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, 2002JANUARY 2, 2005
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 organization) | (I.R.S. Employer 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 | ||
| 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 [x]þ No [ ]o
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. [ ]o
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes [x]þ No [ ]o
Aggregate market value of the Company’s commonvoting stock held by non-affiliates on June 30, 2002,27, 2004, 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.$4,927,000,000.
Shares of common stock outstanding at February 28, 2003:18, 2005:
Class A Common Stock – 1,722,250 shares
Class B Common Stock – 7,804,4007,866,357 shares
Documents Partially Incorporatedpartially incorporated by Reference:reference:
Definitive Proxy Statement for the Company’s 20032005 Annual Meeting of Stockholders
(incorporated in Part III to the extent provided in Items 10, 11, 12, 13 and 1314 hereof).
| PART I | Page | |||||||||||||||
| Item 1. | Business | 1 | ||||||||||||||
| Newspaper Publishing | 1 | |||||||||||||||
| Television Broadcasting | 3 | |||||||||||||||
| Cable Television Operations | ||||||||||||||||
| Education | 10 | |||||||||||||||
| Magazine Publishing | ||||||||||||||||
| Other Activities | ||||||||||||||||
| Production and Raw Materials | ||||||||||||||||
| Competition | ||||||||||||||||
| Executive Officers | 18 | |||||||||||||||
| Employees | ||||||||||||||||
| Forward-Looking Statements | ||||||||||||||||
| Available Information | ||||||||||||||||
| Item 2. | Properties | |||||||||||||||
| Item 3. | Legal Proceedings | |||||||||||||||
| Item 4. | Submission of Matters to a Vote of Security Holders | |||||||||||||||
| PART II | ||||||||||||||||
| Item 5. | Market for the Registrant’s Common Equity, | |||||||||||||||
| Item 6. | Selected Financial Data | |||||||||||||||
| Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 22 | ||||||||||||||
| Item 7A. | Quantitative and Qualitative Disclosures About Market Risk | 22 | ||||||||||||||
| Item 8. | Financial Statements and Supplementary Data | |||||||||||||||
| Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure | 23 | ||||||||||||||
| Item 9A. | Controls and Procedures | 23 | ||||||||||||||
| Item 9B. | Other Information | 24 | ||||||||||||||
| PART III | ||||||||||||||||
| Item 10. | Directors and Executive Officers of the Registrant | |||||||||||||||
| Item 11. | Executive Compensation | |||||||||||||||
| Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | |||||||||||||||
| Item 13. | Certain Relationships and Related Transactions | |||||||||||||||
| Item 14. | ||||||||||||||||
| PART IV | ||||||||||||||||
| Item 15. | Exhibits and Financial Statement Schedules | |||||||||||||||
| SIGNATURES | ||||||||||||||||
| INDEX TO FINANCIAL INFORMATION | 27 | |||||||||||||||
| Management’s Discussion and Analysis of Results of Operations and Financial Condition | ||||||||||||||||
| Financial Statements and Schedules: | ||||||||||||||||
| Report of Independent | 38 | |||||||||||||||
| Consolidated Statements of Income and Consolidated Statements of Comprehensive Income for the Three Fiscal Years Ended | 39 | |||||||||||||||
| Consolidated Balance Sheets at | 40 | |||||||||||||||
| Consolidated Statements of Cash Flows for the Three Fiscal Years Ended | 42 | |||||||||||||||
| Consolidated Statements of Changes in Common Shareholders’ Equity for the Three Fiscal Years Ended | 43 | |||||||||||||||
| Notes to Consolidated Financial Statements | 44 | |||||||||||||||
| Financial Statement Schedule for the Three Fiscal Years Ended | ||||||||||||||||
| II — Valuation and Qualifying Accounts | ||||||||||||||||
| Ten-Year Summary of Selected Historical Financial Data (Unaudited) | ||||||||||||||||
| INDEX TO EXHIBITS | ||||||||||||||||
Item 1. Business.
. assets at December 29, 2002.VHF television broadcast stations), the ownership and operation of cable television systems, the provision of educational services (through its Kaplan subsidiary), and magazine publishing (principallyNewsweekmagazine), and (through its Kaplan subsidiary) the provision of educational services.MN 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 MN net of intersegment sales, which did not exceed 0.1% of consolidated operating revenues.)During each of the last three years theless than 4%approximately 6%, 5% and 3%, respectively, of the Company’sits consolidated revenues, and the identifiable assets attributable to such operations represented approximately 6% of the Company’s consolidated assets at January 2, 2005 and December 28, 2003, and less than 2% of the Company’s consolidated assets.twelve-month12-month periods ended September 30 in each of the last five years, as reported by the Audit Bureau of Circulations (“ABC”) for the years 1998-20012000–2003 and as estimated byThe Postfor the twelve-month12-month period ended September 30, 20022004 (for which period ABC had not completed its audit as of the date of this report) from the semi-annualsemiannual publisher’s statements submitted to ABC for the six-month periods ended March 31, 20022004 and September 30, 2002:2004:
| Average Paid Circulation | |||||||||||||||||
| Average Paid Circulation | |||||||||||||||||
| Daily | Sunday | ||||||||||||||||
| Daily | Sunday | ||||||||||||||||
| 1998 | 774,414 | 1,095,091 | |||||||||||||||
| 1999 | 775,005 | 1,085,060 | |||||||||||||||
| 2000 | 777,521 | 1,075,918 | 777,521 | 1,075,918 | |||||||||||||
| 2001 | 771,614 | 1,066,723 | 771,614 | 1,066,723 | |||||||||||||
| 2002 | 768,600 | 1,058,889 | 767,843 | 1,058,458 | |||||||||||||
| 2003 | 749,323 | 1,035,204 | |||||||||||||||
| 2004 | 729,981 | 1,016,533 | |||||||||||||||
2005.
| 1998 | 1999 | 2000 | 2001 | 2002 | ||||||||||||||||||||||||||||||||||||||
| 2000 | 2001 | 2002 | 2003 | 2004 | ||||||||||||||||||||||||||||||||||||||
| Total Inches (in thousands) | Total Inches (in thousands) | 3,199 | 3,288 | 3,363 | 2,714 | 2,657 | Total Inches (in thousands) | 3,363 | 2,714 | 2,657 | 2,675 | 2,726 | ||||||||||||||||||||||||||||||
| Full-Run Inches | 2,806 | 2,745 | 2,634 | 2,296 | 2,180 | Full-Run Inches | 2,634 | 2,296 | 2,180 | 2,121 | 2,120 | |||||||||||||||||||||||||||||||
| Part-Run Inches | 393 | 543 | 729 | 418 | 477 | Part-Run Inches | 729 | 418 | 477 | 554 | 606 | |||||||||||||||||||||||||||||||
| Preprints (in millions) | Preprints (in millions) | 1,650 | 1,647 | 1,602 | 1,556 | 1,656 | Preprints (in millions) | 1,602 | 1,556 | 1,656 | 1,835 | 1,887 | ||||||||||||||||||||||||||||||
Early in 2004 this registration process was modified to include the collection of additional information from users, including job title and the type of industry in which the user works. WPNI also offers registered users the option of receiving various e-mail newsletters that cover specific topics, including political news and analysis, personal technology, and entertainment.The Post, a tabloid whichthat contains selected articles and features fromThe Washington Postedited for a national audience. TheNational Weekly Editionhas a basic subscription price of $78 per year and is delivered by second classsecond-class mail to approximately 47,00042,000 subscribers.675645 full-time editors, correspondents, reporters and photographers on its staff,staff; draws upon the news reporting facilities of the major wire servicesservices; and maintains correspondents in 2021 news centers abroad and in New York City; Los Angeles; San Francisco; Chicago; Miami; Austin, Texas; and Austin, Texas.Seattle, Washington.The Postalso maintains reporters in 12 local news bureaus. July 1996 this subsidiary of the Company has produced washingtonpost.com, an Internet site that features the full editorial text ofThe Washington Postand most ofThe Post’s classified advertising, as well as original content created by WPNI’s staff and content obtained from other sources. ThisAs measured by WPNI, this site is currently generating more than 160190 million page views per month. The washingtonpost.com site also features comprehensive information about activities, groups and businesses in the Washington, D.C. area, including an arts and entertainment section and a news section focusing on technology businesses and related policy issues. This site has developed a substantial audience of users who are outside of the Washington, D.C. area, and WPNI believes that at least three-quarters of the unique users accessingwho access the site each month are in that category. During the fall ofSince 2002 WPNI began requiringhas required most users accessing the washingtonpost.com site to register and provide their year of birth, gender and zip code. The resulting information helps WPNI provide online advertisers with opportunities to target specific geographic areas and demographic groups.Webweb guides and other features.June 2000 and amended in 2003, WPNI and several other business units of the Company have been sharing certain news material and promotional resources with NBC News and MSNBC. Among other things, under this agreement theNewsweekWeb sitewebsite has become a feature on MSNBC.com and MSNBC.com is being provided access to certain content fromThe Washington Post. Similarly, washingtonpost.com is being provided access to certain MSNBC.com multimedia content.3934 controlled-circulation weekly community newspapers. This division’s newspapers are divided into two groups:The Gazette Newspapers,, which circulate in Montgomery, Prince George’s and Frederick Counties and in parts of Carroll Anne Arundel and Howard Counties,County, Maryland; andSouthern Maryland Newspapers,, which circulate in southern Prince George’s County and in Charles, St. Mary’s and Calvert Counties, Maryland. During 20022004 these newspapers had a
| National | $ | 130,659,000 | |||
| Local | 209,256,000 | ||||
| Network | 17,735,000 | ||||
| Total | $ | 357,650,000 | |||
| Station Location and | Expiration | Expiration | Total Commercial | Expiration | Total Commercial | |||||||||||||||||||||||||||||||||||||||||||
| Year Commercial | National | Date of | Date of | Stations in DMA(b) | National | Expiration | Date of | Stations in DMA(b) | ||||||||||||||||||||||||||||||||||||||||
| Operation | Market | Network | FCC | Network | Market | Network | Date of FCC | Network | ||||||||||||||||||||||||||||||||||||||||
| Commenced | Ranking(a) | Affiliation | License | Agreement | Allocated | Operating | Ranking(a) | Affiliation | License | Agreement | Allocated | Operating | ||||||||||||||||||||||||||||||||||||
| WDIV | 10th | NBC | Oct. 1, | Dec. 31, | VHF-4 | VHF-4 | 10th | NBC | Oct. 1, | Dec. 31, | VHF-4 | VHF-4 | ||||||||||||||||||||||||||||||||||||
| Detroit, Mich. | 2005 | 2011 | UHF-6 | UHF-5 | 2005 | 2011 | UHF-6 | UHF-5 | ||||||||||||||||||||||||||||||||||||||||
| 1947 | ||||||||||||||||||||||||||||||||||||||||||||||||
| KPRC | 11th | NBC | Aug. 1, | Dec. 31, | VHF-3 | VHF-3 | 11th | NBC | Aug. 1, | Dec. 31, | VHF-3 | VHF-3 | ||||||||||||||||||||||||||||||||||||
| Houston, Tx. | 2006 | 2011 | UHF-11 | UHF-11 | 2006 | 2011 | UHF-11 | UHF-11 | ||||||||||||||||||||||||||||||||||||||||
| 1949 | ||||||||||||||||||||||||||||||||||||||||||||||||
| WPLG | 17th | ABC | Feb. 1, | Dec. 31, | VHF-5 | VHF-5 | 17th | ABC | Feb. 1, | Dec. 31, | VHF-5 | VHF-5 | ||||||||||||||||||||||||||||||||||||
| Miami, Fla. | 2005 | 2004 | UHF-8 | UHF-8 | 2005(c) | 2009 | UHF-8 | UHF-8 | ||||||||||||||||||||||||||||||||||||||||
| 1961 | ||||||||||||||||||||||||||||||||||||||||||||||||
| WKMG | 20th | CBS | Feb. 1, | Apr. 6, | VHF-3 | VHF-3 | 20th | CBS | Feb. 1, | Apr. 6, | VHF-3 | VHF-3 | ||||||||||||||||||||||||||||||||||||
| Orlando, Fla. | 2005 | 2005 | UHF-11 | UHF-10 | 2013 | 2015 | UHF-11 | UHF-10 | ||||||||||||||||||||||||||||||||||||||||
| 1954 | ||||||||||||||||||||||||||||||||||||||||||||||||
| KSAT | 37th | ABC | Aug. 1, | Dec. 31, | VHF-4 | VHF-4 | 37th | ABC | Aug. 1, | Dec. 31, | VHF-4 | VHF-4 | ||||||||||||||||||||||||||||||||||||
| San Antonio, Tx. | 2006 | 2004 | UHF-6 | UHF-6 | 2006 | 2009 | UHF-6 | UHF-6 | ||||||||||||||||||||||||||||||||||||||||
| 1957 | ||||||||||||||||||||||||||||||||||||||||||||||||
| WJXT | 51st | None | Feb. 1, | — | VHF-2 | VHF-2 | 52nd | None | Feb. 1, | — | VHF-2 | VHF-2 | ||||||||||||||||||||||||||||||||||||
| Jacksonville, Fla. | 2005 | UHF-6 | UHF-5 | 2013 | UHF-6 | UHF-5 | ||||||||||||||||||||||||||||||||||||||||||
| 1947 | ||||||||||||||||||||||||||||||||||||||||||||||||
| (a) | Source: |
| (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. References to stations that are operating in each market are to stations that are broadcasting analog signals. However most of the stations in these markets are also engaged in digital broadcasting using the FCC-assigned channels for DTV operations. |
| (c) | The Company has filed a timely application to renew the FCC license of WPLG and such filing extends the effectiveness of the station’s existing license until the renewal application is acted upon. |
The Company’s 2002 net operating revenues from national and local television advertising and network compensation were as follows:
| National | $ | 118,124,000 | |||
| Local | 205,326,000 | ||||
| Network | 18,409,000 | ||||
| Total | $ | 341,859,000 | |||
Regulation of Broadcasting and Related Matters
The FCC has a policy of reviewing its DTV rules every two years to determine whether those rules need to be adjusted in light of new developments. In January 2003September 2004 the FCC released a Notice of Proposed Rule Making, initiatingissued an order concerning the second periodic review of its DTV rules. This review will examine broadly examined the rules and policies governing broadcasters’ DTV operations, including interference protection rules and various operating requirements,requirements. In that order the FCC established procedures by which stations will elect the channel on which they will operate after the transition to digital television is complete. In most cases, stations will choose between their current analog channel and extensionscurrent DTV channel, provided that those channels are between channels 2 and 51. All of the 2006 deadlineCompany’s TV stations except for ceasingWKMG have two channels that are within this range; for WKMG, only its analog operations. As a partchannel is within this range and, because of this review, thetechnical issues related to its analog channel, WKMG is seeking another channel between channels 2 and 51 to use as its DTV channel when all-digital operations commence.
The Telecommunications In November 2004 the FCC released a Report and Order adopting new obligations concerning children’s programming by digital television broadcasters (although some new obligations apply to the analog signals as well). Among other things, the FCC will require stations to air three hours of “core” children’s programming on their primary digital video streams and additional core children’s programming if they also broadcast free multicast video streams. Many of these requirements do not go into effect until 2006.
Pursuant totelevision stations in the “must-carry” requirements of the Cable Television Consumer Protection and Competitionmarket.
The FCC is conducting proceedings dealing with various issues in addition to those described elsewhere in this section, including proposals to modify its regulations relating to the operation of cable television systems (which regulations are discussed below under “Cable Television Division –Operations — Regulation of Cable Television and Related Matters”), and proposals that could affect the development of alternative video delivery systems that would compete in varying degrees with both cable television and television broadcasting operations. Also, in July 2004 the FCC instituted an inquiry into its rules and policies concerning broadcasters’ service to their local communities.
On November 1, 2002, Among the digital video services offered by Cable One transferred its Akron, Ohio system, together with a cash payment, to a unitis the delivery of AOL Time Warnercertain premium, cable network and local over-the-air channels in return for cable systems serving the communities of Chanute, Emporia, Independence and Parsons, Kansas. That transaction had the effect of increasing by approximately 5,000 the number of subscribers being served by the Company’s cable systems.
HDTV.
Mississippi and in the Boise, Idaho area.
Among other things,
In April 1993optional tiers (although the FCC adopted a “freeze”freeze on rate increases for regulated services (i.e., the basic and, prior to March 1999, optional tiers)tiers expired in 1999). Later that year the FCC promulgated benchmarks for determining the reasonableness of rates for suchregulated services. The benchmarks provided for a percentage reduction in the rates that were in effect when the benchmarks were announced. Pursuant to the FCC’s rules, cable operators can increase their benchmarked rates for regulated services to offset the effects of inflation, equipment upgrades, and higher programming, franchising and regulatory fees. Under the FCC’s approach, cable operators may exceed their benchmarked rates if they can show in
The Copyright Act of 1976 grants togives cable television systems the ability, under certain terms and conditions the rightand assuming that any applicable retransmission consents have been obtained, to retransmit the signals of television stations pursuant to a compulsory copyright license. Those terms and conditions permit cable systems to retransmit the signals of local television stations on a royalty-free basis; however in most cases cable systems retransmitting the signals of distant stations are required to pay 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. In 1994 the availability of a compulsory copyright license was extended to “wireless cable” for both local and distant television signals and to directsignals. Direct broadcast satellite (“DBS”) operators for distant signals only,have had a compulsory copyright license since 1988, although in the latter case thethat license was limited to distant television signals and only permitted the delivery of the signals of distant network-affiliated stations delivered to subscribers who could not receive an over-the-air signal of a station affiliated with the same network. However, in November 1999 Congress enacted the Satellite Home Viewer Improvement Act, which created a royalty-free compulsory copyright license
In 2004 the FCC revised these rules and limited the extent to which incumbent telephone companies must provide access to these features and functionalities; the FCC also permitted incumbent telephone companies to increase the price they charge for such access.
On March 14, Thus there currently is no restriction on the ownership of both a television broadcast station and a cable television system in the same market.
Magazine Publishing
Newsweek
Newsweekis a weekly news magazine published both domestically and internationally by Newsweek, Inc., a subsidiary of the Company. In gathering, reporting and writing news and other material for publication,Newsweekmaintains news bureaus in 9 U.S. and 11 foreign cities.
The domestic edition ofNewsweekincludes more than 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,Newsweekranks second in circulation among the three leading weekly news magazines (Newsweek,TimeandU.S. News & World Report). For each of the last five yearsNewsweek’s average weekly domestic circulation rate base has been 3,100,000 copies. In 1998 and 1999Newsweek’s percentage of the total weekly domestic circulation rate base of the three leading weekly news magazines was 33.5%. Since 2000 that percentage has been 34.0%.
Newsweekis 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. Most subscriptions are sold at a discount from the basic price. In May 2001,Newsweek’s newsstand cover price was increased from $3.50 per copy (which price had been in effect since April 1999) to $3.95 per copy.
The total number ofNewsweek’s domestic advertising pages and gross domestic advertising revenues as reported by Publishers’ Information Bureau, Inc., together withNewsweek’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:
| Percentage of | Newsweek | |||||||||||||||
| Newsweek | Three Leading | Gross | Percentage of | |||||||||||||
| Advertising | News | Advertising | Three Leading | |||||||||||||
| Pages* | Magazines | Revenues* | News Magazines | |||||||||||||
| 1998 | 2,472 | 34.4 | % | $ | 393,168,000 | 33.8 | % | |||||||||
| 1999 | 2,567 | 33.5 | % | 432,701,000 | 32.8 | % | ||||||||||
| 2000 | 2,383 | 33.8 | % | 433,932,000 | 34.2 | % | ||||||||||
| 2001 | 1,822 | 33.6 | % | 334,179,000 | 32.5 | % | ||||||||||
| 2002 | 1,971 | 35.2 | % | 387,698,000 | 34.8 | % | ||||||||||
Newsweek’s published advertising rates are based on its average weekly circulation rate base and are competitive with those of the other weekly news magazines. As is common in the magazine industry, advertising typically is sold at varying discounts fromNewsweek’s published rates. Effective with the January 14, 2002 issue,Newsweek’s published national advertising rates for all categories of such advertising were increased by 5.0%. Beginning with the issue dated January 13, 2003, such rates were increased by an additional 4.8%.
Internationally,Newsweekis published in an Atlantic edition covering Europe, the Middle East and Africa, a Pacific edition covering Japan, Korea and south Asia, and a Latin American 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 section ofNewsweekarticles has been included inThe Bulletin, an Australian weekly news magazine which also circulates in New Zealand. A Japanese-language edition ofNewsweek, Newsweek Nihon Ban,has been published in Tokyo since 1986 pursuant to an arrangement with a Japanese publishing company which translates editorial copy, sells advertising in Japan and prints and distributes the edition.Newsweek Hankuk Pan,a Korean-language edition ofNewsweek,began publication in 1991 pursuant to a similar arrangement with a Korean publishing company. Since 1996Newsweek en Español, a Spanish-language edition ofNewsweekdistributed in Latin America, has been published under an agreement with a Miami-based publishing company which translates editorial copy, prints and distributes the edition and jointly sells advertising with Newsweek. In June 2000,Newsweek Bil Logha Al-Arabia, an Arabic-language edition ofNewsweek, was launched under a similar arrangement with a Kuwaiti publishing company. Also,Newsweek Polska, a Polish-language newsweekly, was launched in September 2001 under a licensing agreement with a Polish publishing company which, in addition to translating selected stories fromNewsweek’s various U.S. and foreign editions, has established a staff of Polish reporters and editors for the magazine. In December 2002 Newsweek announced an agreement with a Hong Kong-based publisher to publishNewsweek Select, a Chinese-language magazine which will be based primarily on selected content translated fromNewsweek’s U.S. and international editions.
The average weekly circulation rate base, advertising pages and gross advertising revenues ofNewsweek’s international editions (not includingThe Bulletininsertions or the foreign-language editions ofNewsweek) for the past five years have been as follows:
| Average Weekly | Gross | |||||||||||
| Circulation | Advertising | Advertising | ||||||||||
| Rate Base | Pages* | Revenues* | ||||||||||
| 1998 | 660,000 | 2,120 | $ | 83,051,000 | ||||||||
| 1999 | 660,000 | 2,492 | 90,023,000 | |||||||||
| 2000 | 663,000 | 2,606 | 104,868,000 | |||||||||
| 2001 | 666,000 | 1,979 | 81,453,000 | |||||||||
| 2002 | 646,000 | 1,882 | 76,711,000 | |||||||||
For 2003 the average weekly circulation rate base forNewsweek’s English-language international editions (not includingThe Bulletininsertions) will be 646,000 copies.Newsweek’s rate card estimates the average weekly circulation in 2003 forThe Bulletininsertions will be 70,000 copies and for the Japanese-, Korean-, Arabic- and Spanish- and Polish-language editions will be 110,000, 70,000, 30,000, 50,750 and 262,000 copies, respectively.
The online version ofNewsweek, which includes stories fromNewsweek’s print edition as well as other material, has been a co-branded feature on the MSNBC.com Web site since 2000. This feature is being produced by Washingtonpost.Newsweek Interactive Company, another subsidiary of the Company.
Arthur Frommer’s Budget Travelmagazine, another Newsweek publication, was published eight times during 2002 and had a circulation of 450,000 copies.Budget Travelis headquartered in New York City and has its own editorial staff.
During recent years Congress has considered a range of proposals intended to restrict the marketing of tobacco products. The Company cannot now predict what actions may eventually be taken to limit or restrict tobacco advertising. However, such advertising accounts for only about 1% of Newsweek’s operating revenues and negligible revenues atThe Washington Postand the Company’s other publications. Moreover, federal law has prohibited the carrying of advertisements for cigarettes and smokeless tobacco by commercial radio and television stations for many years. Thus the Company believes that any restrictions on tobacco advertising which may eventually be put into effect would not have a material adverse effect on Newsweek or on any of the Company’s other business operations.
PostNewsweek Tech Media
This division of Post-Newsweek Media, Inc. publishes controlled-circulation trade periodicals and produces trade shows and conferences for the government information technology industry.
Specifically, PostNewsweek Tech Media publishesWashington Technology, a twice-monthly news magazine for government information technology systems integrators,Government Computer News, a news magazine published 30 times per year serving government managers who buy information technology products and services, andGCN Technology, a news magazine published four times per year providing information technology product reviews and other buying information for government information technology managers.Washington Technology,Computer Government News, andGCN Technologyhave circulations of about 40,000, 87,000, and 120,000 copies, respectively. This division also publishesTech Almanac, an annual directory of technology industry executives serving the government information technology community.
PostNewsweek Tech Media also produces theFOSEtrade show, which is held each spring in Washington, D.C. for information technology decision makers in government and industry, and thePSXtrade show, which attracts government procurement officers and vendors of the services such officers purchase. This division also produces a
Education
Kaplan, Inc., a subsidiary of the Company, provides an extensive range of educational services for children, students and professionals. Kaplan’s historical focus on test preparation has been expanded as new educational and career services businesses have been acquired or initiated. The Company divides Kaplan’s various businesses into two categories: supplemental education, which consists of the Test Preparation and Admissions Division, the Professional Division, Score! Educational Centers, and The Financial Training Company; and higher education, which consists of Kaplan’s Higher Education Division and the Dublin Business School.
