1 ----------------------------------------------------------------------------- ----------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 -------------------- FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] For the fiscal year ended January 2, 1994 Commission file number 1-6714 The Washington Post Company (Exact name of registrant as specified in its charter) Delaware 53-0182885 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) 1150 15th St., N.W., Washington, D.C. 20071 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (202) 334-6000 SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NAME OF EACH EXCHANGE ON TITLE OF EACH CLASS WHICH REGISTERED ------------------- ------------------------ Class B Common Stock, par value New York Stock Exchange $1.00 per share 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 . ----- ----- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. /X/ Aggregate market value of the Company's voting stock held by non-affiliates on February 28, 1994, based on the closing price for the Company's Class B Common Stock on the New York Stock Exchange on such date: approximately $1,539,000,000. Shares outstanding at February 28, 1994: Class A Common Stock - 1,843,250 shares Class B Common Stock - 9,870,115 shares Documents partially incorporated by reference: Definitive Proxy Statement for the Company's 1994 Annual Meeting of Stockholders (incorporated in Part III to the extent provided in Items 10, 11, 12 and 13 hereof). ----------------------------------------------------------------------------- ----------------------------------------------------------------------------- 2 PART I ITEM 1. BUSINESS. The principal business activities of The Washington Post Company (the "Company") consist of newspaper publishing (principally The Washington Post), television broadcasting (through the ownership and operation of four network-affiliated stations), the ownership and operation of cable television systems, and magazine publishing (Newsweek magazine). Information concerning the consolidated operating revenues, consolidated income from operations and identifiable assets attributable to the principal segments of the Company's business for the last three fiscal years is contained in Note M to the Company's Consolidated Financial Statements appearing elsewhere in this Annual Report on Form 10-K. (Revenues for each segment are shown in such Note M net of intersegment sales, which did not exceed .2% of consolidated operating revenues.) During each of the last three years the Company's operations in geographic areas outside the United States, consisting primarily of the publication of the international editions of Newsweek and cable television operations in the United Kingdom, accounted for less than 7% of the Company's consolidated revenues and less than 1% of its consolidated income from operations, and the identifiable assets attributable to such operations represented less than 7% of the Company's consolidated assets. NEWSPAPER PUBLISHING THE WASHINGTON POST The Washington Post is a morning and Sunday newspaper primarily distributed by home delivery in the Washington, D.C. metropolitan area, including large portions of Virginia and Maryland. The following table shows the average paid daily (including Saturday) and Sunday circulation of The Post for the twelve-month periods ended September 30 in each of the last five years, as reported by the Audit Bureau of Circulations ("ABC") for the years 1989-1992 and as estimated by The Post for the twelve-month period ended September 30, 1993 (for which period ABC had not completed its audit as of the date of this report) from the semi-annual publisher's statements submitted to ABC for the six-month periods ended March 31, 1993 and September 30, 1993: The rate charged to subscribers for home-delivered copies of the daily and Sunday newspaper for each four-week period has been $9.20 since 1988. A price increase for Sunday-only home-delivered copies of the newspaper went into effect on January 20, 1991, raising the rate per four-week period from $5.00 (which had been the rate since 1983) to $6.00. On April 6, 1992, the newsstand price for the Sunday newspaper was increased from $1.25 (which price had been in effect since 1986) to $1.50. The newsstand price for the daily newspaper has been $0.25 since 1981. 1
AVERAGE PAID CIRCULATION ------------------------ DAILY SUNDAY ----- ------ 1989................................................. 785,076 1,137,515 1990................................................. 794,822 1,145,393 1991................................................. 807,129 1,154,138 1992................................................. 815,225 1,158,329 1993................................................. 825,339 1,153,705 3 General advertising rates were increased by approximately 4.3% on February 3, 1993, and approximately another 3.7% on January 1, 1994. Rates for most categories of classified and retail advertising were increased by approximately 4.3% on February 1, 1993, and approximately an additional 4.1% on February 1, 1994. The following table sets forth The Post's advertising inches (excluding preprints) and number of preprints for the past five years: The Post also publishes The Washington Post National Weekly Edition, a tabloid which contains selected articles and features from The Washington Post edited for a national audience. The National Weekly Edition has a basic subscription price of $48.00 per year and is delivered by second class mail to approximately 114,000 subscribers. The Post has about 520 full-time editors, correspondents, reporters and photographers on its staff, draws upon the news reporting facilities of the major wire services and maintains correspondents in 18 news centers abroad and in New York City, Los Angeles, Chicago, Miami, Richmond, Baltimore, Annapolis and Austin, Texas. THE HERALD The Company owns The Daily Herald Company, publisher of The Herald in Everett, Washington, about 30 miles north of Seattle. The Herald is published mornings seven days a week and is primarily distributed by home delivery in Snohomish County. The Herald's average paid circulation as reported to ABC for the twelve months ended September 30, 1993, was 52,356 daily (including Saturday) and 63,732 Sunday (up .3% and down .5%, respectively, from the twelve months ended September 30, 1992). Full- run advertising inches (excluding preprints) decreased 4.0% in 1993 to 888,952 inches, while zoned part-run advertising increased 11.8% to 107,667 inches. The number of preprints distributed increased 3.9% to 100,128,775. The Herald employs approximately 57 editors, reporters and photographers. THE GAZETTE NEWSPAPERS In June 1993 the Company acquired the 16% of the common stock of The Gaithersburg Gazette, Inc. it did not already own. This subsidiary (the name of which has been changed to The Gazette Newspapers, Inc.) publishes one paid-circulation and 13 controlled- circulation weekly community newspapers (collectively known as The Gazette Newspapers) in Montgomery County and limited parts of Frederick and Carroll Counties, Maryland. During 1993 The Gazette Newspapers had an aggregate average weekly circulation of more than 230,000 copies. The Gazette Newspapers have approximately 60 editors, reporters and photographers on their combined staffs. 2
1989 1990 1991 1992 1993 ----- ---- ---- ---- ---- Total Inches (in thousands).............. 4,679 4,125 3,571 3,435 3,394 Full-Run Inches ..................... 4,492 3,938 3,376 3,215 3,165 Part-Run Inches ..................... 187 187 195 220 229 Preprints (in millions).................. 921 987 993 1,135 1,142 4 TELEVISION BROADCASTING Through wholly owned subsidiaries the Company owns four VHF television stations located in Detroit, Michigan; Miami, Florida; Hartford, Connecticut; and Jacksonville, Florida; which are respectively the 9th, 16th, 25th and 54th largest broadcasting markets in the United States. Each of the Company's stations is affiliated with a national network. Although network affiliation agreements generally have limited terms, such agreements typically are renewed and each of the Company's television stations has maintained its network affiliation continuously for at least twenty years. The Company's 1993 net operating revenues from television advertising, by category, were as follows: The following table sets forth certain information with respect to each of the Company's television stations:
National ................................... $ 85,804,000 Local ................................... 80,557,000 Network ................................... 7,808,000 ------------ Total ................................... $174,169,000 ------------- (a) Source: 1993/94 DMA Market Rankings, Nielsen Media Research, Fall 1993, based on television homes in DMA (see note (b) below). (b) Designated Market Area ("DMA") is a market designation of A.C. Nielsen which defines each television market exclusive of another, based on measured viewing patterns. (c) Agreement may be terminated at any time by either party on six months' prior notice. 3
TATION OCATION TOTAL COMMERCIAL ND YEAR NATIONAL EXPIRATION EXPIRATION STATIONS IN DMA(B) OMMERCIAL MARKET DATE OF DATE OF ------------------------ PERATION RANKING NETWORK FCC NETWORK OMMENCED (A) AFFILIATION LICENSE AGREEMENT ALLOCATED OPERATING -------- -------- ----------- ------- --------- --------- --------- WDIV 9th NBC Oct. 1, June 30, VHF-4 VHF-4 Detroit, Mich. 1997 1994 UHF-6 UHF-5 1947 WPLG 16th ABC Feb. 1, April 2, VHF-5 VHF-4 Miami, Fla. 1997 1995(c) UHF-8 UHF-7 1961 WFSB 25th CBS April 1, April 10, VHF-2 VHF-2 Hartford, Conn. 1994 2002 UHF-6 UHF-4 1957 WJXT 54th CBS Feb. 1, July 10, VHF-2 VHF-2 Jacksonville, Fla. 1997 2001 UHF-7 UHF-4 1947 5 In January 1994 subsidiaries of the Company entered into a definitive agreement to acquire the assets of television station KPRC-TV, an NBC affiliate in Houston, Texas, and television station KSAT-TV, an ABC affiliate in San Antonio, Texas, for an aggregate cash purchase price of approximately $250 million. Houston and San Antonio are respectively the 10th and 40th largest broadcasting markets in the United States. REGULATION OF BROADCASTING AND RELATED MATTERS The Company's television broadcasting operations are subject to the jurisdiction of the FCC under the Communications Act of 1934, as amended. Under authority of such Act the FCC, among other things, assigns frequency bands for broadcast and other uses; issues, revokes, modifies and renews broadcasting licenses for particular frequencies; determines the location and power of stations and establishes areas to be served; regulates equipment used by stations; and adopts and implements regulations and policies which directly or indirectly affect the ownership, operations and profitability of broadcasting stations. Each of the Company's television stations holds a license valid for a period of five years which is renewable upon application for a similar period. The FCC is conducting proceedings dealing with such matters as the standards to be applied to broadcast renewal applications, various broadcast network regulations, multiple ownership restrictions, regulations pertaining to cable television operations (discussed below under "Cable Television Division Regulation of Cable Television and Related Matters"), whether to allocate additional radio spectrum to existing broadcasting stations to enable them to implement advanced television ("ATV") technologies, whether to adopt a uniform ATV broadcast transmission standard for television and impose requirements on existing television stations to activate ATV channels and ultimately to turn back to the FCC their existing conventional television channels, and various proposals to further the development of alternative video delivery systems that would compete in varying degrees with both cable television and television broadcasting operations. The Company cannot predict the resolution of these and various other matters although, depending upon their outcome, they could affect the Company's television broadcasting interests either adversely or favorably. Various of the foregoing questions as well as other important substantive and policy issues (including changes in the law governing what broadcasters may charge political candidates) will also likely be considered by Congress. CABLE TELEVISION DIVISION As of the end of 1993 the Company (through subsidiaries) provided basic cable service to approximately 482,000 subscribers (representing about 70% of the 692,000 homes passed by the systems) and had in force more than 301,000 subscriptions to premium program services. The Company's cable systems are located in 15 Midwestern, Southern and Western states and typically serve smaller communities; thus 30 of the Company's systems pass fewer than 10,000 dwelling units, 14 pass 10,000-25,000 dwelling units, and only eight pass more than 25,000 dwelling units, of which the two largest are in Modesto and Santa Rosa, California, each serving more than 45,000 basic subscribers. 4 6 REGULATION OF CABLE TELEVISION AND RELATED MATTERS The Company's cable operations are subject to various requirements imposed by local, state and federal governmental authorities. The franchises granted by local governmental authorities are typically nonexclusive and limited in time and generally contain various conditions and limitations relating to payment of fees to the local authority, determined generally as a percentage of revenues. Additionally, franchises often regulate the conditions of service and technical performance, and contain various types of restrictions on transferability. Failure to comply with such conditions and limitations may give rise to rights of termination by the franchising authority. The Cable Television Consumer Protection and Competition Act of 1992 (the "1992 Cable Act"), requires or authorizes the imposition of a wide range of regulations on cable television operations. The three major areas of regulation are (i) the rates charged for certain cable television services, (ii) required carriage ("must carry") of some local broadcast stations, and (iii) retransmission consent rights for commercial broadcast stations. Except in relatively rare instances of "effective competition" (defined in the 1992 Cable Act as the presence of another cable operator or another multichannel video service serving specified levels of customers in the same community), monthly subscription rates for the basic tier of cable service may be regulated by municipalities, subject to procedures and criteria established by the FCC, and the FCC may regulate the rates charged for optional tiers of service. Rates charged by cable television systems for pay- per-view service, for per-channel premium program services and for advertising are all exempt from regulation under the 1992 Cable Act. In April 1993 the FCC announced a "freeze" on rate increases for regulated services (i.e. the basic and optional tiers), which currently is due to expire on May 15, 1994, and promulgated benchmarks for determining the reasonableness of rates for such services. The FCC expected that its benchmarks, which took effect on September 1, 1993, would produce an overall average reduction of 10% in the rates charged for regulated services. The Company estimates that the combined effect of compliance with the benchmarks and the rate freeze reduced its 1993 revenue from cable operations by approximately $3 million. The FCC's benchmarks were widely criticized by some for being too stringent and by others for being too permissive. On February 22, 1994, acting on petitions to reconsider the original benchmarks, the FCC adopted revisions designed to reduce overall rates for regulated services by, on average, an additional 7%. Although the Company anticipates some further negative impact from these revisions, it is unable to estimate the amount of that impact since the details of the rules implementing the latest FCC action are not yet available. Under the FCC's approach, cable operators may exceed the benchmarks if they can show in a cost-of-service proceeding that higher rates are needed to earn a reasonable return on investment. Also on February 22, 1994, the FCC announced the adoption of rules to implement the cost-of-service standard; among other things the new rules establish an interim industry-wide rate of return of 11.25%. Various parties have indicated they will seek judicial review of the FCC's rate regulation decisions. Pursuant to the "must-carry" rules a commercial television broadcast station may, under certain circumstances, insist on carriage of its signal on cable systems located within the station's market area, while a noncommercial public station may insist on carriage of its signal on cable systems located within either the station's predicted Grade B contour or 50 miles of the station's transmitter. As a result of these obligations (the constitutionality of which is presently under review in the United States Supreme Court) certain of the Company's cable systems have had to add broadcast stations that they might not otherwise have elected to carry, and the freedom the Company's systems would otherwise have to drop signals previously carried has been reduced. 5 7 Beginning in October 1993 and at three-year intervals thereafter commercial broadcasters may elect to forego must-carry rights and insist instead that their signals not be carried without the prior consent of the stations. Prior to October 1993 some of the broadcast stations carried by the Company's cable television systems opted for retransmission consent and initially took the position that they would not grant consent without commitments by the Company's systems to make cash payments. As a result of case- by-case negotiations, the Company's cable systems were able to continue carrying virtually all of the stations insisting on retransmission consent without having to agree to pay any stations for the privilege of carrying their signals. However some commitments were made to carry other program services offered by a station or an affiliated company, to provide advertising availabilities on cable for sale by a station and to distribute promotional announcements with respect to a station. Various other matters addressed in the 1992 Cable Act may significantly affect the costs or profits of cable television systems. These matters include a prohibition on exclusive franchises, restrictions on the ownership of competing video delivery services, restrictions on transfers of cable television ownership, new consumer protection measures, new technical and signal quality standards, and various regulations intended to facilitate the development of competing video delivery services. In contrast to the 1992 Cable Act, the Cable Communications Policy Act of 1984 (the "1984 Cable Act") restricted regulation of cable television in many important respects. Important provisions of the 1984 Cable Act that remain in effect after the 1992 Cable Act include a requirement that franchises be granted for reasonable periods of time, various remedies and safeguards to protect cable operators against arbitrary refusals to renew franchises, and a limitation on franchise fees to 5% of revenues. Apart from its new authority under the 1992 Cable Act, the FCC regulates various other aspects of cable television operations. Since 1990 cable systems have been required to black out from the distant broadcast stations they carry syndicated programs for which local stations have purchased exclusive rights and request exclusivity. Other long-standing FCC rules require cable systems to delete under certain circumstances duplicative network programs broadcast by distant stations. The FCC also imposes certain technical standards on cable television operators, exercises the power to license various microwave and other radio facilities frequently used in cable television operations, regulates the assignment and transfer of control of such licenses, and oversees compliance with certain affirmative action and equal employment opportunity obligations applicable to cable systems. In addition, pursuant to the Pole Attachment Act the FCC exercises authority to disapprove unreasonable rates charged to cable operators by telephone and power utilities for utilizing space on utility poles or in underground conduits. The Copyright Act of 1976 grants to cable television systems, under certain terms and conditions, the right to retransmit the signals of television stations pursuant to a compulsory copyright license. Those terms and conditions include the payment of certain license fees set forth in the statute or established by subsequent administrative regulations. The compulsory license fees have been increased on several occasions since this Act went into effect. Some pending legislative proposals would modify or eliminate the compulsory copyright licensing scheme, and the FCC and others have urged that the compulsory license be phased out for local or distant broadcast signals or both. Still other proposals would extend the compulsory license to "wireless cable," direct- broadcast satellite and other competitive media. 6 8 Currently telephone companies are generally prohibited by the 1984 Cable Act and certain FCC rules from operating cable systems in areas in which they provide telephone service. However Congress, the FCC and the courts are in varying degrees revisiting this question. The FCC has recommended changes in the 1984 Cable Act to permit telephone company ownership of co-located cable systems, and the agency has authorized, subject to judicial review, a "video-dial-tone" service in which telephone companies would provide video programming supplied by others. A court decree that prohibited the former Bell regional operating companies from offering certain information services, including acting as cable television system operators, has been modified to eliminate those restrictions, although the modification is being appealed. This decree modification will have the effect of permitting the former Bell regional operating companies to provide cable television services out of their home regions, but the 1984 Cable Act continues to prohibit all telephone companies from providing cable service in their home regions. Litigation is pending in various courts in which prohibitions on cable television operations without a franchise and various franchise requirements are being challenged as unlawful under the First Amendment, the antitrust laws and on other grounds. If successful, such litigation could foster the development and operation of duplicative cable facilities that would compete with existing cable systems. During the last three years the FCC has adopted several rule changes intended to facilitate the development of so-called "wireless cable," a video service capable of distributing as many as 30 television channels in a local area by over-the-air microwave transmission. The regulation of certain cable television rates pursuant to the 1992 Cable Act has negatively impacted the revenues of the Company's cable systems as discussed above. The Company cannot predict whether the FCC's rate regulation decisions will in fact be appealed and, if so, whether those decisions will ultimately be upheld. In addition, the Company is unable to predict the outcome of the various other matters discussed above or what effect such matters may ultimately have on its cable television business. U.K. CABLE TELEVISION OPERATIONS In September 1993 the Company sold its entire interest in companies constructing and operating cable television systems in the United Kingdom. MAGAZINE PUBLISHING Newsweek is a weekly news magazine published both domestically and internationally. In gathering, reporting and writing news and other material for publication, Newsweek maintains news bureaus in 10 U.S. and 16 foreign cities. Worldwide there are approximately 285 full-time editorial staff members, 216 of whom are in New York. The domestic edition of Newsweek is comprised of over 100 different geographic or demographic editions which carry substantially identical news and feature material but enable advertisers to direct messages to specific market areas or demographic groups. Domestically, Newsweek ranks second in circulation among the three leading weekly news magazines (Newsweek, Time and U.S. News & World Report). Its average weekly domestic circulation rate base and its percentage of the total weekly 7 9 domestic circulation rate base of the three leading weekly news magazines for the past five years are set forth in the following table: Newsweek is sold on newsstands and through subscription mail order sales derived from a number of sources, principally direct mail promotion. The basic one-year subscription price is $41.08. During 1993 most subscriptions were sold at a discount from the basic price. Since January 1992 Newsweek's newsstand price has been $2.95 per copy. The total number of Newsweek's domestic advertising pages and gross domestic advertising revenues as reported by Publishers' Information Bureau, Inc., together with Newsweek's percentages of the total number of advertising pages and total advertising revenues of the three leading weekly news magazines, for the past five years have been as follows:
