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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 March 29, 1998 Commission File Number 1-6714
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THE WASHINGTON POST COMPANY
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(Exact name of registrant as specified in its charter)
Delaware 53-0182885
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1150 15th Street, N.W. Washington, D.C. 20071
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(Address of principal executive offices) (Zip Code)
(202) 334-6000
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X . No .
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Shares outstanding at May 1, 1998:
Class A Common Stock 1,739,250 Shares
Class B Common Stock 8,350,259 Shares
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THE WASHINGTON POST COMPANY
INDEX TO FORM 10-Q
PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statements of Income
(Unaudited) for the Thirteen Weeks
Ended March 29, 1998 and March 30, 1997..........................3
Condensed Consolidated Balance Sheets at March 29, 1998
(Unaudited) and December 28, 1997................................4
Condensed Consolidated Statements of Cash Flows
(Unaudited) for the Thirteen Weeks Ended
March 29, 1998 and March 30, 1997................................5
Notes to Condensed Consolidated Financial Statements
(Unaudited)......................................................6
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition...............................8
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K......................................12
Signatures........................................................................13
Exhibit 10
Exhibit 11
Exhibit 27 (Electronic Filing Only)
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
The Washington Post Company
Condensed Consolidated Statements of Income (Unaudited)
Thirteen Weeks Ended
-------------------------
March 29, March 30,
(In thousands, except per share amounts) 1998 1997
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Operating revenues
Advertising $292,685 $278,528
Circulation and subscriber 130,341 123,674
Other 60,929 51,899
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483,955 454,101
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Operating costs and expenses
Operating 267,587 243,504
Selling, general and administrative 109,930 106,886
Depreciation and amortization of
property, plant and equipment 20,378 17,790
Amortization of goodwill and other intangibles 10,743 7,953
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408,638 376,133
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Income from operations 75,317 77,968
Other income (expense)
Equity in earnings of affiliates 988 125
Interest income 207 1,112
Interest expense (2,244) (165)
Other, net (Note 2) 258,106 (846)
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Income before income taxes 332,374 78,194
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Provision for income taxes
Current 125,252 30,253
Deferred (752) 247
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124,500 30,500
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Net income 207,874 47,694
Redeemable preferred stock dividends (478) (478)
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Net income available for common shares $207,396 $ 47,216
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Basic earnings per common share $ 20.57 $ 4.35
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Diluted earnings per common share $ 20.47 $ 4.35
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Dividends declared per common share $ 2.50 $ 2.40
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Basic average number of common shares outstanding 10,084 10,844
Diluted average number of common shares outstanding 10,131 10,866
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The Washington Post Company
Condensed Consolidated Balance Sheets
(In thousands) March 29, December 28,
1998 1997
(Unaudited)
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Assets
Current assets
Cash and cash equivalents $ 39,232 $ 21,117
Accounts receivable, less estimated returns,
doubtful accounts and allowances 234,416 244,203
Inventories 23,569 19,213
Other current assets 18,245 23,959
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315,462 308,492
Investments in affiliates 63,734 154,791
Property, plant and equipment
Buildings 188,856 188,836
Machinery, equipment and fixtures 805,608 800,435
Leasehold improvements 40,815 39,017
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1,035,279 1,028,288
Less accumulated depreciation and amortization (598,328) (577,445)
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436,951 450,843
Land 33,953 33,953
Construction in progress 186,923 168,954
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657,827 653,750
Goodwill and other intangibles,
less accumulated amortization 712,547 679,714
Deferred charges and other assets 319,465 280,570
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$ 2,069,035 $ 2,077,317
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Liabilities and Shareholders' Equity
Current liabilities
Accounts payable and accrued liabilities $ 207,324 $ 213,824
Federal and state income taxes 126,779 18,352
Deferred subscription revenue 84,481 80,186
Short-term borrowings -- 296,394
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418,584 608,756
Other liabilities 246,248 241,234
Deferred income taxes 31,005 31,306
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695,837 881,296
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Redeemable preferred stock 11,947 11,947
Preferred stock -- --
Common shareholders' equity
Common stock 20,000 20,000
Capital in excess of par value 34,142 33,415
Retained earnings 2,413,033 2,231,341
Accumulated other comprehensive income (losses)
Cumulative foreign currency translation
adjustment (759) (464)
Unrealized gain on available-for-sale
securities 268 31
Cost of Class B common stock held in treasury (1,105,433) (1,100,249)
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1,361,251 1,184,074
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$ 2,069,035 $ 2,077,317
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The Washington Post Company
Condensed Consolidated Statements of Cash Flows (Unaudited)