The Test Preparation and Admissions Division also includes Kaplan’s publishing activities. Kaplan currently co-publishes more than 150190 book titles, predominatelypredominantly in the areas of test preparation, admissions, career guidance and life skills, through a joint venture with Simon & Schuster, and also develops educational software for the K through 12K-12, graduate and graduateEnglish-as-a-second-language markets which is sold through arrangementsan arrangement with a third party whothat is responsible for production and distribution. KaplanThis division also produces a college newsstand guide in conjunction with Newsweek.
division).
Singapore.
No proceeding by the Department of Education is pending to fine any Kaplan school for a failure to comply with any Title IV requirement, or to limit, suspend or terminate the Title IV eligibility of any Kaplan school. However no assurance can be given that the Kaplan schools which currently participate in Title IV programs will maintain their
Several Title IV financial aid programs are subject to periodic legislative review and reauthorization, and the next reauthorization is scheduled to take place during the current Congressional term. In addition, the availability of funding for eachthe Title IV programprograms that provide non-repayable grants is wholly contingent upon the outcome of the annual federal appropriations process.
Other Activities
International Herald Tribune
On1,12, 2004 issue,Newsweek’s published national advertising rates for all categories of such advertising were increased by an average of approximately 4.5%. Beginning with the issue dated January 10, 2005, such rates were increased again, in this case by 5.0%.sold its 50% beneficialbelieves that any restrictions on tobacco advertising that may eventually be put into effect would not have a material adverse effect on Newsweek or on any of the Company’s other business operations.
mill’s wood requirements. In 2004 Bowater Mersey produced about 275,000 tons* of newsprint.
20022004The Washington PostandExpressconsumed about 191,000*190,000 tons and 3,000 tons of newsprint, respectively. Such newsprint was purchased from a number of suppliers, including Bowater Incorporated, which supplied approximately 39%37% ofThe Post’s 2002 the 2004 newsprint requirements.requirements for these newspapers. Although for many years some of the newsprint purchased forThe Postpurchased from Bowater Incorporated typically was 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), since 1999 none of the newsprint consumed by eitherThe PostorExpresshas come from that source. Bowater Mersey owns and operates a newsprint mill near Halifax, Nova Scotia, and owns extensive woodlands that provide part of the mill’s wood requirements. In 2002 Bowater Mersey produced about 255,000 tons of newsprint.2002.2004. Discounts from the announced price of newsprint can be substantial, and prevailing discounts increased duringdecreased throughout the first three quartersyear. The* 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.
Washingtonpost.Newsweek Interactive faces competition from many other Internet services, particularly services that feature national and international news, as well as from alternative methods of delivering news and information. In addition, other Internet-based services, including search engines, are carrying increasing amounts of advertising, and over time such services could also adversely affect the Company’s print publications and television broadcasting operations, all of which rely on advertising for the majority of their revenues. Several companies are offering online services containing information and advertising tailored for specific metropolitan areas, including the Washington, D.C. metropolitan area. For example, Digital CityAmerica Online (a unit of AOL Time Warner) producesDigital City a Washington,,DC, D.C. city guide which is part of AOL’s nationwide network of local online sites. National online classified advertising is becoming a particularly crowded field, with competitors such as Yahoo! and eBay aggregating large volumes of content into a national classified database covering a broad range of product lines. Other competitors are focusing on vertical niches in specific content areas: autos.msn.com (which is majority owned by Microsoft), AutoTrader.com and Autobytel.com, for example, aggregate national car listings; Realtor.com aggregates national real estate listings; while Monster.com, HotJobs.comHotJobs.Yahoo.com (which is owned by Yahoo!) and CareerBuilder.com (which is jointly owned by Gannett, Knight-Ridder and Tribune Co.) aggregate employment listings.
Slatecompetes for readers with many other political and lifestyle publications, both online and in print, and competes for advertising revenue with those publications as well as with a wide variety of other print and online publications and other forms of advertising.
According Telephone companies can also compete with cable television systems in providing broadband Internet access by using DSL and other technologies. Some telephone companies have entered into strategic partnerships with DBS operators that permit the telephone company to figures compiled by Publishers’ Information Bureau, Inc.,package the video programming services of the 239 magazines reported onDBS operator with the telephone company’s own DSL service, thereby competing directly with the video programming and cable modem services being offered by the Bureau,Newsweekranked fifth in total advertising revenues in 2002, when it received approximately 2.3% 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.
PostNewsweek Tech Media’s publications and trade shows compete with many other advertising vehicles and sources of similar information.
existing cable television systems.
Overseas, both The Financial Training Company and Dublin Business School compete with other for-profit companies and with governmentally supported schools and institutions that provide similar training and educational programs.
Executive Officers
The Washington Post
2003, and efforts to negotiate a new agreement are continuing. Also, the agreement covering 63 paper handlers and general workers represented by the Graphic Communications International Union expired on November 20, 2004; a replacement agreement had been negotiated but that agreement was subsequently rejected by the members of the bargaining unit.
The Newspaper’s agreement with the International Brotherhood of Teamsters, which represents bundle haulers, expires on September 22, 2007.
2005.
Newsweek has approximately 650 full-time employees (including about 135 editorial employees represented by the Communications Workers of America under a collective bargaining agreement which expired at the end of 2002 and currently is being renegotiated).
Worldwide, Kaplan employs approximately 4,4707,600 persons on a full-time basis. Kaplan also employs substantial numbers of part-time employees who serve in instructional and administrative capacities. During peak seasonal periods, Kaplan’s part-time workforce exceeds 10,00015,500 employees. None of Kaplan’s employees is represented by a union.
In addition, the Company’s Certificate of Incorporation, its Corporate Governance Guidelines, the Charters of the Audit and Compensation Committees of the Company’s Board of Directors, and the codes of conduct adopted by the Company and referred to in Item 10 of this Annual Report on Form 10-K are each available on the Company’s website; printed copies of such documents may be obtained by any stockholder upon written request to the Secretary of the Company at 1150 15th Street, N.W., Washington, D.C. 20071.
The
On December 22, 2003, WP Company sold a 35,000-square-foot lot on 15th Street next to the lot containingThe Post’s office building.
; both of these properties currently are under contract to be sold.
Post-Newsweek Media has contracted to purchase approximately 7 acres of undeveloped land in Prince George’s County, Maryland, on which it plans to build a combination office building and commercial printing facility. In addition, the Division houses a call-center operation in 20,000 square feet of rented space in Phoenix under a lease that expires in 2013.San Francisco,Oakland, California.whichthat was purchased by Cable One in 1998. The majority of the offices and head-end facilities of the Division’s individual cable systems are located in buildings owned by Cable One. Substantially allMost of the tower sites used by the Division are leased.whichthat expires in 2010. In 1997 Newsweek sold itsalso leases a portion of a building in Mountain Lakes, N.J. facility to a third party and leased back a portion of this building to house its accounting, production and distribution departments. The lease on this space will expire in 2007 but is renewable for two 5-yearfive-year periods at Newsweek’s option.Kaplan owns a total of eight buildings including a six-story building located at 131 West 56th Street in New York City, which serves as an educational center primarily for international students, and a 2,300 square foot office condominium in Chapel Hill, North Carolina which it utilizes for its Test Prep business. Kaplan also owns a 15,000 square foot three-story building in Berkeley, California utilized for its Test Prep and English Language businesses, a 39,000 square foot four-story brick building and a 19,000 square foot two-story brick building in Lincoln, Nebraska which are used by the Lincoln School of Commerce, a 25,000 square foot one-story building in Omaha, Nebraska used by the Nebraska College of Business, a 131,000 square foot five-story brick building in Manchester, New Hampshire used by Hesser College, and an 18,000 square foot one-story brick building in Dayton, Ohio used by the Ohio Institute of Photography and Technology. Kaplan’s principal educational center in New York City for other than international students is located at 16 Cooper Square, where Kaplan rents two floors under a lease expiring in 2013. Kaplan’s distribution facilities are located in a 169,000 square foot warehouse in Aurora, Illinois which has been rented under a lease which expires in 2010. Kaplan’s headquarters offices are located at 888 Seventh Avenue in New York City, where Kaplan rents space on three floors under a lease which expires in 2007. All other Kaplan facilities (including administrative offices and instructional locations) occupy leased premises.
The Company, its wholly owned subsidiary The Gazette Newspapers, Inc. (now Post-Newsweek Media, Inc.), and the Washington Suburban Press Network, Inc. (a corporation jointly owned by Post-Newsweek Media and another media investor), are parties to an antitrust lawsuit filed on February 28, 2001, by the owners of several local Maryland newspapers in the United States District Court for the District of Maryland. This suit alleges violations of the Sherman Act, the Clayton Act and the Maryland Antitrust Act, and asserts state law claims for unfair competition,
Kaplan, Inc., a wholly owned subsidiary of the Company, is the named defendant in a class action filed on December 20, 2002, in Superior Court of the State of California, County of Alameda, brought by individuals who were engaged as Kaplan lecturers, teachers and tutors in California since December 20, 1998. The suit alleges breaches of implied contracts as well as violations of the California wage and hour laws and the California Business and Professions Code prohibitions against unfair competition by means of unlawful, unfair or fraudulent business practices or acts. The case arose out of claims that Kaplan failed to pay its instructors for time spent preparing for lectures, classes and tutoring sessions, time spent after class answering students’ questions, and time spent traveling to and from different teaching locations. The suit seeks unspecified damages (which may in certain instances include penalties).
The Company and its subsidiaries are also defendants in various other civil lawsuits that have arisen in the ordinary course of their businesses, including actions foralleging libel, and invasion of privacy.privacy and violations of applicable wage and hour laws. While it is not possible to predict the outcome of these lawsuits, and the lawsuits described in the preceding two paragraphs, in the opinion of management their ultimate disposition should not have a material adverse effect on the financial position, liquidity or results of operations of the Company.
| Item 4. | Submission of Matters to a Vote of Security Holders. |
| Item 5. | Market for the Registrant’s Common Equity, |
| 2002 | 2001 | 2004 | 2003 | |||||||||||||||||||||||||||||
| Quarter | High | Low | High | Low | High | Low | High | Low | ||||||||||||||||||||||||
| January – March | $618 | $520 | $652 | $524 | $921 | $790 | $764 | $659 | ||||||||||||||||||||||||
| April – June | 634 | 545 | 608 | 542 | 983 | 886 | 741 | 679 | ||||||||||||||||||||||||
| July – September | 675 | 516 | 599 | 470 | 956 | 830 | 752 | 650 | ||||||||||||||||||||||||
| October – December | 743 | 646 | 540 | 479 | 999 | 862 | 820 | 667 | ||||||||||||||||||||||||
Item 6. Selected Financial Data.
$1.45 per share during 2003.
| Item 6. | Selected Financial Data. |
| Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
January 2, 2005.
| Value of Common Stock Investments | Value of Common Stock Investments | Value of Common Stock Investments | Value of Common Stock Investments | Value of Common Stock Investments | ||||||||||||||||||||||||||||||||||||||||
| Assuming Indicated Decrease in | Assuming Indicated Decrease in | Assuming Indicated Increase in | Assuming Indicated Decrease in | Assuming Indicated Increase in | ||||||||||||||||||||||||||||||||||||||||
| Each Stock’s Price | Each Stock’s Price | Each Stock’s Price | Each Stock’s Price | Each Stock’s Price | ||||||||||||||||||||||||||||||||||||||||
| -30% | -30% | -20% | -10% | +10% | +20% | +30% | -30% | -20% | -10% | +10% | +20% | +30% | ||||||||||||||||||||||||||||||||
| $ | 151,573,000 | $ | 173,226,000 | $ | 194,880,000 | $ | 238,186,000 | $ | 259,840,000 | $ | 281,493,000 | 286,815,000 | $ | 327,789,000 | $ | 368,762,000 | $ | 450,710,000 | $ | 491,683,000 | $ | 532,657,000 | ||||||||||||||||||||||
2003.
| Item 8. | Financial Statements and Supplementary Data. |
Stockholders is incorporated herein by reference thereto. INDEX TO FINANCIAL INFORMATION MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION half expiring in 2011. The Washington Post newspaper. Company’s newspaper publishing, magazine publishing and cable television divisions helped to offset these declines. small loss from a new newspaper, Express, which was launched in August 2003. Operating margin at the newspaper publishing division was 15% for 2003 and 13% for 2002. August 2003. The new publication appears each morning, Monday through Friday, in tabloid form and is distributed free-of-charge in the Washington, D.C. area. 2002. Education Division.Education division revenue in the addition of 10 new centers compared to the previous year. expenses for 2003 is associated with several companywide technology projects. BrassRing results improved in 2003, despite a second quarter charge arising from the shutdown of one of the BrassRing businesses, which increased the Company’s equity in losses of BrassRing by $2.2 million. The Company’s equity in losses of BrassRing totaled $7.7 million for 2003, compared to $13.9 million for 2002. December 29, 2002, follows (in millions): In November 2002, the Company completed a cable system exchange transaction with Time Warner Cable which consisted of the exchange by the Company of its cable system in Akron, Ohio serving about 15,500 subscribers, and $5.2 million to Time Warner Cable, for cable systems serving about 20,300 subscribers in Kansas. The non-cash, non-operating gain resulting from the exchange transaction increased net income by $16.7 million, or $1.75 per share. Capital Expenditures.During 2005. $48.3 million. 2003. equivalents, compared to $116.6 million at December 28, 2003. the Company’s significant increase in operating income in 2004 and significant payments for Kaplan stock options in 2003, offset by an increase in the company’s income tax payments in 2004. policies or procedures may deteriorate. If the fair value of a marketable security declines below its cost basis, and the decline is considered other than temporary, the Company will record a write-down which is included in earnings. The Company considers whether the fair values of any of its equity method investments have declined below their carrying value whenever adverse events or changes in circumstances indicate that recorded values may not be recoverable. If the Company considered any such decline to be other than temporary (based on various factors, including historical financial results, product development activities and the overall health of the affiliate’s industry), then a write-down would be recorded to estimated fair value. Fair value estimates are based on a review of the investees’ product development activities, historical financial results and projected discounted cash flows. are less than its recorded value. An impairment charge is measured based on estimated fair market value, determined primarily using estimated future cash flows on a discounted basis. Losses on long-lived assets to be disposed are determined in a similar manner, but the fair market value would be reduced for estimated costs to dispose. The Company made $94.6 million in investments in marketable equity securities in 2004. There were no investments in marketable equity securities in 2003 and 2002. During 2004 and 2003, there were no sales of marketable equity securities or realized gains (losses). During 2002, Summarized financial data for the affiliates’ operations are as follows (in thousands): 2002. Income. August 2006. 2003. 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 2002. Also, on January 3, 2005, the Company made stock awards of 13,090 shares. option accounting. still employed at Kaplan. Additionally, stock compensation expense will be recorded on these remaining exercised stock options over the remaining vesting periods of 2005 to 2008. A small number of key Kaplan executives continue to hold the remaining 68,000 of outstanding Kaplan stock options, with roughly half of these options expiring in 2007 and half expiring in 2011. In January 2005, 15,353 Kaplan stock options were exercised, and 10,582 Kaplan stock options were awarded at an option price of $2,080. Changes in Kaplan stock options outstanding for the years ended January 2, 2005, December 28, 2003, and December 29, 2002, The assumed health care cost trend rate used in measuring the postretirement benefit obligation at 2002. 2002. In November 2002, the Company completed a cable system exchange transaction with Time Warner Cable which consisted of the exchange by the Company of its cable system in Akron, Ohio serving about 15,500 subscribers, and $5.2 million to Time Warner Cable, for cable systems serving about 20,300 subscribers in Kansas. The Kansas systems acquired in the exchange transaction were recorded at their estimated fair The results of operations for each of the businesses acquired are included in the Consolidated Statements of Income from their respective dates of acquisition. Pro forma results of operations for Activity related to the Company’s goodwill and intangible assets during December 29, 2002,January 2, 2005, and for the periods then ended, together with the report of PricewaterhouseCoopers LLP thereon and the information contained in Note NO to said Consolidated Financial Statements titled “Summary of Quarterly Operating Results and Comprehensive Income (Unaudited),” which are included in this Annual Report on Form 10-K and listed in the index to financial information on page 27 hereof.22Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.Not applicable.PART IIIItem 10. Directors and Executive Officers of the Registrant. 20032005 Annual Meeting of Stockholders is incorporated herein by reference thereto.Item 11. Executive Compensation.Participation,”Participation” and “Performance Graph” in the definitive Proxy Statement for the Company’s 20032005 Annual Meeting of Stockholders is incorporated herein by reference thereto.Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. 20032005 Annual Meeting of Stockholders is incorporated herein by reference thereto.Item 13. Certain Relationships and Related Transactions. 20032005 Annual Meeting of Stockholders is incorporated herein by reference thereto.Item 14. ControlsPrincipal Accountant Fees and Procedures.Services.A review and evaluation was performed bymanagement, at the direction2005 Annual Meeting of the Company’s Chief Executive Officer (the Company’s principal executive officer) and the Company’s Vice President–Finance (the Company’s principal financial officer), of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Exchange Act Rules 13a-14(c) and 15d-14(c), as of a date within 90 days prior to the filing of this annual report. Based on that review and evaluation, the Company’s Chief Executive Officer and Vice President–Finance have concluded that the Company’s disclosure controls and procedures, as designed and implemented, are effective in ensuring that all material information required to be disclosed in the reports that the Company files or submits under the Exchange Act have been made known to them in a timely fashion. There have been no significant changes in the Company’s internal controls or in other factors that could significantly affect the Company’s internal controls subsequent to the date of such evaluation.Item 15. Exhibits and Financial Statement Schedules, and Reports on Form 8-K.Schedules.(a) The following documents are filed as part of this report: (i)1. Financial Statements and Financial Statement Schedules As listed in the index to financial information on page 27 hereof. (ii)2. Financial Statement SchedulesAs listed in the index to financial information on page 27 hereof. 3. Exhibits As listed in the index to exhibits on page 6163 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.232004 FORM 10-K
14, 2003.2, 2005. THE WASHINGTON POST COMPANY (Registrant) By /s/ JOHN B. MORSE, JR. John B. Morse, Jr. Vice President-Finance 14, 2003:2, 2005: Donald E. Graham Chairman of the Board and Chief Executive Officer (Principal Executive Officer) and Director John B. Morse, Jr. Vice President-Finance (Principal Financial and Accounting Officer) Warren E. Buffett Director Daniel B. BurkeDirectorBarry Diller Director John L. Dotson Jr. Director Melinda French Gates Director George J. Gillespie, III Director Ralph E. GomoryRonald L. Olson Director Alice M. Rivlin Director Richard D. Simmons Director George W. Wilson Director By /s/ JOHN B. MORSE, JR. John B. Morse, Jr. Attorney-in-Fact 24
CERTIFICATIONS I, Donald E. Graham, Chief Executive Officer (principal executive officer) 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 make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; 3. Based on my knowledge, the financial statements and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this annual report; 4. The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the Registrant and have: (a) designed such disclosure controls and procedures to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; (b) evaluated the effectiveness of the Registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the “Evaluation Date”); and (c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation, to the Registrant’s auditors and the audit committee of Registrant’s board of directors (or persons performing the equivalent functions): (a) all significant deficiencies in the design or operation of internal controls which could adversely affect the Registrant’s ability to record, process, summarize and report financial data and have identified for the Registrant’s auditors any material weaknesses in internal controls; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal controls; and 6. The Registrant’s other certifying officer and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.Date: March 14, 2003/s/ DONALD E. GRAHAMDonald E. Graham,Chief Executive Officer25 I, John B. Morse, Jr., Vice President–Finance (principal financial officer) 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 make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; 3. Based on my knowledge, the financial statements and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this annual report; 4. The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the Registrant and have: (a) designed such disclosure controls and procedures to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; (b) evaluated the effectiveness of the Registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the “Evaluation Date”); and (c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation, to the Registrant’s auditors and the audit committee of Registrant’s board of directors (or persons performing the equivalent functions): (a) all significant deficiencies in the design or operation of internal controls which could adversely affect the Registrant’s ability to record, process, summarize and report financial data and have identified for the Registrant’s auditors any material weaknesses in internal controls; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal controls; and 6. The Registrant’s other certifying officer and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.Date: March 14, 2003/s/ JOHN B. MORSE, JR.John B. Morse, Jr.,Vice President–Finance26 Page Management’s Discussion and Analysis of Results of Operations and Financial Condition (Unaudited) 2928 Financial Statements and Schedules: Report of Independent AccountantsRegistered Public Accounting Firm 38 Consolidated Statements of Income for the Three Fiscal Years Ended December 29, 200239and Consolidated Statements of Comprehensive Income for the Three Fiscal Years Ended December 29, 2002January 2, 2005 39 Consolidated Balance Sheets at December 29, 2002January 2, 2005 and December 30, 200128, 2003 40 Consolidated Statements of Cash Flows for the Three Fiscal Years Ended December 29, 2002January 2, 2005 42 Consolidated Statements of Changes in Common Shareholders’ Equity for the Three Fiscal Years Ended December 29, 2002January 2, 2005 43 Notes to Consolidated Financial Statements 44 Financial Statement Schedule for the Three Fiscal Years Ended December 29, 2002:January 2, 2005: II — Valuation and Qualifying Accounts 5759 Ten-Year Summary of Selected Historical Financial Data (Unaudited) 5860 consolidated financial statementsConsolidated Financial Statements or the notes thereto referred to above.
