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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
FOR THE FISCAL YEAR ENDED DECEMBER 29, 2002
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 incorporation or (I.R.S. Employer Identification No.)
organization)
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
Title of each class on 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 (the ‘‘Act’’) 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 ¥ No n
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. n
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).
Yes ¥No n
Aggregate market value of the Company’s common stock held by non-affiliates on June 30, 2002, based on the
closing price for the Company’s Class B Common Stock on the New York Stock Exchange on such date:
approximately $2,881,000,000.
Shares of common stock outstanding at February 28, 2003:
Class A Common Stock – 1,722,250 shares
Class B Common Stock – 7,804,400 shares
Documents Partially Incorporated by Reference:
Definitive Proxy Statement for the Company’s 2003 Annual Meeting of Stockholders
(incorporated in Part III to the extent provided in Items 10, 11, 12 and 13 hereof).
Table of contents
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Page 1
... N.W., Washington, D.C. (Address of principal executive offices) 20071 (Zip Code) Registrant's Telephone Number, Including Area Code: (202) 334-6000 Securities Registered Pursuant to Section 12(b) of the Act: Title of each class Class B Common Stock, Par Value $1.00 Per Share Name of each exchange... -
Page 2
THE WASHINGTON POST COMPANY 2002 FORM 10-K PART I Item 1. Business Newspaper Publishing Television Broadcasting Cable Television Operations Magazine Publishing Education Other Activities Production and Raw Materials Competition Executive Ofï¬cers Employees Forward-Looking Statements ... -
Page 3
... 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... -
Page 4
...The Washington Post edited for a national audience. The National Weekly Edition has a basic subscription price of $78 per year and is delivered by second class mail to approximately 47,000 subscribers. The Post has about 675 full-time editors, correspondents, reporters and photographers on its staff... -
Page 5
...The Daily Herald Company also provides commercial printing services and publishes six controlledcirculation weekly community newspapers (collectively known as The Enterprise Newspapers) that are distributed in south Snohomish and north King Counties. The Herald's average paid circulation as reported... -
Page 6
... a subscription basis or for which broadcasters receive compensation other than from advertising revenue. In its decision, the FCC imposed a fee of 5% of the gross revenues generated by such services. In rules adopted in April 2000, the FCC also implemented the Community Broadcasters Protection Act... -
Page 7
...Improvement Act of 1999 gave commercial television stations similar rights to elect either must-carry or retransmission consent with respect to the carriage of their signals on direct broadcast satellite (''DBS'') systems that choose to provide ''local-into-local'' service ( i.e. , to distribute the... -
Page 8
...000 subscriptions to cable modem service. Digital video and cable modem services are each currently available in markets serving more than 93% of Cable One's subscriber base. On November 1, 2002, Cable One transferred its Akron, Ohio system, together with a cash payment, to a unit of AOL Time Warner... -
Page 9
... authorities to regulate equipment rentals and service and installation rates on the basis of a cable operator's actual costs plus an allowable profit which is calculated from the operator's net investment, income tax rate and other factors. As discussed in the preceding section, under the ''must... -
Page 10
... the 31 gigahertz band for use by a new wireless service, which is referred to as the Local Multipoint Distribution Service or ''LMDS,'' that has the potential to deliver television programming directly to subscribers' homes as well as provide Internet access and telephony services. To date, however... -
Page 11
... 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 ). For each of the last five years Newsweek's average weekly domestic... -
Page 12
... total advertising revenues of the three leading weekly news magazines, for the past five years have been as follows: Newsweek Advertising Pages* Percentage of Three Leading News Magazines Newsweek Gross Advertising Revenues* Percentage of Three Leading News Magazines 1998 1999 2000 2001 2002... -
Page 13
... advertising revenues of Newsweek's international editions (not including The Bulletin insertions or the foreign-language editions of Newsweek ) for the past five years have been as follows: Average Weekly Circulation Rate Base Advertising Pages* Gross Advertising Revenues* 1998 1999 2000 2001 2002... -
