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 1, 2006
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 if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes þ No o
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 (the “Act”). Yes o No þ
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 a large accelerated filer, an accelerated filer, or a non-accelerated filer. See the definitions of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Act. (Check one):
Large accelerated filer þ Accelerated filer o Non-accelerated filer o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes [x]o No [ ]þ
Aggregate market value of the Company’s commonvoting stock held by non-affiliates on June 30, 2002,July 1, 2005, 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.$4,700,000,000.
Shares of common stock outstanding at February 28, 2003:21, 2006:
Class A Common Stock – 1,722,250 shares
Class B Common Stock – 7,804,4007,879,881 shares
Documents Partially Incorporatedpartially incorporated by Reference:reference:
Definitive Proxy Statement for the Company’s 20032006 Annual Meeting of Stockholders
(incorporated in Part III to the extent provided in Items 10, 11, 12, 13 and 1314 hereof).
| Page | |||||||||||||||||
| PART I | |||||||||||||||||
| Business | 1 | ||||||||||||||||
| Newspaper Publishing | 1 | ||||||||||||||||
| Television Broadcasting | 3 | ||||||||||||||||
| Magazine Publishing | 7 | ||||||||||||||||
| Cable Television Operations | |||||||||||||||||
| Education | 12 | ||||||||||||||||
| Other Activities | 16 | ||||||||||||||||
| Risk Factors | |||||||||||||||||
| Unresolved Staff Comments | |||||||||||||||||
| Properties | |||||||||||||||||
| Legal Proceedings | |||||||||||||||||
| Submission of Matters to a Vote of Security Holders | |||||||||||||||||
| PART II | |||||||||||||||||
| Market for the Registrant’s Common Equity, | |||||||||||||||||
| Selected Financial Data | |||||||||||||||||
| Management’s Discussion and Analysis of Financial Condition and Results of | |||||||||||||||||
| Quantitative and Qualitative Disclosures About Market Risk | |||||||||||||||||
| Financial Statements and Supplementary Data | |||||||||||||||||
| Changes in and Disagreements | |||||||||||||||||
| Controls and Procedures | 26 | ||||||||||||||||
| Other Information | 27 | ||||||||||||||||
| PART III | |||||||||||||||||
| Directors and Executive Officers of the Registrant | |||||||||||||||||
| Executive Compensation | |||||||||||||||||
| Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | |||||||||||||||||
| Certain Relationships and Related Transactions | |||||||||||||||||
| PART IV | |||||||||||||||||
| Exhibits and Financial Statement Schedules | |||||||||||||||||
| SIGNATURES | 29 | ||||||||||||||||
| INDEX TO FINANCIAL INFORMATION | 30 | ||||||||||||||||
| Management’s Discussion and Analysis of Results of Operations and Financial Condition (Unaudited) | |||||||||||||||||
| Financial Statements and Schedules: | |||||||||||||||||
| Report of Independent Registered Public Accounting Firm | |||||||||||||||||
| Consolidated Statements of Income | |||||||||||||||||
| and Consolidated Statements of Comprehensive Income for the Three Fiscal Years | |||||||||||||||||
| Consolidated Balance Sheets at January 1, 2006 and January 2, 2005 | |||||||||||||||||
| Consolidated Statements of Cash Flows for the Three Fiscal Years Ended | |||||||||||||||||
| Consolidated Statements of Changes in Common Shareholders’ Equity for the Three Fiscal Years Ended | |||||||||||||||||
| Notes to Consolidated Financial Statements | |||||||||||||||||
| 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 | |||||||||||||||||
| Exhibit 11 | |||||||||||||||||
| Exhibit 21 | |||||||||||||||||
| Exhibit 23 | |||||||||||||||||
| Exhibit 24 | |||||||||||||||||
| Exhibit 31.1 | |||||||||||||||||
| Exhibit 31.2 | |||||||||||||||||
| Exhibit 32.1 | |||||||||||||||||
| Exhibit 32.2 | |||||||||||||||||
The principal business activities of
During each of the last three years the
assets at January 1, 2006, January 2, 2005 and December 28, 2003 respectively.
| Average Paid Circulation | |||||||||
| Daily | Sunday | ||||||||
| 1998 | 774,414 | 1,095,091 | |||||||
| 1999 | 775,005 | 1,085,060 | |||||||
| 2000 | 777,521 | 1,075,918 | |||||||
| 2001 | 771,614 | 1,066,723 | |||||||
| 2002 | 768,600 | 1,058,889 | |||||||
| Average Paid Circulation | ||||||||
| Daily | Sunday | |||||||
| 2001 | 771,614 | 1,066,723 | ||||||
| 2002 | 767,843 | 1,058,458 | ||||||
| 2003 | 749,323 | 1,035,204 | ||||||
| 2004 | 729,068 | 1,016,163 | ||||||
| 2005 | 706,135 | 983,243 | ||||||
2006.
| 1998 | 1999 | 2000 | 2001 | 2002 | ||||||||||||||||||||||||||||||||||||||
| 2001 | 2002 | 2003 | 2004 | 2005 | ||||||||||||||||||||||||||||||||||||||
| Total Inches (in thousands) | Total Inches (in thousands) | 3,199 | 3,288 | 3,363 | 2,714 | 2,657 | Total Inches (in thousands) | 2,714 | 2,657 | 2,675 | 2,726 | 2,661 | ||||||||||||||||||||||||||||||
| Full-Run Inches | 2,806 | 2,745 | 2,634 | 2,296 | 2,180 | Full-Run Inches | 2,296 | 2,180 | 2,121 | 2,120 | 1,941 | |||||||||||||||||||||||||||||||
| Part-Run Inches | 393 | 543 | 729 | 418 | 477 | Part-Run Inches | 418 | 477 | 554 | 606 | 720 | |||||||||||||||||||||||||||||||
| Preprints (in millions) | Preprints (in millions) | 1,650 | 1,647 | 1,602 | 1,556 | 1,656 | Preprints (in millions) | 1,556 | 1,656 | 1,835 | 1,887 | 1,833 | ||||||||||||||||||||||||||||||
newsroom staff of 19. Advertising sales, production, and certain other services forExpressare provided by WP Company. newsletters that cover specific topics, including political news and analysis, personal technology, and entertainment. In June 2005, WPNI assumed responsibility for the production of theBudget Travel magazine website and relaunched it as BudgetTravelOnline.com. This site contains editorial content fromArthur Frommer’s Budget Travelmagazine and other sources.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 47,00040,000 subscribers.correspondents, reporters and photographers on its staff,staff; draws upon the news reporting facilities of the major wire servicesservices; and maintains correspondents in 20 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 PostPost’s’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 160200 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 of 2002 WPNI began requiringrequires most users accessing the washingtonpost.com site to register and provide their year of birth, gender, zip code, job title and zip code.the type of industry in which they work. The resulting information helps WPNI provide online advertisers with opportunities to target specific geographic areas and demographic groups. WPNI also offers registered users the option of receiving variouse-mailInternet site,website, which was launched in 1998 and contains editorial content from the print edition ofNewsweekas well as daily news updates and analysis, photo galleries, 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 PostPost.. Similarly, washingtonpost.com is being provided access to certain MSNBC.com multimedia content.3935 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 20022005 these newspapers had a
| National | $ | 101,055,000 | |||
| Local | 212,379,000 | ||||
| Network | 13,810,000 | ||||
| Total | $ | 327,244,000 | |||
| Station Location and | Expiration | Expiration | Total Commercial | Expiration | Total Commercial Stations in | |||||||||||||||||||||||||||||||||||||||||||
| Year Commercial | National | Date of | Date of | Stations in DMA(b) | National | Expiration | Date of | 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 | ||||||||||||||||||||||||||||||||||||
| KPRC | 10th | NBC | Aug. 1, | Dec. 31, | VHF-3 | VHF-3 | ||||||||||||||||||||||||||||||||||||||||||
| Houston, Tx | 2006 | 2011 | UHF-11 | UHF-11 | ||||||||||||||||||||||||||||||||||||||||||||
| 1949 | ||||||||||||||||||||||||||||||||||||||||||||||||
| WDIV | 10th | NBC | Oct. 1, | Dec. 31, | VHF-4 | VHF-4 | 11th | NBC | Oct. 1, | Dec. 31, | VHF-4 | VHF-4 | ||||||||||||||||||||||||||||||||||||
| Detroit, Mich. | 2005 | 2011 | UHF-6 | UHF-5 | ||||||||||||||||||||||||||||||||||||||||||||
| Detroit, Mich | 2005(c) | 2011 | UHF-6 | UHF-5 | ||||||||||||||||||||||||||||||||||||||||||||
| 1947 | ||||||||||||||||||||||||||||||||||||||||||||||||
| KPRC | 11th | NBC | Aug. 1, | Dec. 31, | VHF-3 | VHF-3 | ||||||||||||||||||||||||||||||||||||||||||
| Houston, Tx. | 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 | ||||||||||||||||||||||||||||||||||||||||||||
| Miami, Fla | 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 | ||||||||||||||||||||||||||||||||||||||||||||
| Orlando, Fla | 2013 | 2015 | UHF-10 | UHF-9 | ||||||||||||||||||||||||||||||||||||||||||||
| 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 | ||||||||||||||||||||||||||||||||||||||||||||
| San Antonio, Tx | 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 | |||||||||||||||||||||||||||||||||||||||||||||
| Jacksonville, Fla | 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 theFCC-assigned channels for DTV operations. |
| (c) | The Company has filed timely applications to renew the FCC licenses of WDIV and WPLG, and such filings extend the effectiveness of each 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 for stations to 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 Company’s TV stations except for WKMG have two channels that are within this range, and they have accordingly elected to operate on either their existing analog or digital channel. In WKMG’s case, only its analog channel is within this range and, because of technical issues related to its analog channel, WKMG is seeking another channel between channels 2 and 51 to use as its DTV channel whenall-digital operations commence. All channel elections are subject to final FCC approval in a rulemaking proceeding that is expected to occur later in 2006 deadline for ceasing analog operations. As a part of this review, theor in 2007.
The Telecommunications Act of 1996 requires 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 review its broadcast ownership rules every two years and to repeal or modify any rule it determines is no longer in the public interest. In August 1999analog signals as well). Among other things, the FCC amended its local ownership rulewill require stations to permit one companyair three hours of “core” children’s programming on their primary digital video stream and additional core children’s programming if they also broadcast free multicast video streams. The FCC is currently considering petitions for reconsideration with respect to own two televisionthese rules and accordingly has stayed their effectiveness.
themselves.
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 localover-the-air channels in return forHDTV.
number of subscriptions to the other services offered by Cable One).
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 yearin 1993 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 acost-of6
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 directDirect 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-airover-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 for DBS operators who wish to distribute the signals of local television stations to satellite subscribers in the markets served by such stations. This Act continued the limitation on importing the signals of distant network-affiliated stations contained in the original compulsory license for DBS operators.
The Telecommunications Act of 1996 balances this grant of video authority to telephone companies by removing various regulatory barriers to the offering of telephone services by cable companies and others. The Act preempts state and local laws that have barred local telephone competition in some states. In addition, the Act requires local telephone companies to permit cable companies and other competitors to connect with the telephone network and requires telephone companies to give competitors access to the essential features and functionalities of the local telephone network (such as switching capability, signal carriage from the subscriber’s residence to the switching center, and directory assistance) on an unbundled basis. As an alternative method of providing local telephone service, the Act permits cable companies and others to purchase telephone service on a wholesale basis and then resell it to their subscribers.
new companies.
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.
regular telephone (connected to an adaptor) to make and receive calls to or from anyone on the public network. The 1996 Act preempts state and local regulatory barriers to the offering of telephone service by cable companies and others, and the FCC has used that federal provision to preempt specific state laws that seek to regulate VoIP. Other provisions of the 1996 Act enable a competitor such as a cable company to exchange voice and data traffic with the incumbent telephone company and to purchase certain features at reduced costs, and these provisions have enabled some cable companies to offer a competing telephone service. Earlier this year, the FCC ruled that a VoIP provider that enables its customers to make calls to and from persons that use the public switched telephone network must provide its customers with the same “enhanced 911” or “E911” features that traditional telephone and wireless companies are obligated to provide. This decision has been challenged on appeal, though VoIP providers in the meantime have been required to comply, including by ceasing to offer VoIP services in areas where they cannot ensure E911 compliance. The FCC took another step in extending certain requirements to cable modem providers by ruling that Internet access providers and VoIP providers are subject to the requirements of the Communications Assistance for Law Enforcement Act (CALEA), which requires covered carriers and their equipment suppliers to deploy equipment that law enforcement can readily access for lawful wiretap purposes. The FCC ruling, if upheld on appeal, means that cable modem (and DSL) providers and VoIP companies all would be subject to CALEA’s requirements. It is difficult at this time to gauge the cost of compliance, since the FCC has not finished writing those rules, but the Company’s cable modem operations are likely to incur additionalnon-recurring and recurring costs to comply with CALEA. During 2004 some states sought to regulate VoIP service pursuant to their common carrier jurisdiction, but VoIP providers challenged these actions before the FCC. Later in 2004, the FCC ruled that VoIP services are interstate services subject exclusively to the FCC’s federal jurisdiction. This decision, if upheld on appeal (consumer groups and some state regulatory commissions have filed an appeal), is significant because it includes VoIP offered by cable systems as within the scope of activities that are not subject to state telecommunications regulation. Legislation also has been introduced in Congress to accomplish the same objective, though the prospect for passage of such legislation is uncertain.
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 MediaEducation
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 FTC Kaplan Limited (formerly known as The Financial Training Company); and higher education, which consists of Kaplan’s Higher Education Division and several companies that provide higher education services outside the U.S.
The Test Preparation and Admissions Division also includes Kaplan’s publishing activities. Kaplan currently co-publishes more than 150is theco-publisher with Simon & Schuster of 187 book titles, predominatelypredominantly in the areas of test preparation, admissions and career guidance, and life skills, through a joint venture with Simon & Schuster, and also develops educational software for the K through K–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.
Kaplan Financial.
Singapore.
No proceedingan accrediting agency recognized 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
As a general matter, schools participating in Title IV programs are not financially responsible for the failure of their students to repay Title IV loans. However the Department of Education may fine a school for a failure to comply with Title IV requirements and may require a school to repay Title IV program funds if it finds that such funds have been improperly disbursed. In addition, there may be other legal theories under which a school could be subject to suit as a result of alleged irregularities in the administration of student financial aid.