[This Page Intentionally Left Blank]2820022004 COMPARED TO 20012003 2004 2003 Customer premise equipment $ 23.5 $ 17.0 Commercial 0.1 0.1 Scaleable infrastructure 8.6 5.3 Line extensions 14.0 10.6 Upgrade/rebuild 15.6 21.4 Support capital 17.1 11.5 Total $ 78.9 $ 65.9 2004 2003 % Change Supplemental education $ 575,014 $ 469,757 22 Higher education 559,877 368,320 52 $ 1,134,891 $ 838,077 35 Supplemental education $ 100,795 $ 87,044 16 Higher education 93,402 58,428 60 Kaplan corporate overhead (31,533 ) (36,782 ) 14 Other (41,209 ) (120,399 ) 66 $ 121,455 $ (11,709 ) — 2004 2003 Foreign currency gains, net $ 5.5 $ 4.2 Gain on sale of interest in IHT — 49.8 Impairment write-downs on cost method and other investments (0.7 ) (1.3 ) Gain on exchange of cable system business 0.5 — Other gains 2.8 2.7 Total $ 8.1 $ 55.4 2002 was $204.32002. The Company’s 2003 results include a non-operating gain from the sale of the Company’s 50% interest in the International Herald Tribune (after-tax impact of $32.3 million, ($21.34or $3.38 per share), compared with net incomean operating gain from the sale of land at The Washington Post newspaper (after-tax impact of $25.5 million, or $2.66 per share), early retirement program charges at The Washington Post newspaper (after-tax impact of $20.8 million, or $2.18 per share), Kaplan stock compensation expense for the fiscal year ended December 30, 200110% premium associated with the purchase of $229.6certain outstanding stock options announced in the third quarter (after-tax impact of $6.4 million, ($24.06or $0.67 per share), and a charge in connection with the establishment of the Kaplan Educational Foundation (after-tax impact of $3.9 million, or $0.41 per share). The Company’s 2002 results includeincluded a net non-operating gain from the exchange of certain cable systems (after-tax impact of $16.7 million, or $1.75 per share), a transitional goodwill impairment loss (after-tax impact of $12.1 million, or $1.27 per share), charges from early retirement programs (after-tax impact of $11.3 million, or $1.18 per share), and a net non-operating loss from the write-down of certain of the Company’s investments (after-tax impact of $2.3 million, or $0.24 per share).2001 resultsoffer included net non-operating gains froma 10% premium over the sale and exchangethen current valuation price. The Company paid out $118.7 million in the fourth quarter of certain cable systems (after-tax impact of $196.5 million, or $20.69 per share), a non-cash goodwill and other intangibles impairment charge recorded by one2003, with the remainder of the Company’s affiliates (after-tax impactpayouts to be made from 2004 through 2008. A small number of $19.9 million, or $2.10 per share), losses fromkey Kaplan executives will continue to hold the write-downremaining 45% of a non-operating parceloutstanding Kaplan stock options, with roughly half of landthe remaining options expiring in 2007 and certain cost method investments to their estimated fair value (after-tax impact of $18.3 million, or $1.93 per share) and an after-tax charge of $55.0 million, or $5.79 per share, for amortization of goodwill and other intangible assets that are no longer amortized under Statement of Financial Accounting Standards No. 142 (SFAS 142), “Goodwill and Other Intangible Assets.” The Company adopted SFAS 142 effective on the first day of its 2002 fiscal year.20022003 was $2,584.2$2,838.9 million, up 7 percent10% compared to revenue of $2,411.0$2,584.2 million in 2001, with2002. The increase in revenue is due mostly to significant revenue growth at the education division, along with increases at the Company’s cable television, newspaper publishing, and broadcast divisions.magazine publishing divisions; revenues were downincreased 1 percentwas essentially flat in 2002,2003, and circulation and subscriber revenue increased 3 percent.5%. Education revenue increased 26 percent35% in 2002,2003, and other revenue increased 10 percent.was up 8%. The increasechange in advertising revenue is due to increases at the newspaper publishing and magazine publishing divisions, offset by a decline at the television broadcasting division due primarily to significant political revenues at the broadcast division in 2002. The increase in circulation and subscriber revenue is due to an 11 percent8% increase in subscriber revenue at the cable division from rapidly growingcontinued growth in cable modem and digital service revenues, and a 4 percent1% increase in circulation revenue at The Post, and a slight increase in Newsweek circulation revenues due to circulation price increases. This increase was offset by a 14 percent decrease in Newsweek domestic circulation revenue due to difficult comparisons with 2001, when Newsweek saw spikes inincreased newsstand sales from regularfor both the domestic and specialinternational editions surrounding the events of September 11.Newsweek. Revenue growth at Kaplan, Inc. (about one-third43% of which was from acquisitions) accounted for the increase in education revenue.4 percent12% to $2,475.1 million, from $2,206.6 million from $2,112.8 million in 2001 (excluding amortization of goodwill and other intangible assets that are no longer amortized under SFAS 142).2002. The increase is primarily due to higher depreciation expense, highera significant increase in stock-based compensation expense at the education division,Kaplan, higher expenses from operating growth at Kaplan, early retirement program charges, higher newsprint prices and a reduced net pension credit, offset by lower expensesa $41.7 million pre-tax gain on the sale of land at the newspaper publishing and magazine publishing segments due to lower newsprint prices and tight cost controls.increased 27 percentdeclined 4% to $363.8 million, from $377.6 million from $298.3in 2002, due largely to the $84.6 million increase in Kaplan stock compensation discussed above. Operating results for 2003 also include a $41.7 million pre-tax gain on the sale of land at The Washington Post newspaper, $34.1 million in 2001, adjusted as if SFAS 142 had been adoptedpre-tax charges from early retirement programs at The Washington Post newspaper, and a $6.5 million charge for the beginning of 2001.Kaplan Educational Foundation. Operating results for 2002 includeincluded $19.0 million in pre-tax charges from early retirement programs. The Company benefited from improvedCompany’s year-to-date results were adversely impacted by a reduction in operating resultsincome at the educationtelevision broadcasting division and broadcast divisions, along with improved earnings at The Washington Post newspaper and the cable division. These factors were offset in part by increased depreciation expense, a reduced net pension credit, the early retirement program charges noted above and higher stock-based compensation expense accrualscredit. Improved results at the education division.20022003 operating income includes $64.4$55.1 million of net pension credits, compared to $76.9$64.4 million in 2001.2002. These amounts exclude $19.0$34.1 million and $3.3$19.0 million in charges related to early retirement programs in 2003 and 2002, and 2001, respectively.As discussed above, the Company adopted SFAS 142 effective on the first day of its 2002 fiscal year. All operating income comparisons presented below are on a pro forma basis as if SFAS 142 had been adopted at the beginning of 2001. Therefore, 2001 pro forma operating results exclude amortization charges of goodwill and certain other intangible assets that are no longer amortized under SFAS 142.2002 decreased slightly2003 increased 4% to $872.8 million, from $842.0 million from $842.7 million in 2001.2002. Division operating income for 20022003 totaled $109.0$134.2 million, an increase of 23 percent23% from pro forma operating income of $88.6$109.0 million in 2001.2002. Operating results for 2003 include a fourth quarter $41.7 million pre-tax gain on the sale of land at The Washington Post newspaper and $34.1 million in pre-tax charges from early retirement programs at The Washington Post newspaper. Operating results for 2002 included a $2.9 million charge from an early retirement program at The Washington Post newspaper. Improved operating results for 2002 reflect the benefits of2003 are due to increased advertising revenue and cost control initiatives employed throughout the division, and a 22 percent decrease in newsprint expense; these savings were partially offset by a pre-tax early retirement program charge of $2.9 million3% increase in newsprint expense, incremental costs associated with the war in Iraq, a reduced pension credit, and a reduced net pension credit.decreased 3 percentincreased 3% to $572.2 million, from $555.7 million from $574.3 million in 2001.2002. The decreaserise in print advertising revenue for 2002 is due to a continued decline in recruitment advertising revenue, with volume decreases of 32 percent, offset by higher revenue from several advertising categories, including preprints, real estate and other classified advertising.Circulation revenues at The Post were up 4 percent for 20022003 was due to increases in single copy newsstandgeneral and preprint advertising revenue, which more than offset declines in classified and retail advertising revenue from volume declines. Classified recruitment advertising revenue decreased $6.1 million in 2003, due to a 14% volume decline. Classified recruitment advertising revenue increased by $0.8 million, or 6%, during the fourth quarter of 2003, with flat volume compared to 2002. This was the first quarter with an increase in classified recruitment advertising revenue since the third quarter of 2000.prices in 2002.prices. Daily circulation at The Post declined 1.7 percent,2.0%, and Sunday circulation declined 1.2 percent in 2002.1.8%. Single copy sales contributed to the decline, with a 9% daily decrease and a 6% Sunday decrease. For2929, 2002,28, 2003, average daily circulation at The Post totaled 760,000745,000 (unaudited), and average Sunday circulation totaled 1,054,0001,035,000 (unaudited).Revenue18 percent30% to $46.9 million, from $35.9 million during the year, from $30.4 million in 2001.2002. Local and national online advertising revenues grew 60 percent in 2002, while revenue59% and revenues at the Jobs section of washingtonpost.com decreased 1 percentincreased 29%.2002.atfor the television broadcasting division increased 9 percentdecreased 8% to $315.1 million in 2003, from $343.6 million in 2002, from $314.0 million in 2001, due primarily to approximately $31.8 million in political advertising as well asin 2002, $5.0 million in incremental Olympics-related advertising at the Company’s NBC affiliates in the first quarter of 2002. Additionally, revenues in 2001 were lower due to a general softness in advertising2002, and several days of commercial-free coverage followingin connection with the eventsIraq war in March 2003.September 11. These increases were partially offset by reduced network compensation revenues inthe revenue reductions discussed above. Operating margin at the broadcast division was 44% for 2003 and 49% for 2002.wasand KSAT in San Antonio were ranked number one in the latestNovember 2003 ratings period, Monday through Friday, sign-on to sign-off; KSAT in San Antonio was tied for number one; WJXT in Jacksonville ranked second; WPLGWKMG in Orlando was tied for secondsecond; KPRC in Houston ranked third; and WPLG was third among English-language stations in the Miami market; and KPRC in Houston and WKMG in Orlando ranked third in their respective markets.market.Operating income for 2002 increased 16 percent to $168.8 million, from pro forma operating income of $146.0 million in 2001. Operating income growth for 2002 is due to strong revenue growth, along with tight cost controls, partially offset by a reduced pension credit. Operating margin at the broadcast division was 49 percent for 2002 and 46 percent for 2001, excluding amortization of goodwill and other intangibles.for 2002, a 7 percent decrease from $374.6 million in 2001. Revenues for 2001 reflect a significant spike2002. The revenue increase in newsstand circulation2003 is due to increases in ad pages at Newsweek’s domestic edition, Arthur Frommer’s Budget Travel magazine, and the Company’s trade magazines, offset by lower advertising 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. editions of Newsweek, particularly travel-related advertising at the Pacific edition.for 2002, a decrease of 20 percent from pro formain 2002. The improvement in operating income of $32.0 million in 2001. Operating results for 2002 include2003 is primarily attributable to $16.1 million in pre-tax charges in connection with early retirement programs at Newsweek. Expenses for 2001 included approximately $5.0 millionNewsweek in nonrecurring costs associated with regular and special editions related to September 11. Costs for 2002, also have declined due to payroll and other related cost savings from employees accepting early retirement programs offeredoffset by Newsweek, and from significant cost savings programs put into place at Newsweek’s international operations.Excluding amortization of goodwill and other intangibles, operatinga reduced pension credit.7 percent12% for 20022003 and 9 percent7% for 2001.for 2002 represents an 11 percent increase from revenues of $386.0 in 2001.2002. The 20022003 revenue increase is principally due to rapid growth in the division’s cable modem and digital service revenues. revenues, offset by lower pay and basic revenues due to fewer average basic and pay subscribers during the year, and the lack of rate increases due to a decision to freeze most rates for Cable One subscribers in 2003.15 percent9% in 20022003 to $88.4 million, from $80.9 million from pro forma operating income of $70.6 million in 2001.2002. The increase in operating income for 20022003 is due mostly to the division’s revenue growth, offset by higher depreciation expense and increased programming expense.Cable division cash flow (operating income excluding depreciation and amortization expense) totaled $169.8 million for 2002, an increase of 25 percent from $135.3 million for 2001.The increase in depreciationtechnical, Internet, marketing and employee benefits costs. Operating margin at the cable television division was 19% in 2003 and 2002.for 2002 is primarilyincreased due to significant capital spending primarily in 2001 and 2000, whichrecent years that has enabled the cable division to offer digital and broadband cable services to its subscribers; depreciation expense for 2002 also includes $5.4 million in charges for obsolete assets.subscribers. The cable division began its rollout plan for these services in the third quarter of 2000. Depreciation expense in 2002 included a $5.4 million charge for obsolete assets. At December 31, 2002,2003, the cable division had approximately 214,900222,900 digital cable subscribers, representing a 30 percent31% penetration of the subscriber base in the markets wherebase. Both digital and cable modem services are offered. Digital services are currentlynow offered in markets serving 98 percentvirtually all of the cable division’s subscriber base. The initial rollout plan for the new digital cable services included an offer for the cable division’s customers to obtain these services free for one year. markets.2002,2003, the cable division had 194,200 paying digital subscribers, compared to 31,000 at the end of 2001. Most of the benefits from these services began to show in the first quarter of 2002 and continued throughout the year, with the remaining portion of free one-year periods generally having ended by the close of 2002.At December 31, 2002, the cable division had 718,000720,800 basic subscribers, compared to 752,700718,000 at the end of December 2001,2002, with the decreaseincrease due primarily to significant marketing efforts in 2003 to stabilize the difficult economic environment over the past year; basic customer disconnects for non-payment of bills have increased significantly.subscriber base. At December 31, 2002,2003, the cable division had 79,400133,800 CableONE.net service subscribers, compared to 46,40079,400 at the end of December 2001,2002, due to a large increase in the Company’s cable modem deployment (offered to 93 percentand take-up rates. In 2003, the cable division launched a number of homes passed atmarketing initiatives, including door-to-door sales and bundled service offers with monthly discounts, which have resulted in increased customer subscription rates.endsum of December 2002)basic video, digital video and subscriber penetration rates. Of these subscribers, 78,100 and 32,900 were cable modem subscribers, attotaled 1,077,500, compared to 993,600 as of December 31, 2002. The increase is due to an increase in the endnumber of digital cable and cable modem customers.and 2001, respectively, withas defined by the remainder being dial-up subscribers.NCTA Standard Reporting Categories (in millions): 2003 2002 Customer premise equipment $ 17.0 $ 27.2 Commercial 0.1 0.1 Scaleable infrastructure 5.3 6.8 Line extensions 10.6 10.4 Upgrade/rebuild 21.4 37.4 Support capital 11.5 10.6 Total $ 65.9 $ 92.5 3020022003 increased 26 percent35% to $838.1 million, from $621.1 million from $493.7 million in 2001.2002. Kaplan reported an operating incomeloss of $11.7 million for the year, compared to operating income of $20.5 million comparedin 2002. The decline is due to an $84.6 million increase in Kaplan stock compensation expense in 2003 and a pro forma operating loss$6.5 million contribution to the Kaplan Educational Foundation in the fourth quarter of $13.1 million in 2001.2003, offset by significant revenue growth during the year. Approximately one-third43% of the increase in Kaplan revenue and approximately $9 million of the increase in Kaplan operating income is from newly acquired businesses, primarily in the higher education division. Excluding goodwill amortization in 2001, adivision and the professional training schools that are part of supplemental education. A summary of operating results for 20022003 compared to 20012002 is as follows (in thousands): 2002 2001 % Change 2003 2002 % Change Supplemental education $ 371,248 $ 328,039 13% Supplemental education $ 469,757 $ 371,248 27 Higher education 249,877 165,642 51% Higher education 368,320 249,877 47 $ 621,125 $ 493,681 26% $ 838,077 $ 621,125 35 Supplemental education $ 54,103 $ 27,509 97% Supplemental education $ 87,044 $ 54,103 61 Higher education 27,569 9,149 201% Higher education 58,428 27,569 112 Kaplan corporate overhead (26,143 ) (23,981 ) (9% ) Kaplan corporate overhead (36,782 ) (26,143 ) (41 ) Other (35,017 ) (25,738 ) (36% ) Other (120,399 ) (35,017 ) (244 ) $ 20,512 $ (13,061 ) — $ (11,709 ) $ 20,512 — 20022003 is due mostly to higher enrollments and to a lesser extent, higher pricesincreased enrollment at Kaplan’s traditional test preparation business, (particularlysignificant increases in the LSAT, MCAT and GRE prep courses), as well as higher revenues and operating income from Kaplan’s CFA® andprofessional real estate licensure preparation services.courses, and the FTC acquisition. Score! also contributed to the improved results, withenrollment, higher pricesenrollments at existing centers and strong cost controls.the fixed-facility colleges, that were formerly part of Quest Education, as well as online post-secondary and career programs (various distance-learning businesses). Higher education results are showing significant growth due to student enrollment increases, high student retention rates and several acquisitions.Kaplan, Inc.’sKaplan’s corporate office, including a $6.5 million charge in the fourth quarter of 2003 for the Kaplan Educational Foundation, and expenses associated with the design and development of educational software that, if successfully completed, will benefit all of Kaplan’s business units.is comprised primarily ofcomprises accrued charges for stock-based incentive compensation arising from a stock option plan established for certain members of Kaplan’s management (the general provisions of which are discussed in Note G to the Consolidated Financial Statements) and amortization of certain intangibles. Under the stock-based incentive plan, the amount of compensation expense varies directly with the estimated fair value of Kaplan’s common stock and the number of options outstanding. For 2002 and 2001, theThe Company recorded expense of $119.1 million and $34.5 million for 2003 and $25.3 million,2002, respectively, related to this plan. The increase in other expense for 2002 is attributable to an2003 reflects a significant increase in stock-based incentive compensation, which isthe value of Kaplan due to anits rapid earnings growth and the general rise in valuations of education companies. See additional discussion above regarding the Company’s announcement in September 2003 of its offer to purchase 55% of the outstanding Kaplan stock options.Kaplan’s estimated value.20022003 was $19.3$9.8 million, compared to losses of $68.7$19.3 million for 2001. The improvements were primarily due to better operating results at BrassRing LLC, which accounted for approximately $13.9 million of 2002 equity in losses of affiliates, compared to $75.1 million in equity losses for 2001.2002. The Company’s affiliate investments at the end of 20022003 consisted of a 49.4 percent49% interest in BrassRing LLC a 50 percent interest in the International Herald Tribune, and a 49 percent49% interest in Bowater Mersey Paper Company Limited.50 percent50% interest in the International Herald Tribune for $65 million; the Company will reportmillion and recorded an after-tax non-operating gain of approximately $32$32.3 million in the first quarter of 2003.2002, compared to $283.7 million of2002. The 2003 non-operating income, net, for 2001.mostly comprises a $49.8 million pre-tax gain from the sale of the Company’s 50% interest in the International Herald Tribune. The 2002 non-operating income, net, includes a pre-tax gain of $27.8 million on the exchange of certain cable systems in the fourth quarter of 2002 and a gain on the sale of marketable securities; these gains weresecurities, offset by write-downs recorded on certain investments. The 2001mostly comprised gains arising from(expense) for the saleyears ended December 28, 2003 and exchange of certain cable systems completed in the first quarter of 2001, offset by write-downs recorded on certain investments and a parcel of non-operating land to their estimated fair value. 2003 2002 Gain on sale of interest in IHT $ 49.8 $ — Foreign currency gains, net 4.2 — Impairment write-downs on cost method and other investments (1.3 ) (21.2 ) Gain on exchange of cable system business — 27.8 Gain on sale of marketable securities — 13.2 Other gains 2.7 9.1 Total $ 55.4 $ 28.9 $47.52002. At December 28, 2003, the Company had $631.1 million in 2001. Atborrowings outstanding at an average interest rate of 4.1%; at December 29, 2002, the Company had $664.8 million in borrowings outstanding at an average interest rate of 4.0 percent; at December 30, 2001, the Company had $933.1 million in borrowings outstanding.38.8 percent37.0% for 2002,2003, compared to 40.7 percent38.8% for 2001. Excluding the effect of the cable gain transactions, the Company’s effective rate approximated 38.7 percent for 2002 and 50.2 percent for 2001.2002. The 2003 effective tax rate for 2002 declined primarily becausebenefited from the Company no longer has any permanent difference from goodwill amortization not deductible for tax purposes as a result of the adoption of SFAS 142. The Company’s35.1% effective tax rate also has declined dueapplicable to an increase in operating earnings and a decrease in the overall state tax rate.Cumulative Effect of Change in Accounting Principle.In 2002, the Company completed its SFAS 142 transitional goodwill impairment test, resulting in an after-tax impairment loss of $12.1 million, or $1.27 per share, related to PostNewsweek Tech Media (part of the magazine publishing segment). This loss is included in the Company’s 2002 results as a cumulative effect of change in accounting principle.31RESULTS OF OPERATIONS — 2001 COMPARED TO 2000Net income for 2001 was $229.6 million, compared with net income of $136.5 million for 2000. Diluted earnings per share totaled $24.06 in 2001, compared with $14.32 in 2000. The Company’s 2001 results include after-tax gains of $196.5 million, or $20.69 per share,one-time gain arising from the sale and exchange of certain cable systemsthe Company’s interest in the first quarter;International Herald Tribune.non-cashtotal of $59.6 million, financed with cash and $8.7 million of debt. In addition, the cable division completed two small transactions. In May 2004, the Company acquired El Tiempo Latino, a leading Spanish-language weekly newspaper in the greater Washington area. Most of the purchase price for the 2004 acquisitions was allocated to goodwill and other intangibles.impairment charge recorded by the Company’s BrassRing affiliate (after-tax impact of $19.9 million, or $2.10 per share); and losses from the write-down of a non-operating parcel of landproperty, plant and certain cost method investments to their estimated fair value (after-tax impact of $18.3 million, or $1.93 per share).Revenue for 2001 totaled $2,411.0 million, or flat compared to revenue of $2,409.6 million in 2000. Advertising revenue decreased 13 percent in 2001, and circulation and subscriber revenue increased 9 percent. Education revenue increased 40 percent in 2001, and other revenue decreased 10 percent. The large decrease in advertising revenue is due to declines at the newspaper, broadcast and magazine divisions. The increase in circulation and subscriber revenue is due to a 20 percent increase in Newsweek domestic circulation revenue and a 10 percent increase in subscriber revenue at the cable division. Revenue growth at Kaplan, Inc. (about two-thirds of which was from acquisitions) accounted for the increase in education revenue.Operating costs and expenses for the year increased 6 percent to $2,191.1 million, from $2,069.8 million in 2000. The cost and expense increase is primarily attributable to companies acquired in 2001 and 2000, higher depreciation and amortization expense, and higher stock-based compensation expense accruals at the education division, offset by a higher pension credit and lower expenses at the newspaper publishing, television broadcasting and magazine publishing segments due to extensive cost control initiatives.Operating income decreased 35 percent to $219.9 million in 2001, from $339.9 million in 2000. The decline in 2001 operating income is largely due to a significant decline in advertising revenue, increased depreciation and amortization expenses, and higher stock-based compensation expense accruals at the education division. These factors were offset in part by increased operating income contributed by Quest Education (acquired in August 2000), higher profits from Kaplan’s test preparation and professional training businesses, reduced operating losses at Kaplan’s new business development activities, and an increased pension credit. In addition, 2000 earnings included a fourth quarter after-tax charge of $16.5 million, or $1.74 per share, arising from an early retirement program at The Washington Post.The Company’s 2001 operating income includes $76.9 million of net pension credits, compared to $65.3 million in 2000. These amounts exclude $3.3 million and $29.0 million in charges related to early retirement programs in 2001 and 2000, respectively.DIVISION RESULTSNewspaper Publishing Division.Newspaper publishing division revenues in 2001 decreased 8 percent to $842.7 million, from $918.2 million in 2000. Division operating income for 2001 totaled $84.7 million, a decrease of 26 percent from operating income of $114.4 million in 2000.The decrease in operating income for 2001 is due to a significant decline in print advertising, offset in part by a higher pension credit, higher online advertising revenue, lower newsprint expense, cost control initiatives employed throughout the division, and the $27.5 million charge recorded in the fourth quarter of 2000 in connection with 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 revenue declines of 37 percent. The economic environment surrounding most of the other advertising categories at The Post (i.e., retail, general, preprints) was also sluggish for fiscal 2001 compared to the prior year. In these categories, rate increases only partially offset volume declines ranging from 3 percent to 28 percent during 2001. The soft advertising climate worsened late in the third quarter of 2001 as the Company experienced further reductions in advertising revenue and volumes following the events of September 11.Daily and Sunday circulation at The Post declined 0.5 percent and 0.7 percent, respectively, in 2001. For the year ended December 30, 2001, average daily circulation at The Post totaled 773,000 (unaudited) and average Sunday circulation totaled 1,067,000 (unaudited). Newsprint expense at the newspaper publishing division decreased 6 percent for 2001 due to reduced consumption offset by overall higher prices during the year.Revenues generated by the Company’s online publishing activities, primarily washingtonpost.com, increased 12 percent to $30.4 million during the year.Television Broadcasting Division.Revenue for the television broadcasting division totaled $314.0 million for 2001, a 14 percent decline from 2000. Excluding approximately $42 million in political and Olympics advertising in 2000, revenue in 2001 decreased 3 percent due to a general softness in advertising (particularly national advertising) and several days of commercial-free coverage following the events of September 11.Competitive market position remained strong for the Company’s television stations. WJXT in Jacksonville and WDIV in Detroit were ranked number one in the latest ratings period, sign-on to sign-off, in their respective markets; KSAT in San Antonio ranked second; WPLG was tied for second among English-language stations in the Miami market; and KPRC in Houston and WKMG in Orlando ranked third in their respective markets.32Operating income for 2001 declined 26 percent to $131.8 million, from $177.4 million in 2000, due to revenue declines discussed above. Operating margin at the broadcast division was 42 percent for 2001 and 49 percent for 2000. Excluding amortization of goodwill and intangibles, operating margin was 46 percent for 2001 and 53 percent for 2000.Magazine Publishing Division.Revenue for the magazine publishing division totaled $374.6 million for 2001, a 9 percent decrease from revenue of $413.9 million in 2000. Operating income totaled $25.3 million for 2001, a decrease of 48 percent from 2000. The decline in 2001 operating income resulted from a 24 percent decrease in advertising revenue at Newsweek due to fewer advertising pages at both the domestic