Thirteen Weeks Ended
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March 29, March 30,
(In thousands) 1998 1997
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Cash flows from operating activities:
Net income $ 207,874 $ 47,694
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization of property, plant
and equipment 20,378 17,790
Amortization of goodwill and other intangibles 10,743 7,953
Gain on disposition of business (258,436) --
Equity in earnings of affiliates, net
of distributions (326) 498
Provision for deferred income taxes (752) 247
Change in assets and liabilities:
Decrease in accounts receivable, net 9,787 23,574
Increase in inventories (4,356) (6,214)
Decrease in accounts payable and
accrued liabilities (19,672) (13,405)
Increase in income taxes payable 108,427 26,923
(Increase) decrease in other assets and other
liabilities, net (7,616) 4,719
Other 6,089 4,925
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Net cash provided by operating activities 72,140 114,704
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Cash flows from investing activities:
Proceeds from sale of business 330,473 --
Purchases of property, plant and equipment (26,104) (35,206)
Investments in certain businesses (43,580) (23,098)
Other 28 391
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Net cash provided by (used in) investing
activities 260,817 (57,913)
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Cash flows from financing activities:
Principal payments on debt (296,394) --
Dividends paid (12,855) (13,226)
Common shares repurchased (5,593) (41,039)
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Net cash used in financing activities (314,842) (54,265)
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Net increase in cash and cash equivalents 18,115 2,526
Beginning cash and cash equivalents 21,117 102,278
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Ending cash and cash equivalents $ 39,232 $104,804
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The Washington Post Company
Notes to Condensed Consolidated Financial Statements (Unaudited)
Note 1: 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 2: On March 20, 1998, Cowles Media Company ("Cowles") and McClatchy
Newspapers, Inc. ("McClatchy") completed a series of transactions resulting in
the merger of Cowles and McClatchy. In the merger, each share of Cowles common
stock was converted (based upon elections of Cowles stockholders) into shares of
McClatchy stock or a combination of cash and McClatchy stock.
As of the date of the Cowles and McClatchy merger transaction, a wholly-owned
subsidiary of the company owned 3,893,796 (equal to about 28%) of the
outstanding common stock of Cowles, most of which was acquired in 1985. As a
result of this transaction, the company's subsidiary received $330.5 million in
cash from McClatchy and 730,525 shares of McClatchy Class A common stock. The
market value of the McClatchy stock received approximated $21.6 million and is
reflected in "Deferred Charges and other assets" in the Condensed Consolidated
Balance Sheet.
The gain resulting from this transaction, which is included in "Other, net"
in the Condensed Consolidated Statements of Income, increased net income by
approximately $162.8 million and basic and diluted earnings per share by $16.14
and $16.07, respectively.
Note 3: In the first quarter of 1998, the company acquired various businesses
for approximately $43.6 million. These acquisitions included, among others, a
cable system in Grenada, Mississippi serving approximately 7,400 subscribers, an
educational services company that provides English language study programs, and
the publishing rights to the "New Homes Guide", a free-circulation publication
serving the Washington, DC metropolitan area.
In the first quarter of 1997, the company purchased a cable system in
Cleveland, Mississippi serving about 16,000 subscribers for approximately $23.0
million.
In the first quarter of 1998, the company reached definitive agreements to
acquire the assets of cable systems in Anniston, Alabama serving 35,000
subscribers and the assets of cable systems in Mississippi, Texas and Oklahoma
serving approximately 71,500 subscribers. The company also reached an agreement
to sell the assets of 14 small systems in Texas, Oklahoma, Missouri and Kansas
serving approximately 28,000 subscribers. The company expects these transactions
will be completed before the end of the third quarter of 1998 at a net cost of
approximately $153.0 million.
The company has also reached an agreement with TCA Cable Partners to exchange
the assets of selected cable systems in Texas for the assets of selected TCA
Cable Partners cable systems in Oklahoma. The exchange will result in an
increase of approximately 2,500 subscribers to the company. This transaction is
expected to be completed during the second quarter of 1998.
Note 4: During the first three months of 1998 the company repurchased 11,700
shares of its Class B common stock at a cost of approximately $5.6 million.
Note 5: During the first quarter of 1998, the company had average short-term
borrowings of approximately $272 million outstanding at an average interest rate
of approximately 5.6 percent. In March 1998, upon receipt of the cash proceeds
from the Cowles transaction, the company repaid all of its short-term borrowings
then
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outstanding. During the first quarter of 1998, the company incurred interest
cost on short-term borrowings of $3.9 million of which $2.0 million was
capitalized. Interest costs for construction and upgrade of qualifying assets
are capitalized.
In March 1998, the company replaced its existing $300.0 million credit
facility with a five-year, $500.0 million revolving credit facility to support
the issuance of commercial paper. Borrowings under the facility can be used for
general corporate purposes. Under the terms of the credit agreement, interest on
borrowings is at floating rates, and the company is required to pay a facility
fee of 0.055 percent and 0.15 percent on unused and used portions of the
facility, respectively. The credit agreement also contains certain covenants,
including a financial covenant that requires the company to maintain
consolidated shareholders' equity of $850 million. At March 29, 1998, there were
no borrowings outstanding under the facility and the company was in compliance
with all covenants.