Several Title IV funds received in 2005 by the schools in Kaplan’s Higher Education Division) have unresolved show cause orders issued against them by their respective accrediting agencies. Such orders are issued when an accrediting agency is concerned that an institution may be out of compliance with one or more applicable accrediting standards, and gives the institution an opportunity to respond before any further action is taken. The institution may be able to demonstrate that the concern is unfounded, that the necessary corrective action has already been taken or that it has implemented an ongoing program that will resolve the concern. The agency may then vacate the order or continue the order pending the receipt of additional information or the achievement of specified objectives. If the agency’s concerns are not resolved to its satisfaction, it may then withdraw the institution’s accreditation.
On January 1, 2003,
mill’s wood requirements. In 2005 Bowater Mersey produced about 270,000 tons* of newsprint.
20022005The Washington PostandExpressconsumed about 191,000*175,300 tons and 4,400 tons of newsprint, respectively. Such newsprint was purchased from a number of suppliers, including Bowater Incorporated, which supplied approximately 39% ofThe Post’s 2002 the 2005 newsprint requirements.requirements for these newspapers. Although for many years some of the newsprintThe Postpurchased by WP Company 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 byThe Postdelivered to WP Company has 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.2002.2005. Discounts from the announced price of newsprint can be substantial, and prevailing discounts increased duringdecreased throughout the first three quartersyear. The Company believes adequate supplies of the year and decreased slightly during the fourth quarter.newsprint are available toThe Washington Postbelieves it has adequate newsprint availableand the other newspapers published by the Company’s subsidiaries through contracts with its various suppliers. OverMore than 90% of the newsprint usedconsumed byThe Post WP company’s printing plants includes some recycled content. The Company owns 80% of the stock of Capitol Fiber Inc., which handles and sells to recycling industries old newspapers, paper and other paperrecyclable materials collected in Washington, D.C., Maryland and northern Virginia.20022005 the operations of The Daily Herald Company and Post-Newsweek Media, Inc. consumed approximately 6,5006,800 and 20,60023,000 tons of newsprint, respectively, which waswere obtained in each case from various suppliers. Approximately 85%* 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 quotations.
The domestic edition ofNewsweekconsumed about 29,20029,000 tons of paper in 2002,2005, the bulk of which was purchased from six major suppliers. The current cost of body paper (the principal paper component of the magazine) is approximately $860$995 per ton.
by Washingtonpost.Newsweek Interactive facesface competition from many other Internet services particularly(particularly in the case of washingtonpost.com from services that feature national and international news,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 City (a unit of AOL Time Warner) producesDigital City Washington,DC, 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 databaseor direct-shopping databases covering a broad range of product lines. OtherSome nationally managed sites, such as Fandango and Weather.com also offer local information and services (in the case of those sites, movie information and tickets and local weather). In addition, major national search engines have entered local markets. For example, Google and Yahoo have launched local services which offer directory information for local markets with enhanced functionality such as mapping and links to reviews and other information. At the same time, other competitors are focusing on vertical niches in specific content areas: autos.msn.com (which is majority owned by Microsoft),areas. For example, AutoTrader.com and Autobytel.com for example, aggregate national car listings; Realtor.com aggregates national real estate listings; while Monster.com, HotJobs.comYahoo! Hotjobs (which is owned by Yahoo!) and CareerBuilder.com (which is jointly owned by Gannett, Knight-Ridder and Tribune Co.) aggregate employment listings.
All of these vertical-niche sites can be searched for local listings, typically by using zip codes. Finally, several new services have been launched in the past several years that have challenged established business models. Many of these are free classified sites, one of which is craigslist.com. In addition, the role of the free classified board as a center for community information has been expanded by “hyper local” neighborhood sites such as dcurbanmom.com (which provides community information to mothers in the DC Metro area) and backfence.com (which offers community information about McLean and Reston, Virginia as well as Bethesda, Maryland). Some free classified sites, such as Oodle and Indeed, feature databases populated with listings indexed from other publishers’ classified sites. Google Base is taking a somewhat different approach and is accepting free uploads of any type of structured data, from classified listings to an individual’s favorite recipes. For its part,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 publications and online services, as well as with other forms of advertising.
using a relatively new wireless technology known as WiMAX.
The future of the Company’s various business activities depends on a number of factors, including the general strength of the economy, population growth and the level of economic activity in the particular geographic and other markets it serves, the impact of technological innovations on entertainment, news and information dissemination systems, overall advertising revenues, the relative efficiency of publishing and broadcasting compared to other forms of advertising and, particularly in the case of television broadcasting and cable operations, the extent and nature of government regulations.
The Washington Post
2003, and no new agreement has been negotiated.
2007.
2006.
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).
statement is made, even if new information subsequently becomes available.
| • | Changes in Prevailing Economic Conditions, Particularly in the Specific Geographic Markets Served by the Company’s Newspaper Publishing and Television Broadcasting Businesses |
| • | Actions of Competitors, Including Price Changes and the Introduction of Competitive Offerings |
| • | Changing Preferences of Readers or Viewers |
| • | Changing Perceptions About the Effectiveness of Publishing and Television Broadcasting in Delivering Advertising |
| • | Technological Innovations in News, Information or Video Programming Distribution Systems |
| • | Changes in the Nature and Extent of Government Regulations, Particularly in the Case of Television Broadcasting and Cable Television Operations |
| • | Changes in the Cost or Availability of Raw Materials, Particularly Newsprint |
| • | Changes in the Extent to Which Standardized Tests Are Used in the Admissions Process by Colleges or Graduate Schools |
| • | Changes in the Extent to Which Licensing and Proficiency Examinations Are Used to Qualify Individuals to Pursue Certain Careers |
| • | Reductions in the Amount of Funds Available Under the Federal Title IV Programs to Students in Kaplan’s Higher Education Division Schools |
The
The
Post-Newsweek Media, Inc. owns a two-story brick building that serves as its headquarters and as headquarters forThe Gazette Newspapersand a separate two-story brick building that houses its Montgomery County commercial printing business. All of these properties are located in Gaithersburg, Maryland. In addition, Post-Newsweek Media Inc. owns a one-story brick building in Waldorf, Maryland that houses its Charles County commercial printing business and also serves as the headquarters for two of theSouthern Maryland NewspapersNewspapers.. The other editorial and sales offices forThe Gazette Newspapersand theSouthern Maryland Newspapersare located in leased premises. Post-Newsweek Media owns approximately seven acres of land in Prince George’s County, Maryland, on which it is currently constructing a combination office building and commercial printing facility. That facility is expected to become operational in 2007, at which time production operations at its Gaithersburg and Waldorf locations will be discontinued. The PostNewsweek Tech Media Division leases office space in Washington, D.C. and San Francisco,in Oakland, California.
The headquarters offices of the Cable Television Division are located in a three-story office building in Phoenix, Arizona which 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 all the tower sites used by the Division are leased.
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.
2015. Express Publications Company subleases part of this space. In addition, WPNI leases space in Washington, D.C. and subleases space from Newsweek in New York City forSlate’s offices in those cities, and also leases office space for WPNI sales representatives in New York City, Chicago, San Francisco, Los Angeles and Detroit.
The
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).
12, 2006. 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 dispositiondispositions should not have a material adverse effect on the financial position, liquidity or results of operations of the Company.
| 2002 | 2001 | 2005 | 2004 | |||||||||||||||||||||||||||||
| Quarter | High | Low | High | Low | High | Low | High | Low | ||||||||||||||||||||||||
| January – March | $618 | $520 | $652 | $524 | $963 | $880 | $921 | $790 | ||||||||||||||||||||||||
| April – June | 634 | 545 | 608 | 542 | 900 | 814 | 983 | 886 | ||||||||||||||||||||||||
| July – September | 675 | 516 | 599 | 470 | 900 | 787 | 956 | 830 | ||||||||||||||||||||||||
| October – December | 743 | 646 | 540 | 479 | 806 | 717 | 999 | 862 | ||||||||||||||||||||||||
$1.75 per share during 2004.
2730 hereof.Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Neither the Company nor any of its subsidiaries is a party to any derivative financial instruments.
January 1, 2006.
| 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 | 230,945,000 | $ | 263,937,000 | $ | 296,929,000 | $ | 362,913,000 | $ | 395,905,000 | $ | 428,897,000 | ||||||||||||||||||||||
2004.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION these losses. Kaplan results for 2005 include $3.0 million in stock compensation expense, compared to $32.5 million in stock compensation expense in 2004. Gazette Newspapers. Operating margin at the newspaper publishing division was 13% for 2005 and 15% for 2004. increased 33%. discussed above. Operating margin at the broadcast division was 48% for 2004 and 44% for 2003. market. 2003. Education Division.Education division revenue in 2003. 45,000 at the end of 2003. 2003 for the Kaplan Educational Foundation. connection with Section 404 of the Sarbanes–Oxley Act of 2002. The reduction in affiliate losses for 2004 is attributable to improved operating results at both BrassRing and Bowater. December 28, 2003, follows (in millions): International Herald Tribune. Capital Expenditures.During 2006. from $7.00 per share in 2004. 2006. intangibles, net. report the impact of SFAS 123R on the adoption date of January 2, 2006 as a cumulative effect of change in accounting. In policies or procedures may deteriorate. The information on pages The Consolidated Balance Sheets and Consolidated Statements of Changes in Common Shareholders’ Equity have been revised to reflect unearned stock compensation from restricted stock awards in common shareholders’ equity. This revised classification also resulted in a corresponding reduction in other current assets and deferred charges and other assets. 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. Investments in Marketable Equity Securities.Investments in marketable equity securities at There were no investments in marketable equity securities in 2005 and 2003. The Company made $94.6 million in investments in marketable equity securities in 2004. During Summarized financial data for the affiliates’ operations are as follows (in thousands): 2003. Income. During August 2006. 2004. 2003. option accounting. by the January 2006 valuation. In 2006, based on the $1,833 per share value, 2,619 shares or share equivalents will be issued. The expense of this award has been reflected in the 2005 results of operations. Changes in Kaplan stock options outstanding for the years ended The assumed health care cost trend rate used in measuring the postretirement benefit obligation at 2003. 2003. for $2.8 million. In property, plant and equipment. 2003. Activity related to the Company’s goodwill and intangible assets during For segment reporting purposes, the education division has two primary segments, supplemental education and higher education. Kaplan corporate overhead and “other” is also included; “other ” includes Kaplan stock compensation expense and amortization of certain intangibles.December 29, 2002,January 1, 2006, 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 2730 hereof.Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.Item 10. Directors and Executive Officers of the Registrant.20032006 Annual Meeting of Stockholders is incorporated herein by reference thereto.Item 11. Executive Compensation. Participation,”20032006 Annual Meeting of Stockholders is incorporated herein by reference thereto.Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. 20032006 Annual Meeting of Stockholders is incorporated herein by reference thereto.Item 13. Certain Relationships and Related Transactions.20032006 Annual Meeting of Stockholders is incorporated herein by reference thereto.Item 14. Controls and Procedures.A reviewevaluation was performed byServices.management, at the direction2006 Annual Meeting of the Company’s Chief Executive Officer (the Company’s principal executive officer)Stockholders is incorporated herein by reference thereto.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),Financial Statement Schedules.of a date within 90 days prior to the filingpart 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.PART IVreport:Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.(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 2730 hereof. (ii)2. Financial Statement SchedulesAs listed in the index to financial information on page 30 hereof. 