NEWSWEEK AVERAGE WEEKLY PERCENTAGE OF CIRCULATION THREE LEADING RATE BASE NEWS MAGAZINES --------- -------------- 1989 ................................ 3,100,000 32.6% 1990 ................................ 3,100,000 32.9% 1991 ................................ 3,100,000 34.1% 1992 ................................ 3,100,000 33.2% 1993 ................................ 3,100,000 32.7% * Advertising pages and gross advertising revenues are those reported by Publishers' Information Bureau, Inc. PIB computes gross advertising revenues from basic one-time rates and the number of advertising pages carried. PIB figures therefore exceed actual gross advertising revenues, which reflect lower rates for multiple insertions. Net revenues as reported in the Company's Consolidated Statements of Income also exclude agency fees and cash discounts, which are included in the gross advertising revenues shown above. Page and revenue figures exclude affiliated advertising. Newsweek's advertising rates are based on its average weekly circulation rate base and are competitive with the other weekly news magazines. Effective with the January 4, 1993 issue, national advertising rates were increased by an average of 5.5%. Beginning with the issue dated January 3, 1994, national advertising rates were increased again by an average of 4.9%. Newsweek Business, which is published 39 times a year, is a demographic edition of Newsweek distributed to subscribers qualified by a professional or managerial job title and a minimum income level. Advertising rates for this edition, which has a circulation rate base of 750,000, were last increased in January 1993 with that increase averaging 5.5%. 8
NEWSWEEK NEWSWEEK PERCENTAGE OF GROSS PERCENTAGE OF ADVERTISING THREE LEADING ADVERTISING THREE LEADING PAGES* NEWS MAGAZINES REVENUES* NEWS MAGAZINES ------ -------------- --------- -------------- 1989 .............................. 2,490 34.8% $ 255,395,000 33.3% 1990 .............................. 2,294 33.4% 252,447,000 32.5% 1991 .............................. 1,948 32.5% 233,601,000 32.7% 1992 .............................. 2,109 33.2% 258,396,000 32.4% 1993 .............................. 2,102 33.3% 260,396,000 32.3% ------------ 10 Newsweek's other demographic edition, Newsweek Woman, which was published ten times during 1993, has a circulation rate base of 700,000 selected female subscribers. At the beginning of 1993 advertising rates for this edition were increased by an average of 15.0%, with an additional average increase of 4.9% instituted early in 1994. Internationally, Newsweek is published in an Atlantic edition covering the British Isles, Europe, the Middle East and Africa, a Pacific edition covering Japan, Korea and Southeast Asia, and a Latin America edition, all of which are in the English language. Editorial copy solely of domestic interest is eliminated in the international editions and is replaced by other international, business or national coverage primarily of interest abroad. Since 1984 a 24-page section of Newsweek has been included in The Bulletin, an Australian weekly news magazine which also circulates in New Zealand. In 1986 a Japanese-language edition of Newsweek, Nihon Ban, began publication in Tokyo pursuant to an arrangement with a Japanese publishing company which translates editorial copy, sells advertising in Japan and prints and distributes the edition. In November 1991 a Korean-language edition of Newsweek, Hankuk Pan, began publication pursuant to a similar arrangement with a Korean publishing company. The average weekly circulation rate base, advertising pages and gross advertising revenues of Newsweek's international editions (including The Bulletin insertions but not including the Japanese- or Korean-language editions of Newsweek) for the past five years have been as follows: * Advertising pages and gross advertising revenues are those reported by LNA International. LNA computes gross advertising revenues from basic one-time rates and the number of advertising pages carried. LNA figures therefore exceed actual gross advertising revenues, which reflect lower rates for multiple insertions. Net revenues as reported in the Company's Consolidated Statements of Income also exclude agency fees and cash discounts, which are included in the gross advertising revenues shown above. Page and revenue figures exclude affiliated advertising. For 1994 the average weekly circulation rate base for Newsweek's English language international editions (including The Bulletin insertions) will be 748,000. The average weekly circulation rate bases for the Japanese-language and Korean-language editions for 1994 will be 160,000 and 100,000, respectively. In April 1993 Newsweek introduced the first CD-ROM version of a major magazine -- Newsweek InterActive. Combining text, photos, audio and video, Newsweek InterActive, which is available by subscription as well as through retail outlets, is the first regularly published general interest multimedia magazine. Newsweek InterActive is also the first multimedia magazine to provide a platform which allows readers to interact with digitally stored advertising information. 9
AVERAGE WEEKLY GROSS CIRCULATION ADVERTISING ADVERTISING RATE BASE PAGES* REVENUES* --------- ------ --------- 1989 ........................... 665,000 2,352 $60,187,000 1990 ........................... 673,000 2,466 67,131,000 1991 ........................... 705,000 2,296 68,405,000 1992 ........................... 730,000 2,549 76,765,000 1993 ........................... 745,000 2,128 68,053,000 ------------ 11 OTHER ACTIVITIES STANLEY H. KAPLAN EDUCATIONAL CENTERS A subsidiary of the Company owns the Stanley H. Kaplan Educational Centers, which are engaged in preparing students for a broad range of admissions tests and licensing examinations including SAT's, LSAT's, GMAT's and GRE's, nursing and medical boards, and the uniform certified public accountant examination. In 1993 the Kaplan Centers had more than 149,000 enrollments and provided courses through more than 150 permanent educational centers located throughout the United States and in Canada, Puerto Rico and London. LEGI-SLATE Legi-Slate, Inc., another subsidiary of the Company, provides its customers with access to a computerized data base containing detailed information on the legislative and regulatory activities of the United States government. The Legi-Slate data base includes both abstracts and the full text of every bill and resolution introduced in Congress, the entire Congressional Record and every document published in the Federal Register, as well as the schedule of each Congressional committee and the voting record of each member of Congress. Legi-Slate also offers the Current USC(TM) and Daily CFR(TM) services, which provide online access to the current full text of the United States Code and the Code of Federal Regulations. PRO AM SPORTS SYSTEM Pro Am Sports System, Inc. ("PASS") is a Detroit-based regional cable sports network that provides programming to approximately 788,000 cable television subscribers in Michigan and northwest Ohio. PASS programming includes games of the Detroit Tigers baseball team, the Detroit Pistons basketball team and the Detroit Red Wings hockey team. INTERNATIONAL HERALD TRIBUNE The Company beneficially owns 50% of the outstanding common stock of the International Herald Tribune, S.A., a French company which publishes the International Herald Tribune in Paris, France. This English-language newspaper has an average daily paid circulation of almost 200,000 copies and is distributed in over 160 countries. COWLES MEDIA COMPANY The Company owns approximately 28% of the outstanding common stock of Cowles Media Company, most of which was acquired in 1985. Cowles owns the Minneapolis-St. Paul Star Tribune and a number of smaller publications. DIGITAL INK In late 1993 the Company organized a new subsidiary, Digital Ink Co., to develop news and information products for distribution by computers, fax and telephone. PERSONAL COMMUNICATIONS SERVICES In 1994 the FCC is expected to begin awarding licenses to operate systems using new wireless telephone technologies (generally referred to as personal communications services or "PCS"). It is contemplated PCS systems will use transmitters which are smaller and closer together than those of conventional cellular systems and other techniques to reduce the size and cost of portable telephones. 10 12 In September 1990 the Company formed a limited partnership with American Personal Communications, Inc. ("APC"), a private company owned by individuals with substantial prior experience in the cellular telephone industry, to develop experimental PCS systems in the Washington, D.C./Baltimore area. APC currently is the sole general partner (although the Company has the right, subject to prior FCC consent, eventually to convert its interest into that of a general partner); the Company holds a majority of the partnership interests and provides most of the partnership's financing. The partnership was awarded two FCC experimental licenses (subsequently consolidated into a single license) and began experimental PCS operations in the fall of 1991. On December 23, 1993, the FCC finalized the award of a "pioneer's preference" to the partnership, in recognition of its efforts to develop PCS. The preference is for 30 MHz of spectrum in the "Block A" set of frequencies (as described below) and covers the Washington/Baltimore Major Trading Area, which consists of the District of Columbia and 65 counties in Maryland, northern Virginia, West Virginia and southern Pennsylvania with an aggregate population of nearly 8 million people. The preference entitles the partnership to apply for a license subject only to meeting basic licensing qualifications. Accordingly, the partnership filed its application for a PCS authorization on January 18, 1994. Petitions for reconsideration and judicial appeals may be filed with respect to the partnership's preference grant and its scope, and petitions to deny may be filed with respect to its application. The partners may also bid on PCS licenses outside the Washington/Baltimore area. The Company and APC have agreed that if either party wishes to bid for licenses covering such areas the other party will have a right to participate. The Omnibus Budget Reconciliation Act of 1993 provided that PCS licenses would be awarded by auctions, subject to the FCC's power to except holders of a pioneer's preference. By mid-1994 the FCC is expected to adopt rules for conducting these auctions. For the PCS frequencies for which the partnership might be interested in applying, auctions are likely to begin late in 1994. The FCC also has issued rules for the licensing and operation of PCS services. Those rules are the subject of petitions for reconsideration on which the FCC is expected to act by the summer of 1994. The present rules allocate seven different frequency blocks for broadband, licensed PCS (narrowband PCS uses much narrower bandwidths in other frequencies to provide more specialized services; and unlicensed PCS, to be implemented on still other frequencies, also would not generally be competitive with broadband PCS): Block A--1850-1865 and 1930-1945 MHz, Block B--1865-1880 and 1945-1960 MHz, Block C--1880-1890 and 1960-1970 MHz, Block D--2130-2135 and 2180-2185 MHz, Block E--2135-2140 and 2185-2190 MHz, Block F--2140-2145 and 2190-2195 MHz, and Block G--2145-2150 and 2195-2200 MHz. The first two sets of frequencies would be licensed for each of 51 Major Trading Areas ("MTA's") as designated by Rand McNally and adopted by the FCC. The remaining five frequency blocks would be licensed for 492 Basic Trading Areas ("BTA's"), also as designated by Rand McNally and adopted by the FCC. Companies with substantial cellular holdings in these areas would be eligible to bid only for Blocks E, F and G, and could hold only one such license. Block C and D frequencies would be reserved for designated entities women, minorities, small businesses and rural telephone companies. PCS will compete with established cellular providers which generally use analog technology but which can convert to digital technologies. Their eligibility for Block E, F or G spectrum, combined with their current access to 25 MHz of spectrum unencumbered by incumbent microwave users, would potentially provide them with advantages compared to PCS providers. Enhanced Specialized Mobile 11 13 Radio ("ESMR") is another service already licensed by the FCC that will provide competition to PCS. Even more than cellular, ESMR has consolidated geographically and in many markets ESMR operators are co-owned or affiliated with other systems which in aggregate will cover geographic areas that are substantially larger than MTA's. PCS will also compete with paging, conventional wireline telephone services and other new services that are in various stages of development. It is expected that PCS will be regulated, like cellular, at both the state and federal levels (although the FCC has precluded a substantial amount of state regulation). PCS operators will have to negotiate interconnection arrangements with local telephone companies pursuant to general guidelines set by the FCC. Roaming arrangements among PCS operators may also be subject to FCC oversight. PCS licensees also will be subject to certain build-out requirements (e.g., they must make service available to one- third of the population in five years, two-thirds in seven years, and 90% in nine years), and the term of their licensees will be ten years, subject to renewal. PRODUCTION AND RAW MATERIALS The Washington Post is produced at the newspaper's principal place of business and plant in downtown Washington, D.C., and at its satellite printing plants in Fairfax County, Virginia, and Southeast Washington, D.C. All editions of The Herald are produced at its plant in Everett, Washington. The Gazette Newspapers are produced by three independent contract printers. Newsweek's domestic edition is produced in five independent printing plants; advertising inserts and photo-offset films for the domestic edition are also produced by independent contractors. The international editions of Newsweek are printed in England, Hong Kong, Singapore, Switzerland and Hollywood, Florida; insertions for The Bulletin are printed in Australia. In 1993 The Washington Post consumed about 250,000 tons* of newsprint purchased from a number of suppliers, including Bowater Incorporated, which supplied approximately 30% of The Post's 1993 newsprint requirements. About half of the newsprint The Post purchases from Bowater Incorporated is provided by Bowater Mersey Paper Company Limited, 49% of the common stock of which is owned by the Company (the majority interest being held by a subsidiary of Bowater Incorporated). Bowater Mersey owns and operates a newsprint mill near Halifax, Nova Scotia, and owns extensive woodlands that provide much of the mill's wood requirements. In 1993 Bowater Mersey produced about 260,000 tons of newsprint. The Company, through a subsidiary, has a 35% limited partnership interest in Bear Island Paper Company, which owns and operates a newsprint mill in Doswell, Virginia, about 85 miles south of Washington, D.C. The general partner, which has a 30% interest and manages the mill, is Brant-Allen Industries, Inc., a firm experienced in the construction and operation of similar mills; the other limited partner, also with a 35% interest, is a subsidiary of Dow Jones & Company, Inc. The Paper Company and Bear Island Timberlands Company, in which a subsidiary of the Company also has a 35% limited partnership interest, own an aggregate of approximately 150,000 acres of Virginia woodlands. These woodlands supply a portion of the wood requirements of the Paper Company's mill. That mill produced about 220,000 tons of newsprint in 1993, and during that year The Washington Post purchased about 20% of its newsprint requirements from Bear Island Paper Company. In March 1994 Bear Island - --------------- * All references in this report to newsprint tonnage and prices refer to short tons (2,000 pounds) and not to metric tons (2,204.6 pounds) which are often used in newsprint price quotations. 12 14 Paper Company expects to complete construction of a recycling plant that is designed to provide at least 20% of the pulp used by the mill. The announced price of newsprint (excluding discounts which decreased before rising during the second half of the year) was approximately $620 per ton throughout 1993. The Post believes it has adequate newsprint available through contracts with its various suppliers. About 50% of The Post's current newsprint consumption consists of newsprint with some recycled content, and the use of recycled newsprint by The Post is expected to increase in the future. During 1990 the Company acquired 90% of the stock of Capitol Fiber Inc., which handles and sells to recycling industries old newspapers and other paper collected in Washington, D.C, Maryland and northern Virginia. In 1993 The Herald consumed approximately 5,900 tons of newsprint supplied by four different suppliers, the largest of which furnished about 35% of the newspaper's total requirements. Approximately 70% of the newsprint used by The Herald includes some recycled content. The domestic edition of Newsweek consumed 31,480 tons of paper in 1993, the bulk of which was purchased from eight major suppliers under long-term contracts at prevailing market prices. The current cost of body paper (the principal paper component of the magazine) is approximately $870 per ton. Over 90% of the aggregate domestic circulation of Newsweek is delivered by second class mail, and most subscriptions are solicited by either first or third class mail. Thus substantial increases in postal rates for these classes of mail may have a significant negative impact on Newsweek's operating income. On March 8, 1994, the U.S. Postal Service proposed a rate increase for all classes of mail averaging 10.3%. This proposal, which would take effect in January 1995 at the earliest, is subject to review by the Postal Rate Commission and then to approval by the Board of Governors of the U.S. Postal Service. If approved, this proposal would increase Newsweek's annual postage costs by approximately $4 million. On the other hand, since advertising distributed by third class mail competes to some degree with newspaper advertising, the Company believes the increases in third class rates included in this proposal could have a positive impact on the advertising revenues of The Washington Post, The Herald and The Gazette Newspapers, although the Company is unable to quantify the amount of such impact. COMPETITION The Washington Times, a newspaper published since 1982 in Washington, D.C., began publishing Saturday and Sunday editions in competition with The Washington Post in September 1991. The Washington Times previously published only on weekdays. The Post also encounters competition in varying degrees from newspapers published in suburban and outlying areas, other nationally circulated newspapers and from television, radio, magazines and other advertising media, including direct mail advertising. The Herald circulates principally in Snohomish County, Washington; its chief competitors are the Seattle Times and the Seattle Post-Intelligencer, which are daily and Sunday newspapers published in Seattle and whose Snohomish County circulation is principally in the southwest portion of the county. Since 1983 the two Seattle newspapers have consolidated their business and production operations and combined their Sunday editions pursuant to a joint operating agreement, although they continue to publish separate daily newspapers. Although The Herald's principal circulation is in Snohomish County, it is also distributed in two other nearby counties (including King County where Seattle is located) in 13 15 which its circulation is less than that of the Seattle newspapers. Numerous weekly and semi-weekly newspapers and shoppers are distributed in The Herald's principal circulation area. The circulation of The Gazette Newspapers is limited to Montgomery County and parts of Frederick and Carroll Counties, Maryland (areas where The Washington Post also circulates). The Gazette Newspapers compete in varying degrees with many advertising vehicles available in their service areas, including The Potomac and Bethesda/Chevy Chase Almanacs, The Free Press and The Western Montgomery Bulletin, weekly controlled-circulation community newspapers, The Montgomery County Sentinel, a weekly paid-circulation community newspaper, and The Montgomery County Journal, a daily paid-circulation community newspaper (which also publishes two controlled- circulation weekly editions). The Company's television stations compete for audiences and advertising revenues with television and radio stations and cable television systems serving the same or nearby areas and to a lesser degree with other media such as newspapers and magazines. Both independent stations and stations affiliated with the Fox Broadcasting Network are becoming increasingly competitive, and cable television systems are expanding their operations in the Company's broadcast markets where they compete for television viewing in varying degrees by importing out-of-market television signals and by distributing pay-cable, advertiser-supported and other programming that is originated for cable