Note 6: In June 1997, the Financial Accounting Standards Board issued SFAS No.
130, "Reporting Comprehensive Income." Comprehensive income is the change in
equity of a business enterprise during a period from transactions and other
events and circumstances from nonowner sources. It includes all changes in
equity during a period except those resulting from investments by owners and
distributions to owners. For the thirteen weeks ended March 29, 1998 and March
30, 1997, comprehensive income totaled $207.8 million and $44.1 million,
respectively. Comprehensive income includes net income, foreign currency
translation adjustments and the change in unrealized gain on available-for-sale
securities.
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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 1998 was $207.9 million ($20.47 per
share - diluted basis), an increase of $160.2 million from net income of $47.7
million ($4.35 per share - diluted basis) in the first quarter of last year.
The company's net income included $162.8 million ($16.07 per share -
diluted basis) from the disposition of its 28 percent interest in Cowles Media
Company. The disposition resulted from the merger of Cowles and McClatchy
Newspapers, Inc., which was completed in March of 1998. Excluding the effect of
the disposition, net income decreased $2.6 million, or 5 percent, in the first
quarter of 1998; diluted earnings per share increased 1 percent to $4.40, from
$4.35 in the first quarter of 1997, with fewer average shares outstanding.
Revenues for the first three months of 1998 were $484.0 million, up 7
percent from $454.1 million in 1997. Advertising revenues and circulation and
subscriber revenues both increased 5 percent over the prior year. Other
operating revenues were up 17 percent. The newspaper and broadcast divisions as
well as the recently acquired trade periodicals included in the magazine
division accounted for substantially all of the increase in advertising
revenues. The increase in circulation and subscriber revenues is due to growth
at the cable division and the increase in other revenues is primarily
attributable to higher tuition and other revenues at Kaplan Educational Centers.
Costs and expenses for the first quarter of 1998 increased 9 percent to
$408.6 million, from $376.1 million in the first quarter of 1997. The increase
in costs and expenses is attributable to increases in newsprint expense, new
media spending, and depreciation as well as expenses arising from companies
acquired in 1997 and 1998 and the expansion of the printing facilities of The
Washington Post. These expense increases were partially offset by an increase in
the company's pension credit.
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In the first quarter of 1998, operating income was $75.3 million compared
to $78.0 million in 1997.
NEWSPAPER DIVISION. At the newspaper division, revenues for the first quarter of
1998 increased 5 percent over the comparable period last year. Advertising
revenues for the division rose 6 percent. Advertising volume at The Post totaled
763,400 inches, substantially unchanged from 763,200 inches in the first quarter
of 1997. Preprint advertising volume at The Post increased 13 percent to 363.4
million pieces, compared to 322.9 million pieces in 1997. Circulation revenues
were essentially unchanged from the first quarter of 1997. The Post's Sunday
circulation declined 1 percent while daily circulation was flat compared to the
same period in 1997. Newsprint expense at the Post increased 10 percent in the
first quarter of 1998 compared to the first quarter of last year.
BROADCAST DIVISION. Broadcast division revenues increased 8 percent in the first
quarter of 1998. The increase in revenues is attributable to a 10 percent and 11
percent increase in national and local advertising, respectively, offset
partially by a decline in network compensation.
MAGAZINE DIVISION. Revenues at the magazine division increased 10 percent over
the first quarter of 1997 due primarily to the trade periodicals acquired in the
fourth quarter of 1997.
CABLE DIVISION. At the cable division, first quarter revenues were 11 percent
higher than in the comparable period in 1997. Higher subscriber levels,
resulting mainly from recent acquisitions, as well as slightly higher rates,
accounted for the increase. At the end of the quarter, there were approximately
646,700 basic subscribers.
OTHER BUSINESSES. Revenues from other businesses, principally Kaplan Educational
Centers, Legi-Slate, Digital Ink, MLJ (Moffet, Larson & Johnson) and PASS Sports
(for 1997 only) were substantially the same as the first quarter of last year.
Excluding PASS Sports, which was sold in the third quarter of 1997, revenues
from other businesses increased 17 percent. Growth at Kaplan Education Centers
produced most of the increase.
EQUITY IN EARNINGS OF AFFILIATES. The company's equity in earnings of affiliates
in the first quarter of 1998 was $1.0 million compared with $0.1 million in
1997. The increase was due primarily to improved results at the company's
affiliated newsprint mill, which has benefited from rising newsprint prices.
NON-OPERATING ITEMS. Interest expense, net of interest income, was $2.0 million,
compared with net interest income of $0.9 million in the first quarter of 1997
due to borrowings outstanding for the majority of the first quarter of 1998.