3. Exhibits As listed in the index to exhibits on page 6169 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.232814, 2003.3, 2006. THE WASHINGTON POST COMPANY (Registrant) By /s/ JOHNJohn B. MORSE, JR.Morse, Jr. John B. Morse, Jr. Vice President-FinancePresident–Finance14, 2003:3, 2006: Donald E. Graham Chairman of the Board and Chief Executive Officer (Principal Executive Officer) and Director John B. Morse, Jr. Vice President-FinancePresident–Finance (Principal Financial and Accounting Officer) Warren E. Buffett Director Daniel B. BurkeChristopher C. Davis Director Barry 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/ JOHNJohn B. MORSE, JR.Morse, Jr. John B. Morse, Jr. Attorney-in-FactAttorney-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–Finance Page 2931 Financial Statements and Schedules: 3842 39and Consolidated Statements of Comprehensive Income for the Three Fiscal Years Ended December 29, 2002January 1, 2006 3943 4044 4246 4347 4448 Financial Statement Schedule for the Three Fiscal Years Ended December 29, 2002:January 1, 2006: 5765 5866 consolidated financial statementsConsolidated Financial Statements or the notesNotes thereto referred to above.27[This Page Intentionally Left Blank]2820022005 COMPARED TO 20012004December 29, 2002 was $204.3January 1, 2006, down from $332.7 million ($21.3434.59 per share), compared with net income for the fiscal year 2004 ended December 30, 2001January 2, 2005. Operating results for the Company in 2005 include the impact of $229.6charges and lost revenues associated with Katrina and other hurricanes; the Company estimates that the adverse impact on($24.06(after-tax impact of $17.3 million, or $1.80 per share). The Company’s 2002 results include 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 certainMost of the Company’s investments (after-tax impact of $2.3 million, or $0.24 per share). The Company’s 2001was at the cable division, but the television broadcasting and education divisions were also adversely impacted. 2005 results included netalso include non-operating gains from the salesales of non-operating land and exchange of certain cable systemsmarketable securities (after-tax impact of $196.5$11.2 million, or $20.69$1.16 per share), a non-cash goodwill.intangibles impairment chargeneighboring communities where storm damage from Hurricane Katrina was significant. Overall, the hurricane had an estimated adverse impact of $23.7 million on the cable division’s results in 2005. Through the end of 2005, the Company recorded by one$9.6 million in property, plant and equipment losses; incurred an estimated $9.4 million in incremental cleanup, repair and other expenses in connection with the hurricane; and experienced an estimated $9.7 million reduction in operating income from subscriber losses and the granting of a30-day service credit to all its 94,000 pre-hurricane Gulf Coast subscribers. As of December 31, 2005, the Company has recorded a $5.0 million receivable for recovery of a portion of cable hurricane losses through December 31, 2005 under the Company’s affiliates (after-tax impactproperty and business interruption insurance program; this recovery was recorded as a reduction of $19.9 million, or $2.10 per share),cable division expense in the fourth quarter of 2005. Actual insurance recovery amounts for cable losses fromthrough December 31, 2005 may ultimately be higher than the write-downestimated $5.0 million. Additional costs and losses related to the hurricane will continue to be incurred in 2006, and property and business interruption insurance coverage is expected to cover some of a non-operating parcel of land 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.20022005 was $2,584.2$3,553.9 million, up 7 percent8% compared to revenue of $2,411.0$3,300.1 million in 2001, with2004. The increase in revenue is due mostly to significant revenue growth at the education division, along with small increases at the Company’s newspaper publishing and cable divisions, offset by declines at the Company’s television broadcasting and broadcastmagazine publishing divisions. Advertising revenue increased 1 percentdeclined 2% in 2002,2005, and circulation and subscriber revenue increased 3 percent.1%. Education revenue increased 26 percent24% in 2002,2005, and other revenue increased 10 percent.was up 1%. The increasedecrease in advertising revenue is due to primarily to significant political revenues atdeclines in the broadcast division in 2002.television broadcasting and magazine publishing divisions. The increase in circulation and subscriber revenue is due to an 11 percenta 3% increase in subscriber revenue at the cable division from rapidly growingcontinued growth in cable modem, basic and digital service revenues, andoffset by a 4 percent increase2% decrease in circulation revenue at The Post, due to circulation price increases. This increase was offset byand a 14 percent decrease3% decline in Newsweek circulation revenues due primarily to subscription rate declines at the domestic circulation revenue due to difficult comparisons with 2001, when Newsweek saw spikes in newsstand sales from regular and specialinternational editions surrounding the events of September 11.Newsweek. Revenue growth at Kaplan, Inc. (about one-third27% of which was from acquisitions) accounted for the increase in education revenue.4 percent11% to $2,206.6$3,039.0 million, from $2,112.8$2,737.1 million in 2001 (excluding amortization of goodwill and other intangible assets that are no longer amortized under SFAS 142).2004. The increase is primarily due to higher depreciation expense, higher stock-based compensationexpenses from operating growth at the education division, early retirement program charges,higher expenses from operating growth and Hurricane Katrina at the cable division, higher newsprint prices and a reduced net pension credit, offset by lower expenses at the newspaper publishing and magazine publishing segments due to lower newsprint prices and tight cost controls.Operating income increased 27 percent to $377.6 million, from $298.3 milliona decrease in 2001, adjusted as if SFAS 142 had been adopted at the beginning of 2001. Operating results for 2002 include $19.0 million in pre-tax charges from early retirement programs. The Company benefited from improved operating results at the education 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 accruals at Kaplan.20022005 operating income includes $64.4$37.9 million of net pension credits, compared to $76.9$42.0 million in 2001.2004. These amounts exclude $19.0$1.2 million and $3.3$0.1 million in charges related to early retirement programs in 20022005 and 2001,2004, 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 slightly2005 increased 2% to $842.0$957.1 million, from $842.7$938.1 million in 2001.2004. Division operating income for 20022005 totaled $109.0$125.4 million, an increasea decrease of 23 percent12% from pro forma$143.1 million in 2004. The decline in operating income of $88.6 million in 2001. Improved2005 reflects a 4% increase in newsprint expense at The Washington Post, as well as increased pension and payroll costs; in addition, operating results for 2002 reflect2005 include losses from the benefits of cost control initiatives employed throughout the division and a 22 percent decrease in newsprint expense; these savingsrecent Slate acquisition. The declines were partially offset by a pre-tax early retirement program charge of $2.9 millionimproved results at Washingtonpost.Newsweek Interactive and a reduced net pension credit.decreased 3 percentin 2005 declined 1% to $555.7$595.8 million, from $574.3$603.3 million in 2001.2004. The decrease in print advertising revenue for 2002 isdecline was partially due to a continued declineone less week included in 2005 compared to 2004. The Post reported declines in national, retail and supplements advertising in 2005, offset by increases in zoned and classified advertising. Classified recruitment advertising revenue with volume decreases of 32 percent, offset by higherwas up 6% to $79.3 million in 2005, from $74.8 million in 2004. from several advertising categories, including preprints, real estate and other classified advertising.Circulation revenues at The Post were up 4 percentwas down 2% for 20022005 due to increasesdeclining circulation and one less week in single copy newsstand and home delivery prices in 2002.fiscal 2005 compared to fiscal 2004. Daily circulation at The Post declined 1.7 percent,4.3% and Sunday circulation declined 1.2 percent4.1% in 2002. For29the year ended December 29, 2002,2005; average daily circulation at The Post totaled 760,000694,100 (unaudited) and average Sunday circulation totaled 1,054,000969,000 (unaudited). 2005 2004 Customer premise equipment $ 30.0 $ 23.5 Commercial 0.2 0.1 Scaleable infrastructure 8.1 8.6 Line extensions 14.6 14.0 Upgrade/rebuild 13.1 15.6 Support capital 45.3 17.1 Total $ 111.3 $ 78.9 2005 2004 % Change Supplemental education $ 690,815 $ 575,014 20 Higher education 721,579 559,877 29 $ 1,412,394 $ 1,134,891 24 Supplemental education $ 117,075 $ 100,795 16 Higher education 82,660 93,402 (12 ) Kaplan corporate overhead (33,305 ) (31,533 ) (6 ) Other (8,595 ) (41,209 ) 79 $ 157,835 $ 121,455 30 2005 2004 Gain on sales of marketable securities $ 12.7 $ — Gain on sales of non-operating land 5.1 — Foreign currency (losses) gains, net (8.1 ) 5.5 Impairment write-downs on cost method and other investments (1.5 ) (0.7 ) Gain on exchange of cable system business — 0.5 Other gains 0.8 2.8 Total $ 9.0 $ 8.1 18 percent32% to $35.9$62.0 million, during the year, from $30.4$46.9 million in 2001.2003. Local and national online advertising revenues grew 60 percent in 2002, while46% and online classified advertising revenue at the Jobs section ofon washingtonpost.com decreased 1 percent in 2002.atfor the television broadcasting division increased 9 percent15% to $343.6$361.7 million in 2002,2004, from $314.0$315.1 million in 2001,2003, due primarily to $31.8$34.3 million in political advertising as well as Olympics-relatedin 2004, $8.0 million in incremental summer Olympics-the first quarter of 2002. Additionally, revenues in 2001 were lower due to a general softness in advertising2004 and several days of commercial-free coverage followingin connection with the eventsIraq war in March 2003.September 11. Thesethe revenue increases were partially offset by reduced network compensation revenues in 2002.wasand KSAT in San Antonio were ranked number one in the latestNovember 2004 ratings period, Monday through Friday, sign-on to sign-off; KSATWKMG in San Antonio was tied for number one;Orlando ranked second; WJXT in Jacksonville and KPRC in Houston ranked second;third; and WPLG was tied for secondthird among English-language stations in the Miami market; and KPRC in Houston and WKMG in Orlando ranked third in their respective markets.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.In July 2002, WJXT in Jacksonville, Florida, began operations as an independent station when its network affiliation with CBS ended.$349.1$366.1 million for 2002,2004, a 7 percent decrease4% increase from $374.6$353.6 million in 2001. Revenues for 2001 reflect a significant spike2003. The revenue increase in newsstand circulation revenue at Newsweek due to regular and special editions related to the events of September 11. Advertising revenues were down for 2002,2004 is primarily due to declinesa 9% increase in advertising revenue, largely from increased ad pages at the domestic and international division. editions of Newsweek and at Arthur Frommer’s Budget Travel magazine, as well as lower travel-related advertising revenues at the Pacific edition of Newsweek in 2003 due to the SARS outbreak, offset by a 4% decline in circulation revenue.$25.7$52.9 million for 2002, a decrease2004, an increase of 20 percent22% from pro forma operating income of $32.0$43.5 million in 2001. Operating2003. The improvement in operating results for 2002 include $16.1 million in pre-tax charges in connection with early retirement programs at Newsweek. Expenses for 2001 included approximately $5.0 million in nonrecurring costs associated with regular and special editions related to September 11. Costs for 2002 also have declined2004 is primarily due to payroll and other relatedincreased advertising revenue, continued cost savings from employees accepting early retirement programs offered by Newsweek, and from significant cost savings programs put into placecontrols at Newsweek’s international operations.Excluding amortization of goodwilleditions and other intangibles, operatingimproved results at the Company’s trade magazines.7 percent14% for 20022004 and 9 percent12% for 2001.$428.5$499.3 million for 20022004 represents an 11 percenta 9% increase from revenuesrevenue of $386.0$459.4 million in 2001.2003. The 20022004 revenue increase is principally due to rapidcontinued growth in the division’s cable modem and digital service revenues. revenues and a $2 monthly rate increase for basic cable service, effective March 1, 2004, at most of the cable division’s systems.15 percent18% in 20022004 to $80.9$104.2 million, from pro forma operating income of $70.6$88.4 million in 2001.2003. The increase in 2004 operating income for 2002 is due mostly to the division’s significant revenue growth, offset by higher programming, Internet and 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 depreciation expense for 2002 is primarily due to significant capital spending, primarily in 2001 and 2000, which has enabledcosts. Operating margin at the cable television division to offer digitalwas 21% in 2004 and broadband cable services to its subscribers; depreciation expense for 2002 also includes $5.4 million19% in charges for obsolete assets. The cable division began its rollout plan for these services in the third quarter of 2000. 