systems. Some cable television programming services also compete with television stations for exhibition rights to various syndicated programs and sports events. In addition, telephone companies have shown increasing interest in providing cable television and other video services, such as the video-dial-tone service recently authorized by the FCC, and Congress is considering legislation to eliminate or scale back the prohibition on in-region telephone company provision of cable television services. With or without this or other legislative changes, the Company's television stations may also become subject to increased competition from low power television stations, wireless cable services, direct home reception of satellite program services, satellite master antenna systems (which can carry pay-cable and similar program material), and prerecorded video programming. Further, high definition and other improved television technologies are being developed which in the future may enhance the ability of some of these other video providers to compete for viewers with the local television broadcasting stations owned by the Company. Cable television systems operate in a highly competitive environment. In addition to competing with the direct reception of television broadcast signals by the viewer's own antenna, such systems (like existing television stations) are subject to competition from other forms of television program delivery such as low power television stations, direct home reception of satellite program services, wireless cable services, satellite master antenna systems and prerecorded video programming. Various legislative and regulatory proposals may also increase the competition faced by existing cable television systems by, among other things, authorizing the provision of competing services by local telephone companies. According to figures compiled by Publishers' Information Bureau, Inc., of the 181 magazines reported on by the Bureau, Newsweek ranked fifth in total advertising revenues in 1993, when it received approximately 3.4% of all advertising revenues of the magazines included in the report. The magazine industry is highly competitive both within itself and with other advertising media which compete for audience and advertising revenue. The Company's publications and television broadcasting and cable operations also compete for readers' and viewers' time with various other leisure-time activities. The future of the Company's various business activities depends on a number of factors, including the general strength of the economy, population growth, technological innovations and new entertain- 14 16 ment, news and information dissemination systems, overall advertising revenues, the relative efficiency of publishing and broadcasting compared to other forms of advertising and, particularly in the case of television broadcasting and cable operations, the extent and nature of government regulations. EXECUTIVE OFFICERS The executive officers of the Company, each of whom is elected for a one-year term at the meeting of the Board of Directors immediately following the Annual Meeting of Stockholders held in May of each year, are as follows: Donald E. Graham, age 48, has been Chairman of the Board of the Company since September 1993 and Chief Executive Officer of the Company since May 1991. Mr. Graham served as President of the Company from May 1991 until September 1993 and prior to that had been a Vice President of the Company for more than five years. Mr. Graham also is Publisher of The Washington Post, having occupied that position since 1979. Alan G. Spoon, age 42, is President and Chief Operating Officer of the Company. Mr. Spoon served as Executive Vice President and Chief Operating Officer of the Company from May 1991 until September 1993 and had previously been a Vice President of the Company since July 1987. Mr. Spoon also served as the Company's Vice President-Finance from July 1987 until November 1989, and as President of Newsweek, Inc. from September 1989 until May 1991. Katharine Graham, age 76, is Chairman of the Executive Committee of the Company's Board of Directors. Mrs. Graham previously served as Chairman of the Board of the Company from 1973 until September 1993 and as the Company's Chief Executive Officer from 1973 until May 1991. Martin Cohen, age 62, is a Vice President of the Company; from 1975 to July 1987 he served as Vice President-Finance and Treasurer of the Company. Diana M. Daniels, age 44, has been Vice President and General Counsel of the Company since November 1988 and Secretary of the Company since September 1991. Ms. Daniels served as General Counsel of the Company from January 1988 to November 1988 and prior to that had been Vice President and General Counsel of Newsweek, Inc. since 1979. Beverly R. Keil, age 47, has been Vice President-Human Resources of the Company since 1986; from 1982 through 1985 she was the Company's Director of Human Resources. John B. Morse, Jr., age 47, has been Vice President-Finance of the Company since November 1989. He joined the Company as Vice President and Controller in July 1989, and prior to that had been a partner of Price Waterhouse for more than five years. G. William Ryan, age 53, is a Vice President of the Company and since March 1988 has been President of Post-Newsweek Stations, Inc. Richard M. Smith, age 48, is a Vice President of the Company; he has served as Editor-in-Chief of Newsweek since 1984 and in May 1991 also became President of Newsweek, Inc. Howard E. Wall, age 64, has been a Vice President of the Company since 1982; he served as President of the Company's Cable Television Division from 1986 until January 1993 when he became Chairman of that Division. 15 17 EMPLOYEES The Company and its subsidiaries employ approximately 6,600 persons on a full-time basis. The Washington Post has approximately 2,950 full-time employees. About 2,050 of The Post's full-time employees and about 450 part-time employees are represented by one or another of nine unions. Collective bargaining agreements are currently in effect with locals of the following unions covering the full-time and part-time employees and expiring on the dates indicated: 1,332 employees in the editorial, newsroom and commercial departments represented by the Washington-Baltimore Newspaper Guild (July 9, 1995); 33 electricians represented by the International Brotherhood of Electrical Workers (August 14, 1994); 141 paperhandlers and general workers represented by the Printing Specialty and Paper Products Union (March 31, 1995); 47 machinists represented by the International Association of Machinists (January 13, 1996); 57 photoengravers-platemakers represented by the Graphic Arts International Union (February 19, 1996); 153 building service employees represented by the Service Employees International Union (April 30, 1996); 38 engineers, carpenters and painters represented by the International Union of Operating Engineers (March 1, 1997); 390 mailers and 195 mailroom helpers represented by the Washington Mailers' Union (June 15, 1997); and 187 typographers represented by the Columbia Typographical Union (October 2, 2000). Of the approximately 210 full-time and 95 part-time employees at The Herald, about 57 full-time and 13 part-time employees are represented by one or another of three unions. The newspaper's collective bargaining agreement with the Graphic Communications International Union, which represents press operators, will expire on January 15, 1995; its agreement with the International Brotherhood of Teamsters, which represents part-time bundle haulers, will expire on May 31, 1998; and its agreement with the Communications Workers of America, which represents printers and mailers, will expire on October 31, 1998. The Gazette Newspapers have approximately 135 full-time and 55 part-time employees, none of whom is represented by a union. Newsweek has approximately 965 full-time employees (including 216 full-time editorial staff members in New York, most of whom are represented by the New York Newspaper Guild under a collective bargaining agreement which expires in December 1995). Newsweek has never experienced a strike, although there have been occasional work stoppages by employees of some of its former independent printers which did not materially interfere with the publication of Newsweek. The Company's broadcasting operations have approximately 635 full-time employees, of whom about 240 are union-represented. Of the 11 collective bargaining agreements covering union-represented employees, four have expired and are being renegotiated. Three other collective bargaining agreements will expire in 1994. The Company's Cable Television Division has approximately 800 full-time employees, none of whom are represented by a union. During the first quarter of 1993 Stanley H. Kaplan Educational Center Ltd. implemented a restructuring plan pursuant to which it replaced independent center administrators and certain of their employees with Kaplan employees. As a result of this action the number of full-time employees at Kaplan has increased from approximately 225 persons to approximately 750 persons (which number does not include substantial numbers of part-time employees who serve in instructional and clerical capacities). Robinson Terminal Warehouse Corporation (the Company's newsprint warehousing and 16 18 distribution subsidiary) and Legi-Slate each has fewer than 125 employees. None of these units' employees is represented by a union. ITEM 2. PROPERTIES. The Company owns the publishing plant and principal offices of The Washington Post in downtown Washington, D.C., including both a seven-story building in use since 1950 and a connected nine-story office building on contiguous property completed in 1972 in which are located the Company's principal executive offices. In 1980 the Company completed construction of a satellite printing plant on 13 acres of land owned by the Company in Fairfax County, Virginia, and in September 1981 purchased the printing plant of the defunct Washington Star located in Southeast Washington, D.C. The Company owns a 34-acre tract of undeveloped land in Prince George's County, Maryland, and a 39-acre tract of undeveloped land near Dulles Airport in Fairfax County, Virginia, both of which are suitable for the construction of facilities for the printing and distribution of copies of The Post to suburban locations. The Company also owns 10 acres of undeveloped land in Montgomery County, Maryland. Additionally, the Company owns land on the corner of 15th and L Streets, N.W., in Washington, D.C., adjacent to The Washington Post plant and office building. The Company has leased this property under a long-term ground lease to The Prudential Insurance Company of America, which in 1982 completed construction of a new multi-story office building on the site. The Company rents a number of floors in this building. The Company also owns and occupies a small office building on L Street which is next to The Post's downtown plant. The Herald owns its plant and office building in Everett, Washington; it also owns two warehouses adjacent to its plant and a small office building in Lynnwood, Washington, from which it manages its south Snohomish County operations. During 1993 The Herald completed installation of a new offset press. The Gazette Newspapers, Inc. owns the one-story brick building in Gaithersburg, Maryland, that serves as headquarters for The Gazette Newspapers. Satellite editorial and sales offices are located in leased premises. The principal offices of Newsweek are currently located in the Newsweek Building at 444 Madison Avenue in New York City, where Newsweek rents space on 18 floors. Newsweek will relocate its New York City offices to 251 West 57th Street during the first quarter of 1994. The lease on the space in the new location will expire in 2009, but is renewable for a 15-year period at Newsweek's option at rentals to be negotiated or arbitrated. Newsweek's accounting, production and distribution depart- ments, and its subscription service and computer operations, are located in a facility Newsweek built in 1987 on a 16-acre tract in Mountain Lakes, New Jersey. The headquarters offices of the Company's broadcasting operations are located in the same facilities in downtown Washington that house the Company's principal executive offices. Each of the Company's television stations operates in facilities owned by the Company. The headquarters offices of the Cable Television Division are located in leased premises in Phoenix, Arizona. The majority of the offices and head-end facilities of the Division's individual cable systems are located in buildings owned by the Company. Substantially all the tower sites used by the Division are leased. Robinson Terminal Warehouse Corporation owns two wharves and several warehouses in Alexandria, Virginia. These facilities are adjacent to the business district and occupy approximately 17 19 seven acres of land. Robinson also owns two partially developed tracts of land in Fairfax County, Virginia, aggregating about 22 acres. These tracts are near The Washington Post's satellite printing plant and include several warehouses. In 1992 Robinson purchased approximately 23 acres of undeveloped land on the Potomac River in Charles County, Maryland, for the possible construction of additional warehouse capacity. Stanley H. Kaplan Educational Center Ltd. owns a six-story building located at 131 West 56th Street in New York City, which serves as the Manhattan Educational Center, and a one-story building in Brooklyn, New York, which houses Kaplan's printing and production facilities. Kaplan's headquarters offices are located at 810 Seventh Avenue in New York City, where Kaplan rents space on two floors under leases which expire between 1994 and 1998. All Kaplan educational centers outside of Manhattan occupy leased premises. Legi-Slate's offices are located in leased premises in Washington, D.C. ITEM 3. LEGAL PROCEEDINGS. The Company and its subsidiaries are parties to various civil lawsuits that have arisen in the ordinary course of their businesses, including actions for libel and invasion of privacy. Management does not believe that any litigation pending against the Company will have a material adverse effect on its business or financial condition. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. Not applicable. PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. The Company's Class B Common Stock is traded on the New York Stock Exchange under the symbol "WPO." The Company's Class A Common Stock is not publicly traded. The high and low sales prices of the Company's Class B Common Stock during the last two years were: During 1993 the Company repurchased 99,800 shares of Class B Common Stock in unsolicited transactions at prices no higher than the last sale price on the New York Stock Exchange. Of the total shares repurchased in 1993, 36,800 shares were included in trading volume reported on that year's consolidated tape and accounted for less than one percent of such volume. 18
1993 1992 ---- ---- Quarter High Low High Low ------- ---- ----- ---- --- January - March . . . . . . . $ 242 $ 228 $ 242 $ 193 April - June . . . . . . . . 244 227 246 214 July - September . . . . . . 230 212 244 214 October - December. . . . . . 257 219 241 215 20 At February 17, 1994, there were 23 holders of record of the Company's Class A Common Stock and 1,549 holders of record of the Company's Class B Common Stock Both classes of the Company's Common Stock participate equally as to dividends. Quarterly dividends were paid at the rate of $1.05 during 1993 and 1992. ITEM 6. SELECTED FINANCIAL DATA. See the information for the years 1989 through 1993 contained in the table titled "Ten-Year Summary of Selected Historic Financial Data" which is included in this Annual Report on Form 10-K and listed in the index to financial information on page 23 hereof (with only the information for such years to be deemed filed as part of this Annual Report on Form 10-K). ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. See the information contained under the heading "Management's Discussion and Analysis of Results of Operations and Financial Condition" which is included in this Annual Report on Form 10-K and listed in the index to financial information on page 23 hereof. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. See the Company's Consolidated Financial Statements at January 2, 1994, and for the periods then ended, together with the report of Price Waterhouse thereon and the information contained in Note N to said Consolidated Financial Statements titled "Summary of Quarterly Operating Results (Unaudited)," which are included in this Annual Report on Form 10-K and listed in the index to financial information on page 23 hereof. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. Not applicable. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. The information contained under the heading "Executive Officers" in Item 1 hereof, the information contained under the headings "Nominees for Election by Class A Stockholders" and "Nominees for Election by Class B Stockholders," and the information contained in the last two paragraphs under the heading "Stock Holdings of Certain Beneficial Owners and Management" in the definitive Proxy Statement for the Company's 1994 Annual Meeting of Stockholders is incorporated herein by reference thereto. ITEM 11. EXECUTIVE COMPENSATION. The information contained in the first paragraph after the list of nominees under the heading "Nominees for Election by Class B Stockholders" and under the headings "Executive Compensation," "Retirement Plans" and "Compensation Committee Report on Executive Compensation" in the definitive Proxy Statement for the Company's 1994 Annual Meeting of Stockholders is incorporated herein by reference thereto. 19 21 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. The information contained under the heading "Stock Holdings of Certain Beneficial Owners and Management" in the definitive Proxy Statement for the Company's 1994 Annual Meeting of Stockholders is incorporated herein by reference thereto. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. The information contained under the heading "Certain Transactions" in the definitive Proxy Statement for the Company's 1994 Annual Meeting of Stockholders is incorporated herein by reference thereto. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K. (A) THE FOLLOWING DOCUMENTS ARE FILED AS PART OF THIS REPORT: (i) Financial Statements and Financial Statement Schedules As listed in the index to financial information on page 23 hereof. (ii) Exhibits As listed in the index to exhibits on page 52 hereof. (B) REPORTS ON FORM 8-K. No reports on Form 8-K were filed during the last quarter of the period covered by this report. 20 22 SIGNATURES PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) 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, ON MARCH 28, 1994. THE WASHINGTON POST COMPANY (Registrant) John B. Morse, Jr. By--------------------------------- John B. Morse, Jr. Vice President-Finance PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE REGISTRANT AND IN THE CAPACITIES INDICATED ON MARCH 28, 1994: John B. Morse, Jr. By--------------------------------- John B. Morse, Jr. Attorney-in-Fact 21
Donald E. Graham Chairman of the Board and Chief Executive Officer (Principal Executive Officer) and Director Alan G. Spoon President, Chief Operating Officer and Director Katharine Graham Chairman of the Executive Committee of the Board and Director John B. Morse, Jr. Vice President-Finance (Principal Financial and Accounting Officer) Benjamin C. Bradlee Director James E. Burke Director Martin Cohen Director George J. Gillespie, III Director Ralph E. Gomory Director Nicholas deB. Katzenbach Director Donald R. Keough Director Anthony J. F. O'Reilly Director Barbara Scott Preiskel Director William J. Ruane Director Richard D. Simmons Director George W. Wilson Director 23 An original power of attorney authorizing Donald E. Graham, Alan G. Spoon, Katharine Graham and John B. Morse, Jr., and each of them, to sign all reports required to be filed by the Registrant pursuant to the Securities Exchange Act of 1934 on behalf of the above-named directors and officers has been filed with the Securities and Exchange Commission. 22 24 --------------------- All other schedules have been omitted either because they are not applicable or because the required information is included in the consolidated financial statements or the notes thereto referred to above. 23
INDEX TO FINANCIAL INFORMATION --------------------- THE WASHINGTON POST COMPANY PAGE ---- Financial Statements and Schedules: Report of Independent Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Consolidated Statements of Income for the Three Fiscal Years Ended January 2, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Consolidated Balance Sheets at January 2, 1994 and January 3, 1993 . . . . . . . . . . . . . . . . . . . . . . 26 Consolidated Statements of Cash Flows for the Three Fiscal Years Ended January 2, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 Consolidated Statements of Changes in Shareholders' Equity for the Three Fiscal Years Ended January 2, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 Financial Statement Schedules for the Three Fiscal Years Ended January 2, 1994 . . . . . . . . . . . . . . . . 40 V -- Property, Plant and Equipment VI -- Accumulated Depreciation and Amortization of Property, Plant and Equipment VIII -- Valuation Accounts and Reserves X -- Supplementary Income Statement Information Management's Discussion and Analysis of Results of Operations and Financial Condition (Unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 Ten-Year Summary of Selected Historical Financial Data (Unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 25 REPORT OF INDEPENDENT ACCOUNTANTS To The Board of Directors and Shareholders of The Washington Post Company In our opinion, the consolidated financial statements, including the financial statement schedules, referred to under Item 14(a)(i) on page 20 and listed in the index on page 23 present fairly, in all material respects, the financial position of The Washington Post Company and its subsidiaries at January 2, 1994 and January 3, 1993, and the results of their operations and their cash flows for each of the three fiscal years in the period ended January 2, 1994, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. As discussed in Note E to the financial statements, the Company adopted, effective at the beginning of 1993, Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes." PRICE WATERHOUSE Washington, D.C. February 1, 1994 24 26 THE WASHINGTON POST COMPANY --------------------------- The information on pages 30 through 39 is an integral part of the financial statements. 25