There were no borrowings outstanding
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during the first quarter of 1997. Included in 1998 other, net is a $258.4
million pre-tax gain resulting from the disposition of the company's 28 percent
interest in Cowles Media Company.
INCOME TAXES. The effective tax rate in 1998 was approximately 37.5 percent as
compared to 39.0 percent in 1997. The lower state tax rate applicable to the
Cowles transaction resulted in the overall decline in the effective tax rate.
FINANCIAL CONDITION: CAPITAL RESOURCES AND LIQUIDITY
In the first quarter of 1998, the company acquired various businesses for
approximately $43.6 million. These acquisitions included, among others, a cable
system in Grenada, Mississippi serving approximately 7,400 subscribers, an
educational services company that provides English language study programs, and
the publishing rights to the "New Homes Guide", a free-circulation publication
serving the Washington, DC metropolitan area.
In the first quarter of 1998, the company reached agreements to acquire
the assets of cable systems in Anniston, Alabama serving 35,000 subscribers and
the assets of cable systems in Mississippi, Texas and Oklahoma serving
approximately 71,500 subscribers. The company also reached an agreement to sell
the assets of 14 small systems in Texas, Oklahoma, Missouri and Kansas serving
approximately 28,000 subscribers. The company expects these transactions will be
completed before the end of the third quarter of 1998 at a net cost of
approximately $153.0 million.
The company has also reached an agreement to exchange the assets of
selected cable systems in Texas for the assets of cable systems located in
Oklahoma. The exchange is expected to be completed during the second quarter of
1998 and result in a 2,500 increase in subscribers.
In March 1998, the company received approximately $330.5 million in cash
and 730,525 shares of McClatchy Class A common stock as a result of the Cowles
and McClatchy merger transaction, as previously described. The market value of
the McClatchy stock received approximated $21.6 million, based upon publicly
quoted market prices.
During the first three months of 1998, the company repurchased 11,700
shares of its Class B common stock at a cost of approximately $5.6 million.
Approximately 804,000 Class B common shares remain available for repurchase
under a November 13, 1997 authorization by the Board of Directors.
During the first quarter of 1998, the company had average short-term
borrowings outstanding of approximately $272.0 million at an average interest
rate of 5.6 percent. In March 1998, upon receipt of the cash proceeds from the
Cowles transaction, the company repaid all
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of its short-term borrowings then outstanding totaling approximately $290.0
million.
In March 1998, the company established a 5-year, $500.0 million revolving
credit facility to support the issuance of commercial paper by the company.
Borrowings under the facility can be used for general corporate purposes. At
March 29, 1998, there were no amounts drawn under the facility. This credit
facility replaces a previously existing $300.0 million credit facility.
The company has experienced no other significant changes in its financial
condition since the end of 1997.
The company is continuing its assessment, planning, remediation and
testing efforts surrounding the year 2000 readiness of its computer systems and
software. Included in these efforts, is the process of seeking confirmation from
key vendors stating that materials and services provided to the company will not
be interrupted by year 2000 processing issues. The company plans to implement
the system and programming changes necessary to address year 2000 issues, and
does not believe based upon present facts that the cost of such actions will
have a material effect on the company's results of operations or financial
condition.
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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
10 The Washington Post Company Stock Option Plan as amended and
restated effective March 12, 1998 (supersedes Exhibit 10.3 to the
Company's Annual Report on Form 10-K for the fiscal year ended
December 28, 1997).
11 Calculation of Earnings per Share of
Common Stock.
27.1 Financial Data Schedule - March 29, 1998
27.2 Financial Data Schedule - September 28, 1997
27.3 Financial Data Schedule - June 29, 1997
27.4 Financial Data Schedule - March 30, 1997
27.5 Financial Data Schedule - December 29, 1996
27.6 Financial Data Schedule - September 29, 1996
27.7 Financial Data Schedule - June 30, 1996
27.8 Financial Data Schedule - March 31, 1996
27.9 Financial Data Schedule - December 31, 1995
(Electronic filing only).
(b) On April 2, 1998, the company filed a Report on Form 8-K related to
the disposition of its 28 percent interest in Cowles Media Company.
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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, 1998 /s/ Donald E. Graham
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Donald E. Graham, Chairman &
Chief Executive Officer
(Principal Executive Officer)
Date: May 12, 1998 /s/ John B. Morse, Jr.
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John B. Morse, Jr., Vice President-Finance
(Principal Financial Officer)
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EXHIBIT 10
THE WASHINGTON POST COMPANY
STOCK OPTION PLAN
(As Amended and Restated effective March 12, 1998)
1. Purpose of the Plan
The purpose of this Stock Option Plan (hereinafter called the Plan)
of The Washington Post Company, a Delaware corporation (hereinafter called the
Company), is to secure for the Company and its stockholders the benefits of
incentive inherent in the ownership of Class B Common Stock of the Company by
employees of the Company and its subsidiaries who will be responsible for its
future growth and continued success. It is generally recognized that stock
option plans aid in retaining and encouraging key employees of ability and in
attracting other able employees.