2003.2002,2004, the cable division had approximately 214,900219,200 digital cable subscribers, representingdown slightly from 222,900 at December 31, 2003. This represents a 30 percent31% penetration of the subscriber base in the markets where digital services are offered. Digital services are currently offered in markets serving 98 percent 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. At December 31, 2002,2004, 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 718,000 basic subscribers, compared to 752,700 at the end of December 2001, with the decrease due primarily to the difficult economic environment over the past year; basic customer disconnects for non-payment of bills have increased significantly. At December 31, 2002, the cable division had 79,400178,300 CableONE.net service subscribers, compared to 46,400133,800 at December 31, 2003. Both digital and cable modem services are now offered in virtually all of the endcable division’s markets. At December 31, 2004, the cable division had 709,100 basic subscribers, compared to 720,800 at December 31, 2003. The decrease is due to small losses associated with the basic rate increase discussed above, along with continued competition from DBS providers.2001,31, 2003. The increase is due to a largean increase in the Company’snumber of cable modem deployment (offered to 93 percentcustomers. RGUs include about 6,500 subscribers who receive free basic video service, primarily local governments, schools and other organizations as required by various franchise agreements.homes passed atcable division capital expenditures for 2004 and 2003, in the end of December 2002) and subscriber penetration rates. Of these subscribers, 78,100 and 32,900 were cable modem subscribers at the end of 2002 and 2001, respectively, with the remainder being dial-up subscribers.NCTA Standard Reporting Categories (in millions): 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 3020022004 increased 26 percent35% to $621.1$1,134.9 million, from $493.7$838.1 million in 2001. Kaplan reported operating income for the year of $20.5 million, compared to a pro forma operating loss of $13.1 million in 2001. Approximately one-third of the increase in Kaplan2003. Excluding 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 amortizationdivision and the professional training schools that are part of supplemental education, education division revenue increased 24% in 2001,2004. Kaplan reported operating income of $121.5 million for the year, compared to an operating loss of $11.7 million in 2003; a significant portion of the improvement is from a $93.1 million decline in costs associated with the Kaplan stock option plan and the establishment of the Kaplan Educational Foundation, as discussed previously. A summary of operating results for 20022004 compared to 20012003 is as follows (in thousands): 2002 2001 % Change 2004 2003 % Change Supplemental education $ 371,248 $ 328,039 13% Supplemental education $ 575,014 $ 469,757 22 Higher education 249,877 165,642 51% Higher education 559,877 368,320 52 $ 621,125 $ 493,681 26% $ 1,134,891 $ 838,077 35 Supplemental education $ 54,103 $ 27,509 97% Supplemental education $ 100,795 $ 87,044 16 Higher education 27,569 9,149 201% Higher education 93,402 58,428 60 Kaplan corporate overhead (26,143 ) (23,981 ) (9% ) Kaplan corporate overhead (31,533 ) (36,782 ) 14 Other (35,017 ) (25,738 ) (36% ) Other (41,209 ) (120,399 ) 66 $ 20,512 $ (13,061 ) — $ 121,455 $ (11,709 ) — The improvementExcluding revenues from acquired businesses, supplemental education revenues grew by 14%. Test preparation revenue grew by 15% due to strong enrollment in the SAT/ PSAT, MCAT and Advanced Med. Operating results in 2004 reflect increased course development costs. Alsofor 2002also include professional real estate, insurance and security courses. Real estate publishing and training courses contributed to growth in supplemental education in 2004. The final component of supplemental education is Score!, which provides academic enrichment to children and has lower operating margins than the other supplemental education businesses due mostly to higher enrollments andfixed costs. Revenues at Score! were up slightly compared to a lesser extent, higher prices at Kaplan’s traditional test preparation business (particularly the LSAT, MCAT and GRE prep courses), as well as higher revenues and operating income from Kaplan’s CFA® and real estate licensure preparation services. Score! also contributed to the improved results, with increased enrollment, higher prices 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). Excluding revenue from acquired businesses, higher education revenues grew by 35% in 2004. Higher education results are showing significant growth, dueespecially the online programs, in which revenues more than doubled in 2004. At the end of 2004, higher education enrollments totaled 58,500, compared to student enrollment increases, high student retention rates and several acquisitions.expenses associated witha $6.5 million charge in the design and developmentfourth quarter 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 $34.5$32.5 million and $25.3$119.1 million for 2004 and 2003, respectively, related to this plan. The increase in otherstock compensation expense for 20022003 included the impact of the third quarter 2003 buyout offer for approximately 55% of the stock options outstanding at Kaplan. The stock compensation expense in 2004 is attributablebased on the remaining Kaplan stock options held by a small number of Kaplan executives after the 2003 buyout.an$32.8 million in 2004, from $30.3 million in 2003. The increase in stock-based incentive compensation, which is primarily due to an increasethe corporate office’s share of increased compliance costs in Kaplan’s estimated value.20022004 was $19.3$2.3 million, compared to losses of $68.7$9.8 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 2001.2003. The Company’s affiliate investments at the end of 20022004 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.$28.9$8.1 million in 2002,2004, compared to $283.7$55.4 million in 2003. The 2004 non-operating income, net, is primarily from foreign currency gains. The 2003 non-operating income, net, mostly comprises a $49.8 million pre-tax gain from the sale of the Company’s 50% interest in the International Herald Tribune.net,(expense) for 2001. The 2002 non-operating income includes a pre-tax gain of $27.8 million on the exchange of certain cable systems in the fourth quarter of 2002years ended January 2, 2005 and a gain on the sale of marketable securities; these gains were offset by write-downs recorded on certain investments. The 2001 non-operating income mostly comprised gains arising from the sale 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. 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 $33.5$26.4 million in 2002,2004, compared to $47.5$26.9 million in 2001.2003. At December 29, 2002,January 2, 2005, the Company had $664.8$484.1 million in borrowings outstanding at an average interest rate of 4.0 percent;5.1%; at December 30, 2001,28, 2003, the Company had $933.1$631.1 million in borrowings outstanding.38.8 percent38.7% for 2002,2004, compared to 40.7 percent37.0% 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 2001.2003. 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 decreasethe one-time gain arising from the sale of the Company’s interest in the overall state tax rate.Cumulative EffectFINANCIAL CONDITION: CAPITAL RESOURCES AND LIQUIDITYChange$140.1 million, financed with cash and $3.0 million in Accounting Principle.debt. The largest of these included BISYS Education Services, a provider of licensing education and compliance solutions for financial service institutions and professionals; The Kidum Group, the leading provider of test preparation services in Israel; and Asia Pacific Management Institute, a private education provider for undergraduate and postgraduate students in Asia. In 2002,January 2005, the Company completed its SFAS 142 transitional goodwill impairment test, resulting in an after-tax impairment lossthe acquisition of $12.1 million, or $1.27 per share, related to PostNewsweek Tech Media (partSlate, the online magazine, which is included as part of the magazineCompany’s newspaper publishing segment). This loss is included indivision. Most of the Company’s 2002 results as a cumulative effect of change in accounting principle.31RESULTS OF OPERATIONS — 2001 COMPARED TO 2000Net incomepurchase price for 2001the 2005 acquisitions 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, from the sale and exchange of certain cable systems in the first quarter; a non-cashallocated to goodwill and other intangibles, impairment charge recorded by the Company’s BrassRing affiliate (after-tax impactand property, plant and equipment.$19.9$59.6 million, or $2.10 per share);financed with cash and losses from the write-down$8.7 million of a non-operating parcel of land 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 atdebt. In addition, 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 income2001 declined 26 percentthe 2004 acquisitions was allocated 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 marginother intangibles.46 percentthe March 2003 acquisition of the stock of The Financial Training Company (FTC), for 2001£55.3 million ($87.4 million). Headquartered in London, FTC provides training services for accountants and 53 percent for 2000.Magazine Publishing Division.Revenuefinancial services professionals, with 28 training centers in the United Kingdom as well as operations in Asia. This acquisition was financed with cash and $29.7 million of debt, primarily to employees of the business. In November 2003, Kaplan acquired Dublin Business School, Ireland’s largest private undergraduate institution. Most of the purchase price 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 due2003 Kaplan acquisitions was allocated to fewer advertising pages at both the domesticgoodwill and international editions. The decline was offset in part by increased newsstand sales on regularother intangibles, and special editions related to the September 11 terrorist attacks, a higher pension creditproperty, plant 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,equipment.had approximately 239,500 digital cable subscribers, representing a 35 percent penetration of the subscriber baseacquired three additional systems 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 plan2003 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.$2.8 million. Most of the benefits frompurchase price for these new services are expectedacquisitions was allocated 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 business33units. Also included in 2000 corporate overhead results are costs associated with eScore.com.Other expense is comprised primarily of accrued charges 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,On January 1, 2003, the Company 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.During 2002, Kaplan acquired several businesses in its 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.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.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 2000.2002,2005, the Company’s capital expenditures totaled $153.0 million.$238.3 million; about $20.0 million is related to rebuilding efforts on the Gulf Coast of Mississippi due to Hurricane Katrina. The Company’s capital expenditures for 2002, 20012005, 2004 and 20002003 are disclosed in Note MN to the Consolidated Financial Statements. The Company estimates that its capital expenditures will total $180be in the range of $275 million to $300 million in 2003.December 29, 2002,January 1, 2006, the fair value of the Company’s investments in marketable equity securities was $216.5$329.9 million, which includes $214.8$262.3 million in Berkshire Hathaway Inc. Class A and B common stock and $1.7$67.6 million of various common stocks of publicly traded companies with e-commerce businesseducation concentrations.December 29, 2002,January 1, 2006 and January 2, 2005, the gross unrealized gain related to the Company’s Berkshire Hathaway Inc. stock investment totaled $29.9 million; the gross unrealized gain on this investment was $34.1$77.4 million at December 30, 2001.and $75.5 million, respectively. The Company presently intends to hold the Berkshire Hathawaycommon stock investment long term.Cost Method Investments.At December 29, 2002 and December 30, 2001,term, thus the Company held minority investmentsinvestment has been classified as a non-current asset in various non-public companies.the Consolidated Balance Sheets. 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 companies at the lower of cost or estimated fair value. During 2002 and 2001, the Company invested $0.3other marketable security investments totaled $18.3 million and $11.7$48.3 million respectively, in various cost method investees. At December 29, 2002at January 1, 2006 and December 30, 2001, the carrying value of the Company’s cost method investments totaled $9.5 million and $29.6 million,January 2, 2005, respectively.2002, 20012005 and 2000,2004, there were no share repurchases. During 2003, the Company repurchased 1,229910 shares 714 shares and 200 shares, respectively, of its Class B common stock at a cost of $0.8 million, $0.4 million and $0.1$0.7 million. At December 29, 2002,January 1, 2006, 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 20032006 was increased to $5.80$7.80 per share, from $5.60$7.40 per share in 20022005 and 2001.December 29, 2002,January 1, 2006, the Company had $28.8$215.9 million in cash and cash equivalents.At December 29, 2002,equivalents, compared to $119.4 million at January 2, 2005. As of January 1, 2006, the Company had $259.3 million in commercial paper borrowings outstanding at an average interest rateinvestments of 1.6 percent with various maturities throughout$59.2 million that are classified as “Cash and cash equivalents” in the first and second quarters of 2003. In addition,Company’s Consolidated Balance Sheet.$398.4which comprised $399.2 million of 5.5 percent, 10-year5.5% unsecured notes due February 2009. These15, 2009, and $29.2 million in other debt. The unsecured notes require semiannualsemi-annual interest payments of $11.0 million payable on February 15 and August 15.had $7.1 millionpartially financed several acquisitions in other debt.In2005.2002,2005, the Company replaced its expiring $250 million364-dayrevolving credit facility agreements with a new $250 million revolving credit facility on essentially the same terms. The new facility expires in August 2006. 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 downgradedratings to A1 from Aa3 and affirmedissuance and/or its revolving credit facility agreements.short-term debt rating at P-1.During 2002, the Company’s borrowings, netConsolidated Statements of repayments, decreased by $268.3Cash Flows, was $522.8 million with the decreasein 2005, compared to $561.7 million in 2004. The decline is primarily due to cash flow from operations.the Company’s reduction in operating income in 2005.2003. 2006 2007 2008 2009 2010 Thereafter Total Debt $ 24,820 $ 2,453 $ 1,295 $ 399,887 $ — $ — $ 428,455 137,530 133,733 111,888 86,138 58,252 189,246 716,787 Operating leases 95,226 91,109 82,649 71,907 61,703 185,392 587,986 391,570 104,020 76,775 62,409 4,741 352 639,867 7,200 8,800 10,400 12,000 13,600 107,992 159,992 Total $ 656,346 $ 340,115 $ 283,007 $ 632,341 $ 138,296 $ 482,982 $ 2,533,087 (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 2006 $ 250,000 2007 350,000 2008 — 2009 — 2010 — 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.$64.4$37.9 million, $76.9$42.0 million and $65.3$55.1 million for 2002, 20012005, 2004 and 2000,2003, 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$10 million compared to 2002.$15 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$7.5 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 percent7.6% in 2002, an increase of 10.9 percent2005, 4.3% in 2001,2004 and an increase of 19.0 percent16.7% in 2000,2003, 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.the carrying value of goodwill and indefinite-lived intangible assetsintangibles at least annually for impairment, generally utilizing a discounted cash flow model (inmodel. In the case of the Company’s cable systems, both a discounted cash flow model and an estimated faira market value per cable subscriber approach employing comparable sales analysis are used). The Company must make assumptions regarding estimated future cash flows and market values to determine a reporting unit’s estimated fair value.considered. 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. The Company must make assumptions regarding estimated future cash flows and market values to determine a reporting unit’s estimated fair value. 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 1, 2006, the Company has $1,255.4$1,643.1 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.award. The lossCompany is includedrequired to adopt SFAS 123R in the Company’s 2002 results asfirst quarter of 2006. SFAS 123R will have a cumulative effect of change in accounting principle.Stock Options — Change in Accounting Method.Effective the first day ofminimal impact on the Company’s 2002 fiscal year,results of operations for Company stock options as 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. Stockall unvested stock options awarded prior to fiscal year 2002 will continue to beat January 2, 2006 are accounted for under the fair-value-based method of accounting. The new standard will require the Company to change its accounting for Kaplan equity awards (Kaplan stock options and Kaplan shares or share equivalents) from the intrinsic value method under Accounting Principles Board Opinion No. 25, “Accountingto the fair-value-based method of accounting. This change is expected to result in the acceleration of expense recognition for Stock IssuedKaplan equity awards; however, it will not impact the overall Kaplan stock compensation expense that will ultimately be recorded over the life of the award. The Company has elected to Employees.”December 2002,the first quarter of 2006, the Company awarded 11,500 stock options, resulting in total stock option compensation expense of $45,000 for 2002.The accounting treatmentexpects to report an estimated $5.0 million as an after-tax charge for the Company’s Kaplan stock option plan is not impacted by thiscumulative effect of change in accounting method, as the expense relatedfor Kaplan equity awards.option plan has been and will continuecompensation plans.be recordedValue Acquired Assets Other than Goodwill,” required companies that had applied the residual method to value intangible assets to perform an impairment test on those intangible assets using the direct method by the end of the first quarter of 2005. The Company completed such an impairment test at its cable division in the Company’s resultsfirst quarter of operations.37ACCOUNTANTSREGISTERED PUBLIC ACCOUNTING FIRMThethe Board of Directors and