and international editions. The decline was offset in part by increased newsstand sales on regular and special editions related to the September 11 terrorist attacks, a higher pension credit and reduced operating expenses.Operating margin at the magazine publishing division decreased to 7 percent for 2001, compared to 12 percent in 2000.Cable Television Division.Cable division revenue of $386.0 million for 2001 represents an 8 percent increase over 2000. The 2001 revenue increase is due to rapid growth in the division’s digital and cable modem service revenues, along with an increased number of basic subscribers from the cable exchange transactions completed in the first quarter of 2001. Cable division operating income declined 51 percent in 2001 to $32.2 million, due mostly to a $25.3 million increase in depreciation and amortization expense compared to 2000.Cable division cash flow (operating income excluding depreciation and amortization expense) totaled $135.3 million for 2001, a decrease of 6 percent from 2000. The decline in cable division cash flow is mostly due to higher programming expense, costs associated with the launch of digital services, and comparatively lower cash flow margin subscribers acquired in the cable system exchanges completed in the first quarter of 2001.The increase in depreciation expense is due to capital spending, which is enabling the Company to offer digital cable services to its subscribers. The cable division began its rollout plan for these services in the third quarter of 2000. At December 31, 2001, the cable division had approximately 239,500 digital cable subscribers, representing a 35 percent penetration of the subscriber base in the markets where digital services are offered. Digital services were offered in markets serving 91 percent of the cable division’s subscriber base. The rollout plan for the new digital cable services included an offer for the cable division’s customers to obtain these services free for one year. At the end of December 2001, the cable division had about 31,000 paying digital subscribers. Of these, 24,000 were from the new Idaho subscribers and were not offered one-year free digital service. Most of the benefits from these new services are expected to show beginning in 2002 and thereafter.At December 31, 2001, the cable division had 752,700 basic subscribers, compared to 735,400 at the end of December 2000. The increase in basic subscribers is largely due to a net gain in subscribers arising from cable system exchanges and sale transactions completed in the first quarter of 2001. At December 31, 2001, the cable division had 46,400 CableONE.net service subscribers, compared to 18,200 at the end of 2000, with the increase due to a large increase in the Company’s cable modem deployment (offered to 89 percent of homes passed at the end of December 2001) and take-up rates. Of these subscribers, 32,900 and 3,600 were cable modem subscribers at the end of 2001 and 2000, respectively, with the remainder being dial-up subscribers.Education Division.Education revenue in 2001 increased 40 percent to $493.7 million, from $353.8 million in 2000; excluding Quest Education (acquired in August 2000), education division revenue increased 15 percent to $342.3 million for 2001, compared to $296.9 million for 2000. Excluding goodwill amortization, a summary of operating results for 2001 compared to 2000 is as follows (in thousands): 2001 2000 % Change Supplemental education $ 328,039 $ 286,386 15% Higher education 165,642 67,435 146% $ 493,681 $ 353,821 40% Supplemental education $ 27,509 $ 18,636 48% Higher education 9,149 (5,705 ) — Kaplan corporate overhead (23,981 ) (38,693 ) 38% Other (25,738 ) (6,250 ) (312% ) $ (13,061 ) $ (32,012 ) 59% Supplemental education includes Kaplan’s test preparation, professional training and Score! businesses. The improvement in supplemental education results for 2001 is due mostly to higher enrollments and, to a lesser extent, higher prices at Kaplan’s traditional test preparation business (particularly the GMAT and the LSAT prep courses) and higher revenues and profits from Kaplan’s CFA® and real estate licensure preparation services. Score! also contributed to the improved results, with both increased enrollment from new learning centers opened (147 centers at the end of 2001 versus 142 centers at the end of 2000) and rate increases implemented early in 2001.Higher education includes all of Kaplan’s post-secondary education businesses, including the fixed-facility colleges that were formerly part of Quest Education, as well as 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 expenses associated with the design and development of educational software that, if successfully completed, will benefit all of Kaplan’s business3334
units. Also includedIn addition, the cable division acquired three additional systems in 2000 corporate overhead results are costs associated with eScore.com.Other expense is comprised primarily2003 for $2.8 million. Most of accrued chargesthe purchase price for stock-based incentive compensation arising from a stock option plan established for certain members of Kaplan’s management and amortization of certain intangibles. Under the stock-based incentive plan, the amount of compensation expense varies directly with the estimated fair value of Kaplan’s common stock and the number of options outstanding. For 2001 and 2000,these acquisitions was allocated to franchise agreements, an indefinite-lived intangible asset.recorded expense of $25.3 million and $6.0 million, respectively, related to this plan. The increase in other expense for 2001 is attributable to an increase in stock-based incentive compensation, which is due to an increase in Kaplan’s estimated value.Equity in Losses of Affiliates.The Company’s equity in losses of affiliates for 2001 was $68.7 million, compared to losses of $36.5 million for 2000. The Company’s affiliate investments consisted of a 39.7 percent common interest in BrassRing LLC, a 50 percentsold its 50% interest in the International Herald Tribune and a 49 percent interest in Bowater Mersey Paper Company Limited.BrassRing accounted for approximately $75.1 million of the 2001 equity in losses of affiliates, compared to $37.0 million in 2000. The increase in 2001 equity in affiliate losses from BrassRing is largely due to a non-cash goodwill and other intangibles impairment charge that BrassRing recorded in 2001 primarily to reduce the carrying value of its career fair business. As a substantial portion of BrassRing’s losses arose from goodwill and intangible amortization expense for both 2001 and 2000, the $75.1$65 million and $37.0 million of equity in affiliate losses recorded by the Company in 2001 and 2000 did not require significant funding by the Company.In December 2001, BrassRing, Inc. was restructured and the Company’s interest in BrassRing, Inc. was converted intorecorded an interestafter-tax non-operating gain of $32.3 million ($3.38 per share) in the newly-formed BrassRing LLC. At December 30, 2001, the Company held a 39.7 percent interest in the BrassRing LLC common equity and a $14.9 million Subordinated Convertible Promissory Note (“Note”) from BrassRing LLC. In February 2002, the Note was converted into Preferred Units, which are convertible at the Company’s option to BrassRing LLC common equity. Assuming the conversionfirst quarter of the Preferred Units, the Company’s common equity interest in BrassRing LLC would have been approximately 49.5 percent.Non-Operating Items.The Company recorded other non-operating income of $283.7 million in 2001, compared to $19.8 million in non-operating expense for 2000. The 2001 non-operating income mostly comprised gains arising from the sale and exchange of certain cable systems completed in January and March of 2001. Offsetting these gains were losses from the write-downs of a non-operating parcel of land and certain investments to their estimated fair value. For income tax purposes, substantial components of the cable system sale and exchange transactions qualify as like-kind exchanges, and therefore, a large portion of these transactions does not result in a current tax liability.The Company incurred net interest expense of $47.5 million in 2001, compared to $53.8 million in 2000. At December 30, 2001, the Company had $933.1 million in borrowings outstanding at an average interest rate of 3.5 percent.Income Taxes.The effective rate was 40.7 percent for 2001, compared to 40.6 percent for 2000. Excluding the effect of the cable gain transactions, the Company’s effective tax rate approximated 50.2 percent for 2001, with the increase in rate due mostly to the decline in pre-tax income.FINANCIAL CONDITION: CAPITAL RESOURCES AND LIQUIDITYAcquisitions, Exchanges and Dispositions.2003.About $9.6 million remains to be paid on these acquisitions, of which $2.2 million has been classified in current liabilities and $7.4 million as long-term debt at December 29, 2002.During 2001, the Company spent approximately $104.4 million on business acquisitions and exchanges, which principally included the purchase of Southern Maryland Newspapers, a division of Chesapeake Publishing Corporation, and amounts paid as part of a cable system exchange with AT&T Broadband. During 2001, the Company also acquired a provider of CFA® exam preparation services and a company that provides pre-certification training 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 approximately 50,000.The cable system exchange with AT&T Broadband was completed in March 2001 and consisted of the exchange by the Company of its cable systems in Modesto and Santa Rosa, California, and approximately $42.0 million to AT&T Broadband for cable systems serving approximately 155,000 subscribers principally located in Idaho. In a related transaction in January 2001, the Company completed the sale of a cable system serving about 15,000 subscribers in Greenwood, Indiana, for $61.9 million. The gain resulting from the cable system sale and exchange transactions increased net income by $196.5 million, or $20.69 per share. For income tax purposes, substantial components of the cable system sale and exchange transactions qualify as like-kind exchanges and therefore, a large portion of these transactions does not result in a current tax liability.34During 2000, the Company spent $212.3 million on business acquisitions. These acquisitions included $177.7 million for Quest Education Corporation, a provider of post-secondary education; $16.2 million for two cable systems serving 8,500 subscribers; and $18.4 million for various other small businesses (principally consisting of educational services companies). There were no significant business dispositions in 2000.2002,2004, the Company’s capital expenditures totaled $153.0$204.6 million. The Company’s capital expenditures for 2002, 20012004, 2003 and 20002002 are disclosed in Note MN to the Consolidated Financial Statements. The Company estimates that its capital expenditures will total $180be in the range of $250 million to $275 million in 2003.December 29, 2002,January 2, 2005, the fair value of the Company’s investments in marketable equity securities was $216.5$409.7 million, which includes $214.8$260.4 million in Berkshire Hathaway Inc. Class A and B common stock and $1.7$149.3 million of various common stocks of publicly traded companies with education and e-commerce business concentrations.December 29, 2002,January 2, 2005, the gross unrealized gain related to the Company’s Berkshire Hathaway Inc. stock investment totaled $29.9$75.5 million; the gross unrealized gain on this investment was $34.1$60.4 million at December 30, 2001.28, 2003. The Company presently intends to hold the Berkshire Hathaway stock long term.Cost Method Investments.At December 29, 2002 and December 30, 2001, the Company held minority investments in various non-public companies. The companies represented by these investments have products or services that in most cases have potential strategic relevancegross unrealized gain related to the Company’s operating units. The Company records its investment in these companiesother marketable security investments at the lower of cost or estimated fair value. During 2002 and 2001, the Company invested $0.3 million and $11.7 million, respectively, in various cost method investees. At December 29, 2002 and December 30, 2001, the carrying value of the Company’s cost method investmentsJanuary 2, 2005 totaled $9.5 million and $29.6 million, respectively.2002, 20012004, there were no share repurchases. During 2003 and 2000,2002, the Company repurchased 1,229 shares, 714910 shares and 2001,229 shares, respectively, of its Class B common stock at a cost of $0.7 million and $0.8 million, $0.4 million and $0.1 million.respectively. At December 29, 2002,January 2, 2005, the Company had authorization from the Board of Directors to purchase up to 544,796542,800 shares of Class B common stock. The annual dividend rate for 20032005 was increased to $7.40 per share, from $7.00 per share in 2004, and from $5.80 per share from $5.60 per share in 2002 and 2001.December 29, 2002,January 2, 2005, the Company had $28.8$119.4 million in cash and cash equivalents.December 29, 2002,January 2, 2005, the Company had $259.3$50.2 million in commercial paper borrowingsborrowing outstanding at an average interest rate of 1.6 percent2.2% with various maturities throughoutthrough the first and second quartersquarter of 2003.2005. In addition, the Company had outstanding $398.4$398.9 million of 5.5 percent,5.5%, 10-year unsecured notes due February 2009. These notes require semiannual interest payments of $11.0 million payable on February 15 and August 15. The Company also had $7.1$35.0 million in other debt.In2002,2004, the Company replaced its expiring $250 million 364-day revolving credit facility agreements with a new $250 million revolving credit facility on essentially the same terms. The new facility expires in August 2005. The Company’s five-year $350 million revolving credit facility, which expires in August 2007, and a 364-day $350 million revolving credit facility, which expiresremains in August 2003.effect. These revolving credit facility agreements support the issuance of the Company’s short-term commercial paper and provide for general corporate purposes. In May 2002, Moody’s downgradedlong-term debt ratingsConsolidated Statements of Cash Flows, was $561.7 million in 2004, as compared to A1 from Aa3 and affirmed the Company’s short-term debt rating at P-1.During 2002, the Company’s borrowings, net of repayments, decreased by $268.3$337.7 million with the decreasein 2003. The increase is primarily due to cash flow from operations.2003.2005. 2005 2006 2007 2008 2009 Thereafter Total Commercial paper $ 50,201 $ — $ — $ — $ — $ — $ 50,201 Long-term debt 8,035 24,679 1,479 407 400,224 200 435,024 126,848 115,076 105,863 85,943 58,008 216,711 708,449 Operating leases 80,842 75,974 71,181 61,767 52,303 154,541 496,608 371,973 117,614 94,653 78,058 71,615 145,003 878,916 7,300 8,000 8,700 9,500 10,400 111,098 154,998 Total $ 645,199 $ 341,343 $ 281,876 $ 235,675 $ 592,550 $ 627,553 $ 2,724,196 (1) Includes commitments for the Company’s television broadcasting and cable television businesses that are reflected in the Company’s Consolidated Balance Sheet and commitments to purchase programming to be produced in future years. (2) Includes purchase obligations related to newsprint contracts, printing contracts, employment agreements, circulation distribution agreements, capital projects and other legally binding commitments. Other purchase orders made in the ordinary course of business are excluded from the table above. Any amounts for which the Company is liable under purchase orders are reflected in the Company’s Consolidated Balance Sheet as “Accounts payable and accrued liabilities.” (3) Primarily made up of postretirement benefit obligations other than pensions. The Company has other long-term liabilities excluded from the table above, including obligations for deferred compensation, long-term incentive plans and long-term deferred revenue. Lines of Fiscal Year Credit 2005 $ 250,000 2006 — 2007 350,000 2008 — 2009 — Thereafter — Total $ 600,000 Education revenue is recognized ratably over the period during which educational services are delivered. For example, at Kaplan’s test preparation division, estimates of average student course length are developed for each course and these estimates are evaluated on an ongoing basis and adjusted as necessary. As Kaplan’s businesses and related course offerings have expanded, including distance-learning businesses, the complexity and significance of management estimates have increased.35thatwho are eligible for advertising rate adjustments and discounts.$76.9 millionfor 2004, 2003 and $65.3 million for 2002, 2001 and 2000, respectively. The Company’s pension benefit costs are actuarially determined and are impacted significantly by the Company’s assumptions related to future events, including the discount rate, expected return on plan assets and rate of compensation increases. At December 30, 2001, the Company modified certain assumptions surrounding the Company’s pension plans. Specifically, the Company reduced its assumptions on discount rate from 7.5 percent to 7.0 percent and expected return on plan assets from 9.0 percent to 7.5 percent. These assumption changes resulted in a reduction of approximately $20 million in the Company’s net pension credit in 2002. At December 29, 2002, the Company reduced its discount rate assumption to 6.75 percent.6.75%. Due to the reduction in the discount rate, and lower than expected investment returns in 2002, and an amendment to the pension retirement program for certain employees at the Post effective June 1, 2003, the pension credit for 2003 declined by $9.3 million compared to 2002. At December 28, 2003, the Company reduced its discount rate assumption to 6.25%. Due to the reduction in the discount rate, the plan amendment from June 2003, and a reduction in the estimated actuarial gain amortization, offset by higher than expected investment returns in 2003, the pension credit for 2004 declined by $13.2 million compared to 2003. At January 2, 2005, the Compa-$10 million compared to 2002.$4 million. For each one-half percent increase or decrease to the Company’s assumed expected return on plan assets, the pension credit increases or decreases by approximately $6.5 million. For each one-half percent increase or decrease to the Company’s assumed discount rate, the pension credit increases or decreases by approximately $5 million. The Company’s actual rate of return on plan assets was a decline of 2.3 percent4.3% in 2002, an increase of 10.9 percent2004, 16.7% in 2001,2003, and an increase of 19.0 percent(2.3%) in 2000,2002, based on plan assets at the beginning of each year. Note H to the Consolidated Financial Statements provides additional details surrounding pension costs and related assumptions.used)considered). The Company must make assumptions regarding estimated future cash flows and market values to determine a reporting unit’s estimated fair value. In reviewing the carrying value of goodwill and indefinite-lived intangible assets at the cable division, the Company aggregates its cable systems on a regional basis. If these estimates or related assumptions change in the future, the Company may be required to record an impairment charge. At December 29, 2002,January 2, 2005, the Company has $1,255.4$1,524.2 million in goodwill and other intangibles.Cost Method Investments.OTHERThe Company usesmethod of accountingemployee services in exchange for its minority investments in non-public companies where it does not have significant influence over the operations and management of the investee. Most of the companies represented by these cost method investments have concentrations in Internet-related business activities. Investments are recorded at the lower of cost or fair value as estimated by management. Fair value estimates arestock options based on a review of the investees’ product development activities, historical financial results and projected discounted cash flows. These estimates are highly judgmental, given the inherent lack of marketability of investments in private companies. The Company has recorded write-down charges on cost method investments of $19.2 million, $29.4 million and $23.1 million in 2002, 2001 and 2000, respectively. Note C to the Consolidated Financial Statements provides additional details surrounding cost method investments.Kaplan Stock Option Plan.The Company maintains a stock option plan at its Kaplan subsidiary that provides for the issuance of stock options representing 10.6 percent of Kaplan, Inc. common stock to certain members of Kaplan’s management. Under the provisions of this plan, options are issued with an exercise price equal to the estimatedgrant-date fair value of Kaplan’s common stock. In general, options vest ratably over five years. Upon exercise, an option holder may either purchase vested shares at the exercise price or elect to receive cash equal to the difference between the exercise price and the then fair value. The fair value of Kaplan’s common stock is determined by the compensation committee of the Company’s Board of Directors, with input from management and an independent outside valuation firm. The compensation committee has historically modified the fair value of Kaplan stock on an annual basis and management expects this practice to continue. At December 29, 2002, options representing 10.4 percent of Kaplan’s common stock were issued and outstanding, and 69 percent of Kaplan stock options were fully vested and exercisable. For 2002, 2001 and 2000, the Company recorded expense of $34.5 million, $25.3 million and $6.0 million, respectively, related to this plan. In 2002 and 2001, payouts from option exercises totaled $0.2 million and $2.1 million, respectively. At December 29, 2002, the Company’s Kaplan stock-based compensation accrual balance totaled $74.4 million. Management expects Kaplan’s profits and related fair value to increase again in 2003, with a corresponding increase in the stock-based compensation expense for 2003 as compared to 2002. Note G to the Consolidated Financial Statements provides additional details surrounding the Kaplan Stock Option Plan.Other.The Company does not have any off-balance sheet arrangements or financing activities with special-purpose entities (SPEs). Transactions with related parties, as discussed in Note C to the Consolidated Financial Statements, are in the ordinary course of business and are conducted on an arms-length basis.OTHERNew Accounting Pronouncements.The Company adopted SFAS 142 effective on the first day of its 2002 fiscal year. As a result of the adoption of SFAS 142, the Company ceased most of the periodic charges previously recorded from the amortization of goodwill and other intangibles.As required under SFAS 142, the Company completed its transitional impairment review of indefinite-lived intangible assets and goodwill. The expected future cash flows of PostNewsweek Tech Media (part of the magazine publishing segment), on a dis-36counted basis, did not support the net carrying value of the related goodwill. Accordingly, an after-tax goodwill impairment loss of $12.1 million, or $1.27 per share was recorded. The loss is included in the Company’s 2002 results as a cumulative effect of change in accounting principle.Stock Options — Change in Accounting Method.Effective the first day of the Company’s 2002 fiscal year,award. Because the Company adopted the fair-value-based method of accounting for Company stock options as outlined in Statement of Financial Accounting Standards No. 123 (SFAS 123), “Accounting for Stock-Based Compensation.” This change in accounting method was applied prospectively to all awards granted from the beginning of the Company’s fiscal year 2002, and thereafter. Stock options awarded prior to fiscal year 2002SFAS 123R will continue to be accounted for under the intrinsic value method under Accounting Principles 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 in accounting method, as the expense related to the Kaplan stock option plan has been and will continue to be recorded inhave a minimal impact on the Company’s results of operations.operations when adopted in the third quarter of 2005.
ACCOUNTANTSREGISTERED PUBLIC ACCOUNTING FIRMThethe Board of Directors and
Shareholders of15(a)(i)15(1) on page 2325 and listed inon the index on page 27 present fairly, in all material respects, the financial position of The Washington Post Company and its subsidiaries at December 29, 2002January 2, 2005 and December 30, 2001,28, 2003, and the results of their operations and their cash flows for each of the three fiscal years in the period ended December 29, 2002,January 2, 2005 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule referred to under Item 15(a)(i) on page 23listed in the accompanying index presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedule are the responsibility of the Company’s management; ourmanagement. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits of these statements in accordance with auditingthe standards generally accepted inof the United States of America whichPublic Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit of financial statements 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 our opinion.As discussedNote our opinion, management’s assessment, included in Management’s Report on Internal Control over Financial Reporting appearing under Item 9A, that the Company maintained effective internal control over financial reporting as of January 2, 2005 based on criteria established inInternal Control — Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), is fairly stated, in all material respects, based on those criteria. Furthermore, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of January 2, 2005, based on criteria established inInternal Control — Integrated Framework issued by the COSO. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express opinions on management’s assessment and on the effectiveness of the Company’s internal control over financial reporting based on our audit. We conducted our audit of internal control over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. An audit of internal control over financial reporting includes obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we consider necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions.the Company ceased amortizing certain goodwillin accordance with generally accepted accounting principles, and intangibles as a resultthat receipts and expenditures of the adoptioncompany are being made only in accordance with authorizations of Statementmanagement and directors of Financial Accounting Standards No. 142, “Goodwillthe company; and Other Intangible Assets,” effective(iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the first dayfinancial statements.2002 fiscal year.inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, as discussedprojections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in Note A,conditions, or that the Company adopteddegree of compliance with the fair-value-based method 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.
Washington, D.C.January 24, 2003
March 1, 2005
Fiscal year ended Fiscal year ended December 29, December 30, December 31, January 2, December 28, December 29, (in thousands, except per share amounts) (in thousands, except per share amounts) 2002 2001 2000 (in thousands, except per share amounts) 2005 2003 2002 Advertising $ 1,226,834 $ 1,209,327 $ 1,396,583 Advertising $ 1,346,870 $ 1,222,324 $ 1,221,180 Circulation and subscriber 675,136 653,028 598,741 Circulation and subscriber 741,810 706,248 675,136 Education 621,125 493,271 352,753 Education 1,134,891 838,077 621,125 Other 61,108 55,398 61,556 Other 76,533 72,262 66,762 2,584,203 2,411,024 2,409,633 3,300,104 2,838,911 2,584,203 Operating 1,717,059 1,549,262 1,369,955 Operating 1,369,955 1,387,101 1,305,546 Selling, general and administrative 835,367 792,292 664,095 Selling, general and administrative 664,095 586,758 583,623 Gain on sale of land — (41,747 ) — Depreciation of property, plant and equipment 171,908 138,300 117,948 Depreciation of property, plant and equipment 175,338 173,848 171,908 Amortization of goodwill and other intangibles 655 78,933 62,634 Amortization of goodwill and other intangibles 9,334 1,436 655 2,206,613 2,191,092 2,069,751 2,737,098 2,475,091 2,206,613 377,590 219,932 339,882 563,006 363,820 377,590 Equity in losses of affiliates (19,308 ) (68,659 ) (36,466 ) Equity in losses of affiliates (2,291 ) (9,766 ) (19,308 ) Interest income 332 2,167 967 Interest income 1,622 953 332 Interest expense (33,819 ) (49,640 ) (54,731 ) Interest expense (28,032 ) (27,804 ) (33,819 ) Other income (expense), net 28,873 283,739 (19,782 ) Other income (expense), net 8,127 55,385 28,873 353,668 387,539 229,870 542,432 382,588 353,668 137,300 157,900 93,400 209,700 141,500 137,300 216,368 229,639 136,470 332,732 241,088 216,368 (12,100 ) — — — — (12,100 ) 204,268 229,639 136,470 332,732 241,088 204,268 (1,033 ) (1,052 ) (1,026 ) (992 ) (1,027 ) (1,033 ) $ 203,235 $ 228,587 $ 135,444 $ 331,740 $ 240,061 $ 203,235 $ 22.65 $ 24.10 $ 14.34 (1.27 ) — — $ 34.69 $ 25.19 $ 22.65 — — (1.27 ) $ 21.38 $ 24.10 $ 14.34 $ 34.69 $ 25.19 $ 21.38 $ 22.61 $ 24.06 $ 14.32 (1.27 ) — — $ 34.59 $ 25.12 $ 22.61 — — (1.27 ) $ 21.34 $ 24.06 $ 14.32 $ 34.59 $ 25.12 $ 21.34 Fiscal year ended Fiscal year ended December 29, December 30, December 31, January 2, December 28, December 29, (in thousands) (in thousands) 2002 2001 2000 (in thousands) 2005 2003 2002 $ 204,268 $ 229,639 $ 136,470 $ 332,732 $ 241,088 $ 204,268 Foreign currency translation adjustments 2,167 (3,104 ) (1,685 ) Foreign currency translation adjustments 9,601 13,416 2,167 Change in net unrealized gain on available-for-sale securities 829 14,528 13,527 Reclassification adjustment on sale of affiliate investment — (1,633 ) — Less reclassification adjustment for realized (gains)
losses included in net income (11,209 ) 3,238 (197 ) Change in net unrealized gain on available-for-sale securities 63,022 31,426 829 Less reclassification adjustment for realized (gains) losses included in net income (202 ) 214 (11,209 ) (8,213 ) 14,662 11,645 Income tax benefit (expense) related to other
comprehensive income (loss) 4,012 (6,987 ) (5,097 ) 72,421 43,423 (8,213 ) Income tax (expense) benefit related to other comprehensive income (loss) (24,577 ) (12,348 ) 4,012 (4,201 ) 7,675 6,548 47,844 31,075 (4,201 ) $ 200,067 $ 237,314 $ 143,018 $ 380,576 $ 272,163 $ 200,067 The information on pages 44 through 56 is an integral part of the financial statements. The information on pages 44 through 57 is an integral part of the financial statements. The information on pages 44 through 57 is an integral part of the financial statements.