Page 14
... 10. In 2002 this business, which provides educational after-school enrichment services through 147 Score centers located in various areas of the United States, served nearly 70,000 students, up from 60,000 students in 2001. Score's services are provided in facilities separate from Kaplan's test... -
Page 15
...that school is no longer enrolling students and will discontinue operations after its current students complete their programs. One of the ways a foreign national wishing to enter the United States to study may do so is to obtain an F-1 student visa. For many years, most of Kaplan's Test Preparation... -
Page 16
...and Prince George's County, Maryland. The Herald and The Enterprise Newspapers are produced at The Daily Herald Company's plant in Everett, Washington, while The Gazette Newspapers and the Southern Maryland Newspapers are all printed at the commercial printing facilities owned by Post-Newsweek Media... -
Page 17
...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. Since 1997 The New York Times has produced a Washington Edition which is printed locally and... -
Page 18
... Frederick News-Post, a daily paid-circulation community newspaper. The Southern Maryland Newspapers circulate in southern Prince George's County and in Charles, Calvert and St. Mary's Counties, Maryland, where they also compete with many other advertising vehicles available in their service areas... -
Page 19
... program delivery services by local telephone companies. According to figures compiled by Publishers' Information Bureau, Inc., of the 239 magazines reported on by the Bureau, Newsweek ranked fifth in total advertising revenues in 2002, when it received approximately 2.3% of all advertising revenues... -
Page 20
... approximately 270 full-time and 95 part-time employees at The Daily Herald Company, about 65 full-time and 20 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... -
Page 21
... Dulles Airport in Fairfax County, Virginia (39 acres) and in Prince George's County, Maryland (34 acres). 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. 2002 FORM 10-K 19 -
Page 22
... Gaithersburg, Maryland. In addition, Post-Newsweek Media, Inc. owns a one-story brick building in Waldorf, Maryland that houses its Charles County commercial printing business and also serves as the headquarters for two of the Southern Maryland Newspapers . The other editorial and sales offices for... -
Page 23
... at the rate of $1.40 per share during both 2002 and 2001. Item 6. Selected Financial Data. See the information for the years 1998 through 2002 contained in the table titled ''Ten-Year Summary of Selected Historical Financial Data'' which is included in this Annual Report on Form 10-K and listed in... -
Page 24
...aggregate fair value of the Company's common stock investments in publicly traded companies to change by approximately 20% in one quarter, 15% in three quarters and by less than 10% in each of the other 12 quarters. Interest Rate Risk At December 29, 2002, the Company had short-term commercial paper... -
Page 25
... and Related Stockholder Matters. The information contained under the heading ''Stock Holdings of Certain Beneficial Owners and Management'' and in the table titled ''Equity Compensation Plan Information'' in the definitive Proxy Statement for the Company's 2003 Annual Meeting of Stockholders is... -
Page 26
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 14, 2003. THE WASHINGTON POST COMPANY (Registrant) By /s/ JOHN B. MORSE... -
Page 27
... (principal executive ofï¬cer) of The Washington Post Company (the ''Registrant''), certify that: 1. I have reviewed this annual report on Form 10-K of the Registrant; 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material... -
Page 28
... ofï¬cer) of The Washington Post Company (the ''Registrant''), certify that: 1. I have reviewed this annual report on Form 10-K of the Registrant; 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to... -
Page 29
... INFORMATION THE WASHINGTON POST COMPANY Page Management's Discussion and Analysis of Results of Operations and Financial Condition (Unaudited Financial Statements and Schedules: Report of Independent Accountants Consolidated Statements of Income for the Three Fiscal Years Ended December 29, 2002... -
Page 30
[This Page Intentionally Left Blank] 28 THE WASHINGTON POST COMPANY -
Page 31
..., real estate and other classified advertising. Circulation revenues at The Post were up 4 percent for 2002 due to increases in single copy newsstand and home delivery prices in 2002. Daily circulation at The Post declined 1.7 percent, and Sunday circulation declined 1.2 percent in 2002. For 2002... -
Page 32