Shareholders of15(a)(i)15(1) on page 2328 and listed in the index on page 2730 present fairly, in all material respects, the financial position of The Washington Post Company and its subsidiaries at December 29, 2002January 1, 2006 and December 30, 2001,January 2, 2005, 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 1, 2006 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 1, 2006 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 1, 2006, based on criteria established inInternal Control — Integrated Frameworkissued 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
McLean, Virginia
March 3, 20063842 Fiscal year ended Fiscal year ended December 29, December 30, December 31, January 1, January 2, December 28, (in thousands, except per share amounts) (in thousands, except per share amounts) 2002 2001 2000 (in thousands, except per share amounts) 2006 2005 2003 Advertising $ 1,317,484 $ 1,346,870 $ 1,222,324 Advertising $ 1,226,834 $ 1,209,327 $ 1,396,583 Circulation and subscriber 747,079 741,810 706,248 Circulation and subscriber 675,136 653,028 598,741 Education 1,412,394 1,134,891 838,077 Education 621,125 493,271 352,753 Other 76,930 76,533 72,262 Other 61,108 55,398 61,556 3,553,887 3,300,104 2,838,911 2,584,203 2,411,024 2,409,633 Operating 1,369,955 1,387,101 1,305,546 Operating 1,909,615 1,717,059 1,549,262 Selling, general and administrative 664,095 586,758 583,623 Selling, general and administrative 931,337 835,367 792,292 Depreciation of property, plant and equipment 171,908 138,300 117,948 Gain on sale of land — — (41,747 ) Amortization of goodwill and other intangibles 655 78,933 62,634 Depreciation of property, plant and equipment 190,543 175,338 173,848 Amortization of goodwill and other intangibles 7,478 9,334 1,436 2,206,613 2,191,092 2,069,751 3,038,973 2,737,098 2,475,091 377,590 219,932 339,882 514,914 563,006 363,820 Equity in losses of affiliates (19,308 ) (68,659 ) (36,466 ) Equity in losses of affiliates (881 ) (2,291 ) (9,766 ) Interest income 332 2,167 967 Interest income 3,385 1,622 953 Interest expense (33,819 ) (49,640 ) (54,731 ) Interest expense (26,754 ) (28,032 ) (27,804 ) Other income (expense), net 28,873 283,739 (19,782 ) Other income (expense), net 8,980 8,127 55,385 353,668 387,539 229,870 499,644 542,432 382,588 137,300 157,900 93,400 185,300 209,700 141,500 216,368 229,639 136,470 (12,100 ) — — 204,268 229,639 136,470 314,344 332,732 241,088 (1,033 ) (1,052 ) (1,026 ) (981 ) (992 ) (1,027 ) $ 203,235 $ 228,587 $ 135,444 $ 313,363 $ 331,740 $ 240,061 $ 22.65 $ 24.10 $ 14.34 (1.27 ) — — $ 32.66 $ 34.69 $ 25.19 $ 32.59 $ 34.59 $ 25.12 $ 21.38 $ 24.10 $ 14.34 $ 22.61 $ 24.06 $ 14.32 (1.27 ) — — $ 21.34 $ 24.06 $ 14.32 Fiscal year ended Fiscal year ended December 29, December 30, December 31, January 1, January 2, December 28, (in thousands) (in thousands) 2002 2001 2000 (in thousands) 2006 2005 2003 $ 204,268 $ 229,639 $ 136,470 $ 314,344 $ 332,732 $ 241,088 Foreign currency translation adjustments 2,167 (3,104 ) (1,685 ) Foreign currency translation adjustments (8,834 ) 9,601 13,416 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 (15,014 ) 63,022 31,426 Less reclassification adjustment for realized (gains) losses included in net income (13,085 ) (202 ) 214 (8,213 ) 14,662 11,645 Income tax benefit (expense) related to other
comprehensive income (loss) 4,012 (6,987 ) (5,097 ) (36,933 ) 72,421 43,423 Income tax benefit (expense) related to other comprehensive income (loss) 10,964 (24,577 ) (12,348 ) (4,201 ) 7,675 6,548 (25,969 ) 47,844 31,075 $ 200,067 $ 237,314 $ 143,018 $ 288,375 $ 380,576 $ 272,163 The information on pages 44 through 56 is an integral part of the financial statements. 39CONSOLIDATED BALANCE SHEETS December 29, December 30, (in thousands) 2002 2001 Cash and cash equivalents $ 28,771 $ 31,480 Investments in marketable equity securities 1,753 16,366 Accounts receivable, net 285,374 279,328 Federal and state income taxes — 10,253 Inventories 27,629 19,042 Other current assets 39,428 40,388 382,955 396,857 Buildings 283,233 267,658 Machinery, equipment and fixtures 1,551,931 1,422,228 Leasehold improvements 85,720 79,108 1,920,884 1,768,994 Less accumulated depreciation (926,385 ) (794,596 ) 994,499 974,398 Land 34,530 34,733 Construction in progress 65,371 89,080 1,094,400 1,098,211 214,780 219,039 70,703 80,936 less accumulated amortization of
$463,580 and $443,925 1,255,433 1,206,761 493,786 447,688 71,837 109,606 $ 3,583,894 $ 3,559,098 The information on pages 44 through 56 is an integral part of the financial statements. 40 December 29, December 30, (in thousands, except share amounts) 2002 2001 Accounts payable and accrued liabilities $ 336,582 $ 253,346 Deferred revenue 135,419 130,744 Federal and state income taxes 4,853 — Short-term borrowings 259,258 50,000 736,112 434,090 136,393 130,824 194,480 192,540 261,153 221,949 405,547 883,078 1,733,685 1,862,481 12,916 13,132 — — 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 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 Capital in excess of par value 149,090 142,814 Retained earnings 3,179,607 3,029,595 Accumulated other comprehensive income (loss), net of taxes Cumulative foreign currency translation adjustment (7,511 ) (9,678 ) Unrealized gain on available-for-sale securities 17,913 24,281 Cost of 10,489,207 and 10,505,134 shares of Class B common stock held in treasury (1,521,806 ) (1,523,527 ) 1,837,293 1,683,485 $ 3,583,894 $ 3,559,098 The information on pages 44 through 56 is an integral part of the financial statements. 41CONSOLIDATED STATEMENTS OF CASH FLOWS Fiscal year ended December 29, December 30, December 31, (in thousands) 2002 2001 2000 Net income $ 204,268 $ 229,639 $ 136,470 Adjustments to reconcile net income to net
cash provided by operating activities: Cumulative effect of change in accounting principle 12,100 — — Depreciation of property, plant and equipment 171,908 138,300 117,948 Amortization of goodwill and other intangibles 655 78,933 62,634 Net pension benefit (64,447 ) (76,945 ) (65,312 ) Early retirement program expense 19,001 3,344 29,049 Gain from sale or exchange of businesses (27,844 ) (321,091 ) — (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 21,194 36,672 23,097 Equity in losses of affiliates, net of distributions 20,018 69,359 37,406 Provision for deferred income taxes 50,115 97,302 (7,743 ) Change in assets and liabilities: (Increase) decrease in accounts receivable, net (1,116 ) 28,803 (44,413 ) Increase in inventories (11,142 ) (3,390 ) (1,265 ) Increase in accounts payable and accrued liabilities 73,653 24,756 22,192 Decrease in income taxes receivable 15,106 1,591 36,227 Decrease in other assets and other liabilities, net 21,360 38,294 23,141 Other 5,846 2,752 10,701 Net cash provided by operating activities 497,466 348,830 368,544 Investments in certain businesses (36,016 ) (104,356 ) (212,274 ) Net proceeds from sale of businesses — 61,921 1,650 Purchases of property, plant and equipment (152,992 ) (224,227 ) (172,383 ) Purchases of cost method investments (250 ) (11,675 ) (42,459 ) Investments in affiliates (7,610 ) (21,112 ) (12,430 ) Proceeds from sale of marketable equity securities 19,701 145 6,332 Other 1,484 1,477 8,036 Net cash used in investing activities (175,683 ) (297,827 ) (423,528 ) (Repayment) issuance of commercial paper, net (276,189 ) 10,072 35,071 Dividends paid (54,256 ) (54,166 ) (52,024 ) Common shares repurchased (786 ) (445 ) (96 ) Proceeds from exercise of stock options 6,739 4,671 7,056 Other — — 9,843 Net cash used in financing activities (324,492 ) (39,868 ) (150 ) (2,709 ) 11,135 (55,134 ) 31,480 20,345 75,479 $ 28,771 $ 31,480 $ 20,345 Cash paid during the year for: Income taxes $ 68,900 $ 52,600 $ 95,000 Interest, net of amounts capitalized $ 30,600 $ 48,000 $ 52,700 4448 through 5663 is an integral part of the financial statements.42 January 1, January 2, (in thousands) 2006 2005 Cash and cash equivalents $ 215,861 $ 119,400 Investments in marketable equity securities 67,596 149,303 Accounts receivable, net 398,552 362,862 Federal and state income taxes 26,651 18,375 Deferred income taxes 37,320 30,871 Inventories 15,079 25,127 Other current assets 57,267 44,571 818,326 750,509 Buildings 327,569 304,606 Machinery, equipment and fixtures 1,839,983 1,730,997 Leasehold improvements 167,116 133,674 2,334,668 2,169,277 Less accumulated depreciation (1,325,676 ) (1,197,375 ) 1,008,992 971,902 Land 42,257 37,470 Construction in progress 91,383 80,580 1,142,632 1,089,952 262,325 260,433 66,775 61,814 1,125,570 1,023,140 494,692 493,192 22,814 7,879 593,469 556,747 58,170 65,099 $ 4,584,773 $ 4,308,765 The information on pages 48 through 63 is an integral part of the financial statements. January 1, January 2, (in thousands, except share amounts) 2006 2005 Accounts payable and accrued liabilities $ 438,693 $ 443,332 Deferred revenue 231,208 186,593 Short-term borrowings 24,820 58,236 694,721 688,161 150,909 145,490 262,270 228,654 422,548 403,698 403,635 425,889 1,934,083 1,891,892 12,267 12,267 — — 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 B common stock, $1 par value; 40,000,000 shares authorized; 18,277,750 shares issued; 7,879,281 and 7,853,822 shares outstanding 18,278 18,278 Capital in excess of par value 207,328 186,827 Retained earnings 3,871,587 3,629,222 Accumulated other comprehensive income, net of taxes Cumulative foreign currency translation adjustment 5,039 13,873 Unrealized gain on available-for-sale securities 58,313 75,448 Unearned stock compensation (14,656 ) (7,876 ) Cost of 10,398,469 and 10,423,928 shares of Class B common stock held in treasury (1,509,188 ) (1,512,888 ) 2,638,423 2,404,606 $ 4,584,773 $ 4,308,765 The information on pages 48 through 63 is an integral part of the financial statements. Fiscal year ended January 1, January 2, December 28, (In thousands) 2006 2005 2003 Net income $ 314,344 $ 332,732 $ 241,088 Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation of property, plant and equipment 190,543 175,338 173,848 Amortization of goodwill and other intangibles 7,478 9,334 1,436 Net pension benefit (37,914 ) (41,954 ) (55,137 ) Early retirement program expense 1,192 132 34,135 Gain from sale or exchange of businesses — (497 ) (49,762 ) Gain on sale of non-operating land and property, plant and equipment (5,148 ) (2,669 ) (41,734 ) Gain on disposition of marketable equity securities (12,661 ) — — Property, plant and equipment losses 9,665 — — Cost method investment and other write-downs 1,465 677 1,337 Equity in losses of affiliates, net of distributions 1,731 3,091 10,516 Foreign exchange loss (gain) 8,099 (5,505 ) (4,187 ) Provision for deferred income taxes 29,297 44,321 30,704 Change in assets and liabilities: Increase in accounts receivable, net (19,416 ) (23,722 ) (9,936 ) Decrease in inventories 11,483 2,640 829 (Decrease) increase in accounts payable and accrued liabilities (27,033 ) 70,058 (14,308 ) Increase in income taxes receivable (8,139 ) (13,079 ) (10,171 ) Decrease in other assets and other liabilities, net 53,618 3,477 34,460 Other 4,168 7,347 (5,404 ) Net cash provided by operating activities 522,772 561,721 337,714 Investments in certain businesses (143,478 ) (55,232 ) (134,541 ) Purchases of property, plant and equipment (238,349 ) (204,632 ) (125,588 ) Proceeds from sale of marketable equity securities 64,801 — — Proceeds from sale of property, plant and equipment 24,077 5,340 44,973 Purchases of cost method investments (8,709 ) (224 ) (849 ) Investments in affiliates (4,981 ) — (5,976 ) Purchases of marketable equity securities — (94,560 ) — Net proceeds from sale of businesses — — 65,000 Net cash used in investing activities (306,639 ) (349,308 ) (156,981 ) Repayment of commercial paper, net (50,201 ) (138,116 ) (70,942 ) Principal payments on debt (6,964 ) (19,253 ) (784 ) Dividends paid (71,979 ) (67,917 ) (56,289 ) Common shares repurchased — — (687 ) Proceeds from exercise of stock options 6,832 15,616 5,898 Cash overdraft. 6,534 (1,953 ) 1,245 Net cash used in financing activities (115,778 ) (211,623 ) (121,559 ) (3,894 ) 2,049 737 96,461 2,839 59,911 119,400 116,561 56,650 $ 215,861 $ 119,400 $ 116,561 Cash paid during the year for: Income taxes $ 161,600 $ 171,400 $ 116,900 Interest, net of amounts capitalized $ 27,300 $ 25,500 $ 27,500 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- Unearned Common Common Excess of Retained Translation for-Sale Stock (in thousands) Stock Stock Par Value Earnings Adjustment Securities Compensation Treasury Stock $ 1,722 $ 18,278 $ 149,090 $ 3,179,607 $ (7,511 ) $ 17,913 $ (6,907 ) $ (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 (11,315 ) 4,599 Amortization of unearned stock compensation 5,962 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 (12,260 ) (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 (1,793 ) 5,006 Amortization of unearned stock compensation 6,177 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 (7,876 ) (1,512,888 ) Net income for the year 314,344 Dividends paid on common stock — $7.40 per share (70,998 ) Dividends paid on redeemable preferred stock (981 ) Issuance of 25,459 shares of Class B common stock, net of restricted stock award forfeitures 15,496 (12,358 ) 3,700 Amortization of unearned stock compensation 5,578 Change in foreign currency translation adjustment (net of taxes) (8,834 ) Change in unrealized gain on available-for-sale securities (net of taxes) (17,135 ) Stock option expense 1,101 Tax benefits arising from employee stock plans 3,904 $ 1,722 $ 18,278 $ 207,328 $ 3,871,587 $ 5,039 $ 58,313 $ (14,656 ) $ (1,509,188 ) The information on pages 48 through 63 is an integral part of the financial statements. 