MediaFile

Read Washington Post chairman’s letter to shareholders

March 25, 2009

Washington Post Co Chairman Don Graham wrote a more than 2,000-word letter to shareholders for his company’s latest annual report. I managed to cut it down to the 587 words that I thought were really worth reading. Graham is the kind of chairman and CEO that you want to cover as a journalist because he seems to rely exclusively on straight talk instead of obfuscation — particularly when the news is bad for the company and for shareholders. Here are the 587 words, with the parts that I found even more interesting than the rest marked in bold type.

We could do without more years like 2008. … In past years, I have rattled on in these letters about our Company’s relationship to our shareholders. Generations of top managers at The Post Company have reiterated: we’re focused on the long run; we’re committed to building value for our shareholders. My own assets are more than 90% concentrated in the stock you own. All of these remain true, but I am in the embarrassing position of writing you after a year in which Post Company stock declined by more than 50%. Comparative results (“you should see what happened to the other newspapers”) offer no solace.

It’s central that you know this: in 1998, about 75% of the Company’s revenue came from The Post, Newsweek and our television stations. In 2008, almost 70% came from Kaplan and Cable ONE.

Many CEOs’ annual reports will say more about their balance sheets than they have for years; this one is no exception. Our Company for many years has had $400 million of notes outstanding; unfortunately, these came due in February. The Post has an A1 credit rating from Moody’s; we are told that ranks us in the top 10% of nonfinancial S&P 500 companies. Nonetheless, the coupon rate when we refinanced our debt was much higher: 7.25% in 2009, compared to 5.5% in 1999. We still have enough cash and marketable securities to cover the debt. The Company can handle the added interest cost. But to have no debt at all-unless for a very compelling reason-seems wiser than ever.

Able managements… did not keep our two print media companies from sliding into the red in 2008. The Post’s numbers will get quite a bit worse in 2009. We are willing to lose money (as we did at Kaplan from 1994 to 2001) if the losses are on a path to a healthy, profitable business.

Newsweek management has a plan it hopes will change the direction of the business and put the magazine on a better and more profitable course. The Post has a harder challenge this year. The familiar problems of the newspaper industry-declining readership and the loss of classified-are now made worse by bankrupt advertisers. The newspaper will lose substantial money in 2009. Some will be non-cash accelerated depreciation because we will be closing a printing plant. Most will be real losses

So what’s the future of the newspaper and newsmagazine businesses? I have no answer to this question. … Today, it isn’t obvious that even the best-run, most successful newspaper can be consistently profitable. But The Post will get every chance. … We are willing to lose money… if the losses are on a path to a healthy, profitable business.

Are we investing in The Post and Newsweek as a public service or because we feel their business models can be fixed? Emphatically the latter: it is universally understood that we must move toward profitability at The Post and Newsweek after what we hope will be a low point in 2009. But how we’ll get there is not clear. We must cut costs; but we must (and will) continue producing excellent newspapers and magazines. Then, we have to continue to find new sources of revenue (at a time when some of our customers will be cutting back because of their own financial problems).

Ten years from now, it is highly likely that customers will be getting news from profitable institutions staffed by talented reporters and editors. We’re going to try to show a way.

(Photo: Reuters)

Comments
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I’ve got an idea! Maybe WAPO can publish articles that are nonbiased. Instead of pathetic bits such as Thomas Shales most recent sycophantic load of BS about Obama. Mr. Graham needs to get idiots like this off of his pages if he wants to survive. (E.J. Dionne is another example of a left-wing hack.) As for Newsweek, I gave up on them a couple of years ago. The newspaper industry can bleat about the internet but the biggest reason for their demise (by far) is their unconcealed bias towards all things left of center, as evidenced by their all-in behavior during the last election. It’s tough to do well when you write off 50% of your customers.

Posted by Dr. Fred in PA | Report as abusive
 

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