through the first nine months of 1999
increased to 39.9 percent from 37.9 percent through the first nine months of
1998. The increase in the effective tax rate is mostly due to the lower state
tax rate applicable to the company's sale of its interest in Cowles Media
Company during March 1998.
FINANCIAL CONDITION: CAPITAL RESOURCES AND LIQUIDITY
ACQUISITIONS. In the first nine months of 1999, the company acquired various
small businesses for approximately $48.5 million, including an accredited
distance education institute that offers degrees in paralegal studies and legal
nurse consulting, a provider of test preparation services for the United States
Medical Licensing Exam, and a leading producer of interactive testing and
certification programs for information technology professionals.
INVESTMENTS IN MARKETABLE EQUITY SECURITIES. During the first nine months of
1999, the company received $51.8 million from the sale of certain marketable
equity securities.
At October 3, 1999, the fair value of the company's investment in marketable
equity securities was $191.6 million, of which $164.0 million consists of the
company's investment in the common stock of Berkshire Hathaway, Inc. The
remaining investment in marketable equity securities consist of common stock
investments in various publicly traded companies, most of which have
concentrations in Internet business activities.
CAPITAL EXPENDITURES. During the first nine months of 1999, the company's
capital expenditures totaled approximately $92.2 million, approximately half of
which related to plant upgrades at the company's cable subsidiary. The company
anticipates it will spend approximately $140.0 million throughout 1999 for
property and equipment, approximately half of which is for projects at the
cable division.
<PAGE> 18
18.
STOCK REPURCHASES. During the first nine months of 1999, the company
repurchased 66,318 shares of its Class B common stock at a cost of
approximately $36.1 million. Approximately 735,000 Class B common shares remain
available for repurchase under a November 13, 1997 authorization by the Board
of Directors.
As discussed in Note 5, on November 8, 1999 the company announced a tender
offer by the company to purchase up to 500,000 shares of its own Class B Common
Stock at a price of $575 per share. The company has reserved the right to
purchase more than 500,000 shares if offered. Assuming 500,000 shares are
repurchased, approximately 235,000 shares will remain available for repurchase
under the November 13, 1997 authorization.
LIQUIDITY. On February 15, 1999, the company completed the issuance of $400.0
million, 5.5 percent unsecured notes due February 15, 2009, netting
approximately $395.0 million in proceeds after discount and fees. The company
used the proceeds from the issuance of these unsecured notes to repay
approximately $395.0 million of commercial paper borrowings then outstanding.
During the first nine months of 1999, the company had average borrowings
outstanding of approximately $441.9 million at an average annual interest rate
of 5.6 percent.
The company expects to fund its estimated capital needs primarily through
internally generated funds, and to a lesser extent, commercial paper
borrowings. In management's opinion, the company will have ample liquidity to
meet its various cash needs throughout 1999.
YEAR 2000. The company's assessment, remediation, testing and contingency
planning efforts surrounding Year 2000 readiness are proceeding as planned with
completion of the final project phases projected for late Fall of 1999. To
date, the assessment of internal systems and equipment has been 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 internal systems, however, have been identified as incapable
of processing transactions beyond the Year 2000, the most significant of which
is the advertising billing system at The Washington Post. For this system the
remediation and testing efforts are complete and installation is presently
expected to be completed by late Fall of 1999. The Company believes it has the
ability to perform these functions manually should the remediation efforts not
be completed according to plan.
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 is executing 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 believed to be approximately 90 percent complete as of
the end of October 1999.
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.
<PAGE> 19
19.
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
have been developed 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
has also developed 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.
The company 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 expensed in 1998 and $8 million expected
to be expensed in 1999). The remaining $10 million represents the estimated
cost to replace non-compliant systems and will be capitalized and amortized
over a period ranging between five and seven years. 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.
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.
The above discussion contains forward-looking statements that reflect the
company's current expectations or beliefs concerning future results and events.
These statements are made pursuant to the "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995. Readers are cautioned that
forward-looking statements contained in the Year 2000 discussion should be read
in conjunction with the following disclosures of the company.
CAUTIONARY STATEMENTS CONCERNING FORWARD-LOOKING STATEMENTS. Forward-looking
statements, which the company believes to be reasonable and are made in good
faith, are subject to certain risks and uncertainties that could cause actual
results to differ materially from those expressed in any forward-looking
statements made by, or on behalf of, the company.
Taking into account the foregoing, the following are identified as important
risk factors that could cause actual results to differ from those expressed in
any forward-looking statement made by, or on behalf of, the company.
The dates on which the company believes its Year 2000 readiness project will be
completed are based on management's best estimates, which were derived
utilizing numerous assumptions of future events, including the continued
availability of certain resources, third-party modification plans and other
factors. Unanticipated failures by critical vendors, as well as a failure by
the company to execute successfully its own remediation efforts, however, could
have a material adverse effect on the costs associated with the Year 2000
readiness project and on its completion. Some important factors that might
cause differences between the estimates and actual results include, but are not
limited to, the availability and cost of personnel trained in these areas, the
ability to locate and correct all relevant computer code, the timely and
accurate responses to and correction by third-parties and suppliers, the
ability to implement interfaces between new systems and the systems not being
replaced and similar uncertainties. Due to the general
<PAGE> 20
20.
uncertainty inherent in the Year 2000 problem, the company cannot ensure its
ability to timely and cost-effectively resolve problems associated with the
Year 2000 issue that may affect its operations and business or expose it to
third-party liability.
