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Investor Relations

SEC Filings

10-Q
GRAHAM HOLDINGS CO filed this Form 10-Q on 11/15/1995
Entire Document
 
<PAGE>   7
                                                                              7.


I
TEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION

         This analysis should be read in conjunction with the consolidated
financial statements and the notes thereto.

         Revenues and expenses in the first and third quarters are customarily
lower than those in the second and fourth quarters because of significant
seasonal fluctuations in advertising volume.  For that reason, the results of
operations for each quarter are compared with those of the corresponding
quarter in the preceding year.

         THIRD QUARTER COMPARISONS

         Net income for the third quarter of 1995 was $41.8 million ($3.79 per
share), a decrease of 11.9 percent from net income of $47.5 million ($4.13 per
share) in the third quarter last year.

         The 1995 third quarter results include a one-time after-tax charge of
$5.6 million ($0.51 per share) relating to a write-off of the company's
investment in Mammoth Micro Productions.  The 1994 third-quarter results
include an after-tax gain of $8.4 million ($0.73 per share) on the sale of land
at one of the company's newsprint affiliates.  Excluding these one-time items,
net income increased 21.3 percent and earnings per share rose 26.5 percent in
the third quarter this year, with fewer shares outstanding in 1995.

         Revenues for the third quarter of 1995 rose 4.5 percent to $417.9
million, from $399.8 million in the same period last year. Advertising revenues
rose 2.0 percent and circulation and subscriber revenues increased 5.4 percent.
Other revenues increased 15.4 percent.  The broadcast division, cable division,
Newsweek and other businesses posted higher revenues in the third quarter this
year.  Newspaper division revenues were flat compared to third quarter 1994.

         Costs and expenses for the third quarter of 1995 increased 8.6 percent
to $362.2 million, from $333.6 million in the third quarter of 1994.  Operating
expenses increased 11.9 percent, and selling, general and administrative
expenses increased 1.6 percent compared with the third quarter last year.
Depreciation expense increased 4.6 percent over the third quarter of 1994.
Approximately 45 percent of the total increase in costs and expenses relates to
the write-off of the company's investment in Mammoth Micro Productions.  In
addition, a 36.2 percent increase in newsprint expense accounted for
approximately 31 percent of the total increase in costs and expenses.

         Third quarter 1995 operating income was $55.7 million, a 15.9 percent
decrease from $66.3 million in 1994 due mainly to the one-time charge related
to Mammoth Micro Productions as described above.  Excluding this charge,
operating income rose approximately 4.0 percent in the quarter.