<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 April 2, 2000 Commission File Number 1-6714
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THE WASHINGTON POST COMPANY
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(Exact name of registrant as specified in its charter)
Delaware 53-0182885
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1150 15th Street, N.W. Washington, D.C. 20071
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(Address of principal executive offices) (Zip Code)
(202) 334-6000
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X . No .
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Shares outstanding at May 3, 2000:
Class A Common Stock 1,739,250 Shares
Class B Common Stock 7,701,160 Shares
<PAGE> 2
2.
THE WASHINGTON POST COMPANY
INDEX TO FORM 10-Q
<TABLE>
<CAPTION>
PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<S> <C>
Condensed Consolidated Statements of Income
(Unaudited) for the Thirteen Weeks
Ended April 2, 2000 and April 4, 1999..........................................................3
Condensed Consolidated Statements of Comprehensive
Income (Unaudited) for the Thirteen Weeks
Ended April 2, 2000 and April 4, 1999..........................................................4
Condensed Consolidated Balance Sheets at April 2, 2000
(Unaudited) and January 2, 2000................................................................5
Condensed Consolidated Statements of Cash Flows
(Unaudited) for the Thirteen Weeks Ended
April 2, 2000 and April 4, 1999................................................................6
Notes to Condensed Consolidated Financial Statements
(Unaudited)....................................................................................7
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition............................................................10
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.......................................................................15
Signatures.........................................................................................................16
Exhibit 11
Exhibit 27 (Electronic Filing Only)
</TABLE>
<PAGE> 3
3.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
The Washington Post Company
Condensed Consolidated Statements of Income (Unaudited)
<TABLE>
<CAPTION>
Thirteen Weeks Ended
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April 2, April 4,
(In thousands, except per share amounts) 2000 1999
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<S> <C> <C>
Operating revenues
Advertising $318,865 $300,002
Circulation and subscriber 147,589 141,431
Education 71,450 52,018
Other 8,867 26,946
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546,771 520,397
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Operating costs and expenses
Operating 296,072 286,583
Selling, general and administrative 135,421 116,997
Depreciation of property, plant and equipment 28,386 25,118
Amortization of goodwill and other intangibles 14,738 14,425
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474,617 443,123
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Income from operations 72,154 77,274
Other income (expense)
Equity in losses of affiliates (11,304) (2,510)
Interest income 224 246
Interest expense (12,567) (6,813)
Other, net (6,938) 6,143
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Income before income taxes 41,569 74,340
Provision for income taxes 17,500 29,150
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Net income 24,069 45,190
Redeemable preferred stock dividends (500) (475)
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Net income available for common shares $ 23,569 $ 44,715
======= =======
Basic earnings per common share $ 2.50 $ 4.43
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Diluted earnings per common share $ 2.49 $ 4.41
======= =======
Dividends declared per common share $ 2.70 $ 2.60
======= =======
Basic average number of common shares outstanding 9,440 10,098
Diluted average number of common shares outstanding 9,458 10,143
</TABLE>
<PAGE> 4
4.
The Washington Post Company
Condensed Consolidated Statements of Comprehensive Income (Unaudited)
<TABLE>
<CAPTION>
Thirteen Weeks Ended
--------------------------------
April 2, April 4,
(In thousands) 2000 1999
---- ----
<S> <C> <C>
Net income $ 24,069 $ 45,190
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Other comprehensive income (loss)
Foreign currency translation adjustment (441) (3,109)
Change in unrealized gain on available-for-sale
securities (3,932) 12,378
Less: reclassification adjustment for realized
gains included in net income - (2,994)
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(4,373) 6,275
Income tax benefit (expense) related to other
comprehensive income 1,456 (3,662)
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(2,917) 2,613
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Comprehensive income $ 21,152 $ 47,803
======= ========
</TABLE>
<PAGE> 5
5.