<PAGE> 21
21.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) The following documents are filed as exhibits to this report:
EXHIBIT
NUMBER DESCRIPTION
3.1 Certificate of Incorporation of the Company as amended through May 12,
1998, and the Certificate of Designation for the Company's Series A
Preferred Stock filed January 22, 1996 (incorporated by reference to
Exhibit 3.1 to the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1995).
3.2 By-Laws of the Company as amended through September 9, 1993
(incorporated by reference to Exhibit 3 to the Company's Quarterly
Report on Form 10-Q for the quarter ended October 3, 1993).
4.1 Credit Agreement dated as of March 17, 1998 among the Company,
Citibank, N.A., Wachovia Bank of Georgia, N.A., and the other Lenders
named therein (incorporated by reference to Exhibit 4.1 to the
Company's Annual Report on Form 10-K for the fiscal year ended
December 28, 1997).
4.2 Form of the Company's 5.50% Notes due February 15, 2009, issued under
the Indenture dated as of February 17, 1999, between the Company and
The First National Bank of Chicago, as Trustee (incorporate by
reference to Exhibit 4.2 to the Company's Annual Report on Form 10-K
for the fiscal year ended January 3, 1999).
4.3 Indenture dated as of February 17, 1999, between the Company and The
First National Bank of Chicago, as Trustee (incorporated by reference
to Exhibit 4.3 to the Company's Annual Report on Form 10-K for the
fiscal year ended January 3, 1999).
11 Calculation of Earnings per Share of Common Stock.
27 Financial Data Schedule - October 3, 1999
(Electronic filing only).
(b) No reports on Form 8-K were filed during the period covered by this
report.
<PAGE> 22
22.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE WASHINGTON POST COMPANY
(Registrant)
Date: November 7, 1999 /s/ Donald E. Graham
---------------- ------------------------
Donald E. Graham, Chairman &
Chief Executive Officer
(Principal Executive Officer)
Date: November 7, 1999 /s/ John B. Morse, Jr.
---------------- ---------------------------
John B. Morse, Jr., Vice President-Finance
(Principal Financial Officer)
<PAGE> 1
Exhibit 11
CALCULATION OF EARNINGS
PER SHARE OF COMMON STOCK
(In thousands of shares)
<TABLE>
<CAPTION>
Thirteen Weeks Ended Thirty-nine Weeks Ended
--------------------------- ------------------------------
October 3, Sept 27, October 3, Sept 27,
1999 1998 1999 1998
--------------------------- ------------------------------
<S> <C> <C> <C> <C>
Number of shares of
Class A and Class B
Common stock outstanding
at beginning of
period 10,091 10,093 10,093 10,089
Issuance of shares of
Class B common stock
(weighted), net of
forfeiture of re-
stricted stock awards 2 2 10 12
Repurchase of Class B
common stock (weighted) (33) (2) (18) (13)
------ ----- ------ ------
Shares used in the computation
of basic earnings per share 10,060 10,093 10,085 10,088
Adjustment to reflect
dilution from common stock
equivalents 41 46 42 44
------ ------ ------ ------
Shares used in the computation
Of diluted earnings per share 10,101 10,139 10,127 10,132
------ ------ ------- -------
Net income available for
common shares $51,452 $81,609 $163,838 $352,548
------ ------ ------- -------
Basic earnings per common
share $5.12 $8.09 $16.25 $34.95
---- ---- ----- -----
Diluted earnings
per common share $5.10 $8.05 $16.18 $34.79
---- ---- ----- -----
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED STATEMENT OF INCOME FOR THE THIRTY-NINE WEEKS ENDED
OCTOBER 3, 1999 AND THE CONDENSED CONSOLIDATED BALANCE SHEET AS OF OCTOBER 3,
1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-02-2000
<PERIOD-END> OCT-03-1999
<CASH> 19,769
<SECURITIES> 191,632
<RECEIVABLES> 324,949
<ALLOWANCES> 61,106
<INVENTORY> 22,350
<CURRENT-ASSETS> 379,093
<PP&E> 1,467,243
<DEPRECIATION> 617,722
<TOTAL-ASSETS> 2,841,952
<CURRENT-LIABILITIES> 415,810
<BONDS> 397,555
11,873
0
<COMMON> 20,000
<OTHER-SE> 1,658,720
<TOTAL-LIABILITY-AND-EQUITY> 2,841,952
<SALES> 0
<TOTAL-REVENUES> 1,617,171
<CGS> 0
<TOTAL-COSTS> 874,765
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 54,685
<INTEREST-EXPENSE> 18,728
<INCOME-PRETAX> 274,288
<INCOME-TAX> 109,500
<INCOME-CONTINUING> 164,788
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 164,788
<EPS-BASIC> 16.25
<EPS-DILUTED> 16.18
</TABLE>