December 29, December 30, January 2, December 28, (in thousands) (in thousands) 2002 2001 (in thousands) 2005 2003 Cash and cash equivalents $ 119,400 $ 116,561 Cash and cash equivalents $ 28,771 $ 31,480 Investments in marketable equity securities 149,303 2,623 Investments in marketable equity securities 1,753 16,366 Accounts receivable, net 362,862 328,816 Accounts receivable, net 285,374 279,328 Federal and state income taxes 18,375 5,318 Federal and state income taxes — 10,253 Deferred income taxes 30,871 31,376 Inventories 27,629 19,042 Inventories 25,127 27,709 Other current assets 39,428 40,388 Other current assets 48,429 43,933 382,955 396,857 754,367 556,336 Buildings 283,233 267,658 Buildings 304,606 288,961 Machinery, equipment and fixtures 1,551,931 1,422,228 Machinery, equipment and fixtures 1,730,997 1,656,111 Leasehold improvements 85,720 79,108 Leasehold improvements 133,674 102,753 1,920,884 1,768,994 2,169,277 2,047,825 Less accumulated depreciation (926,385 ) (794,596 ) Less accumulated depreciation (1,197,375 ) (1,084,790 ) 994,499 974,398 971,902 963,035 Land 34,530 34,733 Land 37,470 36,491 Construction in progress 65,371 89,080 Construction in progress 80,580 56,104 1,094,400 1,098,211 1,089,952 1,055,630 214,780 219,039 260,433 245,335 70,703 80,936 61,814 61,312 less accumulated amortization of
$463,580 and $443,925 1,255,433 1,206,761 1,023,140 965,694 493,192 486,656 7,879 5,226 493,786 447,688 556,747 514,801 71,837 109,606 69,117 71,068 $ 3,583,894 $ 3,559,098 $ 4,316,641 $ 3,962,058 The information on pages 44 through 56 is an integral part of the financial statements. The information on pages 44 through 57 is an integral part of the financial statements. The information on pages 44 through 57 is an integral part of the financial statements.
December 29, December 30, January 2, December 28, (in thousands, except share amounts) (in thousands, except share amounts) 2002 2001 (in thousands, except share amounts) 2005 2003 Accounts payable and accrued liabilities $ 336,582 $ 253,346 Deferred revenue 135,419 130,744 Accounts payable and accrued liabilities $ 443,332 $ 368,363 Federal and state income taxes 4,853 — Deferred revenue 186,593 164,014 Short-term borrowings 259,258 50,000 Short-term borrowings 58,236 208,620 736,112 434,090 688,161 740,997 136,393 130,824 145,490 140,740 194,480 192,540 228,654 235,169 261,153 221,949 403,698 335,200 405,547 883,078 425,889 422,471 1,733,685 1,862,481 1,891,892 1,874,577 12,916 13,132 12,267 12,540 — — — — Common stock Common stock Class A common stock, $1 par value; 7,000,000 shares authorized; 1,722,250 shares issued and outstanding 1,722 1,722 Class A common stock, $1 par value; 7,000,000 shares authorized; 1,722,250 shares issued and outstanding 1,722 1,722 Class B common stock, $1 par value; 40,000,000 shares authorized; 18,277,750 shares issued; 7,788,543 and 7,772,616 shares outstanding 18,278 18,278 Class B common stock, $1 par value; 40,000,000 shares authorized; 18,277,750 shares issued; 7,853,822 and 7,819,330 shares outstanding 18,278 18,278 Capital in excess of par value 149,090 142,814 Capital in excess of par value 186,827 166,951 Retained earnings 3,179,607 3,029,595 Retained earnings 3,629,222 3,364,407 Accumulated other comprehensive income (loss), net of taxes Accumulated other comprehensive income, net of taxes Cumulative foreign currency translation adjustment (7,511 ) (9,678 ) Cumulative foreign currency translation adjustment 13,873 4,272 Unrealized gain on available-for-sale securities 17,913 24,281 Unrealized gain on available-for-sale securities 75,448 37,205 Cost of 10,489,207 and 10,505,134 shares of Class B common stock held in treasury (1,521,806 ) (1,523,527 ) Cost of 10,423,928 and 10,458,420 shares of Class B common stock held in treasury (1,512,888 ) (1,517,894 ) 1,837,293 1,683,485 2,412,482 2,074,941 $ 3,583,894 $ 3,559,098 $ 4,316,641 $ 3,962,058 The information on pages 44 through 56 is an integral part of the financial statements. The information on pages 44 through 57 is an integral part of the financial statements. The information on pages 44 through 57 is an integral part of the financial statements.
Fiscal year ended Fiscal year ended December 29, December 30, December 31, January 2, December 28, December 29, (in thousands) (in thousands) 2002 2001 2000 (in thousands) 2005 2003 2002 Net income $ 332,732 $ 241,088 $ 204,268 Adjustments to reconcile net income to net cash provided by operating activities: Net income $ 204,268 $ 229,639 $ 136,470 Cumulative effect of change in accounting principle — — 12,100 Adjustments to reconcile net income to net
cash provided by operating activities: Depreciation of property, plant and equipment 175,338 173,848 171,908 Cumulative effect of change in accounting principle 12,100 — — Amortization of goodwill and other intangibles 9,334 1,436 655 Depreciation of property, plant and equipment 171,908 138,300 117,948 Net pension benefit (41,954 ) (55,137 ) (64,447 ) Amortization of goodwill and other intangibles 655 78,933 62,634 Early retirement program expense 132 34,135 19,001 Net pension benefit (64,447 ) (76,945 ) (65,312 ) Gain from sale or exchange of businesses (497 ) (49,762 ) (27,844 ) Early retirement program expense 19,001 3,344 29,049 Gain on sale of property, plant and equipment (2,669 ) (41,734 ) — Gain from sale or exchange of businesses (27,844 ) (321,091 ) — Gain on disposition of marketable equity securities and cost method investments, net — — (13,209 ) (Gain) loss on disposition of marketable equity
securities and cost method investments, net (13,209 ) 511 (11,588 ) Cost method investment and other write-downs 677 1,337 21,194 Cost method investment and other write-downs 21,194 36,672 23,097 Equity in losses of affiliates, net of distributions 3,091 10,516 20,018 Equity in losses of affiliates, net of distributions 20,018 69,359 37,406 Foreign exchange gain (5,505 ) (4,187 ) — Provision for deferred income taxes 50,115 97,302 (7,743 ) Provision for deferred income taxes 44,321 30,704 50,115 Change in assets and liabilities: Change in assets and liabilities: (Increase) decrease in accounts receivable, net (1,116 ) 28,803 (44,413 ) Increase in accounts receivable, net (23,722 ) (9,936 ) (1,116 ) Increase in inventories (11,142 ) (3,390 ) (1,265 ) Decrease (increase) in inventories 2,640 829 (11,142 ) Increase in accounts payable and accrued liabilities 73,653 24,756 22,192 Increase (decrease) in accounts payable and accrued liabilities 70,058 (14,308 ) 73,653 Decrease in income taxes receivable 15,106 1,591 36,227 (Increase) decrease in income taxes receivable (13,079 ) (10,171 ) 15,106 Decrease in other assets and other liabilities, net 21,360 38,294 23,141 Decrease in other assets and other liabilities, net 3,477 34,460 21,360 Other 5,846 2,752 10,701 Other 7,347 (5,404 ) 5,846 Net cash provided by operating activities 497,466 348,830 368,544 Net cash provided by operating activities 561,721 337,714 497,466 Investments in certain businesses (36,016 ) (104,356 ) (212,274 ) Investments in certain businesses (55,232 ) (134,541 ) (36,016 ) Net proceeds from sale of businesses — 61,921 1,650 Net proceeds from sale of businesses — 65,000 — Purchases of property, plant and equipment (152,992 ) (224,227 ) (172,383 ) Purchases of property, plant and equipment (204,632 ) (125,588 ) (152,992 ) Purchases of cost method investments (250 ) (11,675 ) (42,459 ) Proceeds from sale of property, plant and equipment 5,340 44,973 1,484 Investments in affiliates (7,610 ) (21,112 ) (12,430 ) Purchases of cost method investments (224 ) (849 ) (250 ) Proceeds from sale of marketable equity securities 19,701 145 6,332 Investments in affiliates — (5,976 ) (7,610 ) Other 1,484 1,477 8,036 Purchases of marketable equity securities (94,560 ) — — Proceeds from sale of marketable equity securities — — 19,701 Net cash used in investing activities (175,683 ) (297,827 ) (423,528 ) Net cash used in investing activities (349,308 ) (156,981 ) (175,683 ) (Repayment) issuance of commercial paper, net (276,189 ) 10,072 35,071 Repayment of commercial paper, net (138,116 ) (70,942 ) (276,189 ) Dividends paid (54,256 ) (54,166 ) (52,024 ) Principal payments on debt (19,253 ) (784 ) — Common shares repurchased (786 ) (445 ) (96 ) Dividends paid (67,917 ) (56,289 ) (54,256 ) Proceeds from exercise of stock options 6,739 4,671 7,056 Common shares repurchased — (687 ) (786 ) Other — — 9,843 Proceeds from exercise of stock options 15,616 5,898 6,739 Other (1,953 ) 1,245 (1,867 ) Net cash used in financing activities (324,492 ) (39,868 ) (150 ) Net cash used in financing activities (211,623 ) (121,559 ) (326,359 ) (2,709 ) 11,135 (55,134 ) 2,049 737 — 2,839 59,911 (4,576 ) 31,480 20,345 75,479 116,561 56,650 61,226 $ 28,771 $ 31,480 $ 20,345 $ 119,400 $ 116,561 $ 56,650 Cash paid during the year for: Cash paid during the year for: Income taxes $ 68,900 $ 52,600 $ 95,000 Income taxes $ 171,400 $ 116,900 $ 68,900 Interest, net of amounts capitalized $ 30,600 $ 48,000 $ 52,700 Interest, net of amounts capitalized $ 25,500 $ 27,500 $ 30,600 5657 is an integral part of the financial statements.
Cumulative Unrealized Foreign Gain on Class A Class B Capital in Currency Available- Common Common Excess of Retained Translation for-Sale Treasury (in thousands) Stock Stock Par Value Earnings Adjustment Securities Stock $ 1,739 $ 18,261 $ 108,867 $ 2,769,676 $ (4,889 ) $ 5,269 $ (1,531,133 ) Net income for the year 136,470 Dividends paid on common stock — $5.40 per share (50,998 ) Dividends paid on redeemable preferred stock (1,026 ) Repurchase of 200 shares of Class B common stock (96 ) Issuance of 21,279 shares of Class B common stock, net of restricted stock award forfeitures 4,433 3,027 Change in foreign currency translation adjustment (net of taxes) (1,685 ) Change in unrealized gain on available-for-sale securities (net of taxes) 8,233 Issuance of subsidiary stock (net of taxes) 13,332 Tax benefits arising from employee stock plans 1,527 1,739 18,261 128,159 2,854,122 (6,574 ) 13,502 (1,528,202 ) Net income for the year 229,639 Dividends paid on common stock — $5.60 per share (53,114 ) Dividends paid on redeemable preferred stock (1,052 ) Repurchase of 714 shares of Class B common stock (445 ) Issuance of 35,105 shares of Class B common stock, net of restricted stock award forfeitures 10,639 5,120 Change in foreign currency translation adjustment (net of taxes) (3,104 ) Change in unrealized gain on available-for-sale securities (net of taxes) 10,779 Conversion of Class A common stock to Class B common stock (17 ) 17 Tax benefits arising from employee stock plans 4,016 1,722 18,278 142,814 3,029,595 (9,678 ) 24,281 (1,523,527 ) Net income for the year 204,268 Dividends paid on common stock — $5.60 per share (53,223 ) Dividends paid on redeemable preferred stock (1,033 ) Repurchase of 1,229 shares of Class B common stock (786 ) Issuance of 17,156 shares of Class B common stock, net of restricted stock award forfeitures 4,440 2,507 Change in foreign currency translation adjustment (net of taxes) 2,167 Change in unrealized gain on available-for-sale securities (net of taxes) (6,368 ) Stock option expense 45 Tax benefits arising from employee stock plans 1,791 $ 1,722 $ 18,278 $ 149,090 $ 3,179,607 $ (7,511 ) $ 17,913 $ (1,521,806 ) The information on pages 44 through 56 is an integral part of the financial statements. Cumulative Unrealized Foreign Gain on Class A Class B Capital in Currency Available- Common Common Excess of Retained Translation for-Sale (in thousands) Stock Stock Par Value Earnings Adjustment Securities Treasury Stock $ 1,722 $ 18,278 $ 142,814 $ 3,029,595 $ (9,678 ) $ 24,281 $ (1,523,527 ) Net income for the year 204,268 Dividends paid on common stock — $5.60 per share (53,223 ) Dividends paid on redeemable preferred stock (1,033 ) Repurchase of 1,229 shares of Class B common stock (786 ) Issuance of 17,156 shares of Class B common stock, net of restricted stock award forfeitures 4,440 2,507 Change in foreign currency translation adjustment (net of taxes) 2,167 Change in unrealized gain on available-for-sale securities (net of taxes) (6,368 ) Stock option expense 45 Tax benefits arising from employee stock plans 1,791 1,722 18,278 149,090 3,179,607 (7,511 ) 17,913 (1,521,806 ) Net income for the year 241,088 Dividends paid on common stock — $5.80 per share (55,261 ) Dividends paid on redeemable preferred stock (1,027 ) Repurchase of 910 shares of Class B common stock (687 ) Issuance of 31,697 shares of Class B common stock, net of restricted stock award forfeitures 14,147 4,599 Change in foreign currency translation adjustment (net of taxes) 11,783 Change in unrealized gain on available-for-sale securities (net of taxes) 19,292 Stock option expense 606 Tax benefits arising from employee stock plans 3,108 1,722 18,278 166,951 3,364,407 4,272 37,205 (1,517,894 ) Net income for the year 332,732 Dividends paid on common stock — $7.00 per share (66,925 ) Dividends paid on redeemable preferred stock (992 ) Issuance of 34,492 shares of Class B common stock, net of restricted stock award forfeitures 11,956 5,006 Change in foreign currency translation adjustment (net of taxes) 9,601 Change in unrealized gain on available-for-sale securities (net of taxes) 38,243 Stock option expense 829 Tax benefits arising from employee stock plans 7,091 $ 1,722 $ 18,278 $ 186,827 $ 3,629,222 $ 13,873 $ 75,448 $ (1,512,888 ) The information on pages 44 through 57 is an integral part of the financial statements.
52-53 week52- to 53-week fiscal year ending on the Sunday nearest December 31. The fiscal year 2004, which ended on January 2, 2005, included 53 weeks. The fiscal years 2002, 20012003 and 2000,2002, which ended on December 29, 2002, December 30, 2001,28, 2003 and December 31, 2000,29, 2002, respectively, included 52 weeks. With the exception of most of the newspaper publishing operations, subsidiaries of the Company report on a calendar-year basis.20022004 presentation.Prior to 2002, goodwill and other intangibles were amortized by use of the straight-line method over periods ranging from 15 to 40 years (with the majority being amortized over 15 to 25 years). In 2002, theThe Company adopted Statement of Financial Accounting Standards No. 142 (SFAS 142), “Goodwill and Other Intangible Assets.” As a result of the adoption ofAssets” in 2002. Under SFAS 142, goodwill and indefinite-lived intangibles are no longer amortized, but are reviewed at least annually for impairment. All other intangible assets are amortized over their useful lives. The Company reviews the carrying value of goodwill and indefinite-lived intangible assets utilizing a discounted cash flow model (in the case of the Company’s cable systems, both a discounted cash flow model and an estimated fair market value per cable subscriber approach are considered). The Company must make assumptions regarding estimated future cash flows and market values to determine a reporting unit’s estimated fair value. In reviewing the carrying value of goodwill and indefinite-lived intangible assets at the cable division, the Company aggregates its cable systems on a regional basis. If these estimates or related assumptions change in the future, the Company may be required to record an impairment charge.andor changes in circumstances indicate that previously anticipatedrecorded values may not be recoverable. A long-lived asset is considered to be not recoverable when the undiscounted estimated future cash flows warrant assessment.are recognized upon delivery. Revenues from newspaperand retail sales are recognized upon delivery, and revenues from magazine retail sales are recognized on the later of delivery or cover date, with adequate provision made for anticipated sales returns. Cable subscriber revenue is recognized monthly as services are delivered. Education revenue is generally recognized ratably over the period during which educational services are delivered. For example, atAt Kaplan’s test preparation division, estimates of average student course length are developed for each course, and these estimates are evaluated on an ongoing basis and adjusted as necessary.44investmentsinvestment in its foreign affiliatesaffiliate are accumulated and reported as a separate component of equity and comprehensive income.will continue to behave been accounted for under the intrinsic value method under Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees.”Sale The following table presents what the Company’s results would have been had the fair values of Subsidiary/Affiliate Securities.Theoptions granted after 1995, but prior to 2002, been recognized as compensation expense in 2004, 2003 and 2002 (in thousands, except per share amounts). 2004 2003 2002 Net income available for common shares, as reported $ 331,740 $ 240,061 $ 203,235 Add: Company stock option compensation expense included in net income, net of related tax effects 506 370 28 Deduct: Total Company stock option compensation expense determined under the fair-value-based method for all awards, net of related tax effects (2,946 ) (3,529 ) (3,645 ) Pro forma net income available for common shares $ 329,300 $ 236,902 $ 199,618 Basic earnings per share, as reported $ 34.69 $ 25.19 $ 21.38 Pro forma basic earnings per share $ 34.43 $ 24.86 $ 21.00 Diluted earnings per share, as reported $ 34.59 $ 25.12 $ 21.34 Pro forma diluted earnings per share $ 34.33 $ 24.79 $ 20.96 records investment basis gains arising fromadopted the salefair-value-based method of equity interestsaccounting for Company stock options in subsidiaries and affiliates that are2002, SFAS 123R will have a minimal impact on the Company’s results of operations when adopted in the early stagesthird quarter of development as capital in excess of par value, net of taxes.2005.B. ACCOUNTS RECEIVABLE AND ACCOUNTS PAYABLE AND ACCRUED LIABILITIESDecember 29, 2002January 2, 2005 and December 30, 200128, 2003 consist of the following (in thousands): 2002 2001 2004 2003 Trade accounts receivable,
less estimated returns, doubtful
accounts and allowances of
$65,396 and $73,248 $ 266,319 $ 261,898 Trade accounts receivable,
less estimated returns, doubtful
accounts and allowances of $70,965 and $66,524 $ 342,879 $ 311,807 Other accounts receivable 19,055 17,430 19,983 17,009 $ 285,374 $ 279,328 $ 362,862 $ 328,816 December 29, 2002January 2, 2005 and December 30, 200128, 2003 consist of the following (in thousands): 2002 2001 2004 2003 Accounts payable and accrued expenses $ 175,174 $ 158,744 $ 229,380 $ 211,972 Accrued compensation and related benefits 154,666 89,061 204,225 147,985 Due to affiliates (newsprint) 6,742 5,541 9,727 8,406 $ 336,582 $ 253,346 $ 443,332 $ 368,363 December 29, 2002January 2, 2005 and December 30, 200128, 2003 consist of the following (in thousands): 2002 2001 2004 2003 Total cost $ 187,169 $ 195,661 $ 285,912 $ 186,954 Net unrealized gains 29,364 39,744 123,824 61,004 Total fair value $ 216,533 $ 235,405 $ 409,736 $ 247,958 December 29, 2002January 2, 2005 and December 30, 2001,28, 2003, the Company’s ownership of 2,634 shares of Berkshire Hathaway Inc. (“Berkshire”) Class A common stock and 9,845 shares of Berkshire Class B common stock accounted for $214.8$260.4 million or 99 percent64% and $219.0$245.3 million or 93 percent,99%, respectively, of the total fair value of the Company’s investments in marketable equity securities. The remaining investments in marketable equity securities at December 29, 2002 and December 30, 2001 consisted of common stock investments in various publicly traded companies, most of which have concentrations in Internet business activities. In most cases, the Company obtained ownership of these common stocks as a result of merger or acquisition transactions in which these companies merged or acquired various small Internet-related companies in which the Company held minor investments.18 percent18% of the common stock of the Company. The chairman, chief executive officer and largest shareholder of Berkshire, Mr. Warren Buffett, is a member of the Company’s Board of Directors. Neither Berkshire nor Mr. Buffett participated in the Company’s evaluation, approval or execution of its decision to invest in Berkshire common stock. The Company’s investment in Berkshire common stock is less than 1 percent1% of the consolidated equity of Berkshire. At December 29, 2002January 2, 2005 and December 30, 2001,28, 2003, the unrealized gain related to the Company’s Berkshire stock investment totaled $29.9$75.5 million and $34.1$60.4 million, respectively. The Company presently intends to hold the Berkshire common stock investment long term, thus the investment has been classified as a non-current asset in the Consolidated Balance Sheets.45 2001 and 2000, proceeds from sales of marketable equity securities were $19.7 million, $0.1 million and $6.3 million, respectively, and gross realized gains (losses) on such sales were $13.2 million, ($0.3 million)million. During 2003 and $4.9 million, respectively. During 2002, and 2001, the Company recorded write-downs on marketable equity securities of $2.0$0.2 million and $3.0$2.0 million, respectively. Realized gains or losses on marketable equity securities are included in “Other income (expense), net” in the Consolidated Statements of Income. For purposes of computing realized gains and losses, the cost basis of securities sold is determined by specific identification.December 29, 2002January 2, 2005 and December 30, 200128, 2003 include the following (in thousands): 2002 2001 2004 2003 BrassRing $ 13,658 $ 19,992 $ 8,755 $ 11,892 Bowater Mersey Paper Company 42,519 45,822 52,112 48,559 International Herald Tribune 13,776 14,480 Other 750 642 Los Angeles Times–Washington Post News Service 947 861 $ 70,703 $ 80,936 $ 61,814 $ 61,312 2002,2004, the Company’s investments in affiliates consisted of a 49.4 percent49.3% interest in BrassRing LLC, which provides recruiting, career development andan Internet-based hiring management services for employers and job candidates;company; a 49 percent49% 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, published near Paris, France; and a 50 percent50% common stock interest in the Los Angeles Times-WashingtonTimes–Washington Post News Service, Inc. 2002 2001 2000 Working capital $ 10,366 $ (8,767 ) $ 29,427 Property, plant and equipment 135,013 126,682 143,749 Total assets 235,208 246,321 432,458 Long-term debt — — — Net equity 138,723 125,211 291,481 Operating revenues $ 263,709 $ 317,389 $ 345,913 Operating loss (21,725 ) (14,793 ) (27,505 ) Net loss (36,326 ) (157,409 ) (77,739 ) 2004 2003 2002 Working capital $ 9,014 $ 11,108 $ 10,366 Property, plant and equipment 137,321 140,917 135,013 Total assets 202,904 214,658 235,208 Long-term debt — — — Net equity 155,147 149,584 138,723 Results of Operations Operating revenues $ 221,618 $ 174,505 $ 263,709 Operating income (loss) 1,695 (18,753 ) (21,725 ) Net loss (4,577 ) (20,164 ) (36,326 ) 2002 2001 2004 2003 Beginning investment $ 80,936 $ 131,629 $ 61,312 $ 70,703 Additional investment 7,610 21,112 — 5,976 Equity in losses (19,308 ) (68,659 ) (2,291 ) (9,766 ) Dividends and distributions received (710 ) (700 ) (800 ) (750 ) Foreign currency translation 2,175 (3,122 ) 3,593 9,205 Other — 676 Sale of interest — (14,056 ) Ending investment $ 70,703 $ 80,936 $ 61,814 $ 61,312 During 2000, BrassRing issued stock to various parties in connection with its acquisitions of various career fair and recruiting services companies. The effect of these transactions reduced the Company’s investment interest in BrassRing to 42 percent, from 54 percent at January 2, 2000, and increased the Company’s investment basis in BrassRing by $13.3 million, net of taxes. The increase in