432005 FORM 10-K52-53 week52- to53-week fiscal year ending on the Sunday nearest December 31. The fiscal years 2002, 2001 and 2000,year 2005, which ended on January 1, 2006, included 52 weeks. The fiscal year 2004, which ended on January 2, 2005, included 53 weeks. The fiscal year 2003, which ended on December 29, 2002, December 30, 2001, and December 31, 2000, respectively,28, 2003, included 52 weeks. With the exception of most of the newspaper publishing operations, subsidiaries of the Company report on a calendar-year basis.20022005 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 of SFAS 142,reviews 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 generally utilizing a discounted cash flow model. In the case of the Company’s cable systems, both a discounted cash flow model and a market approach employing comparable sales analysis are considered. 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. The Company must make assumptions regarding estimated future cash flows and market values to determine a reporting unit’s estimated fair value. 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.options granted prior to 2002 been recognized as compensation expense in 2005, 2004 and 2003 (in thousands, except per share amounts). 2005 2004 2003 Net income available for common shares, as reported $ 313,363 $ 331,740 $ 240,061 Add: Company stock option compensation expense included in net income, net of related tax effects 694 536 370 Deduct: Total Company stock option compensation expense determined under the fair-value-based method for all awards, net of related tax effects (1,071 ) (2,946 ) (3,529 ) Pro forma net income available for common shares $ 312,986 $ 329,330 $ 236,902 Basic earnings per share, as reported $ 32.66 $ 34.69 $ 25.19 Pro forma basic earnings per share $ 32.62 $ 34.44 $ 24.86 Diluted earnings per share, as reported $ 32.59 $ 34.59 $ 25.12 Pro forma diluted earnings per share $ 32.55 $ 34.34 $ 24.79 records investment basis gains arisingis required to adopt Statement of Financial Accounting Standards No. 123R (SFAS 123R), “Share-Based Payment,” in the first quarter of 2006. SFAS 123R will have a minimal impact on the Company’s results of operations for Company stock options as the Company adopted the fair-value-based method of accounting for Company stock options in 2002, and all unvested stock options at January 2, 2006 are accounted for under the fair-value-based method of accounting. The new standard will require the Company to change its accounting for Kaplan equity awards (Kaplan stock options and Kaplan shares or share equivalents) from the saleintrinsic value method to the fair-value-based method of equity interests in subsidiaries and affiliates that areaccounting. This change is expected to result in the early stagesacceleration of developmentexpense recognition for Kaplan equity awards; however, it will not impact the overall Kaplan stock compensation expense that will ultimately be recorded over the life of the award. The Company has elected to report the impact of SFAS 123R on the adoption date of January 2, 2006 as capitala cumulative effect of change in excessaccounting. In the first quarter of par value, net2006, the Company expects to report an estimated $5.0 million as an after-tax charge for the cumulative effect of taxes.change in accounting for Kaplan equity awards.B. ACCOUNTS RECEIVABLE AND ACCOUNTS PAYABLE AND ACCRUED LIABILITIES December 29, 2002January 1, 2006 and December 30, 2001January 2, 2005 consist of the following (in thousands): 2002 2001 2005 2004 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 $78,099 and $70,965 $ 375,668 $ 342,879 Other accounts receivable 19,055 17,430 22,884 19,983 $ 398,552 $ 362,862 $ 285,374 $ 279,328 December 29, 2002January 1, 2006 and December 30, 2001January 2, 2005 consist of the following (in thousands): 2002 2001 2005 2004 Accounts payable and accrued expenses $ 175,174 $ 158,744 $ 272,441 $ 231,066 Accrued compensation and related benefits 154,666 89,061 158,612 204,225 Due to affiliates (newsprint) 6,742 5,541 7,640 8,041 $ 438,693 $ 443,332 $ 336,582 $ 253,346 C. INVESTMENTS C. INVESTMENTSDecember 29, 2002January 1, 2006 and December 30, 2001January 2, 2005 consist of the following (in thousands): 2002 2001 2005 2004 Total cost $ 187,169 $ 195,661 $ 234,196 $ 285,912 Net unrealized gains 29,364 39,744 95,725 123,824 Total fair value $ 216,533 $ 235,405 $ 329,921 $ 409,736 December 29, 2002January 1, 2006 and December 30, 2001,January 2, 2005, 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$262.3 million or 99 percent80% and $219.0$260.4 million or 93 percent,64%, 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 1, 2006 and December 30, 2001,January 2, 2005, the unrealized gain related to the Company’s Berkshire stock investment totaled $29.9$77.4 million and $34.1$75.5 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.452002, 2001 and 2000,2005, proceeds from the sales of marketable equity securities were $19.7 million, $0.1$64.8 million, and $6.3 million, respectively, and grossnet realized gains (losses) on such sales were $13.2 million, ($0.3 million)$12.7 million. During 2004 and $4.9 million, respectively.2003, there were no sales of marketable equity securities or realized gains (losses). During 2002 and 2001,2003, the Company recorded write-downs on marketable equity securities of $2.0 million and $3.0 million, respectively.$0.2 million. 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 1, 2006 and December 30, 2001January 2, 2005 include the following (in thousands): 2002 2001 2005 2004 BrassRing $ 13,658 $ 19,992 $ 11,349 $ 8,755 Bowater Mersey Paper Company 42,519 45,822 54,407 52,112 International Herald Tribune 13,776 14,480 Other 750 642 Los Angeles Times–Washington Post News Service 1,019 947 $ 70,703 $ 80,936 $ 66,775 $ 61,814 2002,2005, the Company’s investments in affiliates consisted of a 49.4 percent49.4% 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 ) 2005 2004 2003 Working capital $ 13,861 $ 9,014 $ 11,108 Property, plant and equipment 131,823 137,321 140,917 Total assets 214,333 202,904 214,658 Long-term debt — — — Net equity 164,801 155,147 149,584 Operating revenues $ 236,233 $ 221,618 $ 174,505 Operating income (loss) 3,513 1,695 (18,753 ) Net loss (1,806 ) (4,577 ) (20,164 ) 2002 2001 2005 2004 Beginning investment $ 80,936 $ 131,629 $ 61,814 $ 61,312 Additional investment 7,610 21,112 4,981 — Equity in losses (19,308 ) (68,659 ) (881 ) (2,291 ) Dividends and distributions received (710 ) (700 ) (850 ) (800 ) Foreign currency translation 2,175 (3,122 ) 1,711 3,593 Other — 676 Ending investment $ 70,703 $ 80,936 $ 66,775 $ 61,814 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.In December 2001, BrassRing, Inc. was restructured and the Company’s interest in BrassRing, Inc. was converted into an interest 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 conversion of the Preferred Units, the Company’s common equity interest in BrassRing LLC would have been approximately 49.5 percent.approximately $13.9$2.4 million of the 20022005 equity in losses of affiliates, compared to $75.1$3.1 million in 2001. The decrease from 2001 equity2004 and $7.7 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 1, 2006 and December 30, 2001,January 2, 2005, the carrying value of the Company’s cost method investments was $9.5$11.9 million and $29.6$4.6 million, respectively. Cost method investments are included in “Deferred Charges and Other Assets” in the Consolidated Balance Sheets.462002, 20012005, 2004, and 2000,2003, the Company invested $0.3$8.7 million, $11.7$0.2 million, and $42.5$0.8 million, respectively, in companies constituting cost method investments and recorded charges of $19.2$1.5 million, $29.4$0.7 million, and $23.1$1.1 million, respectively, to write-down cost method investments to estimated fair value. Charges recorded to write-down cost method investments are included in “Other income (expense), net” in the Consolidated Statements of Income.During 2002, 20012000, proceeds from salesCash Equivalents.As of cost methodJanuary 1, 2006, the Company has commercial paper investments were $1.2of $59.2 million $0.5 millionthat are classified as “Cash 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”cash equivalents” in the Company’s Consolidated Statements of Income.Balance Sheet. There were no commercial paper investments outstanding at January 2, 2005.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 $ 132,650 $ 22,591 $ 155,241 Foreign 4,849 29 4,878 State and local 18,504 6,677 25,181 $ 156,003 $ 29,297 $ 185,300 2004 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 In addition to the income tax provision presented above, in 2002, the Company recorded a federal and state income tax benefit of $6.9 million on the impairment loss recorded as a cumulative effect of change in accounting principle in connection with the adoption of SFAS 142.35 percent35% to income before taxes as a result of the following (in thousands): 2002 2001 2000 2005 2004 2003 U.S. Federal statutory taxes $ 123,784 $ 135,639 $ 80,455 $ 174,875 $ 189,851 $ 133,906 State and local taxes, net of U.S. Federal income tax benefit 14,025 13,832 6,449 16,368 20,369 11,058 Amortization of goodwill not deductible for income tax purposes — 6,988 5,011 Tax provided on foreign subsidiary earnings at less than the expected U.S. Federal statutory tax rate (3,622 ) (1,373 ) — Sale of affiliate with higher tax basis — — (2,188 ) Other, net (509 ) 1,441 1,485 (2,321 ) 853 (1,276 ) Provision for income taxes $ 137,300 $ 157,900 $ 93,400 $ 185,300 $ 209,700 $ 141,500 December 29, 2002January 1, 2006 and December 30, 2001January 2, 2005 consist of the following (in thousands): 2002 2001 2005 2004 Accrued postretirement benefits $ 58,874 $ 56,955 $ 63,129 $ 61,221 Other benefit obligations 94,280 73,080 104,105 122,608 Accounts receivable 16,252 15,949 21,762 18,939 State income tax loss carryforwards 13,693 17,218 9,185 10,753 Affiliate operations 3,135 4,403 Other 22,140 14,612 20,335 19,866 Deferred tax asset 205,239 177,814 221,651 237,790 Property, plant and equipment 135,520 110,763 153,445 173,101 Prepaid pension cost 200,315 181,434 240,495 224,991 Affiliate operations 180 (1,195 ) Unrealized gain on available-for-sale securities 11,463 15,475 37,422 48,387 Goodwill and other intangibles 118,914 93,286 175,517 164,138 Deferred tax liability 466,392 399,763 606,879 610,617 Deferred income taxes $ 261,153 $ 221,949 $ 385,228 $ 372,827 E. DEBTAt December 29, 2002,Company had $664.8extent taxable dividend income would be recognized if such earnings were distributed. Deferred income taxes recorded for undistributed earnings of investments in foreign subsidiaries are net of foreign tax credits estimated to be available. The Company’s estimate of foreign tax credits and the Company’s change to provide only deferred U.S. and state income taxes for a portion of the book value and tax basis differences related to investments in foreign subsidiaries resulted in a reduction of approximately $6.0 million in total debt outstandingincome tax expense in the fourth quarter of 2005.an average interest rateJanuary 1, 2006 and January 2, 2005, respectively. If the investments in foreign subsidiaries were held for sale, instead of 4.0 percent. Debt was comprisedas permanent investments, then additional U.S. and state deferred income tax liabilities, net of $259.3foreign tax credits estimated to be available on undistributed earnings, of approximately $9.8 million and $4.5 million would have been recorded at January 1, 2006 and January 2, 2005, respectively.commercial paper borrowings, $398.4state income tax loss carryforwards. If unutilized, state income tax loss carryforwards will start to expire approximately as follows (in millions): 2006 $ 4.3 2007 3.5 2008 3.8 2009 7.7 2010 8.6 2011 to 2023 152.3 Total $ 180.2 January 1, January 2, 2006 2005 Commercial paper borrowings $ — $ 50.2 5.5% unsecured notes due February 15, 2009 399.2 398.9 4.0% notes due 2006 (£8.4 million) 14.4 16.1 Other indebtedness 14.8 18.9 Total 428.4 484.1 Less current portion (24.8 ) (58.2 ) Total long-term debt $ 403.6 $425.9 5.5 percent unsecuredthe balance, or $15.0 million, on the notes was paid. The remaining balance outstanding of £8.4 million is 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, and December 30, 2001,January 2, 2005, the average interest rate on the Company’s outstanding commercial paper borrowings was 1.6 percent and 2.0 percent, respectively. In2.2%. During the third quarter of 2002,2005, the Company replaced its expiring $250 million364-dayrevolving credit facility agreements with a new $250 million revolving credit facility on essentially the same terms. The new facility expires in August 2006. The Company also has a 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 million364-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 percent0.04% to 0.125 percent0.10% on the unused portion of the facility, and 0.25 percent0.20% to 0.75 percent0.65% on the used portion of the facility. Also under the terms of the $350$250 million364-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.0.10%. Both revolving credit facilities contain certain covenants, including a financial covenant that the Company maintain at least $1 billion of consolidated shareholders’ equity.20022005 and 2001,2004, the Company had average borrowings outstanding of approximately $793.7$442.0 million and $965.8$516.0 million, respectively, at average annual interest rates of approximately 3.7 percent5.4% and 4.9 percent,4.8%, respectively. The Company incurred net interest costs on its borrowings of $33.5$23.4 million and $47.5$26.4 million during 20022005 and 2001,2004, respectively. No interest expense was capitalized in 20022005 or 2001.December 29, 2002January 1, 2006 and December 30, 2001,January 2, 2005, the fair value of the Company’s 5.5 percent5.5% unsecured notes, based on quoted market prices, totaled $426.6$404.1 million and $387.7$423.0 million, respectively, compared with the carrying amount of $398.4$399.2 million and $398.1$398.9 million, respectively.commercial paper borrowings and other unsecured debt at December 29, 2002 and December 30, 2001January 1, 2006 approximates fair value.F. REDEEMABLE PREFERRED STOCK2002, 3062005, 955 shares of Series A Preferred Stock were redeemed at the request of Series A Preferred Stockholders.G. CAPITAL STOCK, STOCK AWARDS AND STOCK OPTIONS 30 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, 20012005 and 2000,2004, the Company did not purchase any shares of its Class B common stock. During 2003, the Company purchased a total of 1,229910 shares 714 shares and 200 shares, respectively, of its Class B common stock at a cost of approximately $0.8 million, $0.4 million and $0.1$0.7 million. At December 29, 2002,January 1, 2006, 