CONSOLIDATED STATEMENTS OF INCOME ======================= - -------------------------------------------------------------------------------------------------------------------- Fiscal year ended --------------------------------------------------------- January 2, January 3, December 29, (in thousands, except share amounts) 1994 1993 1991 - -------------------------------------------------------------------------------------------------------------------- OPERATING REVENUES Advertising . . . . . . . . . . . . . . . . . . . . $ 913,529 $ 895,645 $ 852,438 Circulation and subscriber . . . . . . . . . . . . 444,385 436,193 412,937 Other . . . . . . . . . . . . . . . . . . . . . . . 140,277 119,029 114,886 ----------- ---------- ---------- 1,498,191 1,450,867 1,380,261 ----------- ---------- ---------- OPERATING COSTS AND EXPENSES Operating . . . . . . . . . . . . . . . . . . . . . 790,256 787,256 775,936 Selling, general and administrative . . . . . . . . 393,196 356,799 337,492 Depreciation and amortization of property, plant and equipment . . . . . . . . . . . . . . . . . . 59,543 59,222 58,695 Amortization of goodwill and other intangibles . . 16,216 15,478 15,272 ----------- ---------- ---------- 1,259,211 1,218,755 1,187,395 ----------- ---------- ---------- INCOME FROM OPERATIONS . . . . . . . . . . . . . . . 238,980 232,112 192,866 Equity in losses of affiliates . . . . . . . . . . (1,994) (11,730) (1,856) Interest income . . . . . . . . . . . . . . . . . . 11,085 11,854 17,382 Interest expense . . . . . . . . . . . . . . . . . (4,983) (6,385) (17,759) Other income (expense), net . . . . . . . . . . . . 20,379 (1,655) (412) ----------- ---------- ---------- INCOME BEFORE INCOME TAXES AND CUMULATIVE EFFECT OF CHANGES IN ACCOUNTING PRINCIPLE . . . . . 263,467 224,196 190,221 PROVISION FOR INCOME TAXES . . . . . . . . . . . . . 109,650 96,400 71,500 ----------- ---------- ---------- INCOME BEFORE CUMULATIVE EFFECT OF CHANGES IN ACCOUNTING PRINCIPLE . . . . . . . . . . . . . . 153,817 127,796 118,721 CUMULATIVE EFFECT OF CHANGE IN METHOD OF ACCOUNTING FOR: INCOME TAXES . . . . . . . . . . . . . . . . . . . 11,600 -- -- OTHER POSTRETIREMENT BENEFITS (NET OF TAXES OF $30,311) . . . . . . . . . . . . -- -- (47,897) ----------- ---------- ---------- NET INCOME . . . . . . . . . . . . . . . . . . . . . $ 165,417 $ 127,796 $ 70,824 =========== ========== ========== EARNINGS PER SHARE: BEFORE CUMULATIVE EFFECT OF CHANGES IN ACCOUNTING PRINCIPLE . . . . . . . . . . . . . . . $ 13.10 $ 10.80 $ 10.00 CUMULATIVE EFFECT OF CHANGES IN ACCOUNTING PRINCIPLE . . . . . . . . . . . . . . . .98 -- (4.04) ----------- ---------- ---------- NET INCOME . . . . . . . . . . . . . . . . . . . . $ 14.08 $ 10.80 $ 5.96 =========== ========== ========== 27 THE WASHINGTON POST COMPANY --------------------------- The information on pages 30 through 39 is an integral part of the financial statements. 26
CONSOLIDATED BALANCE SHEETS ============== - -------------------------------------------------------------------------------------------------------------------- January 2, January 3, (in thousands, except share amounts) 1994 1993 - -------------------------------------------------------------------------------------------------------------------- ASSETS CURRENT ASSETS Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . $ 171,512 $ 86,840 Marketable securities . . . . . . . . . . . . . . . . . . . . . . . . . 258,412 241,429 Accounts receivable, net . . . . . . . . . . . . . . . . . . . . . . . 140,518 128,368 Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,419 20,258 Program rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,460 17,842 Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . 23,253 30,238 ----------- ---------- 625,574 524,975 INVESTMENTS IN AFFILIATES . . . . . . . . . . . . . . . . . . . . . . . . 155,251 162,410 PROPERTY, PLANT AND EQUIPMENT Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 166,433 161,048 Machinery, equipment and fixtures . . . . . . . . . . . . . . . . . . . 579,423 571,312 Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . 29,287 29,644 ----------- ---------- 775,143 762,004 Less accumulated depreciation and amortization . . . . . . . . . . . . (469,359) (422,236) ----------- ---------- 305,784 339,768 Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28,799 28,176 Construction in progress . . . . . . . . . . . . . . . . . . . . . . . 29,135 22,860 ----------- ---------- 363,718 390,804 GOODWILL AND OTHER INTANGIBLES, LESS ACCUMULATED AMORTIZATION OF $129,768 and $113,552 . . . . . . . . . . . . . . . . . . . . . . . . . 309,157 325,420 DEFERRED CHARGES AND OTHER ASSETS . . . . . . . . . . . . . . . . . . . . 168,804 164,512 ----------- ---------- $ 1,622,504 $1,568,121 =========== ========== 28 THE WASHINGTON POST COMPANY --------------------------- The information on pages 30 through 39 is an integral part of the financial statements. 27
- -------------------------------------------------------------------------------------------------------------------- January 2, January 3, (in thousands, except share amounts) 1994 1993 - -------------------------------------------------------------------------------------------------------------------- LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable and accrued liabilities . . . . . . . . . . . . . . . $ 163,553 $ 188,525 Federal and state income taxes . . . . . . . . . . . . . . . . . . . . 15,726 12,867 Deferred subscription revenue . . . . . . . . . . . . . . . . . . . . . 79,254 80,956 ----------- ---------- 258,533 282,348 OTHER LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 191,088 194,114 LONG-TERM DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51,768 51,842 DEFERRED INCOME TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . 33,696 46,812 ----------- ---------- 535,085 575,116 ----------- ---------- SHAREHOLDERS' EQUITY Preferred stock, $1 par value, 1,000,000 shares authorized . . . . . . -- -- Common stock Class A common stock, $1 par value, 7,000,000 shares authorized; 1,843,250 shares issued and outstanding . . . . . . . . . . . . . . . 1,843 1,843 Class B common stock, $1 par value, 40,000,000 shares authorized; 18,156,750 shares issued; 9,870,115 and 9,954,885 shares outstanding 18,157 18,157 Capital in excess of par value . . . . . . . . . . . . . . . . . . . . 21,354 18,747 Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,570,546 1,454,505 Cumulative foreign currency translation adjustment . . . . . . . . . . 2,908 4,939 Cost of 8,286,635 and 8,201,865 shares of Class B common stock held in Treasury . . . . . . . . . . . . . . . . . . . . (527,389) (505,186) ----------- ---------- 1,087,419 993,005 ----------- ---------- $ 1,622,504 $1,568,121 =========== ========== 29 THE WASHINGTON POST COMPANY --------------------------- The information on pages 30 through 39 is an integral part of the financial statements. 28
CONSOLIDATED STATEMENTS OF CASH FLOWS ======================= - -------------------------------------------------------------------------------------------------------------------- Fiscal year ended ---------------------------------------- January 2, January 3, December 29, (in thousands) 1994 1993 1991 - -------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 165,417 $ 127,796 $ 70,824 Adjustments to reconcile net income to net cash provided by operating activities: Cumulative effect of change in accounting principle . . . . . . . (11,600) -- 78,208 Depreciation and amortization of property, plant and equipment . . 59,543 59,222 58,695 Amortization of goodwill and other intangibles . . . . . . . . . . 16,216 15,478 15,272 Amortization of program rights . . . . . . . . . . . . . . . . . . 18,927 20,308 28,939 Provision for doubtful accounts and returns . . . . . . . . . . . 56,631 57,629 52,920 Gain from sale of business . . . . . . . . . . . . . . . . . . . . (13,371) -- -- (Decrease) increase in accrued interest and income taxes payable . (5,141) (14,162) 391 Provision for deferred income taxes . . . . . . . . . . . . . . . (1,669) (1,577) (34,336) Change in assets and liabilities: (Increase) in accounts receivable . . . . . . . . . . . . . . . . (68,901) (47,393) (59,685) Decrease (increase) in inventories . . . . . . . . . . . . . . . 3,839 (695) 5,639 (Decrease) increase in accounts payable and accrued liabilities . (17,054) 16,102 (978) (Increase) in other assets and other liabilities, net . . . . . . (9,628) (14,347) (2,388) Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,440 23,886 16,400 --------- --------- --------- Net cash provided by operating activities . . . . . . . . . . . 202,649 242,247 229,901 --------- --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Net proceeds from sale of business . . . . . . . . . . . . . . . . . 64,947 -- -- Purchases of property, plant and equipment . . . . . . . . . . . . . (79,139) (58,889) (55,657) Purchases of marketable securities . . . . . . . . . . . . . . . . . (520,114) (533,082) (249,057) Proceeds from sales of marketable securities . . . . . . . . . . . . 509,937 465,891 180,203 Investments in certain businesses . . . . . . . . . . . . . . . . . . (1,591) (32,353) (19,301) Payments for program rights . . . . . . . . . . . . . . . . . . . . . (20,232) (22,013) (19,917) Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 663 978 969 --------- --------- --------- Net cash (used) by investing activities . . . . . . . . . . . . (45,529) (179,468) (162,760) --------- --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Principal payments on debt . . . . . . . . . . . . . . . . . . . . . -- (25,000) (75,000) Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . (49,376) (49,699) (49,872) Common shares repurchased . . . . . . . . . . . . . . . . . . . . . . (23,133) (7,484) (7,430) Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 122 150 --------- --------- --------- Net cash (used) by financing activities . . . . . . . . . . . . (72,448) (82,061) (132,152) --------- --------- --------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS . . . . . . . . . 84,672 (19,282) (65,011) CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR . . . . . . . . . . . . 86,840 106,122 171,133 --------- --------- --------- CASH AND CASH EQUIVALENTS AT END OF YEAR . . . . . . . . . . . . . . . $ 171,512 $ 86,840 $ 106,122 ========= ========= ========= SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid during the year for: Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 110,300 $ 110,700 $ 72,300 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,600 $ 7,200 $ 19,500 NONCASH INVESTING ACTIVITIES: Program rights acquired . . . . . . . . . . . . . . . . . . . . . . . $ 5,800 $ 25,200 $ 19,800 30 THE WASHINGTON POST COMPANY --------------------------- The information on pages 30 through 39 is an integral part of the financial statements. 29
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY ================================== - ----------------------------------------------------------------------------------------------------------------------------- Cumulative Foreign Class A Class B Capital in Currency Common Common Excess of Retained Translation Treasury (in thousands, except share amounts) Stock Stock Par Value Earnings Adjustment Stock - ----------------------------------------------------------------------------------------------------------------------------- BALANCE DECEMBER 30, 1990 . . . . . . . . . $1,852 $ 18,148 $ 16,641 $ 1,355,456 $ 4,170 $(491,155) Net income for the year . . . . . . . . . 70,824 Dividends -- $4.20 per share . . . . . . (49,872) Repurchase of 42,900 shares of Class B common stock . . . . . . . . . . (7,430) Issuance of 13,611 shares of Class B common stock, net of restricted stock award forfeitures . . . . . . . . . . . 1,833 867 Conversion of 9,128 shares of Class A common stock to Class B common stock . . . . . . . . . . . . . . (9) 9 Change in foreign currency translation adjustment . . . . . . . . . . . . . . . 2,700 Other . . . . . . . . . . . . . . . . . . 251 ------ -------- -------- ----------- ------- --------- BALANCE DECEMBER 29, 1991 . . . . . . . . . 1,843 18,157 18,725 1,376,408 6,870 (497,718) Net income for the year . . . . . . . . . 127,796 Dividends -- $4.20 per share . . . . . . (49,699) Repurchase of 33,949 shares of Class B common stock . . . . . . . . . . (7,484) Issuance of 304 shares of Class B common stock, net of restricted stock award forfeitures . . . . . . . . . . . (52) 16 Change in foreign currency translation adjustment . . . . . . . . . . . . . . . (1,931) Other . . . . . . . . . . . . . . . . . . 74 ------ -------- -------- ----------- ------- --------- BALANCE JANUARY 3, 1993 . . . . . . . . . . 1,843 18,157 18,747 1,454,505 4,939 (505,186) Net income for the year . . . . . . . . . 165,417 Dividends -- $4.20 per share . . . . . . (49,376) Repurchase of 99,800 shares of Class B common stock . . . . . . . . . . (23,133) Issuance of 15,030 shares of Class B common stock, net of restricted stock award forfeitures . . . . . . . . . . . 2,480 930 Change in foreign currency translation adjustment . . . . . . . . . . . . . . . (2,031) Other . . . . . . . . . . . . . . . . . . 127 ------ -------- -------- ----------- ------- --------- BALANCE JANUARY 2, 1994 . . . . . . . . . . $1,843 $ 18,157 $ 21,354 $ 1,570,546 $ 2,908 $(527,389) ====== ======== ======== =========== ======= ========= 31 THE WASHINGTON POST COMPANY --------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ===================== A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Washington Post Company ("the company") operates principally in four areas of the media business: newspaper publishing, television broadcasting, magazine publishing and cable television. Segment data is set forth in Note M. FISCAL YEAR. The company reports on a 52-53 week fiscal year ending on the Sunday nearest December 31. The fiscal year 1993, which ended on January 2, 1994, included 52 weeks, while 1992 included 53 weeks and 1991 included 52 weeks. With the exception of the newspaper publishing operations, subsidiaries of the company report on a calendar-year basis. PRINCIPLES OF CONSOLIDATION. The accompanying financial statements include the accounts of the company and its subsidiaries; significant intercompany transactions have been eliminated. CASH EQUIVALENTS. Short-term investments with maturities of 90 days or less are considered cash equivalents. The carrying amount approximates fair value. MARKETABLE SECURITIES. Marketable securities consist of debt instruments that mature over 90 days from the purchase date and are stated at cost plus accrued interest, which approximates fair value. INVENTORIES. Inventories are valued at the lower of cost or market. Cost of newsprint is determined by the first-in, first-out method, and cost of magazine paper is determined by the specific-cost method. INVESTMENTS IN AFFILIATES. The company uses the equity method of accounting for its investments in and earnings and losses of affiliates. PROPERTY, PLANT AND EQUIPMENT. Property, plant and equipment is recorded at cost and includes interest capitalized in connection with major long-term construction projects. Replacements and major improvements are capitalized; maintenance and repairs are charged to operations as incurred. Depreciation is calculated using the straight-line method over the estimated useful lives of the property, plant and equipment: 3 to 12 years for machinery and equipment, 20 to 50 years for buildings and 5 to 20 years for land improvements. The costs of leasehold improvements are amortized over the lesser of the useful lives or the terms of the respective leases. GOODWILL AND OTHER INTANGIBLES. Goodwill and other intangibles represent the unamortized excess of the cost of acquiring subsidiary companies over the fair values of such companies' net tangible assets at the dates of acquisition. Goodwill and other intangibles acquired prior to October 30, 1970, the effective date of Accounting Principles Board Opinion No. 17, are not being amortized because in the opinion of the company there has been no diminution of the value of such assets. Goodwill and other intangibles acquired subsequently are being amortized by use of the straight-line method over various periods up to 40 years. DEFERRED PROGRAM RIGHTS. The broadcast subsidiaries are parties to agreements that entitle them to show motion pictures and syndicated programs on television. The unamortized cost of these rights and the liability for future payments under these agreements are included in the Consolidated Balance Sheets. The unamortized cost is charged to operations using accelerated amortization rates for motion pictures and accelerated or straight-line rates for syndicated programs. DEFERRED SUBSCRIPTION REVENUE AND MAGAZINE SUBSCRIPTION PROCUREMENT COSTS. Deferred subscription revenue, which primarily represents amounts received from customers in advance of magazine and newspaper deliveries, is included in revenues over the subscription term. Deferred subscription revenue to be earned after one year is included in "Other liabilities" in the Consolidated Balance Sheets. Subscription procurement costs are charged to operations as incurred. INCOME TAXES. The 1993 provision for income taxes has been determined under Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS No. 109), which requires the use of the asset and liability approach. Under this approach, deferred taxes represent the expected future tax consequences of temporary differences between the carrying amount and tax basis of assets and liabilities. Prior to 1993, the provision for income taxes was determined under Accounting Principles Board (APB) Opinion No. 11, which required use of the deferred method. Under that method, the provision for income taxes was based on pretax financial income, which differed from taxable income because certain elements of income and expense were reflected in different periods for 30 32 THE WASHINGTON POST COMPANY --------------------------- financial accounting and tax purposes. Deferred taxes were provided on these timing differences using the tax rate in effect when the timing differences originated, and the effects of reversing timing differences were reflected at those historical tax rates. FOREIGN CURRENCY TRANSLATION. Gains and losses on foreign currency transactions and the translation of the accounts of the company's foreign operations where the U.S. dollar is the functional currency are recognized currently in the Consolidated Statements of Income. Gains and losses on translation of the accounts of the company's foreign operations where the local currency is the functional currency and the company's equity investments in its foreign affiliates are accumulated and reported separately in the "Cumulative foreign currency translation adjustment" in the Consolidated Balance Sheets. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS. The company provides certain health care and life insurance benefits for retired employees. The expected cost of providing these postretirement benefits is accrued over the years that employees render the necessary service. B. MARKETABLE SECURITIES The company's marketable securities at January 2, 1994, and January 3, 1993, include the following (in thousands): C. ACCOUNTS RECEIVABLE AND ACCOUNTS PAYABLE AND ACCRUED LIABILITIES Accounts receivable at January 2, 1994, and January 3, 1993, consist of the following (in thousands):
- -------------------------------------------------------- 1993 1992 - -------------------------------------------------------- U.S. Government and Government agency obligations $237,655 $221,398 Commercial paper 20,757 20,031 -------- -------- $258,412 $241,429 ======== ======== Accounts payable and accrued liabilities at January 2, 1994, and January 3, 1993, consist of the following (in thousands):
- --------------------------------------------------------------------------------- 1993 1992 - --------------------------------------------------------------------------------- Accounts receivable, less estimated returns, doubtful accounts and allowances of $38,602 and $35,300 . . . . . $ 129,976 $ 120,531 Other . . . . . . . . . . . . . . . . . . . . 10,542 7,837 ---------- ---------- $ 140,518 $ 128,368 ========== ========== D. INVESTMENTS IN AFFILIATES The company's investments in affiliates at January 2, 1994, and January 3, 1993, include the following (in thousands):
- --------------------------------------------------------------------------------- 1993 1992 - --------------------------------------------------------------------------------- Accounts payable and accrued expenses . . . . . . . . . . . . . . . . $ 91,831 $113,841 Accrued payroll and related benefits . . . 31,747 28,459 Accrued interest expense . . . . . . . . . 4,437 5,693 Deferred tuition revenue . . . . . . . . . 12,564 11,400 Film contracts payable . . . . . . . . . . 14,978 19,824 Due to affiliates (newsprint) . . . . . . . 7,996 9,308 ---------- ---------- $ 163,553 $ 188,525 ========== ========== The company's investments in affiliates includes a 28 percent interest in the stock of Cowles Media Company, which owns and operates the Minneapolis Star Tribune and several other smaller properties. The company's interest in newsprint mills includes a 49 percent interest in the common stock of Bowater Mersey Paper Company Limited, which owns and operates a newsprint mill in Nova Scotia; a one-third limited partnership interest in Bear Island Paper Company, which owns and operates a newsprint mill near Richmond, Virginia; and a one-third limited partnership interest in Bear Island Timberlands Company, which owns timberland and supplies Bear Island Paper Company with a major portion of its wood requirements. In early 1994 the company increased its investments in both Bear Island Paper Company and Bear Island Timberlands Company to 35 percent. Operating costs and expenses of the company include newsprint supplied by Bowater, Inc. (parent of Bowater Mersey Paper Company), and Bear Island Paper Company and used in operations, the cost of which was $52,500,000 in 1993, $51,000,000 in 1992 and $59,200,000 in 1991. The company's other investments represent a 50 percent common stock interest in the International Herald Tribune newspaper, published near Paris, and a 50 percent common stock interest in the Los Angeles Times-Washington Post News Service, Inc. In 1991 investments also included a 30 percent common stock interest in The Gazette Newspapers, Inc. This investment 31
- --------------------------------------------------------------------------------- 1993 1992 - --------------------------------------------------------------------------------- Cowles Media Company . . . . . . . . . . . $ 80,786 $ 80,415 Newsprint mills . . . . . . . . . . . . . . 50,172 55,829 Other . . . . . . . . . . . . . . . . . . . 24,293 26,166 ---------- ---------- $ 155,251 $ 162,410 ========== ========== 33 THE WASHINGTON POST COMPANY --------------------------- increased in 1992 to a majority interest and, accordingly, it is included as a fully consolidated subsidiary (see Note K on acquisitions). Summarized financial data for the affiliates' operations is as follows (in thousands): The following table summarizes the status and results of the company's investments in affiliates (in thousands):