investment basis was recorded as contributed capital.39.7 percent39.7% interest in the BrassRing LLC common equity and a $14.9 million Subordinated Convertible Promissory Note (“Note”) from BrassRing LLC. In February 2002, the Note was converted into Preferred Units, which are convertible at the Company’s option to BrassRing LLC common equity. Assuming the conversion of the Preferred Units, the Company’s common equity interest in BrassRing LLC would have been approximately 49.5 percent.49.5%. BrassRingBrassRing approximately $13.9$3.1 million of the 20022004 equity in losses of affiliates, compared to $75.1$7.7 million in 2001. The decrease from 2001 equity2003 and $13.9 million in affiliate losses from BrassRing is largely due to a non-cash goodwill and other intangibles impairment charge that BrassRing recorded in 2001 primarily to reduce the carrying value of its career fair business. As a substantial portion of BrassRing’s losses arose from goodwill and intangible amortization expense for 2001, the $75.1 million of equity in affiliate losses recorded by the Company in 2001 did not require significant funding by the Company.50 percent50% interest in The International Herald Tribune newspaper for $65 million; the Company will report an after-tax non-operatingreported a $49.8 million pre-tax gain of approximately $32 millionthat is included in “Other income (expense), net” in the first quarterConsolidated Statements of 2003.December 29, 2002January 2, 2005 and December 30, 2001,28, 2003, the carrying value of the Company’s cost method investments was $9.5$4.6 million and $29.6$9.6 million, respectively. Cost method investments are included in “Deferred Charges and Other Assets” in the Consolidated Balance Sheets.46In June 2004, one of the Company’s cost method investments went public and is now reported as a marketable equity security, recorded at fair value in the Consolidated Balance Sheets, with the change in fair value during the period excluded from earnings and recorded net of tax as a separate component of comprehensive income.2002, 20012004, 2003, and 2000,2002, the Company invested $0.3$0.2 million, $11.7$0.8 million, and $42.5$0.3 million, respectively, in companies constituting cost method investments and recorded charges of $19.2$0.7 million, $29.4$1.1 million, and $23.1$19.2 million, respectively, to write-down cost method investments to estimated fair value. In 2002, three of the investments were written down by an aggregate of $15.6 million, primarily as a result of significant recurring losses in each of the underlying businesses, with the write-downs recorded based on the Company’s best estimate of the fair value of each these investments. Another of the Company’s investments was written down in 2002 by $2.8 million, based on proceeds received by the Company arising from the investee’s merger. Charges recorded to write-down cost method investments are included in “Other income (expense), net” in the Consolidated Statements of Income.During 2002, 2001 and 2000, proceeds from sales of cost method investments were $1.2 million, $0.5 million and $7.1 million, respectively, and gross realized (losses) gains on such sales were $0, ($0.2 million) and $6.6 million, respectively. Gross realized gains or losses on the sale of cost method investments are included in “Other income (expense), net” in the Consolidated Statements of Income.D. INCOME TAXES Current Deferred Total U.S. Federal $ 75,654 $ 38,934 $ 114,588 Foreign 1,634 (499 ) 1,135 State and local 9,897 11,680 21,577 $ 87,185 $ 50,115 $ 137,300 U.S. Federal $ 48,253 $ 86,384 $ 134,637 Foreign 1,270 714 1,984 State and local 11,075 10,204 21,279 $ 60,598 $ 97,302 $ 157,900 U.S. Federal $ 77,517 $ 4,854 $ 82,371 Foreign 1,033 75 1,108 State and local 22,593 (12,672 ) 9,921 $ 101,143 $ (7,743 ) $ 93,400 Current Deferred Total U.S. Federal $ 138,429 $ 35,544 $ 173,973 Foreign 4,751 (361 ) 4,390 State and local 22,199 9,138 31,337 $ 165,379 $ 44,321 $ 209,700 2003 U.S. Federal $ 93,329 $ 27,189 $ 120,518 Foreign 4,129 (159 ) 3,970 State and local 13,338 3,674 17,012 $ 110,796 $ 30,704 $ 141,500 2002 U.S. Federal $ 75,654 $ 38,934 $ 114,588 Foreign 1,634 (499 ) 1,135 State and local 9,897 11,680 21,577 $ 87,185 $ 50,115 $ 137,300 35 percent35% to income before taxes as a result of the following (in thousands): 2002 2001 2000 2004 2003 2002 U.S. Federal statutory taxes $ 123,784 $ 135,639 $ 80,455 $ 189,851 $ 133,906 $ 123,784 State and local taxes, net of U.S. Federal income tax benefit 14,025 13,832 6,449 20,369 11,058 14,025 Amortization of goodwill not deductible for income tax purposes — 6,988 5,011 Sale of affiliate with higher tax basis — (2,188 ) — Other, net (509 ) 1,441 1,485 (520 ) (1,276 ) (509 ) Provision for income taxes $ 137,300 $ 157,900 $ 93,400 $ 209,700 $ 141,500 $ 137,300 December 29, 2002January 2, 2005 and December 30, 200128, 2003 consist of the following (in thousands): 2002 2001 2004 2003 Accrued postretirement benefits $ 58,874 $ 56,955 $ 61,221 $ 60,536 Other benefit obligations 94,280 73,080 122,608 102,791 Accounts receivable 16,252 15,949 18,939 17,650 State income tax loss carryforwards 13,693 17,218 10,753 12,068 Affiliate operations 4,403 4,334 Other 22,140 14,612 19,866 25,480 Deferred tax asset 205,239 177,814 237,790 222,859 Property, plant and equipment 135,520 110,763 173,101 153,615 Prepaid pension cost 200,315 181,434 224,991 207,312 Affiliate operations 180 (1,195 ) Unrealized gain on available-for-sale securities 11,463 15,475 48,387 23,811 Goodwill and other intangibles 118,914 93,286 164,138 141,945 Deferred tax liability 466,392 399,763 610,617 526,683 Deferred income taxes $ 261,153 $ 221,949 $ 372,827 $ 303,824 E. DEBTAt December 29, 2002, thehad $664.8has approximately $213 million in totalstate income tax loss carryforwards. If unutilized, state income tax loss carryforwards will start to expire approximately as follows (in millions): 2005 $ 3.0 2006 5.0 2007 1.0 2008 9.0 2009 4.0 2010 7.0 2011 to 2023 184.0 Total $ 213.0 January 2, December 28, 2005 2003 Commercial paper borrowings $ 50.2 $ 188.3 5.5% unsecured notes due February 15, 2009 398.9 398.7 4.0% notes due 2004–
2006 (£8.35 million and £16.7 million) 16.1 29.7 Other indebtedness 18.9 14.4 Total 484.1 631.1 Less current portion (58.2 ) (208.6 ) Total long-term debt $ 425.9 $ 422.5 at an average interest ratebalance in January 2004 and in August 2004, 50% of 4.0 percent. Debtthe original outstanding balance (less the amount paid in January) was compriseddue for payment. Payments of $259.3$6.2 million and $8.8 million were made in commercial paper borrowings, $398.4January 2004 and August 2004, respectively. The remaining balance outstanding of £8.35 million of 5.5 percent unsecured notesis due February 15, 2009, and $7.1 millionfor payment in other debt.5.5 percent5.5% unsecured notes is payable semi-annually on February 15 and August 15.December 29, 2002,January 2, 2005 and December 30, 2001,28, 2003, the average interest rate on the Company’s outstanding commercial paper borrowings was 1.6 percent2.2% and 2.0 percent,1.1%, respectively. InDuring the third quarter of 2004, the Company replaced its expiring $250 million 364-day revolving credit facility with a new $250 million revolving credit facility on essentially the same terms. The new facility expires in August 2005. In 2002, the Company replaced its revolving credit facility agreements with a new five-year $350 million revolving credit facility, which expires in August 2007, and a new 364-day $350 million revolving credit facility, which expires in August 2003.2007. These revolving credit facility agreements support the issuance of the Company’s short-term commercial paper.0.07 percent0.07% to 0.15 percent470.25 percent0.25% to 0.75 percent0.75% on the used portion of the facility. Under the terms of the $350$250 million 364-day revolving credit facility, interest on borrowings is at floating rates, and based on the Company’s long-term debt rating, the Company is required to pay an annual fee of 0.05 percent0.05% to 0.125 percent0.125% on the unused portion of the facility, and 0.25 percent0.25% to 0.75 percent0.75% on the used portion of the facility. Also under the terms of the $350$250 million 364-day revolving credit facility, the Company has the right to extend the term of any borrowings for up to one year from the credit facility’s maturity date for an additional fee of 0.125 percent.0.125%. Both revolving credit facilities contain certain covenants, including a financial covenant that the Company maintain at least $1 billion of consolidated shareholders’ equity.20022004 and 2001,2003, the Company had average borrowings outstanding of approximately $793.7$516.0 million and $965.8$605.7 million, respectively, at average annual interest rates of approximately 3.7 percent4.8% and 4.9 percent,4.2%, respectively. The Company incurred net interest costs on its borrowings of $33.5$26.4 million and $47.5$26.9 million during 20022004 and 2001,2003, respectively. No interest expense was capitalized in 20022004 or 2001.December 29, 2002January 2, 2005 and December 30, 2001,28, 2003, the fair value of the Company’s 5.5 percent5.5% unsecured notes, based on quoted market prices, totaled $426.6$423.0 million and $387.7$434.6 million, respectively, compared with the carrying amount of $398.4$398.9 million and $398.1$398.7 million, respectively.December 29, 2002January 2, 2005 and December 30, 200128, 2003 approximates fair value.F. REDEEMABLE PREFERRED STOCK2002, 3062004, 955 shares of Series A Preferred Stock were redeemed at the request of Series A Preferred Stockholders.G. CAPITAL STOCK, STOCK AWARDS, AND STOCK OPTIONS30 percent30% 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.2002, 20012004 the Company did not purchase any shares of its Class B common stock. During 2003 and 2000,2002, the Company purchased a total of 1,229 shares, 714910 shares and 2001,229 shares, respectively, of its Class B common stock at a cost of approximately $0.8 million, $0.4$0.7 million and $0.1$0.8 million. At December 29, 2002,January 2, 2005, the Company has authorization from the Board of Directors to purchase up to 544,796542,800 shares of Class B common stock.December 29, 2002,January 2, 2005, there were 68,29052,476 shares reserved for issuance under the incentive compensation plan. Of this number, 27,62528,001 shares were subject to awards outstanding, and 40,66524,475 shares were available for future awards. Activity related to stock awards under the long-term incentive compensation plan for the years ended January 2, 2005, December 28, 2003, and December 29, 2002, December 30, 2001 and December 31, 2000, was as follows: 2004 2003 2002 2002 2001 2000 Number Average Number Average Number Average Number Average Number Average Number Average of Award of Award of Award of Award of Award of Award Shares Price Shares Price Shares Price Shares Price Shares Price Shares Price Awards Outstanding Beginning of year Beginning of year 29,895 $539.25 30,165 $413.28 31,360 $412.86 Beginning of year 29,845 $643.89 27,625 $536.74 29,895 $539.25 Awarded 215 563.36 16,865 608.96 1,155 501.72 Awarded 200 973.88 15,990 734.01 215 563.36 Vested (601 ) 540.61 (15,200 ) 364.13 (99 ) 330.75 Vested (561 ) 625.91 (12,752 ) 523.60 (601 ) 540.61 Forfeited (1,884 ) 578.37 (1,935 ) 555.02 (2,251 ) 456.41 Forfeited (1,483 ) 683.58 (1,018 ) 658.44 (1,884 ) 578.37 End of year End of year 27,625 $536.74 29,895 $539.25 30,165 $413.28 End of year 28,001 $644.51 29,845 $643.89 27,625 $536.74 2002, 3,300 shares in 2001 and 1,950 shares in 2000.December 29, 2002,January 2, 2005, the aforementioned restriction will lapse in 20032005 for 14,86115,491 shares, in 20042006 for 2,637450 shares, in 20052007 for 17,62317,435 shares, and in 20062008 for 1,438675 shares. Stock-based compensation costs resulting from stock awards reduced net income by $3.6 million ($0.38 per share, basic and diluted), $3.9 million ($0.41 per share, basic and diluted), and $3.5 million ($0.37 per share, basic and diluted), $2.6 million ($0.27 per share, basic in 2004, 2003, and diluted), and $2.4 million ($0.25 per share, basic and diluted) in 2002, 2001 and 2000, respectively. which was adopted in 1971 and amended in 1993, reserves 1,900,000 shares of the Company’s Class B common stock for48December 29, 2002,January 2, 2005, there were 470,025421,125 shares reserved for issuance under the stock option plan, of which 163,900122,250 shares were subject to options outstanding, and 306,125298,875 shares were available for future grants.December 30, 2001, and December 31, 2000, were as follows: 2002 2001 2000 2004 2003 2002 Number Average Number Average Number Average of Option of Option of Option Number Average Number Average Number Average Shares Price Shares Price Shares Price of Option of Option of Option Shares Price Shares Price Shares Price Beginning of year Beginning of year 170,575 $490.86 166,450 $465.55 156,497 $470.64 Beginning of year 152,475 $ 530.81 163,900 $515.74 170,575 $490.86 Granted 11,500 729.00 24,000 522.75 89,500 544.90 Granted 4,000 953.50 5,000 803.70 11,500 729.00 Exercised (16,675 ) 404.14 (16,875 ) 276.79 (20,425 ) 345.46 Exercised (33,225 ) 467.68 (15,675 ) 450.87 (16,675 ) 404.14 Forfeited (1,500 ) 561.77 (3,000 ) 546.04 (59,122 ) 643.71 Forfeited (1,000 ) 621.38 (750 ) 729.00 (1,500 ) 561.77 End of year End of year 163,900 $515.74 170,575 $490.86 166,450 $465.55 End of year 122,250 $ 561.05 152,475 $530.81 163,900 $515.74 2002, 102,6502004, 103,750 are now exercisable, 27,875 will become exercisable in 2003, 21,875 will become exercisable in 2004, 8,62510,500 will become exercisable in 2005, and 2,8754,750 will become exercisable in 2006.2006, 2,250 will become exercisable in 2007, and 1,000 will become exercisable in 2008. Information related to stock options outstanding at December 29, 2002,January 2, 2005 is as follows: Weighted Weighted Average Weighted Weighted Average Weighted Weighted Number Remaining Average Number Average Number Remaining Average Number Average Range of Range of Outstanding Contractual Exercise Exercisable Exercise Range of Outstanding Contractual Exercise Exercisable Exercise Exercise Prices Exercise Prices at 12/29/02 Life (yrs.) Price at 12/29/02 Price Exercise Prices at 1/2/2005 Life (yrs.) Price at 1/2/2005 Price $222–299 500 1.0 $ 298.75 500 $ 298.75 $222–319 8,800 2.3 $ 261.49 8,800 $ 261.49 344 5,000 2.0 343.94 5,000 343.94 344 9,850 4.0 343.94 9,850 343.94 472–484 12,125 3.7 473.70 12,125 473.70 472–484 24,750 5.8 474.34 21,750 473.43 500–596 85,625 6.0 535.51 79,875 530.99 500–596 109,000 7.7 538.70 62,250 537.47 693 500 9.0 692.51 125 692.51 729 11,500 10.0 729.00 — — 729 10,000 8.0 729.00 5,000 729.00 816 4,500 9.0 816.05 1,125 816.05 954 4,000 10.0 953.50 — — 2001was $274.93, $229.81, and 2000 was $197.89, $107.78 and $161.15, respectively. The fair value of options at date of grant was estimated using the Black-Scholes method utilizing the following assumptions: 2002 2001 2000 2004 2003 2002 Expected life (years) 7 7 7 7 7 7 Interest rate 3.69% 2.30% 5.98% 3.85 % 4.38 % 3.69 % Volatility 21.74% 19.46% 17.9% 20.24 % 20.43 % 21.74 % Dividend yield 0.77% 1.1% 1.0% 0.73 % 0.71 % 0.77 % Effective the first day of the Company’s 2002 fiscal year, the Company adopted the fair-value-based method of accountingCompanyadditional disclosures surrounding stock options as outlined in SFAS 123. This change in accounting method was applied prospectively to all awards granted from the beginning of the Company’s fiscal year 2002 and thereafter. Stock options awarded prior to fiscal year 2002 will continue to be accounted for under the intrinsic value method under Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees.” The following table presents what the Company’s results would have been had the fair values of options granted after 1995, but prior to 2002, been recognized as compensation expense in 2002, 2001 and 2000 (in thousands, except per share amounts). 2002 2001 2000 Stock-based compensation expense included in net income $ 45 $ — $ — Net income available for common shares, as reported 203,235 228,587 135,444 Stock-based compensation expense not included in net income 3,617 4,309 2,139 Pro forma net income available for common shares $ 199,618 $ 224,278 $ 133,305 Basic earnings per share, as reported $ 21.38 $ 24.10 $ 14.34 Pro forma basic earnings per share $ 21.00 $ 23.64 $ 14.11 Diluted earnings per share, as reported $ 21.34 $ 24.06 $ 14.32 Pro forma diluted earnings per share $ 20.96 $ 23.61 $ 14.09 19981997 and reserves 10.6initially reserved 15 percent, or 150,000 shares, of Kaplan’s common stock for options to be granted under the plan. At December 29, 2002, 147,463 shares were subject to options outstanding. The balance of 2,537 shares have been granted with vesting beginning as of January 1, 2003. Under the provisions of this plan, options are issued with an exercise price equal to the estimated fair value of Kaplan’s common stock. In general,stock and options vest ratably over five years.the number of years specified (generally 4 to 5 years) at the time of the grant. Upon exercise, an option holder may either purchase vested shares at the exercise price or elect to receivereceives cash equal to the$861$1,625 per share, whichand announced an offer totaling $138 million for approximately 55% of the stock options outstanding at Kaplan. The Company’s offer included a 10% premium over the then current valuation price of Kaplan common stock of $1,625 per share. As a result of this offer, 100% of the eligible stock options were tendered. The Company paid out $118.7 million in the fourth quarter of 2003, and $10.3 million in 2004, with the remainder of the payouts, related to 6,131 tendered stock options, to be made at the time of their scheduled vesting from 2005 to 2008 if the option holder is determined after deducting intercompany debt from Kaplan’s enterprise value.2002, 20012004, 2003, and 2000,2002, the Company recorded expense of $34.5$32.5 million, $25.3$119.1 million, and $6.0$34.5 million, respectively, related to this plan. In 20022004, 2003, and 2001,2002 payouts from option exercises totaled $0.2$10.3 million, $119.6 million and $2.1$1.5 million, respectively. At December 29, 2002,31, 2004, the Company’s stock-based compensation accrual balance totaled $74.4$96.2 million.49December 30, 2001, and December 31, 2000, were as follows: 2004 2003 2002 2002 2001 2000 Number Average Number Average Number Average Number Average Number Average Number Average of Option of Option of Option of Option of Option of Option Shares Price Shares Price Shares Price Shares Price Shares Price Shares Price Beginning of year 142,578 $296.69 131,880 $246.14 95,100 $196.31 Beginning of Year Beginning of Year 68,000 $596.17 147,463 $ 311.24 142,578 $296.69 Granted 6,475 652.00 27,962 526.00 36,780 375.00 Granted — — 16,037 1,546.23 6,475 652.00 Exercised (540 ) 375.00 (7,247 ) 227.20 – – Exercised — — (94,652 ) 303.66 (540 ) 375.00 Forfeited (1,050 ) 403.76 (10,017 ) 321.67 – – Forfeited — — (848 ) 382.12 (1,050 ) 403.76 End of year End of year 147,463 $311.24 142,578 $296.69 131,880 $246.14 End of year 68,000 $596.17 68,000 $ 596.17 147,463 $311.24 2002, 101,8042004, 47,836 are now exercisable, 12,755 will become exercisable in 2003, 12,755 will become exercisable in 2004, 12,0057,034 will become exercisable in 2005, 6,8496,935 will become exercisable in 2006, and 1,2953,397 will become exercisable in 2007.2007, and 2,798 will become exercisable in 2008. Information related to stock options outstanding at December 29, 2002,January 2, 2005, is as follows: Weighted Weighted Average Weighted Weighted Average Number Remaining Average Number Average Number Remaining Number Range of Range of Outstanding Contractual Exercise Exercisable Exercise Range of Outstanding Contractual Exercisable Exercise Prices Exercise Prices at 12/29/02 Life (yrs.) Price at 12/29/02 Price Exercise Prices at 1/2/05 Life (yrs.) at 1/2/05 $ 190 31,341 3.0 31,341 375 500 4.6 400 $ 190 83,686 5.0 $ 190 83,686 $ 190 526 19,172 6.0 12,098 350–375 29,540 6.9 372 12,566 371 652 3,000 6.0 1,200 526 27,762 8.0 526 5,552 526 861 487 6.0 97 652 6,475 8.0 652 – 652 1,625 13,500 7.0 2,700 2002, 20012004, 2003 and 20002002 is as follows: Basic Dilutive Diluted Weighted Effect of Weighted Average Stock Average Shares Options Shares 2002 9,503,983 18,671 9,522,654 2001 9,486,386 13,173 9,499,559 2000 9,445,466 14,362 9,459,828 Basic Dilutive Diluted Weighted Effect of Weighted Average Stock Average Shares Options Shares 2004 9,563,314 28,311 9,591,625 2003 9,530,209 24,454 9,554,663 2002 9,503,983 18,671 9,522,654 H. PENSIONS AND OTHER POSTRETIREMENT PLANS December 29, 2002January 2, 2005 and December 30, 200128, 2003 (in thousands): Pension Plans Postretirement Plans 2002 2001 2002 2001 Benefit obligation at beginning of year $ 431,017 $ 391,166 $ 105,392 $ 93,243 Service cost 17,489 15,393 5,418 3,707 Interest cost 30,820 27,526 7,997 6,811 Amendments 28,817 5,182 (3,130 ) — Actuarial loss 22,851 22,334 1,487 6,519 Benefits paid (32,042 ) (30,584 ) (4,990 ) (4,888 ) Benefit obligation at end of year $ 498,952 $ 431,017 $ 112,174 $ 105,392 Fair value of assets at beginning of year $ 1,427,554 $ 1,314,885 — — Actual return on plan assets (33,428 ) 143,253 — — Employer contributions — — $ 4,990 $ 4,888 Benefits paid (32,042 ) (30,584 ) (4,990 ) (4,888 ) Fair value of assets at end of year $ 1,362,084 $ 1,427,554 $ — $ — Funded status $ 863,132 $ 996,537 $ (112,174 ) $ (105,392 ) Unrecognized transition asset (3,631 ) (8,852 ) — — Unrecognized prior service cost 24,553 16,949 (3,469 ) (501 ) Unrecognized actuarial gain (390,268 ) (556,946 ) (20,750 ) (24,931 ) Net prepaid (accrued) cost $ 493,786 $ 447,688 $ (136,393 ) $ (130,824 ) Pension Plans Postretirement Plans 2004 2003 2004 2003 Benefit obligation at beginning of year $ 625,774 $ 498,952 $ 120,444 $ 112,174 Service cost 22,896 19,965 5,285 5,164 Interest cost 37,153 33,696 7,355 7,395 Amendments 218 60,697 — (5,479 ) Actuarial loss 46,655 37,339 5,764 6,733 Benefits paid (43,555 ) (24,875 ) (6,308 ) (5,543 ) Benefit obligation at end of year $ 689,141 $ 625,774 $ 132,540 $ 120,444 Fair value of assets at beginning of year $ 1,564,966 $ 1,362,084 $ — $ — Actual return on plan assets 66,802 227,757 — — Employer contributions — — 6,308 5,543 Benefits paid (43,555 ) (24,875 ) (6,308 ) (5,543 ) Fair value of assets at end of year $ 1,588,213 $ 1,564,966 $ — $ — Funded status $ 899,072 $ 939,192 $ (132,540 ) $ (120,444 ) Unrecognized transition asset (355 ) (1,442 ) — — Unrecognized prior service cost 38,389 46,941 (8,001 ) (8,589 ) Unrecognized actuarial gain (380,359 ) (469,890 ) (4,949 ) (11,707 ) Net prepaid (accrued) cost $ 556,747 $ 514,801 $ (145,490 ) $ (140,740 ) total (income) cost arising from the Company’s definedaccumulated benefit pension and postretirement plans for the years ended December 29, 2002, December 30, 2001, and December 31, 2000, consists of the following components (in thousands): Pension Plans Postretirement Plans 2002 2001 2000 2002 2001 2000 Service cost $ 17,489 $ 15,393 $ 14,566 $ 5,418 $ 3,707 $ 3,496 Interest cost 30,820 27,526 24,962 7,997 6,811 6,338 Expected return on assets (92,192 ) (97,567 ) (85,522 ) — — — Amortization of transition asset (5,221 ) (6,502 ) (7,585 ) — — — Amortization of prior service cost 2,185 2,122 2,091 (421 ) (162 ) (162 ) Recognized actuarial gain (17,528 ) (17,917 ) (13,824 ) (2,435 ) (3,408 ) (2,870 ) Net periodic (benefit) cost for the year (64,447 ) (76,945 ) (65,312 ) 10,559 6,948 6,802 Early retirement programs expense 19,001 3,344 29,049 — — 1,968 Total (benefit) cost for the year $ (45,446 ) $ (73,601 ) $ (36,263 ) $ 10,559 $ 6,948 $ 8,770 The costsobligation for the Company’s defined benefit pension plans at January 2, 2005 and postretirement plans are actuarially determined. December 28, 2003 was $599.2 million and $548.4 million, respectively.December 29, 2002, December 30, 2001,January 2, 2005 and December 31, 2000, include the following:28, 2003 are as follows: Pension Plans Postretirement Plans Postretirement Pension Plans Plans 2002 2001 2000 2002 2001 2000 2004 2003 2004 2003 Discount rate 6.75% 7.0% 7.5% 6.75% 7.0% 7.5% 5.75% 6.25% 5.75% 6.25% Expected return on plan assets 7.5% 7.5% 9.0% — — — Rate of compensation increase 4.0% 4.0% 4.0% — — — 4.0% 4.0% — — 50December 29, 2002January 2, 2005 was 10.5 percent9.5% for both pre-age 65 and post-age 65 benefits, decreasing to 5 percent5% in the year 20132015 and thereafter. 