The Washington Post Company
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
(In thousands) April 2,
2000 January 2,
(unaudited) 2000
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<S> <C> <C>
Assets
Current assets
Cash and cash equivalents $ 29,308 $ 75,479
Investments in marketable equity securities 36,425 37,228
Accounts receivable, net 269,722 270,264
Federal and state income taxes receivable -- 48,597
Inventories 25,189 13,890
Other current assets 33,129 30,701
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393,773 476,159
Property, plant and equipment
Buildings 249,655 249,957
Machinery, equipment and fixtures 1,101,866 1,081,787
Leasehold improvements 54,162 53,048
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1,405,683 1,384,792
Less accumulated depreciation (655,892) (626,899)
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749,791 757,893
Land 37,101 37,301
Construction in progress 63,844 59,712
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850,736 854,906
Investments in marketable equity securities 168,583 165,784
Investments in affiliates 146,043 140,669
Goodwill and other intangibles,
less accumulated amortization 876,974 886,060
Prepaid pension cost 353,045 337,818
Deferred charges and other assets 134,682 125,548
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$2,923,836 $2,986,944
========= =========
Liabilities and Shareholders' Equity
Current liabilities
Accounts payable and accrued liabilities $ 232,153 $ 254,105
Deferred subscription revenue 87,733 80,766
Dividends declared 12,960 --
Short-term borrowings 395,352 487,677
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728,198 822,548
Other liabilities 276,915 273,110
Deferred income taxes 131,862 114,003
Long-term debt 397,685 397,620
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1,534,660 1,607,281
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Redeemable preferred stock 13,148 11,873
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Preferred stock -- --
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Common shareholders' equity
Common stock 20,000 20,000
Capital in excess of par value 121,924 108,867
Retained earnings 2,767,804 2,769,676
Accumulated other comprehensive income (losses)
Cumulative foreign currency translation
adjustment (5,330) (4,889)
Unrealized gain on available-for-sale
securities 2,793 5,269
Cost of Class B common stock held in treasury (1,531,163) (1,531,133)
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1,376,028 1,367,790
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$2,923,836 $2,986,944
========= =========
</TABLE>
<PAGE> 6
6.
The Washington Post Company
Condensed Consolidated Statements of Cash Flows (Unaudited)
<TABLE>
<CAPTION>
Thirteen Weeks Ended
--------------------------------
April 2, April 4,
(In thousands) 2000 1999
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<S> <C> <C>
Cash flows from operating activities:
Net income $ 24,069 $ 45,190
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation of property, plant and equipment 28,386 25,118
Amortization of goodwill and other intangibles 14,738 14,425
Net pension benefit (15,000) (21,658)
Gain on disposition of marketable equity
securities -- (6,689)
Equity in losses of affiliates, net of
distributions 11,304 2,509
Provision for deferred income taxes 10,403 4,048
Change in assets and liabilities:
Decrease in accounts receivable, net 542 9,951
Increase in inventories (11,299) (4,334)
Decrease in accounts payable and
accrued liabilities (21,952) (6,762)
Increase (decrease) in deferred subscription
revenue 6,967 (3,183)
Decrease in income taxes receivable 48,597 22,131
Decrease (increase) in other assets and
other liabilities, net 3,686 (11,324)
Other 6,093 2,692
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Net cash provided by operating activities 106,534 72,114
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Cash flows from investing activities:
Proceeds from sales of marketable equity securities -- 10,527
Purchases of property, plant and equipment (26,524) (29,366)
Investments in certain businesses (4,284) (16,284)
Other investments (16,919) (3,360)
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Net cash used in investing activities (47,727) (38,483)
-------- --------
Cash flows from financing activities:
Net repayment of short term borrowings (92,325) (415,790)
Issuance of long term debt -- 397,425
Dividends paid (12,981) (13,364)
Proceeds from exercise of stock options 547 1,684
Common shares repurchased (219) (770)
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Net cash used in financing activities (104,978) (30,815)
-------- --------
Net (decrease) increase in cash and cash equivalents (46,171) 2,816
Beginning cash and cash equivalents 75,479 15,190
-------- --------
Ending cash and cash equivalents $ 29,308 $ 18,006
======== ========
</TABLE>
<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.