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 1, 2006, there were 68,290187,505 shares reserved for issuance under the incentive compensation plan. Of this number, 27,62529,580 shares were subject to awards outstanding, and 40,665157,925 shares were available for future awards. Activity related to stock awards under the long-term incentive compensation plan for the years ended December 29, 2002, December 30, 2001January 1, 2006, January 2, 2005, and December 31, 2000,28, 2003, was as follows: 2005 2004 2003 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 28,001 $644.51 29,845 $643.89 27,625 $536.74 Awarded 215 563.36 16,865 608.96 1,155 501.72 Awarded 16,550 940.96 200 973.88 15,990 734.01 Vested (601 ) 540.61 (15,200 ) 364.13 (99 ) 330.75 Vested (13,830 ) 609.87 (561 ) 625.91 (12,752 ) 523.60 Forfeited (1,884 ) 578.37 (1,935 ) 555.02 (2,251 ) 456.41 Forfeited (1,141 ) 819.22 (1,483 ) 683.58 (1,018 ) 658.44 End of year End of year 27,625 $536.74 29,895 $539.25 30,165 $413.28 End of year 29,580 $819.83 28,001 $644.51 29,845 $643.89 2,1502,550 shares in 2002, 3,3002004 and 1,050 shares in 2001 and 1,950 shares in 2000.December 29, 2002,January 1, 2006, the aforementioned restriction will lapse in 20032006 for 14,8611,450 shares, in 20042007 for 2,63714,190 shares, in 20052008 for 17,623425 shares, and in 20062009 for 1,43815,865 shares. Stock-based compensation costs resulting from stock awards reduced net income by $3.5 million ($0.370.36 per share, basic and diluted), $2.6$3.6 million ($0.270.38 per share, basic and diluted), and $2.4$3.9 million ($0.250.41 per share, basic and diluted) in 2002, 20012005, 2004, and 2000,2003, 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 1, 2006, there were 470,025408,325 shares reserved for issuance under the stock option plan, of which 163,900113,325 shares were subject to options outstanding, and 306,125295,000 shares were available for future grants.December 29, 2002, December 30, 2001,January 1, 2006, January 2, 2005, and December 31, 2000,28, 2003, were as follows: 2002 2001 2000 2005 2004 2003 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 122,250 $ 561.05 152,475 $530.81 163,900 $515.74 Granted 11,500 729.00 24,000 522.75 89,500 544.90 Granted 4,500 762.50 4,000 953.50 5,000 803.70 Exercised (16,675 ) 404.14 (16,875 ) 276.79 (20,425 ) 345.46 Exercised (12,800 ) 533.24 (33,225 ) 467.68 (15,675 ) 450.87 Forfeited (1,500 ) 561.77 (3,000 ) 546.04 (59,122 ) 643.71 Forfeited (625 ) 530.87 (1,000 ) 621.38 (750 ) 729.00 End of year End of year 163,900 $515.74 170,575 $490.86 166,450 $465.55 End of year 113,325 $ 572.36 122,250 $561.05 152,475 $530.81 2002, 102,6502005, 100,950 are now exercisable, 27,8755,750 will become exercisable in 2003, 21,8752006, 3,375 will become exercisable in 2004, 8,6252007, 2,125 will become exercisable in 2005,2008, and 2,8751,125 will become exercisable in 2006.2009. For 2005, 2004, and 2003, the Company recorded expense of $1.1 million, $0.8 million, and $0.6 million, respectively, related to this plan. Information related to stock options outstanding at December 29, 2002,January 1, 2006 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 1/1/2006 Life (yrs.) Price at 1/1/2006 Price $ 344 3,300 1.0 $ 343.94 3,300 $ 343.94 472–484 12,125 2.7 473.70 12,125 473.70 $222–319 8,800 2.3 $ 261.49 8,800 $ 261.49 500–596 74,900 4.8 531.42 74,900 531.42 344 9,850 4.0 343.94 9,850 343.94 693 500 8.0 692.51 250 692.51 472–484 24,750 5.8 474.34 21,750 473.43 729–763 14,000 8.0 739.77 7,125 729.00 500–596 109,000 7.7 538.70 62,250 537.47 816 4,500 8.0 816.05 2,250 816.05 729 11,500 10.0 729.00 — — 954 4,000 9.0 953.50 1,000 953.50 2002, 20012005, 2004, and 20002003 was $197.89, $107.78$218.62, $274.93, and $161.15,$229.81, respectively. The fair value of options at date of grant 2002 2001 2000 2005 2004 2003 Expected life (years) 7 7 7 7 7 7 Interest rate 3.69% 2.30% 5.98% 4.49 % 3.85 % 4.38 % Volatility 21.74% 19.46% 17.9% 19.08 % 20.24 % 20.43 % Dividend yield 0.77% 1.1% 1.0% 0.97 % 0.73 % 0.71 % 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 10.6 percent,initially reserved 15%, or 150,000 shares, of Kaplan’s common stock for optionsawards 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 difference between the exercise price and the then fair value. The fair value of Kaplan’s common stock is determined by the Company’s compensation committee of the Board of Directors. In January 2006, the committee set the fair value price at $1,833 per share. Option holders have a 30-day window in which they may exercise at this price, after which time the compensation committee has the right to determine a new price in the event of an exercise.$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, $10.3 million in 2004, and $5.1 million in 2005, with the remainder of the payouts, related to 1,705 tendered stock options, to be made at the time of their scheduled vesting in 2006 to 2008 if the option holder is still employed at Kaplan. Additionally, stock compensation expense will be recorded on these remaining exercised stock options over the remaining vesting periods of 2006 to 2008. A small number of key Kaplan executives continue to hold the remaining 62,229 of outstanding Kaplan stock options. In January 2006, 15,298 Kaplan stock options were exercised, and 12,239 Kaplan stock options were awarded at an option price of $1,833 per share.after deducting intercompany debt from Kaplan’s enterprise value.2002, 20012005, 2004 and 2000,2003, the Company recorded total Kaplan stock compensation expense of $34.5$3.0 million, $25.3$32.5 million and $6.0$119.1 million, respectively, related to this plan.respectively. In 20022005, 2004, and 2001,2003 payouts from option exercises totaled $0.2$35.2 million, $10.3 million, and $2.1$119.6 million, respectively. At December 29, 2002,31, 2005, the Company’s accrual balance related to Kaplan stock-based compensation accrual balance totaled $74.4$63.6 million.49December 29, 2002, December 30, 2001,January 1, 2006, January 2, 2005, and December 31, 2000,28, 2003, were as follows: 2005 2004 2003 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 Beginning of Year 68,000 $ 596.17 68,000 $596.17 147,463 $ 311.24 Granted 10,582 2,080.00 — — 16,037 1,546.23 Beginning of year 142,578 $296.69 131,880 $246.14 95,100 $196.31 Granted 6,475 652.00 27,962 526.00 36,780 375.00 Exercised (16,153 ) 225.14 — — (94,652 ) 303.66 Exercised (540 ) 375.00 (7,247 ) 227.20 – – Forfeited (200 ) 652.00 — — (848 ) 382.12 Forfeited (1,050 ) 403.76 (10,017 ) 321.67 – – End of year End of year 147,463 $311.24 142,578 $296.69 131,880 $246.14 End of year 62,229 $ 944.63 68,000 $596.17 68,000 $ 596.17 2002, 101,8042005, 38,931 are now exercisable, 12,755 will become exercisable in 2003, 12,755 will become exercisable in 2004, 12,005 will become exercisable in 2005, 6,8499,366 will become exercisable in 2006, and 1,2955,843 will become exercisable in 2007.2007, 5,443 will become exercisable in 2008, and 2,646 will become exercisable in 2009. Information related to stock options outstanding at December 29, 2002,January 1, 2006, is as follows: Weighted Average Weighted Weighted Number Remaining Average Number Average Number Weighted Average Number Range of Range of Outstanding Contractual Exercise Exercisable Exercise Range of Outstanding Remaining Contractual Exercisable Exercise Prices Exercise Prices at 12/29/02 Life (yrs.) Price at 12/29/02 Price Exercise Prices at 1/1/06 Life (yrs.) at 1/1/06 $ 190 16,650 2.0 16,650 375 338 4.5 338 526 18,672 5.5 15,139 $ 190 83,686 5.0 $ 190 83,686 $ 190 652 2,000 6.0 1,200 350–375 29,540 6.9 372 12,566 371 861 487 6.0 204 526 27,762 8.0 526 5,552 526 1,625 13,500 6.0 5,400 652 6,475 8.0 652 – 652 2,080 10,582 6.0 — uponon the weighted average number of shares of common stock outstanding each year, adjusted for the dilutive effect of shares issuable under outstanding stock options. Basic and diluted weighted average share information for 2002, 20012005, 2004, and 20002003 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 Average Effect of Weighted Average Shares Stock Options Shares 2005 9,593,837 22,060 9,615,897 2004 9,563,314 28,311 9,591,625 2003 9,530,209 24,454 9,554,663 H. PENSIONS AND OTHER POSTRETIREMENT PLANS December 29, 2002January 1, 2006 and December 30, 2001January 2, 2005 (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 2005 2004 2005 2004 Benefit obligation at beginning of year $ 689,141 $ 625,774 $ 132,540 $ 120,444 Service cost 27,161 22,896 6,026 5,285 Interest cost 39,989 37,153 7,434 7,355 Amendments 3,751 218 — — Actuarial loss 15,272 46,655 1,860 5,764 Benefits paid (26,441 ) (43,555 ) (6,391 ) (6,308 ) Benefit obligation at end of year $ 748,873 $ 689,141 $ 141,469 $ 132,540 Fair value of assets at beginning of year $ 1,588,213 $ 1,564,966 $ — $ — Actual return on plan assets 121,493 66,802 — — Employer contributions — — 6,391 6,308 Benefits paid (26,441 ) (43,555 ) (6,391 ) (6,308 ) Fair value of assets at end of year $ 1,683,265 $ 1,588,213 $ — $ — Funded status $ 934,392 $ 899,072 $ (141,469 ) $ (132,540 ) Unrecognized transition asset (249 ) (355 ) — — Unrecognized prior service cost 36,233 38,389 (7,413 ) (8,001 ) Unrecognized actuarial gain (376,907 ) (380,359 ) (2,027 ) (4,949 ) Net prepaid (accrued) cost $ 593,469 $ 556,747 $ (150,909 ) $ (145,490 ) 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 1, 2006 and postretirement plans are actuarially determined. January 2, 2005, was $650.6 million and $599.2 million, respectively.December 29, 2002, December 30, 2001,January 1, 2006 and December 31, 2000, include the following:January 2, 2005, are as follows: Pension Plans Postretirement Plans Pension Plans Postretirement Plans 2002 2001 2000 2002 2001 2000 2005 2004 2005 2004 Discount rate 6.75% 7.0% 7.5% 6.75% 7.0% 7.5% 5.75% 5.75% 5.60% 5.75% 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 1, 2006 was 10.5 percent9.5% for both pre-age 65 and post-age 65 benefits, decreasing to 5 percent5.0% in the year 20132015 and thereafter. 1% 1% Increase Decrease 1% 1% Increase Decrease Benefit obligation at end of year $ 16,740 $ (15,637 ) $ 21,471 $ (20,075 ) Service cost plus interest cost 2,115 (2,050 ) $ 2,150 $ (2,085 ) Postretirement Pension Plans Plans 2006 $ 28.5 $ 6.9 2007 $ 30.1 $ 7.4 2008 $ 32.3 $ 8.0 2009 $ 34.4 $ 8.6 2010 $ 36.6 $ 9.4 2011-2015 $ 230.8 $ 55.7 Plan Asset Allocations January 1, 2006 January 2, 2005 Equities $ 1,427 84.8% $ 1,362 85.8% Fixed Income 256 15.2% 226 14.2% Total $ 1,683 100.0% $ 1,588 100.0% Pension Plans Postretirement Plans 2005 2004 2003 2005 2004 2003 Service cost $ 27,161 $ 22,896 $ 19,965 $ 6,026 $ 5,285 $ 5,164 Interest cost 39,989 37,153 33,696 7,434 7,355 7,395 Expected return on assets (104,589 ) (97,702 ) (96,116 ) — — — Amortization of transition asset (106 ) (1,086 ) (2,189 ) — — — Amortization of prior service cost 4,716 4,530 4,172 (588 ) (588 ) (360 ) Recognized actuarial gain (5,085 ) (7,745 ) (14,665 ) (1,061 ) (995 ) (1,675 ) Net periodic (benefit) cost for the year (37,914 ) (41,954 ) (55,137 ) 11,811 11,057 10,524 Early retirement programs expense 1,192 132 34,135 — — — Curtailment gain — — — — — (634 ) Total (benefit) cost for the year $ (36,722 ) $ (41,822 ) $ (21,002 ) $ 11,811 $ 11,057 $ 9,890 Pension Plans Postretirement Plans 2005 2004 2003 2005 2004 2003 Discount rate 5.75% 6.25% 6.75% 5.75% 6.25% 6.75% Expected return on plan assets 7.5% 7.5% 7.5% — — — Rate of compensation increase 4.0% 4.0% 4.0% — — — 2002, $1.82004, and $2.0 million in 2001 and $1.1 million in 2000.$15.4$18.3 million in 2002, $14.52005, $17.6 million in 20012004, and $13.3$15.5 million in 2000.I. LEASE AND OTHER COMMITMENTSI. LEASE AND OTHER COMMITMENTS December 29, 2002,January 1, 2006, future minimum rental payments under noncancelable operating leases approximate the following (in thousands): 2003 $ 55,335 2004 49,650 2005 43,178 2006 37,915 $ 95,226 2007 32,855 91,109 2008 82,649 2009 71,907 2010 61,703 Thereafter 74,039 185,392 $ 292,972 $ 587,986 $4.4$4.8 million due in the future under noncancelable subleases.and expenses was approximately $60.7$113.0 million, $58.3$97.6 million, and $49.7$76.8 million, in 2002, 20012005, 2004, and 2000,2003, respectively. Sublease income was approximately $0.8 million, $0.6 million, $1.5 million and $1.2$0.6 million in 2002, 20012005, 2004, and 2000,2003, respectively.December 29, 2002,January 1, 2006, such commitments amounted to approximately $52.3$97.3 million. If such programs are not produced, the Company’s commitment would expire without obligation.$47.4$156.1 million in 2002, $104.42005, $63.9 million in 20012004, and $212.3$169.5 million in 2000 (including assumed debt and related acquisition costs).2003. 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.2002,2005, Kaplan acquired severalten businesses in theirits higher education, professional and test preparation divisions for approximately $42.2 million. About $9.6a total of $140.1 million, remains to be paid onfinanced with cash and $3.0 million in debt. The largest of 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.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 value. 