Washington Post 2013 Annual Report Download - page 54

Interest Rate Risk. The Company’s long-term debt consists of $400 million principal amount of 7.25% unsecured notes
due February 1, 2019 (the Notes). At December 31, 2013, the aggregate fair value of the Notes, based upon quoted
market prices, was $475.2 million. 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 December 31, 2013, would have been approximately $383.6 million. 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 $417.1 million.
On September 7, 2011, the Company borrowed AUD 50 million under its revolving credit facility. On the same date,
the Company entered into interest rate swap agreements with a total notional value of AUD 50 million and a maturity
date of March 7, 2015. These interest rate swap agreements will pay the Company variable interest on the AUD
50 million notional amount at the three-month bank bill rate, and the Company will pay the counterparties a fixed rate of
4.5275%. These interest rate swap agreements were entered into to convert the variable rate Australian dollar borrowing
under the revolving credit facility into a fixed rate borrowing.
Foreign Exchange Rate Risk. The Company is exposed to foreign exchange rate risk primarily at its Kaplan
international operations and its Corporate entity, 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, and the AUD
50 million borrowing. In 2013, the Company reported unrealized foreign currency losses of $13.4 million. In 2012, the
Company reported unrealized foreign currency gains of $3.1 million. In 2011, the Company reported unrealized foreign
currency losses of $3.3 million.
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 2013, the Company’s pre-tax income for 2013 would have been approximately $18 million lower.
Conversely, if such values had been 10% higher, the Company’s reported pre-tax income for 2013 would have been
approximately $18 million higher.
Item 8. Financial Statements and Supplementary Data.
See the Company’s Consolidated Financial Statements at December 31, 2013, and for the periods then ended, together
with the report of PricewaterhouseCoopers LLP thereon and the information contained in Note 20 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 39 hereof.
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
Not applicable.
Item 9A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
An evaluation was performed by the Company’s management, with the participation of the Company’s Chief Executive
Officer (the Company’s principal executive officer) and the Company’s Senior Vice President–Finance (the Company’s
principal financial officer), of the effectiveness of the Company’s disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)), as of December 31, 2013. Based on that evaluation, the Company’s
Chief Executive Officer and Senior Vice President–Finance have concluded that the Company’s disclosure controls and
procedures, as designed and implemented, are effective in ensuring that information required to be disclosed by the
Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in the Securities and Exchange Commission’s rules and forms and is accumulated and
communicated to management, including the Chief Executive Officer and Senior Vice President–Finance, in a manner that
allows timely decisions regarding required disclosure.
Management’s Report on Internal Control Over Financial Reporting
Management’s report set forth on page 53 is incorporated herein by reference.
36 GRAHAM HOLDINGS COMPANY