... in 2001. Revenues for 2001 reflect a significant spike in newsstand circulation revenue at Newsweek due to regular and special editions related to the events of September 11. Advertising revenues were down for 2002, primarily due to declines in the international division. Operating income totaled... -
Page 33
... higher revenues and operating income from Kaplan's CFA Ë› and real estate licensure preparation services. Score! also contributed to the improved results, with increased enrollment, higher prices and strong cost controls. Higher education includes all of Kaplan's post-secondary education businesses... -
Page 34
... an early retirement program completed at The Post. Print advertising revenue at The Washington Post newspaper decreased 14 percent to $574.3 million, from $664.1 million in 2000. Volume declines of 41 percent in classified recruitment advertising for 2001 caused classified recruitment advertising... -
Page 35
... online post-secondary and career programs (various distance-learning businesses). Higher education results increased as 2001 includes a full year of Quest results versus five months of activity in 2000. Corporate overhead represents unallocated expenses of Kaplan, Inc.'s corporate office, including... -
Page 36
... for real estate, insurance and securities professionals. Southern Maryland Newspapers publishes the Maryland Independent in Charles County, Maryland; The Enterprise in St. Mary's County, Maryland; and The Calvert Recorder in Calvert County, Maryland, with a combined total paid circulation of... -
Page 37
... B common stock. The annual dividend rate for 2003 was increased to $5.80 per share, from $5.60 per share in 2002 and 2001. Liquidity. At December 29, 2002, the Company had $28.8 million in cash and cash equivalents. At December 29, 2002, the Company had $259.3 million in commercial paper borrowings... -
Page 38
... customers that are eligible for advertising rate adjustments and discounts. Pension Costs. Excluding special termination benefits related to early retirement programs, the Company's net pension credit was $64.4 million, $76.9 million and $65.3 million for 2002, 2001 and 2000, respectively. The... -
Page 39
...Board Opinion No. 25, ''Accounting for Stock Issued to Employees.'' In December 2002, the Company awarded 11,500 stock options, resulting in total stock option compensation expense of $45,000 for 2002. The accounting treatment for the Company's Kaplan stock option plan is not impacted by this change... -
Page 40
... of accounting for stock options as outlined in Statement of Financial Accounting Standards No. 123, ''Accounting for Stock-Based Compensation,'' beginning with stock options granted in fiscal 2002 and thereafter. PricewaterhouseCoopers LLP Washington, D.C. January 24, 2003 38 THE WASHINGTON POST... -
Page 41
CONSOLIDATED STATEMENTS OF INCOME Fiscal year ended December 30, 2001 (in thousands, except per share amounts) December 29, 2002 December 31, 2000 Operating Revenues Advertising Circulation and subscriber Education Other 1,226,834 675,136 621,125 61,108 2,584,203 1,369,955 664,095 171,908 ... -
Page 42
CONSOLIDATED BALANCE SHEETS (in thousands) December 29, 2002 December 30, 2001 Assets Current Assets Cash and cash equivalents Investments in marketable equity securities Accounts receivable, net Federal and state income taxes Inventories Other current assets 28,771 1,753 285,374 - 27,629 ... -
Page 43
(in thousands, except share amounts) December 29, 2002 December 30, 2001 Liabilities and Shareholders' Equity Current Liabilities Accounts payable and accrued liabilities Deferred revenue Federal and state income taxes Short-term borrowings 336,582 135,419 4,853 259,258 736,112 136,393 194,... -
Page 44
...or exchange of businesses 27,844) (Gain) loss on disposition of marketable equity securities and cost method investments, net 13,209) Cost method investment and other write-downs 21,194 Equity in losses of affiliates, net of distributions 20,018 Provision for deferred income taxes 50,115 Change... -
Page 45
...(net of taxes Change in unrealized gain on available-for-sale securities (net of taxes Stock option expense Tax benefits arising from employee stock plans ** Balance, December 29, 2002 The information on pages 44 through 56 is an integral par t of the financial statements. 2002 FORM 10-K 43 -
Page 46
...from media advertising is recognized, net of agency commissions, when the underlying advertisement is published or broadcast. Revenues from newspaper and magazine subscriptions are recognized upon delivery. Revenues from newspaper retail sales are recognized upon delivery, and revenues from magazine... -
Page 47
... equity investments in its foreign affiliates are accumulated and reported as a separate component of equity and comprehensive income. Stock Options. Effective the first day of the Company's 2002 fiscal year, the Company adopted the fair-value-based method of accounting for Company stock options as... -
