Washington Post 2008 Annual Report Download - page 46

Equity Price Risk
The Company has common stock investments in several publicly traded companies (as discussed in Note D to the
Company’s Consolidated Financial Statements) that are subject to market price volatility. The fair value of these common
stock investments totaled $333,319,000 at December 28, 2008.
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 and money market
funds. As of December 28, 2008 the Company had $150.0 million of commercial paper borrowings outstanding at an
average interest rate of 0.20% and $11.5 million of investments in an institutional U.S. government money market fund at
a rate of 1.20%. 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 2008, the Company’s interest expense would have increased by
approximately $786,000.
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 December 28, 2008, the aggregate fair value of the Notes, based upon quoted market prices,
was $397,800,000. 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 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 at December 31, 2008, would have been approximately $399,440,000. 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 $400,450,000. During the first quarter of 2009, the
Notes were refinanced primarily with the net proceeds from the sale of $400,000,000 principal amount of 7.25%
unsecured notes due February 1, 2019.
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 losses on
intercompany loans of $46.3 million were recorded in 2008 arising from the significant strengthening of the U.S dollar
during the year. Comparing exchange rates in effect at December 31, 2008 versus December 31, 2007, the U.S.
dollar strengthened against the British pound and the Australian dollar by approximately 28% and 21%, respectively. In
2007 and 2006, the Company reported unrealized foreign currency gains of $8.8 million and $11.9 million,
respectively, 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 2008, the Company’s pre-tax income for fiscal 2008 would have been approximately $15 million
lower. Conversely, if such values had been 10% greater, the Company’s reported pre-tax income for fiscal 2008 would
have been approximately $15 million higher.
Item 8. Financial Statements and Supplementary Data.
See the Company’s Consolidated Financial Statements at December 28, 2008, and for the periods then ended, together
with the report of PricewaterhouseCoopers LLP thereon and the information contained in Note Q 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 38 hereof.
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
Not applicable.
34 THE WASHINGTON POST COMPANY