- --------------------------------------------------------------------------------- 1993 1992 1991 - --------------------------------------------------------------------------------- FINANCIAL POSITION Working capital . . . . $ (67,923) $(119,505) $ (93,737) Property, plant and equipment . . . . . . 422,606 436,620 478,502 Total assets . . . . . 732,940 718,352 759,850 Long-term debt . . . . 200,105 197,203 212,923 Net equity . . . . . . 172,332 175,618 203,997 RESULTS OF OPERATIONS Operating revenues . . $ 610,617 $ 650,194 $ 644,814 Operating income . . . 43,569 20,500 30,509 Net income (loss) . . . 7,218 (13,175) 6,543 At January 2, 1994, the unamortized excess of the company's investments over its equity in the underlying net assets of its affiliates at the date of acquisition was approximately $89,700,000. Amortization included in "Equity in losses of affiliates" was $2,600,000 for the years ended January 2, 1994, and January 3, 1993, and $2,550,000 for the year ended December 29, 1991. E. INCOME TAXES In 1993 the company adopted the provisions of SFAS No. 109, "Accounting for Income Taxes," which requires the use of the asset and liability method of accounting for deferred income taxes. The cumulative effect of this adoption was an increase in 1993 net income of $11,600,000 and is shown on the Consolidated Statements of Income as the cumulative effect of a change in accounting principle. Financial statements for years prior to 1993 were not restated. Information shown below for those prior years was determined under the provisions of APB Opinion No. 11. The provision for income taxes consists of the following (in thousands):
- --------------------------------------------------------------------------------- 1993 1992 - --------------------------------------------------------------------------------- Beginning investment . . . . . . . . . . . $ 162,410 $ 181,764 Equity in losses . . . . . . . . . . . . . (1,994) (11,730) Dividends and distributions received . . . (2,743) (2,575) Foreign currency translation . . . . . . . (2,422) (1,611) Other . . . . . . . . . . . . . . . . . . . -- (3,438) ---------- ----------- Ending investment . . . . . . . . . . . . . $ 155,251 $ 162,410 ========== =========== During 1993 the company sold its cable franchises in the United Kingdom. This transaction increased foreign taxes by approximately $6,800,000. In 1992 and 1991 deferred tax benefit resulted principally from the excess of financial statement depreciation over tax depreciation, the tax effect of which amounted to $1,783,000 in 1992 and $2,437,000 in 1991, and accrued postretirement benefit expense, the effect of which amounted to $4,138,000 in 1992 and $3,163,000 in 1991. These amounts were offset by the tax effect of $7,469,000 in 1992 and $5,335,000 in 1991 of net pension credits in excess of contributions. The provision for income taxes exceeds the amount of income tax determined by applying the U.S. Federal statutory rate of 35 percent in 1993 and 34 percent in 1992 and 1991 to income before taxes as a result of the following (in thousands):
- --------------------------------------------------------------------------------- Current Deferred - --------------------------------------------------------------------------------- 1993 U.S. Federal . . . . . . . . . . . . . . . . $ 85,082 $ (535) Foreign . . . . . . . . . . . . . . . . . . . 6,913 (657) State and local . . . . . . . . . . . . . . . 19,324 (477) --------- ---------- $ 111,319 $ (1,669) ========= ========== 1992 U.S. Federal . . . . . . . . . . . . . . . . $ 79,380 $ (295) Foreign . . . . . . . . . . . . . . . . . . . 488 (1,219) State and local . . . . . . . . . . . . . . . 18,109 (63) --------- ---------- $ 97,977 $ (1,577) ========= ========== 1991 U.S. Federal . . . . . . . . . . . . . . . . $ 60,732 $ (3,195) Foreign . . . . . . . . . . . . . . . . . . . 567 (528) State and local . . . . . . . . . . . . . . . 14,226 (302) --------- ---------- $ 75,525 $ (4,025) ========= ========== 32
- --------------------------------------------------------------------------------- 1993 1992 1991 - --------------------------------------------------------------------------------- U.S. Federal statutory taxes . . . . . . . . . $ 92,213 $ 76,226 $ 64,675 State and local taxes net of U.S. Federal income tax benefit . . . . . . 12,251 11,911 9,190 Amortization of goodwill not deductible for income tax purposes . . . . . 2,433 2,922 2,805 Prior period tax adjustments . . . . . . -- -- (10,013) Other . . . . . . . . . . 2,753 5,341 4,843 ----------- ----------- ---------- Provision for income taxes . . . . . . . . . $ 109,650 $ 96,400 $ 71,500 =========== =========== ========== 34 THE WASHINGTON POST COMPANY --------------------------- Deferred income taxes at January 2, 1994, consist of the following (in thousands): F. DEBT Long-term debt of the company as of January 2, 1994, and January 3, 1993, is summarized as follows (in thousands):
- --------------------------------------------------------------------------------- 1993 - --------------------------------------------------------------------------------- Accrued postretirement benefits . . . . . . . . . . . . . . . . $ 42,336 Other benefit obligations . . . . . . . . . . . . . . . . . . . 17,760 Accounts receivable . . . . . . . . . . . . . . . . . . . . . . 6,368 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,855 ---------- Deferred tax asset . . . . . . . . . . . . . . . . . . . . . . $ 70,319 ---------- Property, plant and equipment . . . . . . . . . . . . . . . . . $ 48,275 Prepaid pension cost . . . . . . . . . . . . . . . . . . . . . 39,769 Affiliate operations . . . . . . . . . . . . . . . . . . . . . 12,211 Investment tax credit . . . . . . . . . . . . . . . . . . . . . 3,760 ---------- Deferred tax liability . . . . . . . . . . . . . . . . . . . . 104,015 ---------- Deferred income taxes . . . . . . . . . . . . . . . . . . . . . $ 33,696 ========== G. CAPITAL STOCK, STOCK OPTIONS AND STOCK AWARDS CAPITAL STOCK. Each share of Class A common stock and Class B common stock participates equally in dividends. The Class B stock has limited voting rights and as a class has the right to elect 30 percent of the Board of Directors; the Class A stock has unlimited voting rights including the right to elect a majority of the Board of Directors. In 1991, 9,128 shares of the company's Class A common stock were converted into an equal number of shares of the company's Class B common stock. During 1993 and 1992 the company purchased a total of 99,800 and 33,949 shares, respectively, of its Class B common stock at a cost of approximately $23,133,000 and $7,484,000. STOCK OPTIONS. In May 1993 the Stock Option Plan was amended to increase to 1,900,000 the number of shares of the company's Class B common stock to be reserved for options to be granted under the Plan. The purchase price of the shares covered by an option cannot be less than the fair value on the granting date. At January 2, 1994, there were 662,950 shares reserved for issuance under the Stock Option Plan, of which 155,000 shares were subject to options outstanding and 507,950 shares were available for future grants. Changes in options outstanding for the years ended January 2, 1994, and January 3, 1993, were as follows:
- --------------------------------------------------------------------------------- 1993 1992 - --------------------------------------------------------------------------------- 10.1 percent unsecured European Currency Unit notes, $50,000,000 face amount due in 1996 . . . . . . . . . . $ 50,368 $ 50,442 10.875 percent unsecured Eurodollar notes, $1,400,000 face amount due in 1995 . . . . . . . . . . 1,400 1,400 ----------- ---------- $ 51,768 $ 51,842 =========== ========== Of the shares covered by options outstanding at the end of 1993, 65,375 are now exercisable, 14,875 will become exercisable in 1994, 13,750 will become exercisable in 1995, 7,875 will become exercisable in 1996, 3,125 will become exercisable in 1997, and 50,000 will become exercisable in 1999. STOCK AWARDS. In 1982 the company adopted a Long-Term Incentive Compensation Plan that, among other provisions, authorizes the awarding of stock to key employees. Stock awards made under the Incentive Compensation Plan are subject to the general restriction that stock awarded to a participant will be forfeited and revert to company ownership if the participant's employment terminates before the end of a specified period of service to the company. At January 2, 1994, there were 140,164 shares reserved for issuance under the Incentive Compensation Plan. Of this number, 27,955 shares were subject to awards outstanding, and 112,209 shares were available for future awards. Activity related to stock awards for the years ended January 2, 1994, and January 3, 1993, was as follows:
- --------------------------------------------------------------------------------- 1993 1992 ----------------------------------------------- Number Average Number Average Of Option Of Option Shares Price Shares Price - --------------------------------------------------------------------------------- Beginning of year . . . . . . . . 143,000 $256.88 125,000 $260.49 Granted . . . . . . . 12,500 239.88 19,000 226.00 Exercised . . . . . . (500) 121.50 (1,000) 121.50 ------- ------- End of year . . . . . . 155,000 255.95 143,000 256.88 ======= ======= For the share awards outstanding at January 2, 1994, the aforementioned restriction will lapse in January 1995 for 12,809 shares and in January 1997 for 15,146 shares. 33
- --------------------------------------------------------------------------------- 1993 1992 ----------------------------------------------- Number Average Number Average Of Award Of Award Shares Price Shares Price - --------------------------------------------------------------------------------- Awards Outstanding Beginning of year . . . . . . . . 24,765 $202.99 25,461 $202.62 Awarded . . . . . . . 15,437 228.67 192 228.58 Vested . . . . . . . (11,340) 209.05 -- -- Forfeited . . . . . . (907) 206.35 (888) 197.83 ------- ------ End of year . . . . . . 27,955 214.61 24,765 202.99 ======= ====== 35 THE WASHINGTON POST COMPANY --------------------------- AVERAGE NUMBER OF SHARES OUTSTANDING. Earnings per share are based on the weighted average number of shares of common stock outstanding during each year, adjusted for the dilutive effect of shares issuable under outstanding stock options and awards made under the Incentive Compensation Plan. The average number of shares outstanding was 11,750,000 for 1993, 11,830,000 for 1992 and 11,876,000 for 1991. H. RETIREMENT PLANS The company and its subsidiaries have various funded and unfunded pension and incentive savings plans and in addition contribute to several multi-employer plans on behalf of certain union-represented employee groups. Substantially all of the company's employees, including some located in foreign countries, are covered by these plans. Pension (benefit) cost for all retirement plans combined was $(2,300,000) in 1993, $5,200,000 in 1992 and $3,000,000 in 1991. Included in 1992 are costs of $8,300,000 related to a new deferred compensation arrangement at The Washington Post newspaper. Included in 1991 are costs of $4,900,000 associated with the voluntary reduction of staff at The Washington Post newspaper. The costs for the company's defined benefit pension plans are actuarially determined and include amortization of prior service costs over various periods, generally not exceeding 20 years. The company's policy is to fund the costs accrued for its defined benefit plans. The following table sets forth the funded status of the defined benefit plans and amounts recognized in the Consolidated Balance Sheets at January 2, 1994, and January 3, 1993 (in thousands): The net pension credit for the years ended January 2, 1994, January 3, 1993, and December 29, 1991, includes the following components (in thousands):
- --------------------------------------------------------------------------------- 1993 1992 - --------------------------------------------------------------------------------- Actuarial present value of accumulated plan benefits, including vested benefits of $142,706 and $129,144 . . . . $ 151,200 $ 139,980 ========= ========== Plan assets at fair value, primarily listed securities . . . . . . . . . . . . $ 454,741 $ 425,422 Projected benefit obligation for service rendered to date . . . . . . . . (187,490) (173,133) --------- ---------- Plan assets in excess of projected benefit obligation . . . . . . . . . . . 267,251 252,289 Prior service cost not yet recognized in periodic pension cost . . . . . . . . . . 15,697 16,855 Less unrecognized net gain from past experience different from that assumed . . . . . . . . . . . . . . . . . (114,212) (112,653) Less unrecognized net asset (transition amount) being recognized over approximately 17 years . . . . . . . (68,933) (76,599) --------- ---------- Prepaid pension cost . . . . . . . . . . . $ 99,803 $ 79,892 ========= ========== The weighted average discount rate and rate of increase in future compensation levels used for 1993, 1992 and 1991 in determining the actuarial present value of the projected benefit obligation were 7.5 percent and 4 percent, respectively. The expected long-term rate of return on assets was 9 percent in 1993, 1992 and 1991. Contributions to multi-employer pension plans, which are generally based on hours worked, amounted to $1,900,000 in 1993, $1,500,000 in 1992 and $1,300,000 in 1991. The costs of unfunded retirement plans are charged to expense when accrued. The company's liability for such plans, which is included in "Other Liabilities" in the Consolidated Balance Sheets, was $45,000,000 at January 2, 1994, and $41,500,000 at January 3, 1993. I. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS The company and its subsidiaries provide health care and life insurance benefits to certain retired employees. These employees become eligible for benefits after meeting minimum age and service requirements. In 1991 the company adopted the provisions of SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions." As permitted by SFAS No. 106, the company elected to recognize in 1991 the accumulated benefit obligation related to prior service costs. This obligation of $78,208,000, after income taxes of $30,311,000, is shown on the Consolidated Statements of Income as the cumulative effect of a change in accounting principle. 34
- --------------------------------------------------------------------------------- 1993 1992 1991 - --------------------------------------------------------------------------------- Service cost for benefits earned during the period . $ 8,805 $ 8,312 $ 7,200 Interest cost on projected benefit obligation . . . . 12,683 11,700 10,327 Actual return on plan assets . . . . . . . . . . (35,086) (29,388) (84,880) Net amortization and deferral . . . . . . . . . (5,839) (8,185) 50,471 Cost of voluntary reduction in staff . . . . . . . . . -- -- 4,916 -------- -------- -------- Net pension credit . . . . . $(19,437) $(17,561) $(11,966) ======== ======== ======== 36 THE WASHINGTON POST COMPANY --------------------------- The following table sets forth the amounts included in "Other liabilities" in the Consolidated Balance Sheets at January 2, 1994, and January 3, 1993 (in thousands): Net periodic postretirement benefit cost for the years ended January 2, 1994, January 3, 1993, and December 29, 1991, includes the following components (in thousands):
- --------------------------------------------------------------------------------- 1993 1992 - --------------------------------------------------------------------------------- Accumulated postretirement benefit obligation: Retirees . . . . . . . . . . . . . . . . $ 46,988 $ 46,329 Fully eligible active plan participants . . . . . . . . . . . . . 6,423 5,880 Other active plan participants . . . . . 40,926 35,184 ---------- ---------- 94,337 87,393 Unrecognized prior service costs arising from plan amendments . . . . . . . 2,357 2,571 Unrecognized net gain from past experience different from that assumed. . . . . . . . . . . . . . . . 739 739 ---------- ---------- Accrued postretirement benefit cost . . . . . $ 97,433 $ 90,703 ========== ========== The curtailment gain of $6,000,000 relates to the termination in December 1992 of one of the company's health care plans at The Washington Post newspaper. The terminated plan has been replaced by a deferred payment arrangement and a related expense of $8,300,000 was recognized as a result of this change (see Note H). For 1993, 1992 and 1991 the accumulated postretirement benefit obligation was determined using a discount rate of 8 percent and a health care cost trend rate of approximately 14 percent for pre-age-65 benefits, decreasing to 6.5 percent in the year 2022 and thereafter; and rates of approximately 11 to 14 percent for post-age-65 benefits, decreasing to 6.5 percent in the year 2022 and thereafter. The company's policy is to fund the above-mentioned benefits as claims and premiums are paid. The effect on the accumulated postretirement benefit obligation at January 4, 1993, of a 1 percent increase each year in the health care cost trend rate used would result in increases of approximately $16,500,000 in the obligation and $2,000,000 in the aggregate service and interest components of the 1993 expense. The cash expenditures for postretirement benefits were $2,830,000 in 1993, $2,560,000 in 1992 and $2,222,000 in 1991. J. LEASE COMMITMENTS The company leases primarily real property under operating agreements. Many of the leases contain renewal options and escalation clauses that require payments of additional rent to the extent of increases in the related operating costs. At January 2, 1994, future minimum rental payments under noncancelable operating leases are as follows (in thousands):
- --------------------------------------------------------------------------------- 1993 1992 1991 - --------------------------------------------------------------------------------- Service cost for benefits earned during the period . . . . . . . . . . $ 2,894 $3,029 $ 2,948 Interest cost on accumulated post- retirement benefit obligation . . . . . . . . 6,880 6,853 6,404 Amortization of prior service costs . . . . . . . (214) (61) Curtailment gain . . . . . . -- (5,963) -- ------- ------ ------- Net periodic postretirement benefit cost . . . . . . . $ 9,560 $3,858 $ 9,352 ======= ====== ======= Minimum payments have not been reduced by minimum sublease rentals of $3,000,000 due in the future under noncancelable subleases. Rent expense under operating leases included in operating costs and expenses was approximately $22,200,000 in 1993, $21,500,000 in 1992 and $20,000,000 in 1991. Sublease income was approximately $1,300,000 in 1993, 1992 and 1991. In 1993 the company entered into a lease agreement under which certain costs are paid for through a restricted funding mechanism. At January 2, 1994, $6,900,000 included in "Cash and cash equivalents" is restricted under the provisions of this funding arrangement. 35
- --------------------------------------------------------------------------------- 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 18,058 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,500 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,332 1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,739 1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,998 Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . 42,844 ---------- $ 113,471 ========== 37 THE WASHINGTON POST COMPANY --------------------------- K. ACQUISITIONS AND DISPOSITIONS In September 1993 the company sold its cable franchises in the United Kingdom. The related gain of $20,175,000 before giving effect to taxes of $6,804,000 is included in "Other income (expense), net" in the Consolidated Statements of Income. This transaction increased earnings by $1.14 per share in 1993. During 1992 the company expended approximately $32,000,000, including related expenses, for investments in new businesses. These included a cable system in Mississippi; Pro Am Sports System, a company that provides sports programming in the Detroit area; and continued investment in personal communications services (PCS) technology development. The company also purchased shares in ACTV, Inc., a company that is involved in interactive television, and made additional investments in The Gazette Newspapers, Inc., which increased the company's ownership to 84 percent in 1992 and 100 percent in 1993. The acquisitions, except for the investment in ACTV, Inc., were accounted for using the purchase method and, accordingly, the assets and liabilities of the companies acquired have been recorded at their estimated fair values at the date of acquisition. The excess of the cost over the fair value of net assets acquired is being amortized over periods up to 40 years. The investment in ACTV, Inc., is accounted for under the cost method of accounting. In 1994 the company entered into an agreement to purchase the assets of two television stations from H & C Communications, Inc., for approximately $250,000,000. The completion of the transaction is contingent upon approval by the Federal Communications Commission. L. CONTINGENCIES The company and its subsidiaries are parties to various civil lawsuits that have arisen in the ordinary course of their businesses, including actions for libel and invasion of privacy. Management does not believe that any litigation pending against the company will have a material adverse effect on its business or financial condition. M. BUSINESS SEGMENTS The company operates principally in four areas of the communications industry: newspaper publishing, television broadcasting, magazine publishing and cable television. Newspaper operations involve the publication of newspapers in the Washington, D.C., area and Everett, Washington, and newsprint warehousing and recycling facilities. Broadcast operations are conducted primarily through four VHF television stations. All stations are network-affiliated, with revenues derived primarily from sales of advertising time. Magazine operations consist of the publication of a weekly news magazine, Newsweek, which has one domestic and three international editions. Revenues from both newspaper and magazine publishing operations are derived from advertising and, to a lesser extent, from circulation. Cable television operations consist of over 50 cable systems offering basic cable and pay television services to more than 480,000 subscribers in 15 midwestern, western and southern states. Prior to September 1993 cable television operations also included services provided in the United Kingdom. The principal source of revenues is monthly subscription fees charged for services. Other businesses include the operations of a database publishing company, a regional sports cable system, a wireless telephone system and educational centers engaged in preparing students for admissions tests and licensing examinations (including the preparation and publishing of training materials). Income from operations is the excess of operating revenues over operating expenses including corporate expenses, which are allocated to operations of the segments. In computing income from operations by segment, the effects of equity in earnings of affiliates, interest income, interest expense, other income and expense items and income taxes are not included. Identifiable assets by segment are those assets used in the company's operations in each business segment. Investments in affiliates are discussed in Note D. Corporate assets are principally cash and cash equivalents and marketable securities. 36 38 THE WASHINGTON POST COMPANY --------------------------- 37