2. Stock Subject to the Plan
There are hereby authorized and reserved for issuance upon the
exercise of options to be granted from time to time under the Plan an aggregate
of 1,900,000 shares* of the Company's Class B Common Stock, which shares may be
in whole or in part, as the Board of Directors shall from time to time
determine, issued shares which shall have been reacquired by the Company or
authorized but unissued shares, whether now or hereafter authorized. If any
option granted under the Plan shall expire, terminate or be canceled for any
reason without having been exercised in full, the corresponding number of
unpurchased shares which were reserved for issuance upon exercise thereof shall
again be available for the purposes of the Plan. To the extent that options
provide that the exercise of one shall reduce the number of shares purchasable
under the other, then, for purposes of the Plan, the Company shall be deemed to
have awarded options only for the aggregate number of shares which in fact may
be purchased under
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* Adjusted to give effect to stock splits in 1971, 1976 and 1978.
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such options (and not for the number of shares covered by both such options).
3. Administration of the Plan
The Plan shall be administered by the Committee referred to in
paragraph 4 (hereinafter called the Committee). Subject to the express
provisions of the Plan, the Committee shall have plenary authority, in its
discretion, to determine the individuals to whom, and the time or times at
which, options shall be granted and the number of shares to be subject to each
option; provided, however, that the aggregate fair market value of the shares
(determined as of the time the option is granted) for which incentive stock
options (as defined in Section 422 of the Internal Revenue Code of 1986, as it
may be amended from time to time) granted to an employee, under all plans of the
Company and its subsidiaries providing for the grant of incentive stock options,
may first become exercisable in any calendar year after 1986 shall not exceed
$100,000. In making such determinations, the Committee may take into account the
nature of the services rendered or expected to be rendered by the respective
employees, their present and potential contributions to the Company's success,
the anticipated number of years of effective service remaining and such other
factors as the Committee in its discretion shall deem relevant. Subject to the
express provisions of the Plan, the Committee shall also have plenary authority
to interpret the Plan, to prescribe, amend and rescind rules and regulations
relating to it, to determine the terms and provisions of the respective options
(which terms and provisions need not be the same in each case), and to make all
other determinations deemed necessary or advisable in administering the Plan.
The determinations of the Committee on the matters referred to in this paragraph
3 shall be conclusive.
4. The Committee
The Committee shall consist of not less than three members of the
Board of Directors, each of whom shall be a "disinterested" person within the
meaning of Rule 16b-3 of the Securities Exchange Act of 1934, as amended (or any
successor rule or regulation). No member of the Committee shall be eligible to
receive an option under the Plan. The Committee shall be appointed by the Board
of Directors, which may from time to time appoint members to the Committee in
substitution for or in addition to members previously appointed and may fill
vacancies, however caused, in the Committee; the Board of Directors shall also
designate one of the members of the Committee as its Chairman. The Committee
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shall hold its meetings at such times and places as it may determine. A majority
of its members shall constitute a quorum. All determinations of the Committee
shall be made by a majority of its members. Any decision or determination
reduced to writing and signed by all the members shall be fully as effective as
if it had been made by a majority vote at a meeting duly called and held. The
Committee may appoint a secretary (who need not be a member of the Committee)
and may make such rules and regulations for the conduct of its business as it
shall deem advisable. No member of the Committee shall be liable, in the absence
of bad faith, for any act or omission with respect to his service on the
Committee. Service on the Committee shall constitute service as a Director of
the Company so that the members of the Committee shall be entitled to
indemnification and reimbursement as Directors of the Company pursuant to its
Certificate of Incorporation.
5. Time of Granting of Options
Nothing contained in the Plan or in any resolution adopted or to be
adopted by the Board of Directors or by the stockholders of the Company shall
constitute the granting of any option hereunder. The action of the Committee
with respect to the granting of an option shall take place on such date as a
majority of the members of the Committee at a meeting shall make a determination
with respect to the granting of an option or, in the absence of a meeting, on
such date as a written Designation covering such option shall have been executed
by all the members of the Committee. The effective date of the grant of an
option (hereinafter called the Granting Date) shall be the date specified by the
Committee in its determination or Designation relating to the award of such
option.
6. Eligibility
Options may be granted only to key employees (which term shall be
deemed to include officers) who on the Granting Date are in the employ of the
Company or one of its present or future subsidiary corporations, as defined in
Section 424 of the Internal Revenue Code of 1986, as the same shall be amended
from time to time (hereinafter called Subsidiaries). A Director of the Company
or of a Subsidiary who is not also such an employee of the Company or one of its
Subsidiaries shall not be eligible to receive an option. During the life of the
Plan options may be granted to eligible employees whether or not they hold or
have held options under the Plan or other options previously granted by the
Company.
