Washington Post 2015 Annual Report Download - page 55

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; to its borrowing and cash-management
activities, which are subject to interest rate risk; and to its non-U.S. business operations, which are subject to
foreign exchange rate risk.
Equity Price Risk. The Company has common stock investments in several publicly traded companies (as
discussed in Note 4 to the Company’s Consolidated Financial Statements) that are subject to market price
volatility. The fair value of these common stock investments totaled $350.6 million at December 31, 2015.
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, 2015, the aggregate fair value of the Notes,
based upon quoted market prices, was $436.6 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, 2015, would have been
approximately $389.3 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
$411.0 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 paid the Company variable interest on the
AUD 50 million notional amount at the three-month bank bill rate, and the Company paid 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. On March 9, 2015, the
Company repaid the AUD 50 million borrowed under its revolving credit facility. On the same day, the AUD
50 million interest rate swap agreements matured.
Foreign Exchange Rate Risk. The Company is exposed to foreign exchange rate risk primarily at its Kaplan
international operations, and the primary exposure relates to the exchange rate between the U.S. dollar and 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. In 2015, the
Company reported unrealized foreign currency losses of $15.6 million. In 2014, the Company reported
unrealized foreign currency losses of $11.1 million. In 2013, the Company reported unrealized foreign currency
losses of $13.4 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 2015, the Company’s pre-tax income for 2015 would have been approximately
$22 million lower. Conversely, if such values had been 10% higher, the Company’s reported pre-tax income for
2015 would have been approximately $22 million higher.
Item 8. Financial Statements and Supplementary Data.
See the Company’s Consolidated Financial Statements at December 31, 2015, 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 44 hereof.
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
Not applicable.
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