There were no significant acquisitions in the first quarter of 2000. In
the first quarter of 1999, the company acquired businesses for approximately
$16.3 million, including an accredited distance education institute that offers
degrees in paralegal studies and legal nurse consulting.
In March 2000, the company reached an agreement in principle to trade
the assets of certain of its cable television systems located in California for
the assets of certain cable systems owned by AT&T Broadband in Idaho. In a
related transaction, the company reached an agreement in principle whereby
Insight, a cable system operator 50 percent owned by AT&T Broadband, agreed to
purchase a cable system from the company serving 16,000 subscribers in Indiana.
The company anticipates these transactions will be completed in the fourth
quarter of 2000 and result in a net increase of approximately 20,000
subscribers.
Note 2: Investments in Marketable Securities.
Investments in marketable equity securities at April 2, 2000 and January 2,
2000 consist of the following (in thousands):
<TABLE>
<CAPTION>
April 2, January 2,
2000 2000
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<S> <C> <C>
Total cost $200,292 $194,364
Gross unrealized gains 4,716 8,648
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Total fair value $205,008 $203,012
======= =======
</TABLE>
There were no sales of marketable equity securities during the first
quarter of 2000. During the first quarter of 1999, proceeds from sales of
marketable equity securities were $10.5 million and gross realized gains on such
sales were $6.7 million. Gross realized gain or losses 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 first quarter of 2000 and 1999, the company had average
borrowings outstanding of approximately $830.0 million and $449.0 million,
respectively, at average annual interest rates of approximately 5.8 percent and
5.5 percent. During the first quarter of 2000 and 1999, the company incurred
interest expense on borrowings of $12.1 million and $6.2 million, respectively.
<PAGE> 8
8.
Note 4: Business Segments.
The following table summarizes financial information related to each of the
company's business segments. The 2000 and 1999 results of operations information
is for the thirteen weeks ended April 2, 2000 and April 4, 1999, respectively.
The 2000 and 1999 asset information is as of April 2, 2000 and January 2, 2000,
respectively.
(in thousands)
<TABLE>
<CAPTION>
Education Other
and Businesses
Newspaper Television Magazine Cable Career and Corporate
Publishing Broadcasting Publishing Television Services Office Consolidated
---------- ------------ ---------- ---------- -------- ------------- ------------
2000
- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Operating revenues $224,656 $ 78,742 $ 84,690 $ 86,653 $ 72,030 $ - $ 546,771
Income (loss) from
operations $ 36,251 $ 32,349 $ 2,684 $ 14,645 $ (9,627) $ (4,148) $ 72,154
Equity in losses of
affiliates (11,304)
Interest expense, net (12,343)
Other expense, net (6,938)
----------
Income before income
taxes $ 41,569
==========
Depreciation expense $ 9,604 $ 3,111 $ 1,289 $ 11,758 $ 2,624 $ - $ 28,386
Amortization expense $ 392 $ 3,534 $ 1,697 $ 7,414 $ 1,701 $ - $ 14,738
Pension credit $ 4,636 $ 1,346 $ 9,018 $ - $ - $ - $ 15,000
Identifiable assets $704,911 $423,690 $415,135 $710,505 $271,506 $ 47,038 $2,572,785
Investments in
marketable equity
securities 205,008
Investments in
affiliates 146,043
----------
Total assets $2,923,836
==========
</TABLE>
<TABLE>
<CAPTION>
Education Other
and Businesses
Newspaper Television Magazine Cable Career and Corporate
Publishing Broadcasting Publishing Television Services Office Consolidated
---------- ------------ ---------- ---------- -------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
1999
- ----
Operating revenues $209,210 $ 80,297 $ 90,716 $ 80,799 $ 57,412 $ 1,963 $ 520,397
Income (loss) from
operations $ 33,690 $ 34,428 $ 8,970 $ 14,818 $ (7,378) $( 7,254) $ 77,274
Equity in losses of
affiliates (2,510)
Interest expense, net (6,567)
Other income, net 6,143
----------
Income before income
taxes $ 74,340
==========
Depreciation expense $ 8,214 $ 2,788 $ 1,263 $ 10,754 $ 1,993 $ 106 $ 25,118
Amortization expense $ 380 $ 3,560 $ 1,478 $ 7,446 $ 1,561 $ - $ 14,425
Pension credit $ 7,200 $ 2,246 $ 12,212 $ - $ - $ - $ 21,658
Identifiable assets $672,609 $444,372 $409,404 $718,230 $265,960 $132,688 $2,643,263
Investments in
marketable equity
securities 203,012
Investments in
affiliates 140,669
----------
Total assets $2,986,944
==========
</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, recycling operations and the company's
electronic media publishing business (primarily washingtonpost.com).