- ---------------------------------------------------------------------------------------------------------------------- Newspaper Television Magazine Cable Other (in thousands) Publishing Broadcasting Publishing Television Businesses Consolidated - ---------------------------------------------------------------------------------------------------------------------- 1993 Operating revenues . . . . . . . $692,287 $ 177,415 $332,506 $185,721 $110,262 $1,498,191 ========== Income (loss) from operations . . $123,151 $ 65,306 $ 18,011 $ 41,618 $ (9,106) $ 238,980 Equity in losses of affiliates . (1,994) Interest expense . . . . . . . . (4,983) Other income, net . . . . . . . . 31,464 ---------- Income before income taxes . . . $ 263,467 ========== Identifiable assets . . . . . . . $329,799 $ 144,622 $152,462 $416,589 $ 71,059 1,114,531 Investments in affiliates . . . . 155,251 Corporate assets . . . . . . . . 352,722 ---------- Total assets . . . . . . . . . 1,622,504 ========== Depreciation and amortization of property, plant and equipment . $ 16,768 $ 5,276 $ 6,266 $ 28,052 $ 3,181 $ 59,543 Amortization of goodwill and other intangibles . . . . . . . $ 800 $ 670 $ 12,247 $ 2,499 $ 16,216 Capital expenditures . . . . . . $ 24,422 $ 6,599 $ 4,472 $ 38,802 $ 4,844 $ 79,139 1992 Operating revenues . . . . . . . $677,645 $ 162,154 $347,067 $174,098 $ 89,903 $1,450,867 ========== Income (loss) from operations . . $120,794 $ 54,568 $ 23,882 $ 38,967 $ (6,099) $ 232,112 Equity in losses of affiliates . (11,730) Interest expense . . . . . . . . (6,385) Other income, net . . . . . . . . 10,199 ---------- Income before income taxes . . . $ 224,196 ========== Identifiable assets . . . . . . . $315,522 $ 143,357 $141,008 $397,504 $ 77,365 $1,074,756 Investments in affiliates . . . . 162,410 Corporate assets . . . . . . . . 330,955 ---------- Total assets . . . . . . . . . $1,568,121 ========== Depreciation and amortization of property, plant and equipment . $ 16,724 $ 6,289 $ 6,252 $ 26,994 $ 2,963 $ 59,222 Amortization of goodwill and other intangibles . . . . . . . $ 745 $ 664 $ 11,574 $ 2,495 $ 15,478 Capital expenditures . . . . . . $ 13,653 $ 2,844 $ 2,732 $ 36,900 $ 2,760 $ 58,889 1991 Operating revenues . . . . . . . $642,694 $ 163,471 $326,475 $159,503 $ 88,118 $1,380,261 ========== Income from operations . . . . . $ 89,488 $ 49,074 $ 9,085 $ 35,011 $ 10,208 $ 192,866 Equity in losses of affiliates . (1,856) Interest expense . . . . . . . . (17,759) Other income, net . . . . . . . . 16,970 ---------- Income before income taxes . . . $ 190,221 ========== Identifiable assets . . . . . . . $307,897 $ 144,232 $131,510 $386,527 $ 52,779 $1,022,945 Investments in affiliates . . . . 181,764 Corporate assets . . . . . . . . 282,952 ---------- Total assets . . . . . . . . . $1,487,661 ========== Depreciation and amortization of property, plant and equipment . $ 18,119 $ 7,174 $ 6,548 $ 24,651 $ 2,203 $ 58,695 Amortization of goodwill and other intangibles . . . . . . . $ 533 $ 664 $ 11,553 $ 2,522 $ 15,272 Capital expenditures . . . . . . $ 19,215 $ 3,158 $ 2,762 $ 25,363 $ 5,159 $ 55,657 39 THE WASHINGTON POST COMPANY --------------------------- N. SUMMARY OF QUARTERLY OPERATING RESULTS (UNAUDITED) Quarterly results of operations for the years ended January 2, 1994, and January 3, 1993, are as follows (in thousands, except per share amounts): 38
- --------------------------------------------------------------------------------------------------------------------- First Second Third Fourth Quarter Quarter Quarter Quarter - --------------------------------------------------------------------------------------------------------------------- 1993 Operating revenues Advertising . . . . . . . . . . . . . . . . . . . . $214,602 $ 233,078 $ 208,972 $ 256,877 Circulation and subscriber . . . . . . . . . . . . 113,428 112,779 110,091 108,087 Other . . . . . . . . . . . . . . . . . . . . . . . 33,676 30,848 45,059 30,694 -------- --------- --------- --------- 361,706 376,705 364,122 395,658 -------- --------- --------- --------- Operating costs and expenses Operating . . . . . . . . . . . . . . . . . . . . . 195,083 193,597 199,287 202,289 Selling, general and administrative . . . . . . . . 97,783 99,949 92,224 103,240 Depreciation and amortization of property, plant and equipment . . . . . . . . . . 14,982 15,100 14,773 14,688 Amortization of goodwill and other intangibles . . 4,067 4,058 4,058 4,033 -------- --------- --------- --------- 311,915 312,704 310,342 324,250 -------- --------- --------- --------- Income from operations . . . . . . . . . . . . . . . 49,791 64,001 53,780 71,408 Other income (expense) Equity in (losses) earnings of affiliates . . . . . (1,795) (591) (11) 403 Interest income . . . . . . . . . . . . . . . . . . 2,606 2,488 2,653 3,338 Interest expense . . . . . . . . . . . . . . . . . (1,446) (985) (1,029) (1,523) Other . . . . . . . . . . . . . . . . . . . . . . . (51) 638 20,500 (708) -------- --------- --------- --------- Income before income taxes and cumulative effect of change in accounting principle . . . . . . . . . . 49,105 65,551 75,893 72,918 Provision for income taxes . . . . . . . . . . . . . 20,600 27,560 31,050 30,440 -------- --------- --------- --------- Income before cumulative effect of change in accounting principle . . . . . . . . . . . . . . . 28,505 37,991 44,843 42,478 Cumulative effect of change in method of accounting for income taxes . . . . . . . . . . . . . . . . . 11,600 -- -- -- -------- --------- --------- --------- Net income . . . . . . . . . . . . . . . . . . . . . $ 40,105 $ 37,991 $ 44,843 $ 42,478 ======== ========= ========= ========= Earnings per share: Before cumulative effect of change in accounting principle . . . . . . . . . . . . . $ 2.42 $ 3.23 $ 3.82 $ 3.63 Cumulative effect of change in accounting principle .98 -- -- -- -------- --------- --------- --------- Net income . . . . . . . . . . . . . . . . . . . . $ 3.40 $ 3.23 $ 3.82 $ 3.63 ======== ========= ========= ========= Average number of shares outstanding . . . . . . . . 11,796 11,755 11,731 11,718 40 THE WASHINGTON POST COMPANY --------------------------- 39
- -------------------------------------------------------------------------------------------------------------------- First Second Third Fourth Quarter Quarter Quarter Quarter - -------------------------------------------------------------------------------------------------------------------- 1992 Operating revenues Advertising . . . . . . . . . . . . . . . . . . . $ 195,668 $ 242,929 $ 203,348 $ 253,700 Circulation and subscriber . . . . . . . . . . . 105,480 107,989 109,045 113,679 Other . . . . . . . . . . . . . . . . . . . . . . 27,923 26,015 38,628 26,463 --------- ---------- ---------- --------- 329,071 376,933 351,021 393,842 --------- ---------- ---------- --------- Operating costs and expenses Operating . . . . . . . . . . . . . . . . . . . . 187,115 186,461 197,675 216,005 Selling, general and administrative . . . . . . . 85,655 90,726 84,293 96,125 Depreciation and amortization of property, plant and equipment . . . . . . . . . 14,709 14,850 14,711 14,952 Amortization of goodwill and other intangibles . 3,798 3,842 3,941 3,897 --------- ---------- ---------- --------- 291,277 295,879 300,620 330,979 --------- ---------- ---------- --------- Income from operations . . . . . . . . . . . . . . 37,794 81,054 50,401 62,863 Other income (expense) Equity in (losses) of affiliates . . . . . . . . (4,848) (1,709) (2,411) (2,762) Interest income . . . . . . . . . . . . . . . . . 3,030 2,820 2,944 3,060 Interest expense . . . . . . . . . . . . . . . . (1,535) (1,780) (1,671) (1,399) Other . . . . . . . . . . . . . . . . . . . . . . 89 (108) (66) (1,570) --------- ---------- ---------- --------- Income before income taxes . . . . . . . . . . . . 34,530 80,277 49,197 60,192 Provision for income taxes . . . . . . . . . . . . 14,850 34,525 21,650 25,375 --------- ---------- ---------- --------- Net income . . . . . . . . . . . . . . . . . . . . $ 19,680 $ 45,752 $ 27,547 $ 34,817 ========= ========== ========== ========= Earnings per share . . . . . . . . . . . . . . . . $ 1.66 $ 3.87 $ 2.33 $ 2.94 ========= ========== ========== ========= Average number of shares outstanding . . . . . . . 11,835 11,835 11,835 11,816 41 SCHEDULE V - ---------- (A) Consists of completed construction transferred from construction in progress. (B) Includes $407,000 of completed construction transferred from construction in progress and $691,000 reclassified to buildings. (C) Includes $17,231,000 of completed construction transferred from construction in progress and $691,000 reclassified from leasehold improvements. (D) Consists of completed construction transferred to related accounts. (E) Includes $25,620,000 of completed construction transferred from related accounts and $3,113,000 of assets of subsidiaries acquired. 40
THE WASHINGTON POST COMPANY SCHEDULE V--PROPERTY, PLANT AND EQUIPMENT =================================================================================================================================== COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F - ----------------------------------------------------------------------------------------------------------------------------------- BALANCE AT BALANCE AT BEGINNING OF ADDITIONS OTHER CHANGES END OF CLASSIFICATION PERIOD AT COST RETIREMENTS ADD (DEDUCT) PERIOD - ----------------------------------------------------------------------------------------------------------------------------------- Year Ended December 29, 1991 Plant Assets Machinery, equipment and fixtures . . $495,511,000 $14,213,000 $15,093,000 $ 42,575,000 (A) $537,206,000 Leasehold improvements . . . . . . . 29,047,000 765,000 767,000 (284,000) (B) 28,761,000 Buildings . . . . . . . . . . . . . . 139,875,000 23,000 1,623,000 17,922,000 (C) 156,197,000 Construction in progress . . . . . . 36,094,000 40,615,000 (61,017,000) (D) 15,692,000 Land . . . . . . . . . . . . . . . . 26,143,000 41,000 38,000 758,000 (A) 26,904,000 ----------- ----------- ----------- ------------ ------------ 726,670,000 55,657,000 17,521,000 (46,000) 764,760,000 ----------- ----------- ----------- ------------ ------------ Other Assets Buildings . . . . . . . . . . . . . . 1,803,000 1,803,000 Land . . . . . . . . . . . . . . . . 25,509,000 3,000 25,512,000 ------------ ----------- ----------- ------------ ------------ 27,312,000 3,000 27,315,000 ------------ ----------- ----------- ------------ ------------ $753,982,000 $55,660,000 $17,521,000 $ (46,000) $792,075,000 ============ =========== =========== ============ ============ Year Ended January 3, 1993 Plant Assets Machinery, equipment and fixtures . . $537,206,000 $20,027,000 $14,654,000 $ 28,733,000 (E) $571,312,000 Leasehold improvements . . . . . . . 28,761,000 643,000 493,000 733,000 (F) 29,644,000 Buildings . . . . . . . . . . . . . . 156,197,000 1,269,000 76,000 3,658,000 (G) 161,048,000 Construction in progress . . . . . . 15,692,000 36,373,000 (29,205,000) (H) 22,860,000 Land . . . . . . . . . . . . . . . . 26,904,000 577,000 15,000 710,000 (I) 28,176,000 ------------ ----------- ----------- ------------ ------------ 764,760,000 58,889,000 15,238,000 4,629,000 813,040,000 ------------ ----------- ----------- ------------ ------------ Other Assets Buildings . . . . . . . . . . . . . . 1,803,000 1,803,000 Land . . . . . . . . . . . . . . . . 25,512,000 50,000 22,000 25,540,000 ------------ ----------- ----------- ------------ ------------ 27,315,000 50,000 22,000 27,343,000 ------------ ----------- ----------- ------------ ------------ $792,075,000 $58,939,000 $15,260,000 $ 4,629,000 $840,383,000 ============ =========== =========== ============ ============ Year Ended January 2, 1994 Plant Assets Machinery, equipment and fixtures . . $571,312,000 $20,834,000 $7,854,000 $ (759,000) (J) $583,533,000 Leasehold improvements . . . . . . . 29,644,000 610,000 760,000 (207,000) (K) 29,287,000 Buildings . . . . . . . . . . . . . . 161,048,000 658,000 233,000 4,960,000 (L) 166,433,000 Construction in progress . . . . . . 22,860,000 56,796,000 (54,631,000) (M) 25,025,000 Land . . . . . . . . . . . . . . . . 28,176,000 241,000 13,000 395,000 (N) 28,799,000 ------------ ----------- ---------- ------------ ------------ 813,040,000 79,139,000 8,860,000 (50,242,000) 833,077,000 ------------ ----------- ---------- ------------ ------------ Other Assets Machinery, equipment and fixtures . . 1,700,000 (O) 1,700,000 Buildings . . . . . . . . . . . . . . 1,803,000 1,803,000 Land . . . . . . . . . . . . . . . . 25,540,000 626,000 93,000 26,073,000 ------------ ------------ ----------- ------------ ------------ 27,343,000 626,000 93,000 1,700,000 29,576,000 ------------ ------------ ----------- ------------ ------------ $840,383,000 $ 79,765,000 $ 8,953,000 $(48,542,000) $862,653,000 ============ ============ =========== ============ ============ 42 SCHEDULE V (CONTINUED) (F) Includes $538,000 of completed construction transferred from related accounts and $195,000 of assets of subsidiaries acquired. (G) Includes $2,455,000 of completed construction transferred from related accounts, $1,113,000 of assets of subsidiaries acquired, and $90,000 reclassified from land. (H) Includes $28,626,000 of completed construction transferred to related accounts, $872,000 transferred to other assets, and $293,000 of assets of subsidiaries acquired. (I) Includes $800,000 of assets of subsidiaries acquired and $90,000 reclassified to buildings. (J) Includes $32,591,000 of completed construction transferred from construction in progress net of $31,650,000 of assets of cable subsidiary sold and $1,700,000 transferred to non-operating property. (K) Includes $277,000 of completed construction transferred from construction in progress net of $484,000 of assets of cable subsidiary sold. (L) Includes $5,301,000 of completed construction transferred from construction in progress net of $341,000 of assets of cable subsidiary sold. (M) Includes $38,307,000 of completed construction transferred to related accounts, $16,280,000 of assets of cable subsidiary sold, and $44,000 transferred to other assets. (N) Includes $138,000 of completed construction transferred from construction in progress, and $257,000 reclassified from other assets. (O) Consists of non-operating property transferred from machinery, equipment and fixtures. 41 43 SCHEDULE VI (A) Includes $1,139,000 related to assets of subsidiaries acquired net of $455,000 of reclassifications of prior year additions. (B) Includes $97,000 related to assets of subsidiaries acquired and $869,000 of reclassifications. (C) Includes $77,000 related to assets of subsidiaries acquired and $725,000 of reclassifications of prior year additions. (D) Includes $3,454,000 related to assets of cable subsidiary sold, $1,700,000 transferred to non-operating property, and $202,000 transferred to other assets. (E) Includes $615,000 related to reclassifications net of $28,000 of assets of cable subsidiary sold. (F) Includes $58,000 related to reclassifications net of $28,000 of assets of cable subsidiary sold. (G) Relates to non-operating property transferred from machinery, equipment and fixtures. 42
THE WASHINGTON POST COMPANY SCHEDULE VI--ACCUMULATED DEPRECIATION AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT - ----------------------------------------------------------------------------------------------------------------------------------- COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F - ----------------------------------------------------------------------------------------------------------------------------------- ADDITIONS --------- BALANCE AT CHARGED TO BALANCE AT BEGINNING OF COSTS AND OTHER END OF DESCRIPTION PERIOD EXPENSES RETIREMENTS CHANGES PERIOD - ----------------------------------------------------------------------------------------------------------------------------------- Year Ended December 29, 1991 Plant Assets Machinery, equipment and fixtures . . . $270,822,000 $49,013,000 $13,902,000 $305,933,000 Leasehold improvements . . . . . . . 12,479,000 4,270,000 768,000 15,981,000 Buildings . . . . . . . . . . . . . . 48,390,000 5,412,000 1,269,000 52,533,000 ------------ ----------- ----------- ------------- ------------ . . . . . . . . . . . . . . . . . 331,691,000 58,695,000 15,939,000 374,447,000 ------------ ----------- ----------- ------------- ------------ Other Assets Buildings . . . . . . . . . . . . . . 583,000 93,000 676,000 ------------ ----------- ----------- ------------- ------------ $332,274,000 $58,788,000 $15,939,000 $375,123,000 ============ =========== =========== ============= ============ Year Ended January 3, 1993 Plant Assets Machinery, equipment and fixtures . . $305,933,000 $48,382,000 $13,408,000 $ 684,000 (A) $341,591,000 Leasehold improvements . . . . . . . 15,981,000 4,080,000 410,000 966,000 (B) 20,617,000 Buildings . . . . . . . . . . . . . . 52,533,000 6,760,000 67,000 802,000 (C) 60,028,000 ------------ ----------- ----------- ----------- ------------ . . . . . . . . . . . . . . . . . 374,447,000 59,222,000 13,885,000 2,452,000 422,236,000 ------------ ----------- ----------- ----------- ------------ Other Assets Buildings . . . . . . . . . . . . . . 676,000 142,000 818,000 ------------ ----------- ----------- ----------- ------------ $375,123,000 $59,364,000 $13,885,000 $ 2,452,000 $423,054,000 ============ =========== =========== =========== ============ Year Ended January 2, 1994 Plant Assets Machinery, equipment and fixtures . . $341,591,000 $49,103,000 $7,127,000 $(5,356,000) (D) $378,211,000 Leasehold improvements . . . . . . . 20,617,000 4,122,000 387,000 587,000 (E) 24,939,000 Buildings . . . . . . . . . . . . . . 60,028,000 6,318,000 167,000 30,000 (F) 66,209,000 ------------ ----------- ----------- ----------- ----------- 422,236,000 59,543,000 7,681,000 (4,739,000) 469,359,000 ------------ ----------- ----------- ----------- ----------- Other Assets Machinery, equipment and fixtures . . $1,700,000 (G) $1,700,000 Buildings . . . . . . . . . . . . . . 818,000 93,000 911,000 ------------ ----------- ----------- ----------- ------------ 818,000 93,000 1,700,000 2,611,000 ------------ ----------- ----------- ----------- ------------ $423,054,000 $59,636,000 $ 7,681,000 $(3,039,000) $471,970,000 - ------------ ============ =========== =========== =========== ============ 44 SCHEDULE VIII 43
THE WASHINGTON POST COMPANY SCHEDULE VIII--VALUATION ACCOUNTS AND RESERVES - ----------------------------------------------------------------------------------------------------------------------------------- COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E - ----------------------------------------------------------------------------------------------------------------------------------- ADDITIONS -- BALANCE AT CHARGED TO BALANCE AT BEGINNING COSTS AND END OF DESCRIPTION OF PERIOD EXPENSES DEDUCTIONS PERIOD - ----------------------------------------------------------------------------------------------------------------------------------- Year Ended December 29, 1991 Allowance for doubtful accounts and returns . . . . . . . . $26,600,000 $42,729,000 $41,168,000 $28,161,000 Allowance for advertising rate adjustments and discounts . 6,628,000 10,287,000 9,434,000 7,481,000 ----------- ----------- ----------- ----------- $33,228,000 $53,016,000 $50,602,000 $35,642,000 =========== =========== =========== =========== Year Ended January 3, 1993 Allowance for doubtful accounts and returns . . . . . . . . $28,161,000 $48,140,000 $48,006,000 $28,295,000 Allowance for advertising rate adjustments and discounts . 7,481,000 9,493,000 9,969,000 7,005,000 ----------- ----------- ----------- ----------- $35,642,000 $57,633,000 $57,975,000 $35,300,000 =========== =========== =========== =========== Year Ended January 2, 1994 Allowance for doubtful accounts and returns . . . . . . . . $28,295,000 $47,558,000 $45,005,000 $30,848,000 Allowance for advertising rate adjustments and discounts . 7,005,000 9,073,000 8,324,000 7,754,000 ----------- ---------- ----------- ----------- $35,300,000 $56,631,000 $53,329,000 $38,602,000 =========== =========== =========== =========== 45 SCHEDULE X 44
