Washington Post 2006 Annual Report Download - page 35

Warner have used a jointly owned company based in England to provide production and distribution services for the
Europe, Middle East and Africa edition of Newsweek and the Europe edition of Time. In 2002 this jointly owned company
began providing certain production and distribution services for the Asian editions of these magazines. Budget Travel is
produced by one of the independent contract printers that also prints Newsweek 's domestic edition.
In 2006 The Washington Post, Express and El Tiempo Latino collectively consumed about 168,000 tons of newsprint. Such
newsprint was purchased from a number of suppliers, including Bowater Incorporated, which supplied approximately 39%
of the 2006 newsprint requirements for these newspapers. Although for many years some of the newsprint purchased by
WP Company from Bowater Incorporated typically was provided by Bowater Mersey Paper Company Limited (in which,
as noted previously, the Company owns an interest), since 1999 none of the newsprint delivered to WP Company has
come from that source.
The price of newsprint has historically been volatile. During 2006 the RISI East Coast Newsprint Price Index, which
provides monthly single-price estimates based on marketplace surveys of both buyers and sellers, for 30-lb. newsprint (the
kind of newsprint used by The Washington Post and most of the newspapers published by Post-Newsweek Media, Inc.),
ranged (on a short-ton basis) from a low of $581 a ton in January to a high of $601 a ton for the July through September
period. (Because of quantity discounts and other factors, the RISI index prices do not necessarily correspond with the
prices actually paid by the Company's subsidiaries for newsprint.) The Company believes adequate supplies of newsprint
are available to The Washington Post and the other newspapers published by the Company's subsidiaries through
contracts with various suppliers. More than 90% of the newsprint consumed by WP Company's printing plants includes
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 recyclable materials collected in Washington, D.C., Maryland and northern Virginia.
In 2006 the operations of The Daily Herald Company and Post-Newsweek Media, Inc. consumed approximately 6,400
and 22,000 tons of newsprint, respectively, which were obtained in each case from various suppliers. Approximately
95% of the newsprint used by The Daily Herald Company and 75% of the newsprint used by Post-Newsweek Media, Inc.
includes recycled content. The domestic edition of Newsweek consumed about 27,000 tons of paper in 2006, 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 $1,035 per ton.
Over 90% of the aggregate domestic circulation of both Newsweek and Budget Travel is delivered by periodical
(formerly second-class) mail and most subscriptions for such publications are solicited by either first-class or standard
(formerly third-class) mail. Thus, substantial increases in postal rates for these classes of mail could have a significant
negative impact on the operating income of these business units. The U.S. Postal Service filed a new rate case in May
2006 seeking rate increases of 7% for first-class letters, 8.6% for route-sorted standard mail and 11.4% for periodicals.
The rate request is currently under review by the Postal Rate Commission, which is expected to issue a recommendation in
March 2007. If the requested rate increases are then approved by the Postal Service Board of Governors, those
increases will likely take effect at the beginning of May 2007. If implemented as requested, those increases will have the
effect of increasing Newsweek's 2007 postage costs (May through December) by approximately $3.1 million. On
December 20, 2006 the Postal Accountability and Enhancement Act was signed into law. Although that legislation will
have no effect on the pending rate case, among other things it will abolish the current method of ratemaking and generally
limit future increases to increases in the Consumer Price Index. It is anticipated that this will result in smaller, though more
frequent, postal rate increases in the future. However, the Postal Service has 12 months from the date of enactment of this
legislation to file a final rate case under the preexisting rules.
Competition
Kaplan competes in each of its test preparation product lines with a variety of regional and national test preparation
businesses, as well as with individual tutors and in-school preparation for standardized tests. Kaplan's Score! Education
subsidiary competes with other regional and national learning centers, individual tutors and other educational businesses
that target parents and students. PMBR competes with an online provider of multi-state bar exam preparation services as
well as with various bar review providers (the largest of which is BAR/BRI, a unit of The Thomson Corporation) that
prepare students for the multi-state portion of the bar exam in addition to the state-specific portion of the exam. Kaplan's
Professional Division competes with other companies that provide alternative or similar professional training, test
preparation and consulting services. Kaplan's Higher Education Division competes with both facilities-based and other
distance learning providers of similar educational services, including not-for-profit colleges and universities and for-profit
businesses. Overseas, each of Kaplan's businesses competes with other for-profit companies and, in certain instances,
with governmentally supported schools and institutions that provide similar training and educational programs.
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