Washington Post 2002 Annual Report Download - page 24

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 27 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 and to its borrowing activities which are subject to
interest rate risk.
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 $216,533,000 at December 29, 2002.
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% in the market price of each stock included therein:
Value of Common Stock Investments Value of Common Stock Investments
Assuming Indicated Decrease in Assuming Indicated Increase in
Each Stock’s Price Each Stock’s Price
–30% –20% –10% +10% +20% +30%
$151,573,000 $173,226,000 $194,880,000 $238,186,000 $259,840,000 $281,493,000
During the 16 quarters since the end of the Company’s 1998 fiscal year, market price movements caused the
aggregate fair value of the Company’s common stock investments in publicly traded companies to change by
approximately 20% in one quarter, 15% in three quarters and by less than 10% in each of the other 12 quarters.
Interest Rate Risk
At December 29, 2002, the Company had short-term commercial paper borrowings outstanding of $259,258,000
at an average interest rate of 1.6%. At December 30, 2001, the Company had commercial paper borrowings
outstanding of $533,896,000 at an average interest rate of 2.0%. The Company is exposed to interest rate risk with
respect to such borrowings since an increase in commercial paper borrowing rates would increase the Company’s
interest expense on its commercial paper borrowings. Assuming a hypothetical 100 basis point increase in its
average commercial paper borrowing rates from those that prevailed during the Company’s 2002 and 2001 fiscal
years, the Company’s interest expense would have been greater by approximately $4,100,000 in fiscal 2002 and
by approximately $5,700,000 in fiscal 2001.
The Company’s long-term debt consists of $400,000,000 principal amount of 5.5% unsecured notes due Februa-
ry 15, 2009 (the ‘‘Notes’’). At December 29, 2002, the aggregate fair value of the Notes, based upon quoted
market prices, was $426,640,000. 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 5.5%, the fair value of the Notes would be approximately $380,027,000. 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 would then be approximately $421,176,000.
Item 8. Financial Statements and Supplementary Data.
See the Company’s Consolidated Financial Statements at December 29, 2002, and for the periods then ended,
together with the report of PricewaterhouseCoopers LLP thereon and the information contained in Note N 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 27 hereof.
22 THE WASHINGTON POST COMPANY