Television broadcasting operations are conducted through six VHF,
network-affiliated television stations serving the Detroit, Houston, Miami, San
Antonio, Orlando and Jacksonville television markets.
<PAGE> 9
9.
The magazine publishing division consists of the publication of a weekly
news magazine, Newsweek, which has one domestic and three international
editions, the publication of Arthur Frommer's Budget Travel, and the publication
of business periodicals for the computer services industry and the
Washington-area technology community.
Cable television operations consist of over 50 cable systems offering basic
cable and pay television services to approximately 740,000 subscribers in
midwestern, western, and southern states.
Education and career services are provided through the company's
wholly-owned subsidiary Kaplan, Inc. Kaplan's four major lines of businesses
include Test Preparation and Admissions, providing test preparation services for
college and graduate school entrance exams; Kaplan Professional, providing
education and career services to business people and other professionals;
SCORE!, offering multi-media learning and private tutoring to children in
kindergarten through twelfth grade; and KaplanCollege.com, Kaplan's distance
learning business, including Concord University School and Law, the country's
first online Law School.
Other businesses and corporate office for 2000 includes the expenses of
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 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 first quarter of 2000
and 1999, the education and career services operating results include a non-cash
charge of $1.5 million and $2.0 million, respectively, related to these plans.
<PAGE> 10
10.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
This analysis should be read in conjunction with the consolidated financial
statements and the notes thereto.
Revenues and expenses in the first and third quarters are customarily lower
than those in the second and fourth quarters because of significant seasonal
fluctuations in advertising volume. For that reason, the results of operations
for each quarter are compared with those of the corresponding quarter in the
preceding year.
RESULTS OF OPERATIONS
Net income for the first quarter of 2000 was $24.1 million ($2.49 per
share), a decrease of $21.1 million from net income of $45.2 ($4.41 per share)
in the first quarter of last year. The decline in earnings is due to increased
costs associated with the development of new businesses (impact of $12.8 million
or $1.39 per share), the absence of marketable security sale gains recorded in
the first quarter of 1999 which did not recur in 2000 (impact of $4.1 million or
$.40 per share), higher interest expense (impact of $3.1 million or $.36 per
share), and a reduced pension credit (impact of $4.3 million or $.41 per share).
These declines were offset in part by improved operating results at the
company's newspaper publishing division.
Revenue for the first quarter of 2000 was $546.8 million, up 5 percent from
$520.4 million in 1999. Advertising revenues and circulation and subscriber
revenues increased 6 percent and 4 percent, respectively, over the prior year.
Education revenues increased 38 percent and other operating revenues decreased
69 percent as compared to last year. The increase in advertising revenues is
mostly due to a 9 percent increase in advertising revenue at The Washington
Post. The increase in circulation and subscriber revenues is the result of a 6
percent improvement in subscriber revenues at Cable One, mainly due to rate
increases established to offset the rising cost of programming. Growth at
Kaplan, Inc., from acquisitions completed after March 1999 as well as growth at
Kaplan's Score! and test preparation businesses, accounted for the majority of
the increase in education revenues. The decrease in other revenues is
attributable to the absence of revenues generated by Kaplan's career fair and
HireSystems businesses (these businesses were contributed to BrassRing in the
third quarter of 1999), as well as the absence of revenues from Legi-Slate (sold
in June 1999).