THE WASHINGTON POST COMPANY SCHEDULE X--SUPPLEMENTARY INCOME STATEMENT INFORMATION - ----------------------------------------------------------------------------------------------------------------------------------- COLUMN A COLUMN B - ----------------------------------------------------------------------------------------------------------------------------------- CHARGED TO COSTS AND EXPENSES YEAR ENDED ------------------------------------------- DECEMBER 29, JANUARY 3, JANUARY 2, DESCRIPTION 1991 1993 1994 - ----------------------------------------------------------------------------------------------------------------------------------- Maintenance and repairs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $10,219,000 $11,313,000 $11,166,000 Amortization of goodwill and other intangibles . . . . . . . . . . . . . . . . . . 15,272,000 15,478,000 16,216,000 Taxes other than payroll and income taxes . . . . . . . . . . . . . . . . . . . . . 16,878,000 16,625,000 15,908,000 Royalties, primarily amortization of film rights . . . . . . . . . . . . . . . . . 30,626,000 22,086,000 20,871,000 Advertising . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,289,000 14,617,000 15,714,000 46 THE WASHINGTON POST COMPANY --------------------------- 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. RESULTS OF OPERATIONS - 1993 COMPARED TO 1992 Net income in 1993 was $165.4 million, an increase of 29 percent over net income of $127.8 million last year. Earnings per share rose 30 percent to $14.08, from $10.80 in 1992. Earnings in 1993 included a one-time credit of $11.6 million ($.98 per share) related to the adoption of Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" and an after-tax gain of $13.4 million ($1.14 per share) from the sale of the company's cable franchises in the United Kingdom. Excluding these two items, 1993 net income and earnings per share increased 10 percent and 11 percent, respectively. Revenues for 1993 totaled $1,498 million, an increase of 3 percent from $1,451 million in 1992. Both advertising revenues and circulation and subscriber revenues rose 2 percent, while other revenues increased 18 percent. Full year revenues from businesses acquired at the end of 1992, principally Pro Am Sports System (PASS), a regional sports cable network, contributed to the improvement in other revenues in 1993. Results for 1993 included 52 weeks at The Washington Post and The Herald newspapers; 1992 included 53 weeks. Costs and expenses for the year increased 3 percent to $1,259 million, from $1,219 million in 1992. Approximately 40 percent of the total increase relates to additional expenses associated with businesses that were acquired at the end of 1992, while the remainder reflects normal increases in the costs of operations and the continued investment in personal communications services (PCS). Nonrecurring charges included in 1992 costs were expenses related to a restructuring at Kaplan and net costs associated with the termination of one of the health care plans at The Washington Post newspaper. In 1993 operating income rose to $239.0 million, a 3 percent increase over $232.1 million in 1992. NEWSPAPER DIVISION. Results at the newspaper division included 52 weeks in 1993, compared with 53 weeks in 1992 and also included full year results at The Gazette Newspapers (formerly known as The Gaithersburg Gazette) in 1993, compared with ten months in 1992. At the newspaper division revenues increased 2 percent in 1993. Advertising revenue for the division rose 3 percent. At The Washington Post, advertising revenues increased 2 percent, as rate increases more than offset a 1 percent decline in advertising linage. Retail linage at The Post decreased by less than 1 percent, and general volume was down 2 percent. Classified linage was 3 percent below last year, primarily due to the continued softness in the Washington, D.C., real estate market. Preprint volume remained strong in 1993. Circulation revenues for the newspaper division decreased 1 percent, principally due to the inclusion of the 53rd week in 1992. For the twelve-month period ended September 30, 1993, daily circulation at The Washington Post rose 1 percent, while Sunday circulation decreased almost 1 percent from 1992 levels, reflecting the introduction of several competing Sunday newspapers in the Washington, D.C., market. The Post maintained its share of the market with 51 percent penetration daily, while Sunday penetration declined to 66 percent. Newspaper division operating margin was 18 percent, unchanged from the prior year. The previously mentioned increases in advertising revenues were offset by normal increases in payroll and fringe benefit costs. A slight increase in average newsprint prices accounted for the 3 percent rise in newsprint expense. BROADCAST DIVISION. Revenues at the broadcast division increased 9 percent over last year. National advertising revenues increased 10 percent during the year, while local advertising revenues rose 8 percent. These increases were primarily due to a surge in automobile advertising in 1993. Viewership remained strong in all four markets in 1993. In the latest ratings period, all four television stations were ranked number one, sign-on to sign-off, in their markets. Operating margin at the broadcast division increased to 37 percent, from 34 percent in 1992. Results in 1992 included the impact of Hurricane Andrew on WPLG in Miami and lower revenues from sports programming at WDIV in Detroit, which were partially offset by higher political advertising revenues. 45 47 THE WASHINGTON POST COMPANY --------------------------- MAGAZINE DIVISION. Newsweek revenues in 1993 decreased 4 percent, principally due to an 8 percent decline in advertising revenues at both the domestic and international editions. Lower rates and fewer pages were responsible for the decrease. Circulation revenues increased 1 percent at Newsweek, with higher volume and rates at the international editions being the major contributors to the increase. In 1993 Newsweek Domestic published the same number of weekly issues as in 1992 (52), with two special newsstand issues in 1993, compared with one special issue in 1992. At Newsweek International 51 weekly issues were published in 1993, the same as in the prior year. At Newsweek, the operating margin decreased to 5 percent, from 7 percent in 1992, principally as a result of the decrease in advertising revenues and certain costs related to the relocation of the New York City operations scheduled for 1994. CABLE DIVISION. Revenues at the cable division in 1993 increased 7 percent over last year (excluding the operations in the United Kingdom, which were sold in September 1993, revenues also increased 7 percent). The number of basic subscribers rose 4 percent, primarily due to the 10,000 subscribers acquired from Coast TV Cable, Inc., in Long Beach, Mississippi. Also affecting the change in division revenues were higher advertising revenues at the domestic systems, an approximately $3 million negative impact of rate reregulation and the sale of the company's cable operations in the United Kingdom. Operating margin in 1993 remained flat at 22 percent, compared to the prior year. Excluding the operations in the United Kingdom, 1993 operating margin was 25 percent, the same as in 1992. Domestic cable cash flow rose 5 percent to $85.9 million, from $82.0 million last year. Total costs at the domestic systems increased 9 percent, reflecting the continued rise in programming costs and the larger number of subscribers. OTHER BUSINESSES. In 1993 revenues from other businesses increased 23 percent. Revenues from PASS, acquired at the end of 1992, were the major contributor to the increase. Revenues at Stanley H. Kaplan Educational Center rose 3 percent over last year, and enrollments increased 2 percent, principally in the lower priced courses. The company's other businesses recorded an operating loss of $9.1 million in 1993, compared with an operating loss of $6.1 million in 1992, principally due to the expansion of established businesses, the continuing investment in PCS and lower operating results at Kaplan. This decline at Kaplan was a result of additional costs related to a change in its operating structure, implemented at the end of 1992. EQUITY IN EARNINGS AND LOSSES OF AFFILIATES. The company's equity in earnings of affiliates for 1993 was a loss of $2.0 million, compared with a loss of $11.7 million in 1992. Better results at the company's newsprint affiliates, which included gains on the sale of land in 1993, contributed to the improvement. NON-OPERATING ITEMS. Interest income, net of interest expense, was $6.1 million in 1993, compared with $5.5 million in 1992. This increase was a result of higher invested cash balances, which were partially offset by lower interest rates. Other income in 1993 was $20.4 million, compared with other expense of $1.7 million in 1992. In 1993 other income included a $20.2 million gain on the sale of the company's cable franchises in the United Kingdom. In 1992 other expense included the recognition of unrealized losses on the company's forward foreign currency contracts, in addition to the costs associated with the disposition of certain plant, property and equipment. INCOME TAXES. The effective tax rate decreased to 41.6 percent in 1993, from 43 percent in 1992, exclusive of the cumulative effect of the change in accounting principle. During 1993 the company adjusted the provision for income taxes to reflect the increase in the federal income tax rate, which was retroactive to the beginning of the year. Offsetting the rate increase was the lower effective rate for foreign taxes recorded on the sale of the company's cable operations in the United Kingdom. RESULTS OF OPERATIONS - 1992 COMPARED TO 1991 In 1992 net income increased 80 percent to $127.8 million, from net income of $70.8 million in 1991. Earnings per share increased 81 percent to $10.80, from $5.96 in 1991. The company's 1991 earnings included a one-time, after-tax charge of $47.9 million ($4.04 per share) related to a change in accounting for certain employee postretirement benefits. Net income in 1991 also included a credit of $10.0 million ($.84 per share) resulting from a settlement with the Internal Revenue Service (IRS) and an after-tax charge of $3.5 million ($.30 per share) for severance and related costs resulting from a voluntary reduction in staff at The Washington Post newspaper. Excluding these nonrecurring charges and credits from 1991 results, both net income and earnings per share for 1992 increased 14 percent. Results for 1992 included 53 weeks at The Washington Post and The Herald newspapers; 1991 included 52 weeks. Also included in 1992 are the acquisitions of The Gazette Newspapers and other small businesses. 46 48 THE WASHINGTON POST COMPANY --------------------------- Total operating revenues in 1992 were $1,451 million, an increase of 5 percent from $1,380 million in 1991. The improvement was due to a 5 percent rise in advertising revenues, an increase of 6 percent in circulation and subscriber revenues and a 4 percent increase in other revenues. Total operating costs and expenses were $1,219 million, an increase of 3 percent over $1,187 million in 1991. Included in 1991 operating expenses was a pretax charge of $6 million for severance and related costs resulting from a voluntary reduction in staff at The Washington Post newspaper. Also included in 1991 expenses was a write down of the company's programming rights to "The Cosby Show." Excluding these charges in 1991, total operating costs and expenses increased approximately 4 percent in 1992. This increase reflects normal increases in payroll and related fringe benefit costs and other expenses, partially offset by lower newsprint and magazine paper costs, which decreased 16 percent. Higher costs related to the expansion of cable operations in the United Kingdom and continued investment in PCS also contributed to the increase. Several nonrecurring charges are included in 1992, including charges related to a restructuring at Kaplan and net expenses related to the termination of one of the health care plans at The Washington Post newspaper. Income from operations in 1992 increased 20 percent to $232.1 million, from $192.9 million in 1991. NEWSPAPER DIVISION. Revenues at the newspaper division rose 5 percent from 1991 levels, mostly due to a 5 percent increase in advertising revenues. Results at The Gazette Newspapers also contributed to the increase. Rate increases more than offset the 4 percent decrease in advertising linage at The Washington Post, reflecting the slow economic recovery of the Washington, D.C., market. Retail volume decreased 8 percent, and general volume was down 7 percent, while classified volume was flat. Preprint volume, on the other hand, rose 14 percent as a result of increased daily demand for inserts by advertisers, some of which were formerly users of ROP. Circulation revenues increased 5 percent in 1992, due to an increase in Sunday rates at The Post, from $1.25 to $1.50. For the twelve-month period ended September 30, 1992, daily circulation at The Post was even with the prior year, while Sunday circulation increased slightly, with primary market penetration remaining high at 68 percent on Sunday and 51 percent for daily. At the newspaper division, operating margin increased to 18 percent, from 14 percent in 1991. Contributing to this increase was the decline in newsprint prices and effective cost controls; over the past three years The Post has reduced the number of full-time employees by 7 percent through voluntary buyouts and early retirement programs. BROADCAST DIVISION. Broadcast division revenues decreased 1 percent. Local advertising revenues rebounded from 1991 levels, increasing 6 percent. However, national and network revenues fell 6 percent and 9 percent, respectively, more than offsetting the increase in local advertising. Results included the impact of Hurricane Andrew on WPLG in Miami and lower advertising revenue from sports programming at WDIV in Detroit. These losses were partially offset by $6.8 million in political advertising. Operating margin at the broadcast division increased to 34 percent, from 30 percent in 1991, which included the write down of programming rights to "The Cosby Show." MAGAZINE DIVISION. At Newsweek total revenues increased 6 percent in 1992. Advertising revenues increased 9 percent, bolstered by a combination of volume and rate increases at both the domestic and international editions. Newsweek circulation revenues rose 3 percent over 1991 levels. Higher subscription rates at the domestic edition were principally responsible for the increase. During the year the domestic edition produced the same number of weekly issues as in 1991 (52); 1992 also included the publication of one special issue, compared to four in 1991. The international edition published 51 issues in both 1992 and 1991. Newsweek's operating margin increased to 7 percent, from 3 percent the prior year. Contributing to this improvement were lower manufacturing and distribution costs compared with last year, which included the expenses associated with the four special issues and the special inserts related to the Persian Gulf War. CABLE DIVISION. Cable division revenues in 1992 rose 9 percent over the prior year (7.5 percent excluding the operations in the United Kingdom). Contributing to the increase were a 3 percent rise in the number of basic subscribers, higher rates and increased advertising at the domestic systems. On December 31, 1992, the company acquired the assets of Coast TV Cable, Inc., which have not been included in the 1992 results. Operating margin in 1992 remained flat at 22 percent, unchanged from the prior year. Excluding the operations in the United Kingdom, 1992 operating margin would have been 25 percent, compared to 23 percent in 1991. Total operating costs at the domestic systems rose by 6 percent, due to the larger number of subscribers and higher programming costs, while cash flow increased 9 percent to $82.0 million, from $75.3 million last year. 47 49 THE WASHINGTON POST COMPANY --------------------------- OTHER BUSINESSES. In 1992 revenues from other businesses increased 2 percent, primarily as a result of the newly acquired businesses in 1992. At Stanley H. Kaplan Educational Center, enrollments increased 2 percent; however, the improvement resulted from increased registrations for lower priced courses, while enrollments in higher priced courses decreased. Operating income at the company's other businesses decreased from $10.2 million in 1991, to an operating loss of $6.1 million in 1992, due to continuing investment in PCS and lower operating results at Kaplan. This decline at Kaplan included a restructuring charge related to the change in its distribution system to gain more control over its field operations. EQUITY IN EARNINGS AND LOSSES OF AFFILIATES. The company's equity in earnings of affiliates for 1992 was a loss of $11.7 million, compared with a loss of $1.9 million in 1991. Further weaknesses at the company's newsprint manufacturing affiliates contributed to the loss. NON-OPERATING ITEMS. Net interest income totaled $5.5 million in 1992, compared with net interest expense of $.4 million in 1991. Included in 1991 were a fee of $2.1 million related to the $50 million prepayment on the company's 10.68 percent promissory notes and interest of $1.6 million related to the tax settlement with the IRS, mentioned previously. Other expense in 1992 and 1991 included the costs related to the disposition of certain plant, property and equipment. In 1992 other expense also included the recognition of unrealized losses on the company's forward foreign currency contracts. INCOME TAXES. The effective tax rate increased to 43 percent in 1992, from 37.6 percent in 1991, exclusive of the cumulative effect of the change in accounting for other postretirement benefits. The favorable settlement with the IRS significantly lowered the effective rate in 1991. FINANCIAL CONDITION: CAPITAL RESOURCES AND LIQUIDITY During the period 1991 through 1993 the company spent approximately $285 million on purchases of additional plant, property and equipment, investments in new businesses, various other capital programs, and the repurchase of Class B common stock. In September 1993 the company sold its cable franchises in the United Kingdom for approximately $65 million. Including this transaction, since the end of 1992 working capital has increased by approximately $124 million. At January 2, 1994, the company had $172 million in cash and cash equivalents, $258 million in marketable securities and $52 million in debt. During 1993 and 1992 the company repurchased 99,800 and 33,949 shares, respectively, of its Class B common stock at a cost of $23.1 million and $7.5 million, respectively. Sixty-three thousand of these shares were purchased from The Washington Post Company Profit Sharing Plan. The annual dividend rate in 1994 remains at $4.20 per share. In December 1993 the Federal Communications Commission (FCC) awarded a pioneer's preference for personal communications services to American PCS, L.P. (known as American Personal Communications or APC), a limited partnership in which The Washington Post Company has a 70 percent interest. In accordance with that preference, APC has applied at the FCC for a license to operate a PCS system in most of Maryland, Washington, D.C., northern Virginia and portions of West Virginia and Pennsylvania. APC has begun to acquire cell sites and specify PCS equipment, and upon authorization from the FCC, will begin construction of the system itself. The company estimates that its cost of construction could approximate $200 million, most of which will be incurred in 1994 and 1995. The company has an agreement to purchase the assets of two television stations in Houston and San Antonio, Texas, for approximately $250 million. The completion of the transaction is contingent upon approval by the FCC, which the company received in February 1994. Excluding the expansion of PCS and the purchase of the television stations, the company estimates that in 1994 it will spend approximately $80 million to $100 million for plant and equipment, principally for the completion of various projects at the newspaper and magazine divisions and the development of new media products. It expects to fund all of these expenditures from cash flow from operations. In February 1994 the FCC issued new rules related to pricing and reregulation of the cable industry. The company is in the process of evaluating the rules, but does not expect them to have a material effect on consolidated financial results. In management's opinion, the company will have ample liquidity to meet the various cash needs in 1994 as outlined above. 48 50 [THIS PAGE INTENTIONALLY LEFT BLANK] 49 51 THE WASHINGTON POST COMPANY --------------------------- TEN-YEAR SUMMARY OF SELECTED HISTORICAL FINANCIAL DATA ============================ See Notes to Consolidated Financial Statements for the summary of significant accounting policies and additional information relative to the years 1991-1993. 50
- ---------------------------------------------------------------------------------------------------------------------- (In thousands, except per share amounts) 1993 1992 1991 - ---------------------------------------------------------------------------------------------------------------------- RESULTS OF OPERATIONS Operating revenues $ 1,498,191 $ 1,450,867 $ 1,380,261 Income from operations $ 238,980 $ 232,112 $ 192,866 Income before cumulative effect of changes in accounting principle $ 153,817 $ 127,796 $ 118,721 Cumulative effect of change in method of accounting for income taxes 11,600 -- -- Cumulative effect of change in method of accounting for postretirement benefits other than pensions -- -- (47,897) ------------ ----------- ------------ Net income $ 165,417 $ 127,796 $ 70,824 ============ =========== ============ PER SHARE AMOUNTS Earnings per share Income before cumulative effect of changes in accounting principle $13.10 $10.80 $10.00 Cumulative effect of change in method of accounting for income taxes .98 -- -- Cumulative effect of change in method of accounting for postretirement benefits other than pensions -- -- (4.04) ------ ------ ------ Net income $14.08 $10.80 $ 5.96 ====== ====== ====== Cash dividends $ 4.20 $ 4.20 $ 4.20 Shareholders' equity $92.84 $84.17 $78.12 AVERAGE NUMBER OF SHARES OUTSTANDING 11,750 11,830 11,876 FINANCIAL POSITION Current assets $ 625,574 $ 524,975 $ 472,219 Working capital 367,041 242,627 183,959 Property, plant and equipment 363,718 390,804 390,313 Total assets 1,622,504 1,568,121 1,487,661 Long-term debt 51,768 51,842 51,915 Shareholders' equity 1,087,419 993,005 924,285 52 THE WASHINGTON POST COMPANY --------------------------- 51
- ------------------------------------------------------------------------------------------------------------------------ 1990 1989 1988 1987 1986 1985 1984 - ------------------------------------------------------------------------------------------------------------------------ $ 1,438,640 $ 1,444,094 $ 1,367,613 $ 1,315,422 $ 1,215,064 $ 1,078,650 $ 984,303 $ 281,768 $ 313,691 $ 233,290 $ 257,073 $ 228,986 $ 204,186 $ 166,295 $ 174,576 $ 197,893 $ 269,117 $ 186,743 $ 100,173 $ 114,261 $ 85,886 -- -- -- -- -- -- -- -- -- -- -- -- -- -- - ------------ ------------ ------------ ------------ ------------ ------------ ----------- $ 174,576 $ 197,893 $ 269,117 $ 186,743 $ 100,173 $ 114,261 $ 85,886 ============ ============ ============ ============ ============ ============ =========== $14.45 $15.50 $20.91 $14.52 $ 7.80 $ 8.66 $ 6.11 -- -- -- -- -- -- -- -- -- -- -- -- -- -- ------ ------ ------ ------ ------ ------ ------ $14.45 $15.50 $20.91 $14.52 $ 7.80 $ 8.66 $ 6.11 ====== ====== ====== ====== ====== ====== ====== $ 4.00 $ 1.84 $ 1.56 $ 1.28 $ 1.12 $ .96 $ .80 $76.31 $75.40 $67.50 $47.80 $34.04 $27.26 $27.17 12,081 12,768 12,873 12,861 12,842 13,194 14,050 $ 471,669 $ 553,188 $ 493,736 $ 226,523 $ 219,422 $ 359,174 $ 218,559 175,807 283,118 235,698 (50,290) (22,647) 150,397 56,850 394,979 370,597 352,113 371,080 343,702 219,310 191,072 1,496,509 1,532,211 1,422,267 1,194,196 1,145,227 885,079 645,800 126,988 152,061 154,751 155,791 336,140 222,392 6,250 905,112 941,522 868,240 614,009 436,590 349,548 380,127 53 - ------------ * A management contract or compensatory plan or arrangement required to be included as an exhibit hereto pursuant to Item 14(c) of Form 10-K. 52
INDEX TO EXHIBITS EXHIBIT NUMBER DESCRIPTION ------ ----------- 3.1 --- Certificate of Incorporation of the Company as amended through May 12, 1988 (incorporated by reference to Exhibit 3 to the Company's Current Report on Form 8-K dated May 12, 1988). 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.) In accordance with Item 601(b)(4)(iii)(A) of Regulation S-K, the Company hereby agrees to furnish to the Securities and Exchange Commission upon request a copy of any instrument defining the rights of holders of long-term debt of the Company or any subsidiary which is not required to be filed herewith because the total amount of securities authorized thereunder does not exceed 10 percent of the total consolidated assets of the Company. 10.1 --- The Washington Post Company Annual Incentive Compensation Plan (adopted January 9, 1974) as amended through January 4, 1982 (incorporated by reference to Exhibit 10.10 to the Company's Annual Report on Form 10-K for the fiscal year ended January 3, 1982).* 10.2 --- The Washington Post Company Long-Term Incentive Compensation Plan (adopted December 11, 1981) as amended through March 13, 1992 (incorporated by reference to Exhibit 10.2 to the Company's Annual Report on Form 10-K for the fiscal year ended December 29, 1991).* 10.3 --- The Washington Post Company Stock Option Plan as amended and restated through May 13, 1993 (incorporated by reference to Exhibit 10 to the Company's Quarterly Report on Form 10-Q for the quarter ended April 4, 1993).* 10.4 --- The Washington Post Company Supplemental Executive Retirement Plan as amended and restated effective December 31, 1993.* 10.5 --- Letter Agreement between the Company and Richard D. Simmons dated May 9, 1991 (incorporated by reference to Exhibit 10 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1991).* 11 --- Calculation of earnings per share of common stock. 21 --- List of subsidiaries of the Company. 23 --- Consent of independent accountants. 24 --- Power of attorney dated March 10, 1994.