Page 48
..., career development and hiring management services for employers and job candidates; 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 50 percent interest in the International Herald Tribune newspaper... -
Page 49
... on the sale of cost method investments are included in ''Other income (expense), net'' in the Consolidated Statements of Income. D. INCOME TAXES 35 percent to income before taxes as a result of the following (in thousands): 2002 2001 2000 U.S. Federal statutor y taxes ** State and local taxes... -
Page 50
...438 shares. Stock-based compensation costs resulting from stock awards reduced net income by $3.5 million ($0.37 per share, basic and diluted), $2.6 million ($0.27 per share, basic and diluted), and $2.4 million ($0.25 per share, basic and diluted) in 2002, 2001 and 2000, respectively. Stock Options... -
Page 51
... 29, 2002, the Company's stock-based compensation accrual balance totaled $74.4 million. Effective the first day of the Company's 2002 fiscal year, the Company adopted the fair-value-based method of accounting for Company stock options as outlined in SFAS 123. This change in accounting method was... -
Page 52
... under outstanding stock options. Basic and diluted weighted average share information for 2002, 2001 and 2000 is as follows: Basic Weighted Average Shares Dilutive Effect of Stock Options Diluted Weighted Average Shares The total (income) cost arising from the Company's defined benefit pension and... -
Page 53
... for real estate, insurance and securities professionals. Southern Maryland Newspapers publishes the Maryland Independent in Charles County, Maryland; The Enterprise in St. Mary's County, Maryland; and The Calvert Recorder in Calvert County, Maryland, with a combined total paid circulation of... -
Page 54
... is a provider of post-secondary education offering Bachelor's degrees, Associate's degrees and diploma programs primarily in the fields of health care, business and information technology. In addition, the Company acquired two cable systems serving approximately 8,500 subscribers in Nebraska (in... -
Page 55
... of a weekly news magazine, Newsweek, which has one domestic and three international editions, the publication of a travel magazine and the publication of business periodicals for the computer services industry and the Washington-area technology community. Revenues from both newspaper and magazine... -
Page 56
... thousands) Newspaper Publishing Television Broadcasting Magazine Publishing Cable Television Education Corporate Ofï¬ce Consolidated 2002 Operating revenues Income (loss) from operations Equity in losses of affiliates Interest expense, net Other income, net Income before income taxes... -
Page 57
... 30, 2001 are as follows (in thousands, except per share amounts): First Quarter Second Quarter Third Quarter Fourth Quarter 2002 Quarterly Operating Results Operating revenues Advertising Circulation and subscriber Education Other Operating costs and expenses Operating Selling, general... -
Page 58
(in thousands, except per share amounts) First Quarter Second Quarter Third Quarter Fourth Quarter 2001 Quarterly Operating Results Operating revenues Advertising Circulation and subscriber Education Other Operating costs and expenses Operating Selling, general and administrative ... -
Page 59
... Allowance for advertising rate adjustments and discounts 9,442,000 $ 60,621,000 Year Ended December 30, 2001 Allowance for doubtful accounts and returns 58,003,000 Allowance for advertising rate adjustments and discounts 7,195,000 $ 65,198,000 Year Ended December 29, 2002 Allowance for doubtful... -
Page 60
... Cumulative effect of changes in accounting principles Net income available for common shares Diluted average shares outstanding Cash dividends Common shareholders' equity Financial Position Current assets Working capital (deï¬cit Property, plant and equipment Total assets Long-term... -
Page 61
...,204 $ 375,879 102,806 411,396 1,696,868 50,297 1,126,933 $ 625,574 367,041 363,718 1,622,504 51,768 1,087,419 2002 FORM 10-K 59 -
Page 62
[This Page Intentionally Left Blank] 60 THE WASHINGTON POST COMPANY -
Page 63
... The Washington Post Company Supplemental Executive Retirement Plan as amended and restated through March 14, 2002 (incorporated by reference to Exhibit 10.4 to the Company's Annual Report on Form 10-K for the ï¬scal year ended December 30, 2001).* The Washington Post Company Deferred Compensation... -
Page 64
....Newsweek Interactive The Washington Post National Weekly Edition The Washington Post Writers Group The Herald Community Newspaper Group The Gazette Southern Maryland Newspapers Comprint Military Publications Commercial Printing Greater Washington Publishing Robinson Terminal Warehouse Capitol...