Costs and expenses for the first quarter of 2000 increased 7 percent to
$474.6 million from $443.1 million in 1999. The increase in costs and expenses
is the result of increased spending for new business initiatives, increased
depreciation expense and decreased pension credit. The increased spending for
new business initiatives
<PAGE> 11
11.
occurred mainly at Kaplan, Inc., and Washingtonpost.Newsweek Interactive (WPNI).
At Kaplan, additional spending was focused on the launch and build-out of
various distance learning websites (including kaptest.com and kaplancollege.com)
and the marketing and expansion of Score! learning centers. In addition, Kaplan
continued the development of eSCORE.com, an educational services website
designed to help parents with the educational development of their children. At
Washingtonpost.Newsweek Interactive, increased spending was dedicated
principally to marketing and sales initiatives as well as the further
development of the website's features. The increase in depreciation expense is
mainly due to capital spending at Cable One, The Washington Post, WPNI and
Kaplan. The company's expenses for the first quarter of 2000 were reduced by
$15.0 million of pension credits, compared to $21.0 million in the first quarter
of 1999. Management expects the 2000 annual pension credit will approximate
$60.0 million, compared to $82.0 million in 1999.
Operating income for the quarter decreased 7 percent to $72.2 million, from
$77.3 million in 1999.
NEWSPAPER PUBLISHING DIVISION. Newspaper publishing division revenue totaled
$224.7 million for the first quarter of 2000, a 7 percent increase over revenue
of $209.2 million in the first quarter of 1999. Division operating income for
the first quarter increased 8 percent to $36.3 million, from $33.7 million in
1999. The improvement in division operating results is primarily attributable to
a 25 percent increase in the operating income of The Washington Post newspaper,
offset in part by increased spending for the marketing and advancement of
washingtonpost.com.
Post advertising revenue increased 9 percent to $166.4 million, from $153.1
million in 1999. Post daily circulation increased 1 percent; Sunday circulation
for the first quarter of 2000 remained essentially unchanged.
Net revenues at washingtonpost.com more than doubled in the first quarter
of 2000 compared to the same period in 1999. Sale of online classified
advertisements accounted for most of the increase.
TELEVISION BROADCASTING DIVISION. Revenue for the broadcast division declined 2
percent in the first quarter of 2000 to $78.7 million, from $80.3 million in
1999. Operating income for the first quarter of 2000 decreased 6 percent to
$32.3 million, compared to $34.4 million in the first quarter of 1999. General
softness in advertising accounted for the decline in first quarter operating
income.
MAGAZINE PUBLISHING DIVISION. Revenue for the magazine publishing division
decreased 7 percent in the first quarter of 2000 to $84.7 million, from $90.7
million in the first quarter of 1999. Magazine division operating income totaled
$2.7 million for the first quarter
<PAGE> 12
12.
of 2000, compared to $9.0 million for the same period in the prior year. The
first quarter revenue and operating income was affected by the timing of a
technology trade show conducted by the division's computer technology trade
periodicals unit. The trade show will be conducted in the second quarter of 2000
versus the first quarter of 1999. Operating income was also adversely affected
by a decline in pension credits.
Revenue derived from publishing Newsweek, Arthur Frommer's Budget Travel and
computer trade periodicals was up slightly for the quarter.
CABLE TELEVISION DIVISION. Cable division revenue of $86.7 million for the first
quarter of 2000 represents a 7 percent increase over 1999 first quarter revenue
of $80.8 million. Cable division cash flow (operating income excluding
depreciation and amortization expense) totaled $33.8 million for the first
quarter of 2000, a 2 percent increase over the first quarter of 1999. Cable
division operating income declined 1 percent. The decline in operating income is
due mostly to an increase in programming expenses and higher depreciation
expense. The increase in depreciation expense is due to capital spending for
system rebuilds and upgrades which will enable the cable division to begin
rolling-out new digital video and high-speed cable modem services to its
subscribers in the second quarter of 2000.