1 EXHIBIT 10.4 THE WASHINGTON POST COMPANY SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN Effective as of January 1, 1989 Amended and restated effective December 31, 1993 2 THE WASHINGTON POST COMPANY SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN Section 1. Purpose. The Washington Post Company Supplemental Executive Retirement Plan (the "Plan") is an unfunded plan established for the purpose of providing deferred compensation for a select group of management or highly compensated employees, as referred to in Sections 201(a)(2), 301(a)(3) and 401(a)(1) of ERISA, in order to induce employees of outstanding ability to join or continue in the employ of the Company or an Affiliate of the Company and to increase their efforts for its welfare by providing them with supplemental benefits notwithstanding the limitations imposed by the Internal Revenue Code on retirement and other benefits from tax qualified plans. This Plan is strictly a voluntary undertaking on the part of the Company and shall not be deemed to constitute a contract of employment or part of a contract between the Company and any employee or any employee of an Affiliate, nor shall it be deemed to give any employee the right to be retained in the employ of the Company or an Affiliate, as the case be made, or to interfere with the right of the Company or an Affiliate, as the case may be, to discharge any employee at any time, nor shall this Plan interfere with the right of the Company or an Affiliate, as the case may be, to establish the terms and conditions of employment of any employee. Benefits under this Plan shall be payable solely from the general assets of the Company and participants herein shall not be entitled to look to any source for payment of such benefits other than the general assets of the Company. 3 Section 2. Definitions. As used in this Plan, the following words shall have the following meanings: (a) "Actual Salary" means the regular basic compensation paid or payable to an employee during a calendar year by the Company or an Affiliate (including tax-deferred contributions, otherwise payable to an employee, elected by the employee under any Savings Plan), but excluding any other items of compensation such as (i) bonuses and commissions, (ii) overtime, (iii) compensation under the terms of the Long-Term Incentive Compensation Plan of the Company paid during such Plan Year, (iv) Workers' Compensation, (v) amounts paid by the Company for insurance, retirement or other benefits, (vi) contributions or payments made by the Company or an Affiliate (other than tax-deferred contributions elected by the employee) under any Retirement Plan, any Savings Plan, this Plan or other benefits, or (vii) dismissal or other payments made to an employee as a result of termination of employment. The Actual Salary of an employee will include any payment made under any short-term disability income plan of the Company or an Affiliate. (b) "Affiliate" means any corporation (other than the Company) more than 50% of the outstanding stock of which is directly or indirectly owned by the Company and any unincorporated trade or business which is under common control with the Company as determined in accordance with Section 414(c) of the Internal Revenue Code and the regulations issued thereunder. (c) "Applicable Percentage" shall have the meaning set forth in Section 4. (d) "Compensation" means the Actual Salary of an employee plus, starting in 1988, bonuses payable under the Annual Incentive Compensation Plan of the Company - 2 - 4 during a calendar year by the Company or an Affiliate. Bonuses paid under the Annual Incentive Compensation Plan of the Company will be considered as part of Compensation for the year in which they are paid to the Employee. (e) "Committee" means the Compensation Committee of the Board of Directors of the Company. (f) "Company" means The Washington Post Company, a Delaware corporation, and any successors in interest thereto. (g) "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. (h) "Executive Participant" means an employee of the Company or an Affiliate recommended by the Company's senior management and designated a participant in this Plan by the Committee, who is within the category of a select group of management or highly compensated employees as referred to in Sections 201(a)(2), 301(a)(3) and 401(a)(1) of ERISA for any Plan Year and who either holds or held the office of a Vice President of the Company or an Affiliate or any office senior thereto or a position of equivalent responsibility or importance, during the current Plan Year or the prior Plan Year, and was covered under the Company's Long-Term Incentive Compensation Plan or any successor programs. An Executive Participant shall be designated as being eligible to participate in Section 3 benefits or Section 4 benefits or both as determined in the sole discretion of the Committee. (i) "415 Limitations" means Retirement Plan and Savings Plan provisions adopted pursuant to Section 415 of the Internal Revenue Code to limit (i) annual Retirement Plan benefits pursuant to Section 415(b) thereof, (ii) annual additions to a Savings Plan -3- 5 pursuant to Section 415(c) thereof and (iii) the aggregate of annual Retirement Plan benefits and additions to Savings Plans pursuant to Section 415(e) thereof. (j) "401(a)(17) Limitations" means Retirement Plan and Savings Plan provisions adopted pursuant to Section 401(a)(17) of the Internal Revenue Code to limit earnings considered for purposes of computing Retirement Plan benefits and Savings Plan contributions to $200,000 (or such greater amount permitted for such year in accordance with regulations promulgated by the Secretary of the Treasury or his delegate) for each Plan Year ending on or before December 31, 1993 and then as of January 1, 1994 to $150,000 (or such greater amount permitted for such year in accordance with regulations promulgated by the Secretary of the Treasury or his delegate). (k) "Key Employee Participant" means an employee of the Company or an Affiliate recommended by the Company's senior management and designated a participant in this Plan by the Committee, who is within the category of a select group of management or highly compensated employees as referred to in Sections 201(a)(2), 301(a)(3) and 401(a)(1) of ERISA for any Plan Year and who holds or held a key position during the current Plan Year or the prior Plan Year. A Key Employee Participant shall be designated as being eligible to participate in Section 3 benefits as determined in the sole discretion of the Committee. (l) "Normal Retirement Date" means the first day of the calendar month following the month in which a person's 65th birthday occurs. (m) "Participant" means an Executive Participant or a Key Employee Participant, as applicable. (n) "Plan Year" means the calendar year. -4- 6 (o) "Retirement Plan" means The Washington Post Company Retirement Plan, Post-Newsweek Stations, Inc. Retirement Plan, Retirement Plan for Employees of Newsweek, Inc., The Washington Post Washington-Baltimore Newspaper Guild Retirement Income Plan and such other tax qualified, defined benefit retirement plans as may be sponsored by the Company or its Affiliates and designated for inclusion hereunder by the Committee. (p) "Savings Plan" means The Washington Post Tax Deferral and Savings Plan, Post-Newsweek Stations, Inc. Tax Deferred Savings Plan, The Employees' Savings Plan of Newsweek, Inc., The Savings and Retirement Plan of Affiliated Post Companies and such other tax qualified savings and profit-sharing plans as may be sponsored by the Company or its Affiliates and designated for inclusion hereunder by the Committee. (q) "Service" means the period of employment by the Company or an Affiliate (excluding service prior to the time an Affiliate became such and service after the time an Affiliate is no longer such, except to the extent required by Section 414(a) of the Code and the regulations promulgated thereunder). (r) "Supplemental Retirement Benefit" shall have the meaning set forth in Section 3. (s) "Supplemental Basic Contributions," "Supplemental Savings Account" and "Supplemental Savings Award" shall have the meanings set forth in Section 4. (t) "Surviving Spouse" means the surviving husband or wife of an employee of the Company or an Affiliate, who has been married to the employee throughout the one-year period ending on the date of the death of such employee. -5- 7 (u) "Vesting Year" means each calendar year in which a Participant or a key Employee Participant has at least 1,000 hours of Service with the Company or an Affiliate. Service with a predecessor company prior to becoming an Affiliate will not be counted in calculating Vesting Years. Section 3. Supplemental Retirement Benefits. (a) Each designated person, who is an Executive Participant as of December 3, 1993, or becomes an Executive Participant or a Key Employee Participant after December 3, 1993, for purposes of being eligible to receive benefits under this Section and has ten or more Vesting Years upon termination of Service and to whom benefits become payable under any of the Retirement Plans, shall be paid a supplemental annual retirement benefit (the "Supplemental Retirement Benefits") under this Plan equal in amount to the difference between (i) the aggregate annual benefits paid to such person under the Retirement Plans and (ii) the aggregate annual benefits that would be payable to such person under the Retirement Plans if the 415 and 401(a)(17) Limitations were not contained therein. If such a Participant's Surviving Spouse is entitled to and is receiving a spouse's benefit under any Retirement plan, the Surviving Spouse shall be paid a benefit hereunder equal to the difference between (i) the aggregate spouse's benefits payable to such Surviving Spouse under the Retirement Plans and (ii) the aggregate spouse's benefit that would be payable to such Surviving Spouse under the Retirement Plans if the 415 and 401(a)(17) Limitations were not contained therein. For purposes of calculating the Supplemental Retirement Benefit or the Surviving Spouse's benefit hereunder for an Executive Participant or the Surviving Spouse of an Executive Participant, as the case may be, Compensation rather than Actual Salary will be used. (b) The Supplemental Retirement Benefits provided by this Plan shall be paid to the Participant (or to any beneficiary designated by him in accordance with the Retirement Plan, or to his Surviving Spouse if eligible for and receiving a spouse's benefit -6- 8 under the Retirement Plan) concurrently with the payment of the benefits payable under the Retirement Plan in which he was participating at the date of termination and shall be payable in the same form as such benefits are being paid thereunder. In the event the Supplemental Retirement Benefit commences prior to Normal Retirement Date or is payable in a form other than an annuity for the life of the former employee only, the Supplemental Retirement Benefit shall be actuarially adjusted in the same manner as are benefits payable under the Retirement Plan in which he was participating at the time of termination. The Committee may, however, in its sole discretion direct that the Supplemental Retirement Benefit payable with respect to a former employee be paid as an actuarially equivalent single sum payment; provided, that (except for a distribution to pay taxes as provided in Section 5) no such payment may be made prior to termination of Service or prior to the date that benefits may become payable under any of the Retirement Plans, and provided, further, that in determining actuarial equivalency of a single sum payment in cash, there shall be used the interest rate which would be used by the Pension Benefit Guaranty Corporation for the purpose of determining the present value of a single sum distribution on plan termination and the 1974 George B. Buck Mortality Table, set forward one year. Section 4. Supplemental Savings Plan Benefits. (a) In the event that the Actual Salary of an Executive Participant designated as eligible to receive benefits under this Section 4 for 1989 or any subsequent Plan Year exceeds the 401(a)(17) Limitations for such Plan Year, such Executive Participant shall be eligible to make additional salary reduction contributions under this Plan and receive a Supplemental Savings Award under this Plan for such Plan Year; provided, that such Executive Participant is then participating in his employer's Savings Plan and making (i) the maximum allowable basic, matchable tax-deferred contributions to such Savings Plan and (ii) the maximum allowable after tax contributions which can result in a matching employer contribution, as permitted under such Savings Plan, after taking into account the application of -7- 9 the non-discrimination rules of Sections 401(k) and (m) of the Internal Revenue Code for such Plan Year. In order to compute the amount of such Supplemental Savings Award, a determination will be made of the dollar amount of contributions the Executive Participant is able to make to his employer's Savings Plan which result in matching employer contributions for such Executive Participant under the terms of such Savings Plan. This dollar amount will then be expressed as a percentage (the "Applicable Percentage") of the amount of compensation which can be recognized for purposes of the Savings Plan under Section 401(a)(17) of the Internal Revenue Code for the then-current Plan Year. Prior to the beginning of each Plan Year, the Executive Participant will be provided with the opportunity to elect to irrevocably defer under this Plan the Applicable Percentage (or any whole lower percentage) of the Executive Participant's Actual Salary earned in excess of the 401(a)(17) Limitations for such Plan Year. Such a salary reduction is referred to as a "Supplemental Basic Contribution." In the event that an Executive Participant elects to make a Supplemental Basic Contribution under this Plan and, to the extent the Company is not his employer, his employer forwards on a timely basis such Supplemental Basic Contribution to the Company, such individual will receive a Supplemental Savings Award under this Plan in the form of (i) a matching contribution equal to the product of the Executive Participant's Supplemental Basic Contribution times the matching employer contribution percentage under the terms of the applicable Savings Plan and (ii) to the extent such Participant's employer makes an unmatched contribution to the applicable Savings Plan on behalf of such Participant, a contribution equal to the difference between the amount of such unmatched contribution actually made under such Savings Plan on behalf of such Participant and the amount of such unmatched contribution such Participant would have received under such Savings Plan if the 401(a)(17) Limitations had not been in effect (the "Supplemental Savings Award"). The Supplemental Savings Award for any Plan Year shall be made as of the first day of the following year or on such other basis as may be approved by the Committee. -8- 10 (b) The amount of an Executive Participant's supplemental savings plan benefits under this Plan shall be the aggregate amount of the Supplemental Savings Awards and the Supplemental Basic Contributions together with interest accrued thereon (the "Supplemental Savings Account"). Interest shall be credited on the amount of an Executive Participant's Supplemental Savings Account by crediting the closing account balance at the end of such Plan Year or on such other basis as may be approved by the Committee with interest at the rate per annum determined pursuant to the provisions of paragraph (c) and compounded monthly. (c) The Compensation Committee shall establish the rate of interest to be credited as provided in paragraph (b) above. Notwithstanding the foregoing, in no year shall the rate of interest to be credited be higher than 10%. In the event a Supplemental Savings Account becomes payable prior to the end of a calendar year, interest will be allocated on a pro rata basis (computed on the basis of a year consisting of twelve (12) 30-day months). (d) Supplemental Savings Awards and the interest thereon shall be fully vested and nonforfeitable. (e) No withdrawal of funds in an Executive Participant's Supplemental Savings Account for hardship or any other reason may be made while an Executive Participant remains employed by the Company or an Affiliate. The Supplemental Savings Account shall be paid in cash as soon as practicable following termination of Service. (f) An Executive Participant shall designate a beneficiary to receive the unpaid portion of his Supplemental Savings Account in the event of his death. The designation shall be made in a writing filed with the Committee on a form approved by it and signed by the Executive Participant. If no effective designation of beneficiary shall be on file with the -9- 11 Committee when supplemental savings benefits would otherwise be distributable to a beneficiary, then such benefits shall be distributed to the Surviving Spouse of the Executive Participant or, if there is no Surviving Spouse, to the executor of his will or the administrator of his estate. Section 5. Funding. Benefits under this Plan shall not be funded in order that the Plan may be exempt from the provisions of Parts 2, 3 and 4 of Title I of ERISA. The Committee shall maintain records of Supplemental Savings Accounts and records for the calculation of supplemental retirement benefits. In the event benefits are hereafter determined to be taxable for Participants prior to actual receipt thereof, a payment may be made to such Participants in an amount sufficient to pay such taxes notwithstanding that the Participant may not then have terminated Service or that the payment is being made prior to the date that benefits would otherwise be paid under any of the Retirement Plans. Amounts so paid (i) with respect to supplemental savings benefits shall reduce the Executive Participant's Supplemental Savings Account and (ii) with respect to Supplemental Retirement Benefits shall be used as an offset to the Supplemental Retirement Benefits, if any, thereafter payable. Section 6. Administration. This Plan shall be administered by the Committee. All decisions and interpretations of the Committee shall be conclusive and binding on the Company, and the Participants. The Plan may be amended or terminated by the Board of Directors of the Company at any time and any Participant may have his designation as such terminated by the Committee at any time; provided, however, that no such amendment or termination or change in designation shall deprive any Participant of supplemental retirement or savings benefits accrued to the date of such amendment or termination or modify the last two sentences of Section 5 in a manner adverse to any Participant. -10- 12 Section 7. Loss of Benefits. Notwithstanding any other section of this Plan, if a Participant is discharged by the Company or an Affiliate because of conduct that the Participant knew or should have known was detrimental to legitimate interests of the Company or its Affiliates, dishonesty, fraud, misappropriation of funds or confidential, secret or proprietary information belonging to the Company or an Affiliate or commission of a crime, such Participant's rights to any benefits under this Plan shall be forfeited; except that such Participant shall be entitled to receive the aggregate amount of his Supplemental Basic Contributions, without any interest, in such event. Section 8. Nonassignability. No Participant, or beneficiary shall have the right to assign, pledge or otherwise dispose of any benefits payable to him hereunder nor shall any benefit hereunder be subject to garnishment, attachment, transfer by operation of law, or any legal process. Section 9. Limitation of Liability. The Company's sole obligation under this Plan is to pay the benefits provided for herein and neither the Participant nor any other person shall have any legal or equitable right against the Company, an Affiliate, the Boards of Directors thereof, the Committee or any officer or employee of the Company or an Affiliate other than the right against the Company to receive such payments from the Company as provided herein. Section 10. Use of Masculine and Feminine; Singular and Plural. Wherever used in this Plan, the masculine gender will include the feminine gender and the singular will include the plural, unless the context indicates otherwise. -11-
1 EXHIBIT 11 THE WASHINGTON POST COMPANY AND SUBSIDIARIES CALCULATION OF EARNINGS PER SHARE OF COMMON STOCK (AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA) (1) This computation is submitted although it is not required by Accounting Principles Board Opinion No. 15 since it results in dilution of less than 3%.
FISCAL YEAR -------------------------------------------------------------- 1993 1992 1991 ---- ---- ---- Weighted average shares outstanding Class A Common 1,843 1,843 1,847 Class B Common (excludes shares issuable upon exercise of stock options - accounted for below) 9,903 9,984 10,027 --------- --------- --------- 11,746 11,827 11,874 --------- --------- --------- Add - Shares assumed issuable upon exercise of stock options 69 52 27 Deduct - Shares assumed to be purchased for Treasury with proceeds from exercise of stock options (65) (49) (25) --------- --------- --------- 4 3 2 --------- --------- --------- Shares used in computation of primary earnings per share 11,750 11,830 11,876 Adjustment to reflect fully diluted computation (1) -- -- -- --------- --------- --------- 11,750 11,830 11,876 ========== ========== ========== Net income $ 165,417 $ 127,796 $ 70,824 ========== ========== ========== Primary earnings per share $ 14.08 $ 10.80 $ 5.96 ========== ========== ========== Fully diluted earnings per share (1) $ 14.08 $ 10.80 $ 5.96 ========== ========== ==========
1 EXHIBIT 21 SUBSIDIARIES OF THE COMPANY - --------------- (a) Limited partnership interest.
Jurisdiction % of of Voting Stock Incorporation or Partnership or Interest Owned Name of Subsidiary Organization by Company ------------------ ------------ -------------- American PCS, L.P. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Delaware 70% (a) Bisbee Cable TV, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Arizona 100% Bowater Mersey Paper Company Limited . . . . . . . . . . . . . . . . . . . . . . . . . Nova Scotia 49% Capitol Fiber, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Maryland 90% Coast TV Cable, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Mississippi 100% Coastal Bend Cablevision Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . Texas 100% Digital Ink Co. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Delaware 100% The Gazette Newspapers, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Maryland 100% I.H.T. Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Delaware 50% International Herald Tribune S.A. . . . . . . . . . . . . . . . . . . . . . . . France 33-1/3% International Herald Tribune S.A. . . . . . . . . . . . . . . . . . . . . . . . . . . France 33-1/3% Legi-Slate, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Delaware 100% Los Angeles Times-Washington Post News Service, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . D.C. 50% Marks Cablevision of Green, Incorporated . . . . . . . . . . . . . . . . . . . . . . . Ohio 100% Newsprint, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Virginia 100% Bear Island Paper Company . . . . . . . . . . . . . . . . . . . . . . . . . . . Virginia 35% (a) Bear Island Timberlands Company . . . . . . . . . . . . . . . . . . . . . . . . Virginia 35% (a) Newsweek, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . New York 100% Newsweek Services, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . Delaware 100% Newsweek Services (Canada), Inc. . . . . . . . . . . . . . . . . . . . . . . . . Delaware 100% Oklahoma Broadcasting Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . Oklahoma 100% Omnicom Cablevision of Illinois, Inc. . . . . . . . . . . . . . . . . . . . . . . . . Illinois 100% Post-Newsweek Cable, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Delaware 100% Post-Newsweek Cable of California, Inc. . . . . . . . . . . . . . . . . . . . . . . . California 100% Post-Newsweek Cable of Indiana, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . Indiana 100% Post-Newsweek Cable of North Dakota, Inc. . . . . . . . . . . . . . . . . . . . . . . Delaware 100% 2 SUBSIDIARIES OF THE COMPANY (Continued) - --------------- As permitted by Item 601(b)(22) of Regulation S-K, the foregoing list omits certain subsidiaries which, if considered in the aggregate as a single subsidiary, would not constitute a "significant subsidiary" as that term is defined in Rule 1-02(v) of Regulation S-X.
Jurisdiction % of of Voting Stock Incorporation or Partnership or Interest Owned Name of Subsidiary Organization by Company ------------------ ------------ -------------- Post-Newsweek Cable of Oklahoma, Inc. . . . . . . . . . . . . . . . . . . . . . . . Oklahoma 100% Post-Newsweek Pacific Cable, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . California 100% Post-Newsweek Stations, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . Delaware 100% Post-Newsweek Stations, Connecticut, Inc. . . . . . . . . . . . . . . . . . . Delaware 100% Post-Newsweek Stations, Florida, Inc. . . . . . . . . . . . . . . . . . . . . Florida 100% Post-Newsweek Stations, Michigan, Inc. . . . . . . . . . . . . . . . . . . . Delaware 100% Pro Am Sports System, Inc. . . . . . . . . . . . . . . . . . . . . . . . Delaware 100% Post-Newsweek U.K. Cable Limited . . . . . . . . . . . . . . . . . . . . . . . . . . England 100% Robinson Terminal Warehouse Corporation . . . . . . . . . . . . . . . . . . . . . . Delaware 100% Sandoval County Cable Television Company . . . . . . . . . . . . . . . . . . . . . . New Mexico 100% Stanley H. Kaplan Educational Center Ltd. . . . . . . . . . . . . . . . . . . . . . Delaware 100% Post-Newsweek Education, Inc. . . . . . . . . . . . . . . . . . . . . . . . . Delaware 100% Stanley H. Kaplan Educational Center of Canada Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . Ontario 100% Stanley H. Kaplan Educational Center of Puerto Rico, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . Puerto Rico 100% The Daily Herald Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . Washington 100% WPC Telecommunications, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . Delaware 100% Moffet, Larson & Johnson, Inc. . . . . . . . . . . . . . . . . . . . . . . . Delaware 71%
1 EXHIBIT 23 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (Registration No. 2-42170) of The Washington Post Company, and in the Prospectus constituting a part thereof, of our report dated February 1, 1994 appearing on page 24 of this Annual Report on Form 10-K, and to the reference to us under the heading "Experts" in such Prospectus. PRICE WATERHOUSE Washington, D.C. March 28, 1994
1 EXHIBIT 24 Power of Attorney Reports Under the Securities Exchange Act of 1934 KNOW ALL MEN BY THESE PRESENTS that each of the undersigned directors and officers of The Washington Post Company, a Delaware corporation (hereinafter called the "Company"), hereby constitutes and appoints KATHARINE GRAHAM, DONALD E. GRAHAM, ALAN G. SPOON and JOHN B. MORSE, JR. and each of them, his or her true and lawful attorneys-in-fact and agents with full power to act without the others and with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all reports required to be filed by the Company pursuant to the Securities Exchange Act of 1934, as amended, and any and all amendments thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises as fully and to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Dated: March 10, 1994.
/s/ Donald E. Graham /s/ Ralph E. Gomory - --------------------------------- ---------------------------------- Donald E. Graham, Chairman of the Ralph E. Gomory, Director Board and Chief Executive Officer (Principal Executive Officer) and Director /s/ Alan G. Spoon /s/ Nicholas deB. Katzenbach - -------------------------------- ---------------------------------- Alan G. Spoon, President, Chief Nicholas deB. Katzenbach, Director Operating Officer and Director /s/ Katharine Graham /s/ Donald R. Keough - -------------------------------- ---------------------------------- Katharine Graham, Chairman of the Donald R. Keough, Director Executive Committee of the Board and Director /s/ John B. Morse, Jr. /s/ Anthony J.F. O'Reilly - --------------------------------- ---------------------------------- John B. Morse, Jr., Vice President- Anthony J.F. O'Reilly, Director Finance (Principal Financial and Accounting Officer) /s/ Benjamin C. Bradlee /s/ Barbara Scott Preiskel - --------------------------------- ---------------------------------- Benjamin C. Bradlee, Director Barbara Scott Preiskel, Director /s/ James E. Burke /s/ William J. Ruane - --------------------------------- ---------------------------------- James E. Burke, Director William J. Ruane, Director 2 2
/s/ Martin Cohen /s/ Richard D. Simmons - --------------------------------- ---------------------------------- Martin Cohen, Director Richard D. Simmons, Director /s/ George J. Gillispie /s/ George W. Wilson - --------------------------------- ---------------------------------- George J. Gillespie, III, Director George W. Wilson, Director