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7. Option Prices
The purchase price of the Class B Common Stock under each option
shall be determined by the Committee, but shall not be less than 100% of the
fair market value of the Class B Common Stock on the Granting Date of such
option, as determined by the Committee. The purchase price of shares purchased
upon the exercise of an option is to be paid in full upon the issuance of such
shares, either in cash or by the surrender of whole shares of Class B Common
Stock having a fair market value, as determined by the Committee, equal to such
purchase price, or by a combination of cash and whole shares. If paid in cash,
the purchase price paid for stock upon the exercise of options shall be added to
the general funds of the Company and used for corporate purposes. If paid in
whole or in part in shares, the shares surrendered shall be held as Treasury
shares.
In the alternative, the Committee may, in its discretion at any
time, determine whether to permit an optionee the right to elect to make a
"cashless exercise" of all or some portion of an option by tendering to the
Company some or all of the vested otherwise exercisable portion of the option in
return for a cash payment from the Company equal to the positive difference, if
any, between the fair market value of the number of shares of Class B Common
Stock covered by such tendered portion of the option and the aggregate option
price attributable to such shares. The Company shall cause appropriate tax
withholding to be made with respect to any such cash payment upon a "cashless
exercise" of an option by withholding the appropriate amount from the aggregate
proceeds made available through the "cashless exercise". Finally, an optionee
may direct, in connection with a "cashless exercise," that some or all of the
cash otherwise payable to the optionee from the Company be instead applied to
the payment of the option price of shares of Class B Common Stock with respect
to which the optionee has a vested currently exercisable option and which are
not the subject of the current "cashless exercise." As such, the optionee would
be using the value inherent in some existing options to create a source for
funding the exercise of other options. The Company shall effectuate appropriate
income tax withholding with respect to any "cashless exercise" used to fund the
purchase of shares of Class B Common Stock by withholding the appropriate amount
from the aggregate proceeds made available through the "cashless exercise"
(including the amount of tax withholding required with respect to the purchase
of such additional shares of
5
5
Class B Common Stock) and applying the remaining amount of consideration to the
purchase of additional shares of Class B Common Stock.
8. Option Types, Terms and Conditions
Options granted under the Plan shall be in the form of (a) incentive
stock options (as defined in Section 422 of the Internal Revenue Code of 1986,
as it may be amended from time to time) and/or (b) non-qualified stock options.
To the extent that any option that is intended to be an incentive stock option
exceeds the $100,000 limitation set forth in paragraph 3 above, it shall be
deemed to be a non-qualified option.
The term of each option shall be for such period as the Committee
shall determine, but not more than ten years from the Granting Date in the case
of incentive stock options and non-qualified options, subject to earlier
termination as the Committee may determine and as provided in paragraphs 10 and
11 hereof.
The Committee shall, in its discretion, prescribe the terms and
conditions upon which options may be exercised, which terms and provisions need
not be the same in each case. Except as provided in paragraphs 10 and 11 below,
no option may be exercised at any time unless the holder thereof is then an
employee of the Company or of a Subsidiary. An employee shall have none of the
rights of a stockholder with respect to any of the shares subject to option
until such shares shall be issued to him upon the exercise of his option.
The Committee may grant to holders of outstanding options, in
exchange for the surrender and cancellation of such options, new options (which
may be incentive stock options and/or non-qualified stock options) having
purchase prices lower than the purchase prices provided in the options so
surrendered and canceled and containing such other terms and conditions as the
Committee may prescribe in accordance with the provisions of the Plan; provided
that such new options shall provide for the purchase of not more than 90% of the
number of shares covered by the options so surrendered and canceled and that the
purchase price under such new options shall be determined in accordance with
paragraph 7 hereof.
The maximum number of shares subject to options which may be granted
under this Plan to any individual
6
6
employee during the life of this Plan shall not exceed 250,000 in the aggregate.
9. Non-Transferability of Options
No option granted under the Plan shall be transferable otherwise
than by will or the laws of descent and distribution and an option may be
exercised, during the lifetime of the holder thereof, only by him.
10. Termination of Employment
In the event that the employment of an employee to whom an option
has been granted under the Plan shall be terminated (otherwise than by reason of
death), such option may, subject to the provisions of paragraphs 8 and 12, be
exercised (only to the extent that the employee was entitled to do so at the
termination of his employment) at any time within three months after such
termination, but in no event after the expiration of the term of the option.
