Washington Post 2009 Annual Report Download - page 47

Item 6. Selected Financial Data.
See the information for the years 2005 through 2009 contained in the table titled “Ten-Year Summary of Selected
Historical Financial Data,” which is included in this Annual Report on Form 10-K and listed in the index to financial
information on page 37 hereof (with only the information for such years to be deemed filed as part of this Annual Report
on Form 10-K).
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
See the information contained under the heading “Management’s Discussion and Analysis of Results of Operations and
Financial Condition,” which is included in this Annual Report on Form 10-K and listed in the index to financial information
on page 37 hereof.
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. Except
for insignificant activity in short-term forward foreign exchange contracts, 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 E to the
Company’s Consolidated Financial Statements) that are subject to market price volatility. The fair value of these common
stock investments totaled $353,884,000 at January 3, 2010.
Interest Rate Risk
The Company’s long-term debt consists of $400,000,000 principal amount of 7.25% unsecured notes due February 1,
2019 (the “Notes”). At January 3, 2010, the aggregate fair value of the Notes, based upon quoted market prices, was
$443,120,000. 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 pay on the Notes is fixed,
but such an increase in rates would affect the fair value of the Notes. Assuming, hypothetically, that the market interest
rate applicable to the Notes was 100 basis points higher than the Notes’ stated interest rate of 7.25%, the fair value of
the Notes at January 3, 2010, would have been approximately $374,750,000. 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 have been approximately $427,360,000.
Foreign Exchange Rate Risk
The Company is exposed to foreign exchange rate risk at its Kaplan and Newsweek international operations, and the
primary exposure relates to the exchange rate between the U.S. dollar and both the British pound and the Australian dollar.
This exposure includes British pound and Australian-dollar denominated intercompany loans on U.S. based Kaplan entities
with a functional currency in U.S. dollars. Gains and losses arising from foreign currency transactions affecting the
Consolidated Statements of Income have historically not been significant; however, unrealized foreign currency gains on
intercompany loans of $16.9 million were recorded in 2009 arising from the weakening of the U.S dollar during the year.
Comparing exchange rates in effect at December 31, 2009, versus December 31, 2008, the U.S. dollar weakened
against the British pound and the Australian dollar by approximately 10% and 29%, respectively. In 2008, the Company
reported unrealized foreign currency losses of $46.3 million as a result of the significant strengthening of the U.S. dollar
against the British pound and the Australian dollar. In 2007, the Company reported unrealized foreign currency gains of
$8.8 million as a result of the weakening of the U.S. dollar against the British pound and the Australian dollar.
If the values of the British pound and the Australian dollar relative to the U.S. dollar had been 10% lower than the values
that prevailed during 2009, the Company’s pre-tax income for fiscal 2009 would have been approximately $17 million
lower. Conversely, if such values had been 10% greater, the Company’s reported pre-tax income for fiscal 2009 would
have been approximately $17 million higher.
2009 FORM 10-K 33