Washington Post 2005 Annual Report Download - page 42

During the 28 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 six quarters and by 10% or less in each of the other 21 quarters.
Interest Rate Risk
The Company has historically satisfied some of its financing requirements 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. Although during most of
fiscal 2005 the Company had commercial paper borrowings outstanding, at January 1, 2006, the Company had no such
borrowings outstanding and held commercial paper investments aggregating $59,240,000 at an average interest rate of
4.2%. At January 2, 2005, the Company had short-term commercial paper borrowings outstanding of $50,187,000 at
an average interest rate of 2.2%. The Company is exposed to interest rate risk with respect to such investments and
borrowings since an increase in the interest rates on commercial paper would increase the Company's interest income on
commercial paper investments it held at the time and would also increase the Company's interest expense on any
commercial borrowings it had outstanding at the time. Assuming a hypothetical 100 basis point increase in the average
interest rate on commercial paper from the rates that prevailed during the Company's 2005 and 2004 fiscal years, the
Company's interest income (net of interest expense on commercial paper borrowings) would have been greater by
approximately $200,000 in fiscal 2005 and its interest expense would have been greater by approximately $726,000 in
fiscal 2004.
The Company's long-term debt consists of $400,000,000 principal amount of 5.5% unsecured notes due February 15,
2009 (the ""Notes''). At January 1, 2006, the aggregate fair value of the Notes, based upon quoted market prices,
was $404,080,000. 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 $388,850,000. 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
$411,490,000.
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 the U.S. dollar. Translation gains and losses
affecting the Consolidated Statements of Income have historically not been significant and represented less than 2% of net
income during each of the Company's last three fiscal years. If the value of the British pound relative to U.S. dollar had
been 10% lower than the values that prevailed during 2005, the Company's reported net income for fiscal 2005 would
have been decreased by approximately 1%. Conversely, if such value had been 10% greater, the Company's reported
net income for fiscal 2005 would have been increased by approximately 1%.
Item 8. Financial Statements and Supplementary Data.
See the Company's Consolidated Financial Statements at January 1, 2006, and for the periods then ended, together with
the report of PricewaterhouseCoopers LLP thereon and the information contained in Note O 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 30 hereof.
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial
Disclosure.
Not applicable.
Item 9A. Controls and Procedures.
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 Vice PresidentÓFinance (the Company's principal
financial officer), of the effectiveness of the Company's disclosure controls and procedures (as defined in Exchange Act
26 THE WASHINGTON POST COMPANY