Notwithstanding the foregoing, the Committee may permit any option granted to an
employee whose employment is being terminated (otherwise than by reason of
death) to remain exercisable for such period as the Committee shall determine,
but in no event beyond the expiration of the term of the option. In the event
the Committee so extends the exercise period of an option held by a
terminating employee and such option is exercisable as to additional shares in
installments, such installments shall continue to accrue after the termination
of employment unless the Committee determines that the exercise period shall be
extended only with respect to the number of shares purchasable at the date of
the termination of employment. Options granted under the Plan shall not be
affected by any change of employment so long as the holder continues to be an
employee of the Company or of a Subsidiary. Retirement pursuant to any
retirement plan of the Company or any Subsidiary shall be deemed to be a
termination of employment for the purposes of this paragraph. The Committee may
specify in the original terms of an option, or if not so specified shall
determine, whether any authorized leave of absence or absence on military or
governmental service or for any other reason shall constitute a termination of
employment for purposes of this paragraph. Nothing in the Plan or in any option
granted pursuant to the Plan (in the absence of an express provision to the
contrary) shall confer on any individual any right to continue in the employ of
the Company or any of its Subsidiaries or interfere in any way with the right of
the Company or any of its Subsidiaries to terminate his employment at any time.
7
7
11. Death of Holder of Option
Upon the death of the holder of an option granted under the Plan,
such option may be exercised (unless the option otherwise provides) for the
following specified number of shares by a legatee or legatees of such option
under the holder's last will, or by the holder's personal representatives or
distributees, at any time within one year after the holder's death, but in no
event after the expiration of the term of the option: (i) if death occurs while
the holder is employed by the Company or a subsidiary, to the extent of (a) the
shares purchasable by such holder at the date of his death plus (b) the
additional shares covered by the next installment, if any, of such option, or
(ii) if death occurs within three months after the termination of the holder's
employment or during any extension of the post-termination exercise period
permitted by the Committee pursuant to paragraph 10 hereof, to the extent of the
shares purchasable by such holder at the date of his death.
12. Employee's Agreement to Serve
The recipient of any option exercisable by the optionee within
twelve months of the Granting Date shall agree to serve in the employ of the
Company or, at the election of the Company from time to time, one of its
Subsidiaries, for such period as the Committee shall determine, which shall not
be less than twelve months following the Granting Date. The Committee shall be
authorized in its discretion to grant options not exercisable by the optionee
within twelve months of the Granting Date, in which case the recipient of such
option need not (unless otherwise determined by the Committee) agree to serve in
the employ of the Company or its Subsidiaries.
13. Adjustments in Class B Common Stock
Notwithstanding any other provision of the Plan, each option may
contain such provisions as the Committee shall determine to be appropriate for
the adjustment of the number and class of shares subject to such option, the
option price and the number of shares as to which the option shall be
exercisable at any time in the event of changes in the outstanding Class B
Common Stock by reason of any stock dividend, split-up, recapitalization,
combination or exchange of shares, merger, consolidation, separation,
reorganization, liquidation and the like. In the event of any such change in
8
8
the outstanding Class B Common Stock, the class and aggregate number of shares
available under the Plan shall be appropriately adjusted by the Committee,
whose determination shall be conclusive.
14. Amendment and Termination
Incentive stock options may not be granted after March 11, 2003; and
unless the Plan shall theretofore have been terminated as hereinafter provided,
the Plan shall terminate on, and no non-qualified option shall be granted
thereunder after, December 31, 2003, provided that the Board of Directors may at
any time prior to that date terminate the Plan. The Board of Directors shall
have complete power and authority to amend the Plan, provided, however, that the
Board of Directors shall not, without the affirmative vote of the holders of a
majority of the voting stock of the Company entitled to vote thereon, (i)
increase the maximum number of shares for which options may be granted under the
Plan, (ii) change the formula as to minimum option prices, (iii) extend the
period during which options may be granted or exercised or (iv) change the class
of employees to whom options may be granted. No termination or amendment of the
Plan may, without the consent of the individual to whom any option shall
theretofore have been granted, adversely affect the rights of such individual
under such option.
15. Government and Other Regulations
The obligation of the Company to sell and deliver shares under
options granted under the Plan shall be subject to all applicable laws, rules
and regulations, and to such approvals by any governmental agencies as may be
required, including, but not by way of limitation, the effectiveness of a
Registration Statement under the Securities Act of 1933, as amended, as deemed
necessary or appropriate by counsel for the Company.
16. Other Actions
Nothing contained in the Plan shall be construed to limit the
authority of the Company to exercise its corporate rights and powers, including,
but not by way of limitation, the right of the Company (i) to grant options for
proper corporate purposes otherwise than under the Plan to any employee or other
person, firm, corporation or association or (ii) to grant options to, or assume
the option of, any person in connection with the acquisition, by purchase,
lease, merger, consolidation or otherwise, of the business and
9
9
assets (in whole or in part) of any person, firm, corporation or association.
