Washington Post 2007 Annual Report Download - page 51

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
The Company is exposed to market risk in the normal course of its business due primarily to its ownership of marketable
equity securities, which are subject to equity price risk; to its borrowing and cash-management activities, which are
subject to interest rate risk; and to its foreign business operations, which are subject to foreign exchange rate risk.
Neither the Company nor any of its subsidiaries is a party to any derivative financial instruments.
Equity Price Risk
The Company has common stock investments in several publicly traded companies (as discussed in Note C to the
Company’s Consolidated Financial Statements) that are subject to market price volatility. The fair value of these
common stock investments totaled $469,459,000 at December 30, 2007.
The following table presents the hypothetical change in the aggregate fair value of the Company’s common stock
investments in publicly traded companies assuming hypothetical stock price fluctuations of plus or minus 10%, 20% and
30%inthemarketpriceofeachstockincludedtherein:
⫺30% ⫺20% ⫺10% +10% +20% +30%
Value of Common Stock Investments
Assuming Indicated Decrease in
Each Stock’s Price
Value of Common Stock Investments
Assuming Indicated Increase in
Each Stock’s Price
$328,621,000 $375,567,000 $422,513,000 $516,405,000 $563,351,000 $610,297,000
Interest Rate Risk
TheCompanyhashistoricallysatisfiedsomeofitsfinancingrequirements through the issuance of short-term commercial
paper. Conversely, when cash generation exceeds its current need for cash the Company may pay down its
commercial paper borrowings and invest some or all of the surplus in commercial paper issued by third parties
and money market funds. Although the Company invested excess cash for most of 2007, as of December 30, 2007
the Company had $84.8 million of commercial paper borrowings outstanding at an average interest rate of 4.5%. The
Company is exposed to interest rate risk with respect to such investments and borrowings since an increase in short-term
interest rates would increase the Company’s interest income on any commercial paper or money market investments it
held at the time and would increase the Company’s interest expense on any commercial paper it had outstanding at the
time. Assuming a hypothetical 100 basis point increase in the average interest rate on the Company’s commercial
paper borrowings during 2007, the Company’s interest expense would have been greater by less than $0.1 million in
2007.
The Company’s long-term debt consists of $400,000,000 principal amount of 5.5% unsecured notes due Febru-
ary 15, 2009 (the “Notes”). At December 30, 2007, the aggregate fair value of the Notes, based upon quoted
market prices, was $400,800,000. An increase in the market rate of interest applicable to the Notes would not
increase the Company’s interest expense with respect to the Notes since the rate of interest the Company is required to
payontheNotesisfixed,butsuchanincreaseinrateswouldaffectthefairvalueoftheNotes.Assuming,
hypothetically, that the market interest rate applicabletotheNoteswas100basispointshigherthantheNotes’
stated interest rate of 5.5%, the fair value of the Notes at December 30, 2007, would have been approximately
$395,715,000. Conversely, if the market interest rate applicable to the Notes was 100 basis points lower than the
Notes’ stated interest rate, the fair value of the Notes at such date would then have been approximately
$404,300,000.
Foreign Exchange Rate Risk
The Company is exposed to foreign exchange rate risk due to its Newsweek and Kaplan international operations, and
the primary exposure relates to the exchange rate between the British pound and U.S. dollar. Translation gains and
losses affecting the Consolidated Statements of Income have historically not been significant and represented less than
2.5% of net income during each of the Company’s last three fiscal years. If the value of the British pound relative to the
U.S. dollar had been 10% lower than the values that prevailed during 2007, the Company’s reported net income for
fiscal 2007 would have been decreased by approximately 2.5%. Conversely, if such value had been 10% greater, the
Company’s reported net income for fiscal 2007 would have been increased by approximately 2.5%.
Item 8. Financial Statements and Supplementary Data.
See the Company’s Consolidated Financial Statements at December 30, 2007, and for the periods then ended,
together with the report of PricewaterhouseCoopers LLP thereon and the information contained in Note P to said
2007 FORM 10-K 35