At the end of the first quarter of 2000, there were 741,400 basic
subscribers.
EDUCATION AND CAREER SERVICES DIVISION. The company provides education and
career services through its subsidiary, Kaplan, Inc. Kaplan's four major lines
of businesses include Test Preparation and Admissions, providing test
preparation services for college and graduate school entrance exams; Kaplan
Professional, providing education and career services to business people and
other professionals; SCORE!, offering multi-media learning and private tutoring
to children in kindergarten through twelfth grade; and KaplanCollege.com,
Kaplan's distance learning business, including Concord University School and
Law, the country's first online Law School.
Excluding the operating results of the career fair and HireSystems
businesses from 1999 (these businesses were contributed to BrassRing in the
third quarter of 1999), education and career services revenue increased 41
percent to $72.0 million in the first quarter of 2000, compared to $51.1 million
in 1999. Operating losses for the quarter totaled $9.6 million, compared to $4.6
million in the first quarter of 1999. Approximately half of the 2000 revenue
increase is attributable to businesses acquired after the first quarter of 1999.
The remaining increase in revenue is due mostly to growth at the Score! and test
preparation businesses. The decline in 2000 operating results is primarily
attributable to marketing and expansion
<PAGE> 13
13.
activities at Score!, start-up costs associated with eSCORE.com and the
development of various distance learning initiatives (including kaptest.com and
kaplancollege.com), offset in part by operating income generated by acquisitions
completed after the first quarter of 1999.
At the end of the first quarter of 2000, Score! operated 100 learning
centers, compared to 68 centers at the end of the first quarter of 1999.
Including the operating results of the career fair and HireSystems
businesses in 1999, education and career services revenue increased 25 percent
to $72.0 million in the first quarter of 2000, compared to $57.4 million in
1999. Operating losses for the quarter totaled $9.6 million, compared to
operating losses of $7.4 million in the first quarter of 1999.
OTHER BUSINESSES AND CORPORATE OFFICE. Operating losses for the first quarter of
2000 totaled $4.1 million, representing a 43 percent improvement compared to the
first quarter of 1999. The reduction in losses for the first quarter 2000 is
primarily attributable to the absence of losses generated by Legi-Slate (sold in
June 1999) and reduced spending at the company's corporate office.
EQUITY IN LOSSES OF AFFILIATES. The company's equity in losses of affiliates in
the first quarter of 2000 was $11.3 million, compared with losses of $2.5
million in the first quarter of 1999. The company's affiliate investments
consist of a 42 percent interest in BrassRing, Inc. (formed in late September
1999), 50 percent interest in the International Herald Tribune, and a 49 percent
interest in Bowater Mersey Paper Company Limited. The decline in 2000 affiliate
results is primarily attributable to BrassRing, Inc., which is in the
development and marketing phase of its operations; BrassRing accounted for
approximately $9.0 million of the total first quarter equity in losses of
affiliates.
In March 2000, BrassRing acquired the Westech Group of Companies, a
provider of Internet recruiting services and high-tech career fairs, from
Central Newspapers, Inc. in exchange for a 23 percent interest in BrassRing. As
a result of this transaction, the company's equity interest in BrassRing
declined from 54 percent to 42 percent. The company began recording its share of
BrassRing losses at the reduced ownership percentage in March 2000.
NET INTEREST EXPENSE. For the first quarter of 2000, the company incurred net
interest expense of $12.3 million, compared to $6.6 million for the same period
in the prior year. At April 2, 2000, the company had $793.1 million in
borrowings outstanding.
NON-OPERATING ITEMS. The company recorded other non-operating expense of $6.9
million for the first quarter of 2000, compared to $6.1
<PAGE> 14
14.
million in non-operating income for the first quarter of 1999. The 1999
non-operating income was comprised mostly of non-recurring gains arising from
the sale of marketable securities (mostly various Internet-related securities).
INCOME TAXES. The effective tax rate during the first quarter of 2000 was 42.0
percent as compared to 39.2 percent in 1999. The increase in the effective tax
rate is principally due to the non-recognition of benefits from state net
operating loss carryforwards generated by certain of the company's new business
start-up activities.