1% 1% Increase Decrease 1% 1% Increase Decrease Benefit obligation at end of year $ 16,740 $ (15,637 ) $ 20,106 $ (18,798 ) Service cost plus interest cost 2,115 (2,050 ) $ 2,018 $ (1,957 ) Postretirement Pension Plans Plans 2005 $ 26.2 $ 6.6 2006 $ 27.2 $ 6.9 2007 $ 28.5 $ 7.4 2008 $ 30.0 $ 8.0 2009 $ 31.8 $ 8.6 2010-2014 $ 196.9 $ 52.7 Pension Plans Postretirement Plans 2004 2003 2002 2004 2003 2002 Service cost $ 22,896 $ 19,965 $ 17,489 $ 5,285 $ 5,164 $ 5,418 Interest cost 37,153 33,696 30,820 7,355 7,395 7,997 Expected return on assets (97,702 ) (96,116 ) (92,192 ) — — — Amortization of transition asset (1,086 ) (2,189 ) (5,221 ) — — — Amortization of prior service cost 4,530 4,172 2,185 (588 ) (360 ) (421 ) Recognized actuarial gain (7,745 ) (14,665 ) (17,528 ) (995 ) (1,675 ) (2,435 ) Net periodic (benefit) cost for the year (41,954 ) (55,137 ) (64,447 ) 11,057 10,524 10,559 Early retirement programs expense 132 34,135 19,001 — — — Curtailment gain — — — — (634 ) — Total (benefit) cost for the year $ (41,822 ) $ (21,002 ) $ (45,446 ) $ 11,057 $ 9,890 $ 10,559 Pension Plans Postretirement Plans 2004 2003 2002 2004 2003 2002 Discount rate 6.25% 6.75% 7.0% 6.25% 6.75% 7.0% Expected return on plan assets 7.5% 7.5% 7.5% — — — Rate of compensation increase 4.0% 4.0% 4.0% — — — 2002, $1.82004, $2.0 million in 20012003, and $1.1$2.0 million in 2000.2002, $14.5 million in 2001 and $13.3 million in 2000.December 29, 2002,January 2, 2005, future minimum rental payments under noncancelable operating leases approximate the following (in thousands): 2003 $ 55,335 2004 49,650 2005 43,178 $ 80,842 2006 37,915 75,974 2007 32,855 71,181 2008 61,767 2009 52,303 Thereafter 74,039 154,541 $ 292,972 $ 496,608 $4.4$5.5 million due in the future under noncancelable subleases.and expenses was approximately $97.6 million, $76.8 million, and $60.7 million $58.3 millionin 2004, 2003, and $49.7 million in 2002, 2001 and 2000, respectively. Sublease income was approximately $0.6 million, $1.5$0.6 million, and $1.2$0.6 million in 2004, 2003, and 2002, 2001 and 2000, respectively.December 29, 2002,January 2, 2005, such commitments amounted to approximately $52.3$93.0 million. If such programs are not produced, the Company’s commitment would expire without obligation.$47.4$63.9 million in 2004, $169.5 million in 2003 and $90.5 million in 2002 $104.4 million in 2001 and $212.3 million in 2000 (including estimated fair value of cable systems surrendered, assumed debt and related acquisition costs). All of these acquisitions 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 purchase price allocations for these acquisitions mostly comprised goodwill and other intangibles and property, plant and equipment.theirits higher education and test preparation divisions for approximately $42.2 million. About $9.6 million remains to be paid on these acquisitions, of which $2.2 million has been classified in current liabilities and $7.4 million as long-term debt at December 29, 2002.value.value, as determined based on an appraisal completed by an independent third- party firm. The non-cash, non-operating gain resulting from the exchange transaction increased net income by $16.7 million, or $1.75 per share.The Company’s acquisitions in 2001 principally included the purchase of Southern Maryland Newspapers, a division of Chesapeake Publishing Corporation, and amounts paid as part of a cable system exchange with AT&T Broadband. During 2001, the Company also acquired a provider of CFA® exam preparation services and a company that provides pre-certification training 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 approximately 50,000.The cable system exchange with AT&T Broadband was completed in March 2001 and consisted of the exchange by the Company of its cable systems in Modesto and Santa Rosa, California, and approximately $42.0 million to AT&T Broadband for cable systems serving approximately 155,000 subscribers principally located in Idaho. The Idaho systems acquired in the exchange transactions were recorded at their estimated fair value. In a related transaction in January 2001, the Company completed the sale of a cable system serving about 15,000 subscribers in Greenwood, Indiana, for $61.9 million. The gain resulting from the cable system sale and exchange transactions increased net income by $196.5 million, or $20.69 per share. For income tax purposes, substantial components of the cable51system sale and exchange transactions qualify as like-kind exchanges and therefore, a large portion of these transactions does not result in a current tax liability.In August 2000, the Company acquired Quest Education Corporation (Quest) for approximately $177.7 million, including assumed debt. The acquisition of Quest was completed through an all cash tender offer in which the Company purchased substantially all of the outstanding stock of Quest for $18.35 per share. The acquisition was financed through the issuance of additional borrowings. Quest 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 June 2000) and Mississippi (in August 2000) for approximately $16.2 million, as well as various other smaller businesses throughout 2000 for $18.4 million (principally consisting of educational services companies).2002, 20012004, 2003 and 2000,2002, assuming the acquisitions and exchanges occurred at the beginning of 2000,2002, are not materially different from reported results of operations. earlier this year, the Company completed its transitional impairment review of indefinite-lived intangible assets and goodwill. The expected future cash flows for PostNewsweek Tech Media (part of the magazine publishing segment), on a discounted basis, did not support the net carrying value of the related goodwill. Accordingly, an after-tax goodwill impairment loss of $12.1 million, or $1.27 per share, was recorded. The loss is included in the Company’s 2002 fiscal year results as a cumulative effect of change in accounting principle.On a pro forma basis, the Company’s 2001 and 2000 operating income would have been $298.3 million and $402.1 million, respectively, if SFAS 142 had been adopted at the beginning of fiscal 2000, compared to $377.6 million for 2002.Other pro forma results for the years ended December 30, 2001, and December 30, 2000, to exclude amortization of goodwill and indefinite-lived intangible assets, were as follows (in thousands, except per share amounts): 2002 2001 2000 Income before cumulative effect of change in accounting principle,
as reported $ 216,368 $ 229,639 $ 136,470 Amortization of goodwill and other intangibles, net of tax — 54,989 43,079 Pro forma income before cumulative effect of change in
accounting principle 216,368 284,628 179,549 Cumulative effect of change in method of accounting for goodwill
and other intangible assets, net of tax (12,100 ) — — Redeemable preferred stock dividends (1,033 ) (1,052 ) (1,026 ) Pro forma net income available for common shares $ 203,235 $ 283,576 $ 178,523 Basic earnings per share: Before cumulative effect of change in accounting principle, as reported $ 22.65 24.10 14.34 Cumulative effect of change in accounting principle (1.27 ) — — Amortization of goodwill and other intangibles — 5.79 4.56 Pro forma net income available for common shares $ 21.38 $ 29.89 $ 18.90 Diluted earnings per share: Before cumulative effect of change in accounting principle, as reported $ 22.61 $ 24.06 $ 14.32 Cumulative effect of change in accounting principle (1.27 ) — — Amortization of goodwill and other intangibles — 5.79 4.55 Pro forma net income available for common shares $ 21.34 $ 29.85 $ 18.87 In accordance with SFAS 142, the Company has reviewed its goodwill and other intangible assets and classified them in three categories (goodwill, indefinite-lived intangible assets and amortized intangible assets). division.division, as the Company expects its cable franchise agreements to provide the Company with substantial benefit for a period that extends beyond the foreseeable horizon, and the Company’s cable division historically has obtained renewals and extensions of such agreements for nominal costs and without any material modifications to the agreements. Amortized intangible assets are primarily non-compete agreements, with amortization periods up to five years. The Company’s amortized intangible assets increased $1.4 million in 2002 due to acquisitions. Amortization expense was $655,000$9.3 million in 2002,2004 and is estimated to be less than $1approximately $6 million in each of the next five years.December 29, 2002January 2, 2005 and December 30, 200128, 2003 were as follows (in thousands): Accumulated Gross Amortization Net Goodwill $ 1,069,263 $ 298,402 $ 770,861 Indefinite-lived intangible assets 646,225 163,806 482,419 Amortized intangible assets 3,525 1,372 2,153 $ 1,719,013 $ 463,580 $ 1,255,433 Goodwill $ 1,033,956 $ 279,402 $ 754,554 Indefinite-lived intangible assets 614,565 163,806 450,759 Amortized intangible assets 2,165 717 1,448 $ 1,650,686 $ 443,925 $ 1,206,761 Accumulated Gross Amortization Net $ 1,321,542 $ 298,402 $ 1,023,140 656,998 163,806 493,192 20,021 12,142 7,879 $ 1,998,561 $ 474,350 $ 1,524,211 Goodwill $ 1,264,096 $ 298,402 $ 965,694 Indefinite-lived intangible assets 650,462 163,806 486,656 Amortized intangible assets 8,034 2,808 5,226 $ 1,922,592 $ 465,016 $ 1,457,576 5220022004 was as follows (in thousands): Newspaper Television Magazine Cable Publishing Broadcasting Publishing Television Education Total Beginning of year $ 72,738 $ 203,165 $ 88,556 $ 88,197 $ 301,898 $ 754,554 Acquisitions 37,838 37,838 Disposition (2,531 ) (2,531 ) Impairment (19,000 ) (19,000 ) End of year $ 72,738 $ 203,165 $ 69,556 $ 85,666 $ 339,736 $ 770,861 Beginning of year $ 450,759 $ 450,759 Acquisitions 32,160 32,160 Disposition (500 ) (500 ) Impairment — — End of year $ 482,419 $ 482,419 Newspaper Television Magazine Cable Publishing Broadcasting Publishing Television Education Total Beginning of year $ 71,277 $ 203,165 $ 69,556 $ 85,666 $ 536,030 $ 965,694 Acquisitions 1,493 44,143 45,636 Foreign currency exchange rate 11,810 11,810 End of year $ 72,770 $ 203,165 $ 69,556 $ 85,666 $ 591,983 $ 1,023,140 Beginning of year $ 484,556 $ 2,100 $ 486,656 Acquisitions 1,774 4,762 6,536 End of year $ 486,330 $ 6,862 $ 493,192 Beginning of year $ 30 $ 1,081 $ 4,115 $ 5,226 Acquisitions 107 2,045 9,845 11,997 Foreign currency exchange rate (10 ) (10 ) Amortization (19 ) (652 ) (8,663 ) (9,334 ) End of year $ 118 $ 2,474 $ 5,287 $ 7,879 Newspaper Television Magazine Cable Publishing Broadcasting Publishing Television Education Total Beginning of year $ 72,738 $ 203,165 $ 69,556 $ 85,666 $ 339,736 $ 770,861 Acquisitions 184,075 184,075 Disposition (1,461 ) (1,461 ) Foreign currency exchange rate 12,219 12,219 End of year $ 71,277 $ 203,165 $ 69,556 $ 85,666 $ 536,030 $ 965,694 Beginning of year $ 482,419 $ 482,419 Acquisitions 2,137 $ 2,100 4,237 End of year �� $ 484,556 $ 2,100 $ 486,656 Beginning of year $ 45 $ 1,232 $ 876 $ 2,153 Acquisitions 4,463 4,463 Amortization (15 ) (151 ) (1,270 ) (1,436 ) Foreign currency exchange rate 46 46 End of year $ 30 $ 1,081 $ 4,115 $ 5,226 2004 2003 2002 Foreign currency gains, net $ 5.5 $ 4.2 $ — Gain on sale of interest in IHT — 49.8 — Impairment write-downs on cost method and other investments (0.7 ) (1.3 ) (21.2 ) Gain on sale or exchange of cable system businesses 0.5 — 27.8 Gain on sales of marketable securities — — 13.2 Other 2.8 2.7 9.1 Total $ 8.1 $ 55.4 $ 28.9 also to an antitrust lawsuit related to the acquisition by a subsidiaryviolations of a group of community newspapers in 2001.applicable wage and hour laws. Management does not believe that any litigation pending against the Company will have a material adverse effect on its business or financial condition.programsPrograms administered by the United StatesU.S. Department of Education pursuant to the Federal Higher Education Act of 1965 (“HEA”)(HEA), as amended. In order to participate in Title IV Programs, the Company must comply with complex standards set forth in the HEA and the regulations promulgated thereunder (the “Regulations”)Regulations). The failure to comply with the requirements of HEA or the Regulations could result in the restriction or loss of the ability to participate in Title IV Programs and subject the Company to financial penalties. For the years ended January 2, 2005, December 28, 2003 and December 29, 2002, December 30, 2001, and December 31, 2000, approximately $161.7$430.0 million, $101.5$250.0 million and $35.0$161.7 million, respectively, of the Company’s education division revenues were derived from financial aid received by students under Title IV Programs. These revenues were earned and recognized by Quest following the Company’s acquisition of Quest in August 2000. Management believes that the Company’s education division schools that participate in Title IV Programs are in material compliance with the standards set forth in the HEA and the Regulations.M.N. BUSINESS SEGMENTSoperations involvepublishing includes the publication of newspapers in the Washington, D.C. area and Everett, Washington; newsprint warehousing and recycling facilities; and the Company’s electronic media publishing business (primarily washingtonpost.com).Magazine operations consist principallya travel magazineArthur Frommer’s Budget Travel, and the publication of business periodicals for the computer services industry and the Washington-area technology community.Broadcaststations.stations serving the Detroit, Houston, Miami, San Antonio, Orlando and Jacksonville television markets. All stations are network affiliatednetwork-affiliated (except for WJXT in Jacksonville, Florida)Jacksonville) with revenues derived primarily from sales of advertising time.approximately 718,000 subscribers in 19 midwestern, western, and southern states. The principal source of revenues is monthly subscription fees charged for services.test preparationKaplan Test Prep and admissions,Admissions, providing test preparation services for college and graduate school entrance exams; Kaplan Professional, providing education and career services to business people and other professionals; and Score!, offering multimediamulti-media learning and private tutoring to children and educational resources to parents. Kaplan’s businesses also includeprovide higher education services, which includesinclude all of Kaplan’s post-secondary education businesses, including the fixed facilityfixed-facility colleges that were formerly part of Quest Education, which offersoffer Bachelor’s degrees, Associate’s degrees and diploma programs primarily in the fields of health care, business and information technology; and online post-secondary and career programs (various distance-learning businesses, including kaplancollege.com)businesses).53
Newspaper Television Magazine Cable Corporate Newspaper Television Magazine Cable Corporate (in thousands) (in thousands) Publishing Broadcasting Publishing Television Education Office Consolidated (in thousands) Publishing Broadcasting Publishing Television Education Office Consolidated Operating revenues $ 938,066 $ 361,716 $ 366,119 $ 499,312 $ 1,134,891 $ — $ 3,300,104 Income (loss) from operations $ 143,086 $ 174,176 $ 52,921 $ 104,171 $ 121,455 $ (32,803 ) $ 563,006 Equity in losses of affiliates (2,291 ) Interest expense, net (26,410 ) Other income, net 8,127 Income before income taxes $ 542,432 Identifiable assets $ 688,812 $ 410,294 $ 582,489 $ 1,113,554 $ 1,035,772 $ 14,170 $ 3,845,091 Investments in marketable equity securities 409,736 Investments in affiliates 61,814 Total assets $ 4,316,641 Depreciation of property, plant and equipment $ 36,862 $ 11,093 $ 3,255 $ 94,974 $ 29,154 $ — $ 175,338 Amortization expense $ 19 $ — $ — $ 652 $ 8,663 $ — $ 9,334 Pension credit (expense) $ 3,598 $ 3,172 $ 37,613 $ (1,030 ) $ (1,531 ) $ — $ 41,822 Kaplan stock-based incentive compensation $ 32,546 $ 32,546 Capital expenditures $ 27,959 $ 6,967 $ 1,499 $ 78,873 $ 85,221 $ 4,113 $ 204,632 Operating revenues $ 872,754 $ 315,126 $ 353,555 $ 459,399 $ 838,077 $ — $ 2,838,911 $ 134,197 $ 139,744 $ 43,504 $ 88,392 $ (11,709 ) $ (30,308 ) $ 363,820 Equity in losses of affiliates (9,766 ) Interest expense, net (26,851 ) Other income, net 55,385 Income before income taxes $ 382,588 Identifiable assets $ 690,226 $ 412,799 $ 534,671 $ 1,131,580 $ 872,133 $ 11,379 $ 3,652,788 Investments in marketable equity securities 247,958 Investments in affiliates 61,312 Total assets $ 3,962,058 Depreciation of property, plant and equipment $ 41,914 $ 11,414 $ 3,727 $ 92,804 $ 23,989 $ — $ 173,848 Amortization expense $ 15 $ — $ — $ 151 $ 1,270 $ — $ 1,436 Pension credit (expense) $ (19,580 ) $ 4,165 $ 38,493 $ (853 ) $ (1,223 ) $ — $ 21,002 Kaplan stock-based incentive compensation $ 119,126 $ 119,126 Capital expenditures $ 18,642 $ 5,434 $ 1,027 $ 65,948 $ 34,537 $ — $ 125,588 Operating revenues $ 841,984 $ 343,552 $ 349,050 $ 428,492 $ 621,125 $ — $ 2,584,203 Operating revenues $ 841,984 $ 343,552 $ 349,050 $ 428,492 $ 621,125 $ — $ 2,584,203 Income (loss) from operations $ 109,006 $ 168,826 $ 25,728 $ 80,937 $ 20,512 $ (27,419 ) $ 377,590 Income (loss) from operations $ 109,006 $ 168,826 $ 25,728 $ 80,937 $ 20,512 $ (27,419 ) $ 377,590 Equity in losses of affiliates (19,308 ) Equity in losses of affiliates (19,308 ) Interest expense, net (33,487 ) Interest expense, net (33,487 ) Other income, net 28,873 Other income, net 28,873 Income before income taxes $ 353,668 Income before income taxes $ 353,668 Identifiable assets $ 690,197 $ 413,663 $ 488,562 $ 1,142,995 $ 542,251 $ 18,990 $ 3,296,658 Identifiable assets $ 697,606 $ 414,722 $ 488,345 $ 1,154,534 $ 549,390 $ 19,940 $ 3,324,537 Investments in marketable equity securities 216,533 Investments in marketable equity securities 216,533 Investments in affiliates 70,703 Investments in affiliates 70,703 Total assets $ 3,583,894 Total assets $ 3,611,773 Depreciation of property, plant and equipment $ 42,961 $ 11,187 $ 4,124 $ 88,751 $ 24,885 $ — $ 171,908 Depreciation of property, plant and equipment $ 42,961 $ 11,187 $ 4,124 $ 88,751 $ 24,885 $ — $ 171,908 Amortization expense $ 15 $ — $ — $ 155 $ 485 $ — $ 655 Amortization expense $ 15 $ — $ — $ 155 $ 485 $ — $ 655 Pension credit (expense) $ 18,902 $ 4,730 $ 23,814 $ (814 ) $ (1,186 ) $ — $ 45,446 Pension credit (expense) $ 18,902 $ 4,730 $ 23,814 $ (814 ) $ (1,186 ) $ — $ 45,446 Kaplan stock-based incentive compensation $ 34,531 $ 34,531 Kaplan stock-based incentive compensation $ 34,531 $ 34,531 Capital expenditures $ 27,280 $ 8,784 $ 1,672 $ 92,499 $ 22,757 $ — $ 152,992 Capital expenditures $ 27,280 $ 8,784 $ 1,672 $ 92,499 $ 22,757 $ — $ 152,992 Operating revenues $ 842,721 $ 314,010 $ 374,575 $ 386,037 $ 493,681 $ — $ 2,411,024 Income (loss) from operations $ 84,744 $ 131,847 $ 25,306 $ 32,237 $ (28,337 ) $ (25,865 ) $ 219,932 Equity in losses of affiliates (68,659 ) Interest expense, net (47,473 ) Other income, net 283,739 Income before income taxes $ 387,539 $ 88,592 $ 145,982 $ 31,975 $ 70,634 $ (13,061 ) $ (25,865 ) $ 298,257 Identifiable assets $ 703,947 $ 419,246 $ 486,804 $ 1,117,426 $ 472,988 $ 42,346 $ 3,242,757 Investments in marketable equity securities 235,405 Investments in affiliates 80,936 Total assets $ 3,559,098 Depreciation of property, plant and equipment $ 37,862 $ 11,932 $ 4,654 $ 64,505 $ 19,347 $ — $ 138,300 Amortization expense $ 3,864 $ 14,135 $ 6,669 $ 38,553 $ 15,712 $ — $ 78,933 Pension credit (expense) $ 25,197 $ 6,263 $ 44,989 $ (638 ) $ (847 ) $ (1,363 ) $ 73,601 Kaplan stock-based incentive compensation $ 25,302 $ 25,302 Capital expenditures $ 32,551 $ 11,032 $ 1,737 $ 166,887 $ 12,020 $ — $ 224,227 Operating revenues $ 918,234 $ 364,758 $ 413,904 $ 358,916 $ 353,821 $ — $ 2,409,633 Income (loss) from operations $ 114,435 $ 177,396 $ 49,119 $ 65,967 $ (41,846 ) $ (25,189 ) $ 339,882 Equity in losses of affiliates (36,466 ) Interest expense, net (53,764 ) Other expense, net (19,782 ) Income before income taxes $ 229,870 $ 116,023 $ 191,531 $ 55,877 $ 95,906 $ (32,012 ) $ (25,189 ) $ 402,136 Identifiable assets $ 684,908 $ 430,444 $ 452,453 $ 757,083 $ 482,014 $ 41,075 $ 2,847,977 Investments in marketable equity securities 221,137 Investments in affiliates 131,629 Total assets $ 3,200,743 Depreciation of property, plant and equipment $ 38,579 $ 12,991 $ 5,059 $ 47,670 $ 13,649 $ — $ 117,948 Amortization expense $ 1,588 $ 14,135 $ 6,758 $ 30,069 $ 10,084 $ — $ 62,634 Pension (expense) credit $ (5,579 ) $ 5,767 $ 37,341 $ (599 ) $ (667 ) $ — $ 36,263 Kaplan stock-based incentive compensation $ 6,000 $ 6,000 Capital expenditures $ 33,117 $ 11,672 $ 1,858 $ 96,167 $ 29,569 $ — $ 172,383 2001 and 2000 results, adjusted to exclude amortizationNewspaper publishing operating income in 2003 includes gain on sale of goodwill and indefinite-lived intangible assets no longer amortized under SFAS 142.54
N.O. SUMMARY OF QUARTERLY OPERATING RESULTS AND COMPREHENSIVE INCOME (UNAUDITED)December 29, 2002January 2, 2005 and December 30, 200128, 2003 are as follows (in thousands, except per share amounts): First Second Third Fourth Quarter Quarter Quarter Quarter Operating revenues Advertising $ 273,564 $ 316,102 $ 292,523 $ 344,645 Circulation and subscriber 161,298 168,614 171,535 173,689 Education 146,929 149,695 160,454 164,047 Other 18,531 13,292 15,781 13,504 600,322 647,703 640,293 695,885 Operating costs and expenses Operating 333,239 335,443 342,411 358,862 Selling, general and administrative 176,866 160,387 162,642 164,200 Depreciation of property, plant and equipment 41,173 41,286 45,808 43,641 Amortization of goodwill and other intangibles 152 159 172 172 551,430 537,275 551,033 566,875 Income from operations 48,892 110,428 89,260 129,010 Equity in losses of affiliates (6,506 ) (9,183 ) (1,254 ) (2,366 ) Interest income 133 59 69 71 Interest expense (8,867 ) (8,797 ) (8,717 ) (7,438 ) Other income (expense), net 6,454 (5,963 ) 1,115 27,268 Income before income taxes and cumulative effect of change in accounting principle 40,106 86,544 80,473 146,545 Provision for income taxes 16,400 35,400 32,700 52,800 Income before cumulative effect of change in accounting principle 23,706 51,144 47,773 93,745 (12,100 ) — — — Net income 11,606 51,144 47,773 93,745 Redeemable preferred stock dividends (525 ) (259 ) (249 ) — Net income available for common shares $ 11,081 $ 50,885 $ 47,524 $ 93,745 Basic earnings per common share: Before cumulative effect of change in accounting principle $ 2.44 $ 5.35 $ 5.00 $ 9.86 Cumulative effect of change in accounting principle (1.27 ) — — — Net income available for common shares $ 1.17 $ 5.35 $ 5.00 $ 9.86 Diluted earnings per common share: Before cumulative effect of change in accounting principle $ 2.43 $ 5.34 $ 4.99 $ 9.83 Cumulative effect of change in accounting principle (1.27 ) — — — Net income available for common shares $ 1.16 $ 5.34 $ 4.99 $ 9.83 Basic average number of common shares outstanding 9,498 9,503 9,506 9,509 Diluted average number of common shares outstanding 9,512 9,521 9,523 9,537 2002 Quarterly Comprehensive Income $ 3,380 $ 47,493 $ 58,333 $ 90,861 First Second Third Fourth Quarter Quarter Quarter Quarter Operating revenues Advertising $ 299,127 $ 338,060 $ 323,021 $ 386,662 Circulation and subscriber 180,259 185,728 185,521 190,302 Education 258,271 276,696 293,621 306,303 Other 21,312 17,907 17,869 19,445 758,969 818,391 820,032 902,712 Operating costs and expenses Operating 409,681 420,407 422,894 464,077 Selling, general and administrative 198,132 203,334 210,488 223,413 Depreciation of property, plant and equipment 43,859 44,769 45,020 41,690 Amortization of goodwill and other intangibles 2,380 3,881 1,332 1,741 654,052 672,391 679,734 730,921 Income from operations 104,917 146,000 140,298 171,791 Equity in (losses) earnings of affiliates (1,716 ) (353 ) 539 (761 ) Interest income 344 458 351 469 Interest expense (6,861 ) (6,830 ) (6,874 ) (7,467 ) Other income (expense), net 742 (71 ) 858 6,598 Income before income taxes 97,426 139,204 135,172 170,630 Provision for income taxes 38,000 54,300 52,700 64,700 Net income 59,426 84,904 82,472 105,930 Redeemable preferred stock dividends (502 ) (245 ) (245 ) — Net income available for common shares $ 58,924 $ 84,659 $ 82,227 $ 105,930 Basic earnings per common share $ 6.17 $ 8.85 $ 8.59 $ 11.07 Diluted earnings per common share: $ 6.15 $ 8.82 $ 8.57 $ 11.03 Basic average shares outstanding 9,550 9,563 9,568 9,571 Diluted average shares outstanding 9,582 9,596 9,598 9,601 2004 Quarterly comprehensive income $ 74,806 $ 78,719 $ 90,962 $ 136,089 (1) Cumulative effect charge presented in the first quarter as required by SFAS 142.5556
