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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 2, 2011, would have been approximately $376,710,000. 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 $425,040,000.
Foreign Exchange Rate Risk
The Company is exposed to foreign exchange rate risk at its Kaplan 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 Operations have historically not been significant; however, unrealized foreign currency gains on inter-
company loans of $6.7 million were recorded in 2010 arising from the overall weakening of the U.S dollar during the
year. Comparing exchange rates in effect at December 31, 2010, versus December 31, 2009, the U.S. dollar
weakened against the Australian dollar by approximately 14% and strengthened against the British pound by approx-
imately 3%. In 2009, the Company reported unrealized foreign currency gains of $16.9 million as a result of the
weakening of the U.S. dollar against the British pound and Australian dollar. 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.
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 2010, the Company’s pre-tax income for fiscal 2010 would have been approximately $14 million
lower. Conversely, if such values had been 10% greater, the Company’s reported pre-tax income for fiscal 2010 would
have been approximately $14 million higher.
Item 8. Financial Statements and Supplementary Data.
See the Company’s Consolidated Financial Statements at January 2, 2011, and for the periods then ended, together
with the report of PricewaterhouseCoopers LLP thereon and the information contained in Note S 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 45 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 January 2, 2011. 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 61 is incorporated herein by reference.
Changes in Internal Control Over Financial Reporting
There has been no change in the Company’s internal control over financial reporting during the quarter ended January 2,
2011, that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial
reporting.
42 THE WASHINGTON POST COMPANY