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 acquiredBISYS Education Services, a provider of CFA® examlicensing education and compliance solutions for financial service institutions and professionals, The Kidum Group, the leading provider of test preparation services in Israel, and Asia Pacific Manage-company that provides pre-certification trainingprivate education provider for real estate, insuranceundergraduate and securities professionals.Southern Maryland Newspapers publishes the Maryland Independentpostgraduate students 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.Asia. In a related transaction inaddition, on January 2001,14, 2005, the Company completed the saleacquisition of Slate, the online magazine, which is now included as part of the Company’s newspaper publishing division. Most of the purchase price for the 2005 acquisitions was allocated to goodwill and other intangibles, and property, plant and equipment.cable system serving about 15,000 subscribers in Greenwood, Indiana, for $61.9 million. The gain resulting fromtotal of $59.6 million, financed with cash and $8.7 million of debt. In addition, the cable system sale and exchangedivision completed two small 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.August 2000,May 2004, the Company acquired Quest Education Corporation (Quest)El Tiempo Latino, a leading Spanish-language weekly newspaper in the greater Washington area. Most of the purchase price for approximately $177.7the 2004 acquisitions was allocated to goodwill and other intangibles.including assumedfinanced with cash and $36.7 million of debt. The largest of these was the March 2003 acquisition of Quest was completed through an all cash tender offer in which the Company purchased substantially all of the outstanding stock of QuestThe Financial Training Company (FTC), for $18.35 per share. The£55.3 million ($87.4 million). Headquartered in London, FTC provides training services for accountants and financial services professionals, with 28 training centers in the United Kingdom as well as operations in Asia. This acquisition was financed throughwith cash and $29.7 million of debt, primarily to employees of the issuancebusiness. In November 2003, Kaplan acquired Dublin Business School, Ireland’s largest private undergraduate institution. Most of additional borrowings. Quest is a provider of post-secondary education offering Bachelor’s degrees, Associate’s degreesthe purchase price for the 2003 Kaplan acquisitions was allocated to goodwill and diploma programs primarily in the fields of health care, businessother intangibles and information technology.acquired two cable systems serving approximately 8,500 subscriberssold its 50 percent interest in Nebraska (in June 2000)the International Herald Tribune for $65 million and Mississippi (in August 2000) for approximately $16.2the Company recorded an after-tax non-operating gain of $32.3 million as well as various other smaller businesses throughout 2000 for $18.4 million (principally consisting($3.38 per share) in the first quarter of educational services companies).2002, 20012005, 2004 and 2000,2003, assuming the acquisitions and exchanges occurred at the beginning of 2000,2003, are not materially different from reported results of operations.As required under SFAS 142, 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 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 mastheads, customer relationship intangibles and non-compete agreements, with amortization periods up to fiveten years. The Company’s amortized intangible assets increased $1.4 million in 2002 due to acquisitions. Amortization expense was $655,000$7.5 million in 2002,2005 and is estimated to be less than $1approximately $6 million in each of the next five years.December 29, 2002January 1, 2006 and December 30, 2001January 2, 2005 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 $ 1,423,972 $ 298,402 $ 1,125,570 658,498 163,806 494,692 42,434 19,620 22,814 $ 2,124,904 $ 481,828 $ 1,643,076 Goodwill $ 1,321,542 $ 298,402 $ 1,023,140 Indefinite-lived intangible assets 656,998 163,806 493,192 Amortized intangible assets 20,021 12,142 7,879 $ 1,998,561 $ 474,350 $ 1,524,211 5220022005 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 $ 72,770 $ 203,165 $ 69,556 $ 85,666 $ 591,983 $ 1,023,140 Acquisitions 7,881 111,623 119,504 Foreign currency exchange rate (17,074 ) (17,074 ) End of year $ 80,651 $ 203,165 $ 69,556 $ 85,666 $ 686,532 $ 1,125,570 Beginning of year $ 486,330 $ 6,862 $ 493,192 Acquisitions 1,500 1,500 End of year $ 486,330 $ 8,362 $ 494,692 Beginning of year $ 118 $ 2,474 $ 5,287 $ 7,879 Acquisitions 7,677 14,989 22,666 Foreign currency exchange rate (253 ) (253 ) Amortization (1,119 ) (764 ) (5,595 ) (7,478 ) End of year $ 6,676 $ 1,710 $ 14,428 $ 22,814 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 2005 2004 2003 Gain on sales of marketable securities $ 12.7 $ — $ — Gain on sale of non-operating land 5.1 — — Foreign currency (losses) gains, net (8.1 ) 5.5 4.2 Impairment write-downs on cost method and other investments (1.5 ) (0.7 ) (1.3 ) Gain on sale of interest in IHT — — 49.8 Gain on sale or exchange of cable system businesses — 0.5 — Other 0.8 2.8 2.7 Total $ 9.0 $ 8.1 $ 55.4 alsoviolations of applicable wage and hour laws. Kaplan Inc. is a party to ana proposed class action antitrust lawsuit relatedin California filed on April 29, 2005. The suit alleges violations of the Sherman Act. The Company intends to defend the acquisition by a subsidiary of a group of community newspapers in 2001.lawsuit vigorously. 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 December 29, 2002, December 30, 2001,January 1, 2006, January 2, 2005 and December 31, 2000,28, 2003, approximately $161.7$505.0 million, $101.5$430.0 million and $35.0$250.0 million, respectively, of the Company’sCompany 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 theBroadcaststations.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 (in thousands) Publishing Broadcasting Publishing Television Education Office Consolidated 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 Equity in losses of affiliates (19,308 ) Interest expense, net (33,487 ) Other income, net 28,873 Income before income taxes $ 353,668 Identifiable assets $ 690,197 $ 413,663 $ 488,562 $ 1,142,995 $ 542,251 $ 18,990 $ 3,296,658 Investments in marketable equity securities 216,533 Investments in affiliates 70,703 Total assets $ 3,583,894 Depreciation of property, plant and equipment $ 42,961 $ 11,187 $ 4,124 $ 88,751 $ 24,885 $ — $ 171,908 Amortization expense $ 15 $ — $ — $ 155 $ 485 $ — $ 655 Pension credit (expense) $ 18,902 $ 4,730 $ 23,814 $ (814 ) $ (1,186 ) $ — $ 45,446 Kaplan stock-based incentive compensation $ 34,531 $ 34,531 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 Newspaper Television Magazine Cable Corporate (in thousands) Publishing Broadcasting Publishing Television Education Office Consolidated Operating revenues $ 957,082 $ 331,817 $ 344,894 $ 507,700 $ 1,412,394 $ — $ 3,553,887 Income (loss) from operations $ 125,359 $ 142,478 $ 45,122 $ 76,720 $ 157,835 $ (32,600 ) $ 514,914 Equity in losses of affiliates (881 ) Interest expense, net (23,369 ) Other income, net 8,980 Income before income taxes $ 499,644 Identifiable assets $ 702,221 $ 420,154 $ 594,937 $ 1,122,654 $ 1,257,952 $ 90,159 $ 4,188,077 Investments in marketable equity securities 329,921 Investments in affiliates 66,775 Total assets $ 4,584,773 Depreciation of property, plant and equipment $ 36,556 $ 10,202 $ 2,801 $ 100,031 $ 39,453 $ 1,500 $ 190,543 Amortization expense $ 1,119 $ — $ — $ 764 $ 5,595 $ — $ 7,478 Pension credit (expense) $ (784 ) $ 2,939 $ 38,184 $ (1,252 ) $ (2,365 ) $ — $ 36,722 Kaplan stock-based incentive compensation $ 3,000 $ 3,000 Capital expenditures $ 33,276 $ 8,557 $ 660 $ 111,331 $ 84,257 $ 268 $ 238,349 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 $ 685,744 $ 409,574 $ 581,601 $ 1,112,935 $ 1,033,810 $ 13,551 $ 3,837,215 Investments in marketable equity securities 409,736 Investments in affiliates 61,814 Total assets $ 4,308,765 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 $ 684,944 $ 411,434 $ 532,867 $ 1,130,410 $ 870,850 $ 10,023 $ 3,640,528 Investments in marketable equity securities 247,958 Investments in affiliates 61,312 Total assets $ 3,949,798 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 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 Corporate Higher Supplemental Overhead Total (in thousands) Education Education and Other Education Operating revenues $ 721,579 $ 690,815 $ — $ 1,412,394 Income (loss) from operations $ 82,660 $ 117,075 $ (41,900 ) $ 157,835 Identifiable assets $ 587,997 $ 645,957 $ 23,998 $ 1,257,952 Depreciation of property, plant and equipment $ 20,100 $ 16,073 $ 3,280 $ 39,453 Amortization expense $ 5,595 $ 5,595 Kaplan stock-based incentive compensation $ 3,000 $ 3,000 Capital expenditures $ 49,406 $ 30,134 $ 4,717 $ 84,257 Operating revenues $ 559,877 $ 575,014 $ — $ 1,134,891 Income (loss) from operations $ 93,402 $ 100,795 $ (72,742 ) $ 121,455 Identifiable assets $ 505,077 $ 492,195 $ 36,538 $ 1,033,810 Depreciation of property, plant and equipment $ 13,222 $ 13,899 $ 2,033 $ 29,154 Amortization expense $ 8,663 $ 8,663 Kaplan stock-based incentive compensation $ 32,546 $ 32,546 Capital expenditures $ 48,990 $ 26,550 $ 9,681 $ 85,221 Operating revenues $ 368,320 $ 469,757 $ — $ 838,077 Income (loss) from operations $ 58,428 $ 87,044 $ (157,181 ) $ (11,709 ) Identifiable assets $ 389,365 $ 458,156 $ 23,329 $ 870,850 Depreciation of property, plant and equipment $ 7,970 $ 14,624 $ 1,395 $ 23,989 Amortization expense $ 1,270 $ 1,270 Kaplan stock-based incentive compensation $ 119,126 $ 119,126 Capital expenditures $ 20,876 $ 10,513 $ 3,148 $ 34,537 N.O. SUMMARY OF QUARTERLY OPERATING RESULTS AND COMPREHENSIVE INCOME (UNAUDITED)December 29, 2002January 1, 2006 and December 30, 2001January 2, 2005 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 $ 305,550 $ 336,563 $ 311,581 $ 363,790 Circulation and subscriber 186,222 191,622 182,677 186,557 Education 325,383 345,780 362,822 378,409 Other 16,775 23,612 16,582 19,962 833,930 897,577 873,662 948,718 Operating costs and expenses Operating 452,453 472,981 486,400 497,782 Selling, general and administrative 226,312 237,531 225,760 241,734 Depreciation of property, plant and equipment 45,568 47,905 47,531 49,538 Amortization of goodwill and other intangibles 1,608 1,465 1,587 2,818 725,941 759,882 761,278 791,872 Income from operations 107,989 137,695 112,384 156,846 Equity in (losses) earnings of affiliates (525 ) 342 (952 ) 254 Interest income 574 576 611 1,624 Interest expense (6,519 ) (6,436 ) (7,554 ) (6,245 ) Other income (expense), net 7,072 (3,622 ) 6,869 (1,339 ) Income before income taxes 108,591 128,555 111,358 151,140 Provision for income taxes 42,000 49,800 44,800 48,700 Net income 66,591 78,755 66,558 102,440 Redeemable preferred stock dividends (491 ) (245 ) (245 ) — Net income available for common shares $ 66,100 $ 78,510 $ 66,313 $ 102,440 Basic earnings per common share $ 6.89 $ 8.18 $ 6.91 $ 10.67 Diluted earnings per common share $ 6.87 $ 8.16 $ 6.89 $ 10.65 Basic average shares outstanding 9,589 9,594 9,596 9,598 Diluted average shares outstanding 9,617 9,618 9,618 9,616 2005 Quarterly comprehensive income $ 51,301 $ 66,397 $ 56,318 $ 114,359 (1) Cumulative effect charge presented in the first quarter as required by SFAS 142. First Second Third Fourth Quarter Quarter Quarter Quarter Charges and lost revenues associated with Katrina and other hurricanes ($12.6 million and $4.7 million in the third and fourth quarters, respectively) $ (1.31 ) $ (0.49 ) Gain on sale of marketable equity securities and land ($5.4 million, $5.2 million and $0.6 million in the first, third and fourth quarters, respectively) $ 0.56 $ 0.54 $ 0.06 5562 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 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 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) Quarterly 2001 results are adjusted to exclude amortization of goodwill and indefinite-lived intangible assets no longer amortized under SFAS 142.56SCHEDULE II 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 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 Year Ended January 1, 2006 Allowance for doubtful accounts and returns $ 65,652,000 $ 127,195,000 $ 121,722,000 $ 71,125,000 Allowance for advertising rate adjustments and discounts 5,313,000 14,970,000 13,309,000 6,974,000 $ 70,965,000 $ 142,165,000 $ 135,031,000 $ 78,099,000 572005 FORM 10-K2000-2002.2003–2005. 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) 2005 2004 2003 Operating revenues $ 3,553,887 $ 3,300,104 $ 2,838,911 Income from operations $ 514,914 $ 563,006 $ 363,820 Income before cumulative effect of change in accounting principle $ 314,344 $ 332,732 $ 241,088 Cumulative effect of change in method of accounting for goodwill and other intangibles — — — Net income $ 314,344 $ 332,732 $ 241,088 Basic earnings per common share Before cumulative effect of change in accounting principle $ 32.66 $ 34.69 $ 25.19 Cumulative effect of change in accounting principle — — — Net income available for common shares $ 32.66 $ 34.69 $ 25.19 Basic average shares outstanding 9,594 9,563 9,530 Diluted earnings per share Before cumulative effect of change in accounting principle $ 32.59 $ 34.59 $ 25.12 Cumulative effect of change in accounting principle — — — Net income available for common shares $ 32.59 $ 34.59 $ 25.12 Diluted average shares outstanding 9,616 9,592 9,555 Cash dividends $ 7.40 $ 7.00 $ 5.80 Common shareholders’ equity $ 274.79 $ 251.11 $ 216.17 Current assets $ 818,326 $ 750,509 $ 550,571 Working capital (deficit) 123,605 62,348 (190,426 ) Property, plant and equipment 1,142,632 1,089,952 1,051,373 Total assets 4,584,773 4,308,765 3,949,798 Long-term debt 403,635 425,889 422,471 Common shareholders’ equity 2,638,423 2,404,606 2,062,681 • charges and lost revenues of $17.3 million ($1.80 per share) associated with Katrina and other hurricanes • gain of $11.2 million ($1.16 per share) from sales of non-operating land and marketable equity securities • 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 (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]60THE WASHINGTON POST COMPANY 2002 2001 2000 1999 1998 1997 1996 Operating revenues $ 2,584,203 $ 2,411,024 $ 2,409,633 $ 2,212,177 $ 2,107,593 $ 1,952,986 $ 1,851,058 Income from operations $ 377,590 $ 219,932 $ 339,882 $ 388,453 $ 378,897 $ 381,351 $ 337,169 Income before cumulative effect of change in accounting principle $ 216,368 $ 229,639 $ 136,470 $ 225,785 $ 417,259 $ 281,574 $ 220,817 Cumulative effect of change in method of accounting for goodwill and other intangibles (12,100 ) — — — — — — Net income $ 204,268 $ 229,639 $ 136,470 $ 225,785 $ 417,259 $ 281,574 $ 220,817 Basic earnings per common share Before cumulative effect of change in accounting principle $ 22.65 $ 24.10 $ 14.34 $ 22.35 $ 41.27 $ 26.23 $ 20.08 Cumulative effect of change in accounting principle (1.27 ) — — — — — — Net income available for common shares $ 21.38 $ 24.10 $ 14.34 $ 22.35 $ 41.27 $ 26.23 $ 20.08 Basic average shares outstanding 9,504 9,486 9,445 10,061 10,087 10,700 10,964 Diluted earnings per share Before cumulative effect of change in accounting principle $ 22.61 $ 24.06 $ 14.32 $ 22.30 $ 41.10 $ 26.15 $ 20.05 Cumulative effect of change in accounting principle (1.27 ) — — — — — — Net income available for common shares $ 21.34 $ 24.06 $ 14.32 $ 22.30 $ 41.10 $ 26.15 $ 20.05 Diluted average shares outstanding 9,523 9,500 9,460 10,082 10,129 10,733 10,980 Cash dividends $ 5.60 $ 5.60 $ 5.40 $ 5.20 $ 5.00 $ 4.80 $ 4.60 Common shareholders’ equity $ 192.45 $ 177.30 $ 156.55 $ 144.90 $ 157.34 $ 117.36 $ 121.24 Current assets $ 407,347 $ 426,603 $ 405,067 $ 476,159 $ 404,878 $ 308,492 $ 382,631 Working capital (deficit) (356,644 ) (37,233 ) (3,730 ) (346,389 ) 15,799 (300,264 ) 100,995 Property, plant and equipment 1,094,400 1,098,211 927,061 854,906 841,062 653,750 511,363 Total assets 3,604,866 �� 3,588,844 3,200,743 2,986,944 2,729,661 2,077,317 1,870,411 Long-term debt 405,547 883,078 873,267 397,620 395,000 — — Common shareholders’ equity 1,830,386 1,683,485 1,481,007 1,367,790 1,588,103 1,184,074 1,322,803 • 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 • 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 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 10, 2005, among the Company, Citibank, N.A., JP Morgan Chase Bank, N.A., Wachovia Bank, National Association, SunTrust Bank, The Bank of New York and PNC Bank, N.A. (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on form 8-K dated August 12, 2005). 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 PNC 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 amended and restated on January 20, 2006 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated January 20, 2006).* 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 May 12, 2005 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated May 12, 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 registered public accounting firm. 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 28, 2006. 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.612005 FORM 10-K