First Second Third Fourth (in thousands, except per share amounts) Quarter Quarter Quarter Quarter Operating revenues Advertising $ 297,974 $ 312,881 $ 277,425 $ 321,047 Circulation and subscriber 148,016 161,260 174,716 169,036 Education 121,341 119,442 127,159 125,329 Other 19,068 10,326 13,007 12,997 586,399 603,909 592,307 628,409 Operating costs and expenses Operating 343,416 340,114 345,567 358,003 Selling, general and administrative 147,915 151,409 144,954 142,480 Depreciation of property, plant and equipment 34,632 35,867 34,765 33,036 Amortization of goodwill and other intangibles 17,192 19,926 20,068 21,748 543,155 547,316 545,354 555,267 Income from operations 43,244 56,593 46,953 73,141 Equity in losses of affiliates (12,461 ) (6,641 ) (26,535 ) (23,023 ) Interest income 325 1,047 226 570 Interest expense (14,624 ) (13,240 ) (11,861 ) (9,914 ) Other income (expense), net 308,769 (10,717 ) (4,365 ) (9,949 ) Income before income taxes 325,253 27,042 4,418 30,825 Provision for income taxes 126,200 12,550 2,850 16,300 Net income 199,053 14,492 1,568 14,525 Redeemable preferred stock dividends (526 ) (263 ) (263 ) — Net income available for common shares 198,527 14,229 1,305 14,525 Basic earnings per common share $ 20.94 $ 1.50 $ 0.14 $ 1.53 Diluted earnings per common share $ 20.90 $ 1.50 $ 0.14 $ 1.53 Basic average number of common shares outstanding 9,479 9,485 9,489 9,492 Diluted average number of common shares outstanding 9,499 9,502 9,502 9,501 2001 Quarterly Comprehensive Income (loss) $ 187,049 $ 25,860 $ (937 ) $ 25,342 Net income available for common shares, as reported $ 198,527 $ 14,229 $ 1,305 $ 14,525 Amortization of goodwill and other intangibles, net of tax 12,224 13,863 13,948 14,954 Pro forma net income available for common shares $ 210,751 $ 28,092 $ 15,253 $ 29,479 Basic earnings per share $ 22.23 $ 2.96 $ 1.61 $ 3.11 Diluted earnings per share $ 22.19 $ 2.96 $ 1.61 $ 3.10 First Second Third Fourth (in thousands, except per share amounts) Quarter Quarter Quarter(1 )Quarter Operating revenues Advertising $ 277,121 $ 316,288 $ 285,143 $ 343,772 Circulation and subscriber 172,036 176,348 175,595 182,269 Education 177,778 195,560 224,663 240,076 Other 13,505 18,744 20,678 19,335 640,440 706,940 706,079 785,452 Operating costs and expenses Operating 348,634 368,974 378,864 411,043 Selling, general and administrative 169,170 187,493 244,299 191,330 Depreciation of property, plant and equipment 43,395 43,212 42,420 44,821 Amortization of goodwill and other intangibles 149 363 398 526 561,348 600,042 665,981 647,720 Income from operations 79,092 106,898 40,098 137,732 Equity in losses of affiliates (2,642 ) (5,524 ) (1,116 ) (484 ) Interest income 114 458 189 191 Interest expense (7,237 ) (6,658 ) (7,037 ) (6,872 ) Other income (expense), net 48,135 2,274 1,565 3,412 Income before income taxes 117,462 97,448 33,699 133,979 Provision for income taxes 44,400 36,800 13,800 46,500 Net income 73,062 60,648 19,899 87,479 Redeemable preferred stock dividends (517 ) (258 ) (252 ) — Net income available for common shares $ 72,545 $ 60,390 $ 19,647 $ 87,479 Basic earnings per common share $ 7.62 $ 6.34 $ 2.06 $ 9.17 Diluted earnings per common share $ 7.59 $ 6.32 $ 2.06 $ 9.15 Basic average shares outstanding 9,526 9,527 9,532 9,536 Diluted average shares outstanding 9,553 9,555 9,556 9,563 2003 Quarterly comprehensive income $ 61,417 $ 79,992 $ 24,158 $ 106,596 2001 results are adjusted to exclude amortization of goodwillimpact from certain unusual items (after-tax and indefinite-lived intangible assets no longer amortized under SFAS 142.diluted EPS amounts): First Second Third Fourth Quarter Quarter Quarter Quarter Early retirement program charges ($1.3 million and $19.5 million in the second and fourth quarters, respectively) $ (0.14 ) $ (2.04 ) Gain on sale of IHT ($32.3 million) $ 3.38 Gain on sale of land ($25.5 million) $ 2.66 Kaplan stock compensation expense for 10% premium on Kaplan stock option offer ($6.4 million) $ (0.67 ) Establishment of Kaplan Educational Foundation ($3.9 million) $ (0.41 ) 56SCHEDULE IITHE WASHINGTON POST COMPANYSCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS 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 31, 2000 Allowance for doubtful accounts and returns $ 51,179,000 $ 74,540,000 $ 67,716,000 $ 58,003,000 Allowance for advertising rate adjustments and discounts 9,442,000 2,662,000 4,909,000 7,195,000 $ 60,621,000 $ 77,202,000 $ 72,625,000 $ 65,198,000 Year Ended December 30, 2001 Allowance for doubtful accounts and returns $ 58,003,000 $ 98,655,000 $ 88,689,000 $ 67,969,000 Allowance for advertising rate adjustments and discounts 7,195,000 4,163,000 6,079,000 5,279,000 $ 65,198,000 $ 102,818,000 $ 94,768,000 $ 73,248,000 Year Ended December 29, 2002 Allowance for doubtful accounts and returns $ 67,969,000 $ 91,091,000 $ 98,820,000 $ 60,240,000 Allowance for advertising rate adjustments and discounts 5,279,000 4,938,000 5,061,000 5,156,000 $ 73,248,000 $ 96,029,000 $ 103,881,000 $ 65,396,000
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, 2002 Allowance for doubtful accounts and returns $ 67,969,000 $ 91,091,000 $ 98,820,000 $ 60,240,000 Allowance for advertising rate adjustments and discounts 5,279,000 4,938,000 5,061,000 5,156,000 $ 73,248,000 $ 96,029,000 $ 103,881,000 $ 65,396,000 Year Ended December 28, 2003 Allowance for doubtful accounts and returns $ 60,240,000 $ 93,565,000 $ 91,951,000 $ 61,854,000 Allowance for advertising rate adjustments and discounts 5,156,000 6,371,000 6,857,000 4,670,000 $ 65,396,000 $ 99,936,000 $ 98,808,000 $ 66,524,000 Year Ended January 2, 2005 Allowance for doubtful accounts and returns $ 61,854,000 $ 106,605,000 $ 102,807,000 $ 65,652,000 Allowance for advertising rate adjustments and discounts 4,670,000 7,874,000 7,231,000 5,313,000 $ 66,524,000 $ 114,479,000 $ 110,038,000 $ 70,965,000 2000-2002.2002–2004. Operating results prior to 2002 include amortization of goodwill and certain other intangible assets that are no longer amortized under SFAS 142. (in thousands, except per share amounts) 2004 2003 2002 Operating revenues $ 3,300,104 $ 2,838,911 $ 2,584,203 Income from operations $ 563,006 $ 363,820 $ 377,590 Income before cumulative effect of change in accounting principle $ 332,732 $ 241,088 $ 216,368 Cumulative effect of change in method of accounting for goodwill and other intangibles — — (12,100 ) Net income $ 332,732 $ 241,088 $ 204,268 Basic earnings per common share Before cumulative effect of change in accounting principle $ 34.69 $ 25.19 $ 22.65 Cumulative effect of change in accounting principle — — (1.27 ) Net income available for common shares $ 34.69 $ 25.19 $ 21.38 Basic average shares outstanding 9,563 9,530 9,504 Diluted earnings per share Before cumulative effect of change in accounting principle $ 34.59 $ 25.12 $ 22.61 Cumulative effect of change in accounting principle — — (1.27 ) Net income available for common shares $ 34.59 $ 25.12 $ 21.34 Diluted average shares outstanding 9,592 9,555 9,523 Cash dividends $ 7.00 $ 5.80 $ 5.60 Common shareholders’ equity $ 251.93 $ 217.46 $ 193.18 Current assets $ 754,367 $ 556,336 $ 410,834 Working capital (deficit) 66,206 (184,661 ) (353,157 ) Property, plant and equipment 1,089,952 1,051,373 1,094,400 Total assets 4,316,641 3,962,058 3,611,773 Long-term debt 425,889 422,471 405,547 Common shareholders’ equity 2,412,482 2,074,941 1,837,293 (in thousands, except per share amounts) 2002 2001 2000 $ 2,584,203 $ 2,411,024 $ 2,409,633 Income from operations $ 377,590 $ 219,932 $ 339,882 Income before cumulative effect of changes in accounting principles $ 216,368 $ 229,639 $ 136,470 Cumulative effect of change in method of accounting for goodwill and other intangibles (12,100 ) — — Cumulative effect of change in method of accounting for income taxes — — — Net income $ 204,268 $ 229,639 $ 136,470 Basic earnings per common share Income before cumulative effect of changes in accounting principles $ 22.65 $ 24.10 $ 14.34 Cumulative effect of changes in accounting principles (1.27 ) — — Net income available for common shares $ 21.38 $ 24.10 $ 14.34 Basic average shares outstanding 9,504 9,486 9,445 Diluted earnings per share Income before cumulative effect of changes in accounting principles $ 22.61 $ 24.06 $ 14.32 Cumulative effect of changes in accounting principles (1.27 ) — — Net income available for common shares $ 21.34 $ 24.06 $ 14.32 Diluted average shares outstanding 9,523 9,500 9,460 Cash dividends $ 5.60 $ 5.60 $ 5.40 Common shareholders’ equity $ 193.18 $ 177.30 $ 156.55 Current assets $ 382,955 $ 396,857 $ 405,067 Working capital (deficit) (353,157 ) (37,233 ) (3,730 ) Property, plant and equipment 1,094,400 1,098,211 927,061 Total assets 3,583,894 3,559,098 3,200,743 Long-term debt 405,547 883,078 873,267 Common shareholders’ equity 1,837,293 1,683,485 1,481,007 (1) Operating revenues have been reclassified to conform with the current year presentation.58 (in thousands, except per share amounts) 1999 1998 1997 1996 1995 1994 1993 $ 2,212,177 $ 2,107,593 $ 1,952,986 $ 1,851,058 $ 1,716,971 $ 1,611,629 $ 1,496,029 Income from operations $ 388,453 $ 378,897 $ 381,351 $ 337,169 $ 271,018 $ 274,875 $ 238,980 Income before cumulative effect of changes in accounting principles $ 225,785 $ 417,259 $ 281,574 $ 220,817 $ 190,096 $ 169,672 $ 153,817 Cumulative effect of change in method of accounting for goodwill and other intangibles — — — — — — — Cumulative effect of change in method of accounting for income taxes — — — — — — 11,600 Net income $ 225,785 $ 417,259 $ 281,574 $ 220,817 $ 190,096 $ 169,672 $ 165,417 Basic earnings per common share Income before cumulative effect of changes in accounting principles $ 22.35 $ 41.27 $ 26.23 $ 20.08 $ 17.16 $ 14.66 $ 13.10 Cumulative effect of changes in accounting principles — — — — — — 0.98 Net income available for common shares $ 22.35 $ 41.27 $ 26.23 $ 20.08 $ 17.16 $ 14.66 $ 14.08 Basic average shares outstanding 10,061 10,087 10,700 10,964 11,075 11,577 11,746 Diluted earnings per share Income before cumulative effect of changes in accounting principles $ 22.30 $ 41.10 $ 26.15 $ 20.05 $ 17.15 $ 14.65 $ 13.10 Cumulative effect of changes in accounting principles — — — — — — 0.98 Net income available for common shares $ 22.30 $ 41.10 $ 26.15 $ 20.05 $ 17.15 $ 14.65 $ 14.08 Diluted average shares outstanding 10,082 10,129 10,733 10,980 11,086 11,582 11,750 Cash dividends $ 5.20 $ 5.00 $ 4.80 $ 4.60 $ 4.40 $ 4.20 $ 4.20 Common shareholders’ equity $ 144.90 $ 157.34 $ 117.36 $ 121.24 $ 107.60 $ 99.32 $ 92.84 Current assets $ 476,159 $ 404,878 $ 308,492 $ 382,631 $ 406,570 $ 375,879 $ 625,574 Working capital (deficit) (346,389 ) 15,799 (300,264 ) 100,995 98,393 102,806 367,041 Property, plant and equipment 854,906 841,062 653,750 511,363 457,359 411,396 363,718 Total assets 2,986,944 2,729,661 2,077,317 1,870,411 1,732,893 1,696,868 1,622,504 Long-term debt 397,620 395,000 — — — 50,297 51,768 Common shareholders’ equity 1,367,790 1,588,103 1,184,074 1,322,803 1,184,204 1,126,933 1,087,419 (1) Operating revenues have been reclassified to conform with the current year presentation.59[This Page Intentionally Left Blank]• gain of $32.3 million ($3.38 per share) on the sale of the Company’s 50% interest in the International Herald Tribune • gain of $25.5 million ($2.66 per share) on sale of land at The Washington Post newspaper • charge of $20.8 million ($2.18 per share) for early retirement programs at The Washington Post newspaper • Kaplan stock compensation expense of $6.4 million ($0.67 per share) for the 10% premium associated with the purchase of outstanding Kaplan stock options • charge of $3.9 million ($0.41 per share) in connection with the establishment of the Kaplan Educational Foundation • gain of $16.7 million ($1.75 per share) on the exchange of certain cable systems • charge of $11.3 million ($1.18 per share) for early retirement programs at Newsweek and The Washington Post newspaper • gain of $196.5 million ($20.69 per share) on the exchange of certain cable systems • non-cash goodwill and other intangibles impairment charge of $19.9 million ($2.10 per share) recorded in conjunction with the Company’s BrassRing investment • charges of $18.3 million ($1.93 per share) from the write-down of a non-operating parcel of land and certain cost-method investments to their estimated fair value
2001 2000 1999 1998 1997 1996 1995 Operating revenues $ 2,411,024 $ 2,409,633 $ 2,212,177 $ 2,107,593 $ 1,952,986 $ 1,851,058 $ 1,716,971 Income from operations $ 219,932 $ 339,882 $ 388,453 $ 378,897 $ 381,351 $ 337,169 $ 271,018 Income before cumulative effect of change in accounting principle $ 229,639 $ 136,470 $ 225,785 $ 417,259 $ 281,574 $ 220,817 $ 190,096 Cumulative effect of change in method of accounting for goodwill and other intangibles — — — — — — — Net income $ 229,639 $ 136,470 $ 225,785 $ 417,259 $ 281,574 $ 220,817 $ 190,096 Per Share Amounts Basic earnings per common share Before cumulative effect of change in accounting principle $ 24.10 $ 14.34 $ 22.35 $ 41.27 $ 26.23 $ 20.08 $ 17.16 Cumulative effect of change in accounting principle — — — — — — — Net income available for common shares $ 24.10 $ 14.34 $ 22.35 $ 41.27 $ 26.23 $ 20.08 $ 17.16 Basic average shares outstanding 9,486 9,445 10,061 10,087 10,700 10,964 11,075 Diluted earnings per share Before cumulative effect of change in accounting principle $ 24.06 $ 14.32 $ 22.30 $ 41.10 $ 26.15 $ 20.05 $ 17.15 Cumulative effect of change in accounting principle — — — — — — — Net income available for common shares $ 24.06 $ 14.32 $ 22.30 $ 41.10 $ 26.15 $ 20.05 $ 17.15 Diluted average shares outstanding 9,500 9,460 10,082 10,129 10,733 10,980 11,086 Cash dividends $ 5.60 $ 5.40 $ 5.20 $ 5.00 $ 4.80 $ 4.60 $ 4.40 Common shareholders’ equity $ 177.30 $ 156.55 $ 144.90 $ 157.34 $ 117.36 $ 121.24 $ 107.60 Financial Position Current assets $ 426,603 $ 405,067 $ 476,159 $ 404,878 $ 308,492 $ 382,631 $ 406,570 Working capital (deficit) (37,233 ) (3,730 ) (346,389 ) 15,799 (300,264 ) 100,995 98,393 Property, plant and equipment 1,098,211 927,061 854,906 841,062 653,750 511,363 457,359 Total assets 3,588,844 3,200,743 2,986,944 2,729,661 2,077,317 1,870,411 1,732,893 Long-term debt 883,078 873,267 397,620 395,000 — — — Common shareholders’ equity 1,683,485 1,481,007 1,367,790 1,588,103 1,184,074 1,322,803 1,184,204 • charge of $16.5 million ($1.74 per share) for an early retirement program at The Washington Post newspaper • gains of $18.6 million ($1.81 per share) on the sales of marketable equity securities • gain of $168.0 million ($16.59 per share) on the disposition of the Company’s 28% interest in Cowles Media Company • gain of $13.8 million ($1.36 per share) from the sale of 14 small cable systems • gain of $12.6 million ($1.24 per share) on the disposition of the Company’s investment in Junglee, a facilitator of internet commerce • gain of $28.4 million ($2.65 per share) from the sale of the Company’s investments in Bear Island Paper Company LP and Bear Island Timberlands Company LP • gain of $16.0 million ($1.50 per share) from the sale of the PASS regional cable sports network • gain of $8.4 million ($0.75 per share) from the sale of the Company’s investment in American PCS, LP • charge of $5.6 million ($0.51 per share) for the write-off of the Company’s interest in Mammoth Micro Productions Exhibit Exhibit Exhibit Number Number Description Number Description 3 .1 Restated Certificate of Incorporation of the Company dated November 13, 2003 (incorporated by reference to Exhibit 3.1 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 28, 2003). 3 .1 Certificate of Incorporation of the Company as amended through May 12, 1988, and the Certificate of Designation for the Company’s Series A Preferred Stock filed January 22, 1996 (incorporated by reference to Exhibit 3.1 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 1995). 3 .2 Certificate of Designation for the Company’s Series A Preferred Stock dated September 22, 2003 (incorporated by reference to Exhibit 3.2 to Amendment No. 1 to the Company’s Current Report on Form 8-K dated September 22, 2003). 3 .2 By-Laws of the Company as amended through March 8, 2001 (incorporated by reference to Exhibit 3.2 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2000). 3 .3 By-Laws of the Company as amended and restated through September 22, 2003 (incorporated by reference to Exhibit 3.4 to the Company’s Current Report on Form 8-K dated September 22, 2003). 4 .1 Form of the Company’s 5.50% Notes due February 15, 2009, issued under the Indenture dated as of February 17, 1999, between the Company and The First National Bank of Chicago, as Trustee (incorporated by reference to Exhibit 4.2 to the Company’s Annual Report on Form 10-K for the fiscal year ended January 3, 1999). 4 .1 Form of the Company’s 5.50% Notes due February 15, 2009, issued under the Indenture dated as of February 17, 1999, between the Company and The First National Bank of Chicago, as Trustee (incorporated by reference to Exhibit 4.2 to the Company’s Annual Report on Form 10-K for the fiscal year ended January 3, 1999). 4 .2 Indenture dated as of February 17, 1999, between the Company and The First National Bank of Chicago, as Trustee (incorporated by reference to Exhibit 4.3 to the Company’s Annual Report on Form 10-K for the fiscal year ended January 3, 1999). 4 .2 Indenture dated as of February 17, 1999, between the Company and The First National Bank of Chicago, as Trustee (incorporated by reference to Exhibit 4.3 to the Company’s Annual Report on Form 10-K for the fiscal year ended January 3, 1999). 4 .3 364-Day Credit Agreement dated as of August 14, 2002, among the Company, Citibank, N.A., Wachovia Bank, N.A., SunTrust Bank, JPMorgan Chase Bank, Bank One, N.A., The Bank of New York and Riggs Bank (incorporated by reference to Exhibit 4.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 29, 2002). 4 .3 First Supplemental Indenture dated as of September 22, 2003, among WP Company LLC, the Company and Bank One, NA, as successor to The First National Bank of Chicago, as Trustee, to the Indenture dated as of February 17, 1999, between The Washington Post Company and The First National Bank of Chicago, as Trustee (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K dated September 22, 2003). 4 .4 5-Year Credit Agreement dated as of August 14, 2002, among the Company, Citibank, N.A., Wachovia Bank, N.A., SunTrust Bank, JPMorgan Chase Bank, Bank One, N.A., The Bank of New York and Riggs Bank (incorporated by reference to Exhibit 4.4 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 29, 2002). 4 .4 364-Day Credit Agreement dated as of August 11, 2004, among the Company, Citibank, N.A., JP Morgan Chase Bank, Wachovia Bank, N.A., SunTrust Bank, The Bank of New York and Riggs Bank N.A. (incorporated by reference to Exhibit 4.4 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 26, 2004). 10 .1 The Washington Post Company Annual Incentive Compensation Plan as amended and restated effective June 30, 1995 (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 1996).* 4 .5 5-Year Credit Agreement dated as of August 14, 2002, among the Company, Citibank, N.A., Wachovia Bank, N.A., SunTrust Bank, Bank One, N.A., JPMorgan Chase Bank, The Bank of New York and Riggs Bank N.A. (incorporated by reference to Exhibit 4.4 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 29, 2002). 10 .2 The Washington Post Company Long-Term Incentive Compensation Plan as amended and restated effective March 9, 2000 (incorporated by reference to Exhibit 10.2 to the Company’s Annual Report on Form 10-K for the fiscal year ended January 2, 2000).* 4 .6 Consent and Amendment No. 1 dated as of August 13, 2003, to the 5-Year Credit Agreement dated as of August 14, 2002, among the Company, Citibank, N.A. and the other lenders that are parties to such Credit Agreement (incorporated by reference to Exhibit 4.3 to the Company’s Current Report on Form 8-K dated September 22, 2003). 10 .3 The Washington Post Company Stock Option Plan as amended and restated through March 12, 1998 (corrected copy) (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended April 1, 2001).* 10 .1 The Washington Post Company Incentive Compensation Plan as adopted January 20, 2005 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated January 20, 2005).* 10 .4 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 fiscal year ended December 30, 2001).* 10 .2 The Washington Post Company Stock Option Plan as amended and restated effective May 31, 2003 (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 28, 2003).* 10 .5 The Washington Post Company Deferred Compensation Plan as amended and restated effective March 9, 2000 (incorporated by reference to Exhibit 10.5 to the Company’s Annual Report on Form 10-K for the fiscal year ended January 2, 2000).* 10 .3 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 fiscal year ended December 30, 2001).* 11 Calculation of earnings per share of common stock. 10 .4 The Washington Post Company Deferred Compensation Plan as amended and restated effective February 24, 2005 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated February 28, 2005).* 21 List of subsidiaries of the Company. 11 Calculation of earnings per share of common stock. 23 Consent of independent accountants. 21 List of subsidiaries of the Company. 24 Power of attorney dated March 13, 2003. 23 Consent of independent accountants. 99 .1 Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act. 24 Power of attorney dated February 24, 2005. 99 .2 Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act. 31 .1 Rule 13a-14(a)/15d-14(a) Certification of the Chief Executive Officer. 31 .2 Rule 13a-14(a)/15d-14(a) Certification of the Chief Financial Officer. 32 .1 Section 1350 Certification of the Chief Executive Officer. 32 .2 Section 1350 Certification of the Chief Financial Officer.
Form 10-K.612004 FORM 10-K