1
Exhibit 11
CALCULATION OF EARNINGS
PER SHARE OF COMMON STOCK
(In thousands of shares)
Thirteen Weeks Ended
---------------------------
March 29, March 30,
1998 1997
--------- ---------
Number of shares of
Class A and Class B
common stock outstanding
at beginning of
period 10,089 10,910
Issuance of shares of
Class B common stock
(weighted), net of
forfeiture of re-
stricted stock awards 3 16
Repurchase of Class B
common stock (weighted) (8) (82)
------ ------
Shares used in the
computation of basic
earnings per common share 10,084 10,844
Adjustment to reflect
dilution from common
stock equivalents 47 22
------ ------
10,131 10,866
------ ------
Net income available for
common shares $207,396 $47,216
------- ------
Basic earnings per common
share $ 20.57 $ 4.35
------- ------
Diluted earnings per
common share $ 20.47 $ 4.35
------- ------
5
1,000
3-MOS
JAN-03-1999
MAR-29-1998
39,232
0
281,313
46,897
23,569
315,462
1,256,155
598,328
2,069,035
418,584
0
11,947
0
20,000
1,341,251
2,069,035
0
483,955
0
267,587
0
14,360
2,244
332,374
124,500
207,874
0
0
0
207,874
20.57
20.47
NOTE: EPS-PRIMARY REPRESENTS BASIC EARNINGS PER SHARE.
5
1,000
9-MOS
DEC-28-1997
SEP-28-1997
34,202
0
294,818
51,029
26,931
328,390
1,220,147
627,517
1,983,104
330,350
0
11,947
0
20,000
1,353,713
1,983,104
0
1,433,851
0
743,547
0
48,554
505
314,012
123,410
190,602
0
0
0
190,602
17.63
17.59
NOTE: "EPS-PRIMARY" REPRESENTS BASIC EARNINGS PER SHARE.
5
1,000
6-MOS
DEC-28-1997
JUN-29-1997
63,127
0
284,621
50,061
26,795
342,946
1,176,275
613,048
1,886,869
290,295
0
11,947
0
20,000
1,307,198
1,886,869
0
955,476
0
489,982
0
31,556
323
194,051
75,000
119,051
0
0
0
119,051
10.97
10.95
NOTE: "EPS-PRIMARY" REPRESENTS BASIC EARNINGS PER SHARE.
5
1,000
3-MOS
DEC-28-1997
MAR-30-1997
104,804
0
255,743
46,254
30,641
362,778
1,135,134
600,110
1,884,055
311,323
0
11,947
0
20,000
1,284,478
1,884,055
0
454,101
0
243,504
0
15,834
165
78,194
30,500
47,694
0
0
0
47,694
4.35
4.35
NOTE: "EPS-PRIMARY" REPRESENTS BASIC EARNINGS PER SHARE.
5
1,000
YEAR
DEC-29-1996
DEC-29-1996
102,278
0
281,451
48,388
24,427
382,631
1,105,558
594,195
1,870,411
281,636
0
11,947
0
20,000
1,302,803
1,870,411
0
1,853,445
0
1,007,057
0
61,653
1,514
360,217
139,400
220,817
0
0
0
220,817
20.08
20.05
NOTE: "EPS-PRIMARY" REPRESENTS BASIC EARNINGS PER SHARE.
5
1,000
9-MOS
DEC-29-1996
SEP-29-1996
101,010
0
267,317
45,932
23,207
387,945
1,081,296
581,698
1,855,330
314,704
0
11,947
0
20,000
1,252,214
1,855,330
0
1,349,797
0
741,885
0
36,208
1,390
255,094
99,543
155,551
0
0
0
155,551
14.11
14.10
NOTE: "EPS-PRIMARY" REPRESENTS BASIC EARNINGS PER SHARE.
5
1,000
6-MOS
DEC-29-1996
JUN-30-1996
101,664
0
277,092
44,624
24,531
380,884
1,037,037
566,918
1,785,669
276,476
0
11,947
0
20,000
1,226,283
1,785,669
0
889,471
0
496,121
0
28,338
1,222
164,200
64,040
100,160
0
0
0
100,160
9.10
9.10
NOTE: "EPS-PRIMARY" REPRESENTS BASIC EARNINGS PER SHARE.
5
1,000
3-MOS
DEC-29-1996
MAR-31-1996
73,950
0
238,309
40,896
30,601
329,748
1,042,647
550,799
1,753,336
300,311
0
11,947
0
20,000
1,171,708
1,753,336
0
416,619
0
242,482
0
12,390
1,083
60,561
23,619
36,942
0
0
0
36,942
3.34
3.34
NOTE: "EPS-PRIMARY" REPRESENTS BASIC EARNINGS PER SHARE.
5
1,000
YEAR
DEC-31-1995
DEC-31-1995
146,901
12,756
242,662
41,964
26,766
406,570
993,050
535,691
1,732,893
308,177
0
0
0
20,000
1,164,204
1,732,893
0
1,719,449
0
948,088
0
57,233
5,600
311,396
121,300
190,096
0
0
0
190,096
17.16
17.15
NOTE: "EPS-PRIMARY" REPRESENTS BASIC EARNINGS PER SHARE.