EARNINGS PER SHARE. The calculation of diluted earnings per share for the first
quarter of 2000 was based on 9,458,000 weighted average shares outstanding,
compared to 10,143,000 for the first quarter of 1999. The company made no
significant repurchases of its stock during the first quarter of 2000.
FINANCIAL CONDITION: CAPITAL RESOURCES AND LIQUIDITY
ACQUISITIONS. There were no significant acquisitions in the first quarter of
2000.
INVESTMENTS IN MARKETABLE EQUITY SECURITIES. At April 2, 2000, the fair value of
the company's investments in marketable equity securities was $205.0 million, of
which $168.6 million consists of the company's investment in the common stock of
Berkshire Hathaway, Inc. The remaining investments 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 quarter of 2000, the company's capital
expenditures totaled $26.5 million, the most significant portion of which
related to plant upgrades at the company's cable subsidiary. The company
anticipates it will spend approximately $145.0 million throughout 2000 for
property and equipment, primarily for various projects at the newspaper and
cable divisions.
LIQUIDITY. Throughout the first quarter of 2000 the company repaid $92.3 million
of commercial paper borrowings with cash generated from operations as well as
from the receipt of a $45.0 million income tax refund.
During the first quarter of 2000, the company had average borrowings outstanding
of approximately $830.0 million at an average annual interest rate of 5.8
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 2000.
<PAGE> 15
15.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) The following documents are filed as exhibits to this report:
EXHIBIT
NUMBER DESCRIPTION
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 - April 2, 2000
(Electronic filing only).
(b) No reports on Form 8-K were filed during the period covered by this
report.
<PAGE> 16
16.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE WASHINGTON POST COMPANY
(Registrant)
Date: May 12, 2000 /s/ DONALD E. GRAHAM
- ------------------- ------------------------------------------
Donald E. Graham, Chairman &
Chief Executive Officer
(Principal Executive Officer)
Date: May 12, 2000 /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
-----------------------------------
April 2, April 4,
2000 1999
---------- -----------
<S> <C> <C>
Number of shares of
Class A and Class B
common stock outstanding
at beginning of
period 9,439 10,093
Issuance of shares of
Class B common stock
(weighted), net of
forfeiture of restricted
stock awards 1 5
------- -------
Shares used in the
computation of basic
earnings per common share 9,440 10,098
Adjustment to reflect
dilution from common stock
equivalents 18 45
------- -------
9,458 10,143
------- -------
Net income available for
common shares $ 23,569 $ 44,715
------- -------
Basic earnings per common
share $ 2.50 $ 4.43
------- -------
Diluted earnings per
common share $ 2.49 $ 4.41
------- -------
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENT OF INCOME FOR THE THIRTEEN WEEKS ENDED APRIL 2, 2000 AND
THE CONSOLIDATED BALANCE SHEET AS OF APRIL 2, 2000 AND IS QUILIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> APR-02-2000
<CASH> 29,308
<SECURITIES> 205,008
<RECEIVABLES> 338,745
<ALLOWANCES> 69,023
<INVENTORY> 25,189
<CURRENT-ASSETS> 393,773
<PP&E> 1,506,628
<DEPRECIATION> 655,892
<TOTAL-ASSETS> 2,923,836
<CURRENT-LIABILITIES> 728,198
<BONDS> 397,685
0
13,148
<COMMON> 20,000
<OTHER-SE> 1,356,028
<TOTAL-LIABILITY-AND-EQUITY> 2,923,836
<SALES> 0
<TOTAL-REVENUES> 546,771
<CGS> 0
<TOTAL-COSTS> 296,072
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 14,157
<INTEREST-EXPENSE> 12,567
<INCOME-PRETAX> 41,569
<INCOME-TAX> 17,500
<INCOME-CONTINUING> 24,069
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 24,069
<EPS-BASIC> $2.50
<EPS-DILUTED> $2.49
</TABLE>
