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SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549



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FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 29, 2002

Commission file number 1-6714

The Washington Post Company(Exact name of registrant as specified in its charter)

|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 53-0182885                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)
|                                                               |  |                                     
|1150 15th St.,
N.W., Washington, D.C.                          |  | 20071                               
|(Address of principal executive offices)                       |  | (Zip Code)                          

Registrants Telephone Number, Including Area Code: (202) 334-6000

Securities Registered Pursuant to Section 12(b) of the Act:

|                                |  |                        
|------------------------------- |  | -----------------------
|                                |  | Name of each exchange  
|Title of each class             |  | on which registered    
|                                |  |                        
|Class B Common Stock, Par Value |  | New York Stock Exchange
|$1.00 Per Share                 |  |                        

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 (the Act) during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports) and (2) has been subject
to such filing requirements for the past 90 days. Yes [x] No [  ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrants knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [  ]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes [x] No [  ]

Aggregate market value of the Companys common stock held by non-affiliates on
June 30, 2002, based on the closing price for the Companys Class B Common
Stock on the New York Stock Exchange on such date: approximately
$2,881,000,000.

Shares of common stock outstanding at February 28, 2003:

Class A Common Stock  1,722,250 shares
Class B Common Stock  7,804,400 shares

Documents Partially Incorporated by Reference:

Definitive Proxy Statement for the Companys 2003 Annual Meeting of Stockholders
(incorporated in Part III to the extent provided in Items 10, 11, 12 and 13 hereof).



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THE WASHINGTON POST COMPANY 2002 FORM
10-K

|                               |  |                                                                                                         |                              |      |                                                                                                                                |    |  |    |  | 
|------------------------------ |  | ------------------------------------------------------------------------------------------------------- | ---------------------------- | ---- | ------------------------------------------------------------------------------------------------------------------------------ | -- |  | -- |  | 
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|                               |  | PART I                                                                                                  |                              | Page
|                               |  |                                                                                                         |                              |     
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|Item 1.                        |  | Business                                                                                                |                              |      | 1                                                                                                                              |   
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|                               |  |                                                                                                         | Newspaper Publishing         |      |                                                                                                                                | 1  | 
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|                               |  |                                                                                                         | Television Broadcasting      |      |                                                                                                                                | 3  | 
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|                               |  |                                                                                                         | Cable Television Operations  |      |                                                                                                                                | 6  | 
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|                               |  |                                                                                                         | Magazine Publishing          |      |                                                                                                                                | 9  | 
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|                               |  |                                                                                                         | Education                    |      |                                                                                                                                | 12 | 
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|                               |  |                                                                                                         | Other Activities             |      |                                                                                                                                | 14 | 
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|                               |  |                                                                                                         | Production and Raw Materials |      |                                                                                                                                | 14 | 
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|                               |  |                                                                                                         | Competition                  |      |                                                                                                                                | 15 | 
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|                               |  |                                                                                                         | Executive Officers           |      |                                                                                                                                | 18 | 
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|                               |  |                                                                                                         | Employees                    |      |                                                                                                                                | 18 | 
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|                               |  |                                                                                                         | Forward-Looking Statements   |      |                                                                                                                                | 19 | 
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|                               |  |                                                                                                         | Available Information        |      |                                                                                                                                | 19 | 
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|Item 2.                        |  | Properties                                                                                              |                              |      | 19                                                                                                                             |   
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|Item 3.                        |  | Legal Proceedings                                                                                       |                              |      | 20                                                                                                                             |   
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|Item 4.                        |  | Submission of Matters to a Vote of Security
    Holders                                                 |                              |      | 21                                                                                                                             |   
|PART II                       
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|Item 5.                        |  | Market for the Registrants Common Equity
    and Related Stockholder Matters                           |                              |      | 21                                                                                                                             |   
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|Item 6.                        |  | Selected Financial Data                                                                                 |                              |      | 21                                                                                                                             |   
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|Item 7.                        |  | Managements Discussion and Analysis of
    Financial Condition and Results of Operations               |                              |      | 22                                                                                                                             |   
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|Item 7A.                       |  | Quantitative and Qualitative Disclosures About
    Market Risk                                          |                              |      | 22                                                                                                                             |   
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|Item 8.                        |  | Financial Statements and Supplementary Data                                                             |                              |      | 22                                                                                                                             |   
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|Item 9.                        |  | Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure                |                              |      | 23                                                                                                                             |   
|PART III                      
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|Item 10.                       |  | Directors and Executive Officers of the Registrant                                                      |                              |      | 23                                                                                                                             |   
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|Item 11.                       |  | Executive Compensation                                                                                  |                              |      | 23                                                                                                                             |   
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|Item 12.                       |  | Security Ownership of Certain Beneficial Owners
    and Management                                      |                              |      | 23                                                                                                                             |   
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|Item 13.                       |  | Certain Relationships and Related Transactions                                                          |                              |      | 23                                                                                                                             |   
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|Item 14.                       |  | Controls and Procedures                                                                                 |                              |      | 23                                                                                                                             |   
|PART IV                       
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|Item 15.                       |  | Exhibits, Financial Statement Schedules, and
    Reports on Form 8-K                                    |                              |      | 23                                                                                                                             |   
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|SIGNATURES                     |  |                                                                                                         | 24                           |     
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|CERTIFICATIONS                 |  |                                                                                                         | 25                           |     
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|INDEX TO FINANCIAL INFORMATION |  |                                                                                                         | 27                           |     
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|                               |  | Managements Discussion and Analysis of
    Results of Operations and Financial   Condition (Unaudited) |                              |      | 29                                                                                                                             |   
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|                               |  | Financial Statements and Schedules:                                                                     |                              |      |                                                                                                                                |   
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|                               |  |                                                                                                         |                              |      | Report of Independent Accountants                                                                                              |    |  | 38 | 
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|                               |  |                                                                                                         |                              |      | Consolidated Statements of Income for the Three
    Fiscal Years Ended   December 29, 2002                                     |    |  | 39 | 
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|                               |  |                                                                                                         |                              |      | Consolidated Statements of Comprehensive Income
    for the Three Fiscal   Years Ended December 29, 2002                       |    |  | 39 | 
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|                               |  |                                                                                                         |                              |      | Consolidated Balance Sheets at December 29,
    2002 and December 30, 2001                                                     |    |  | 40 | 
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|                               |  |                                                                                                         |                              |      | Consolidated Statements of Cash Flows for the
    Three Fiscal Years Ended   December 29, 2002                                 |    |  | 42 | 
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|                               |  |                                                                                                         |                              |      | Consolidated Statements of Changes in Common
    Shareholders Equity for   the Three Fiscal Years
    Ended December 29, 2002 |    |  | 43 | 
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|                               |  |                                                                                                         |                              |      | Notes to Consolidated Financial Statements                                                                                     |    |  | 44 | 
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|                               |  |                                                                                                         |                              |      | Financial Statement Schedule for the Three Fiscal
    Years Ended   December 29, 2002: II  Valuation and Qualifying Accounts  |    |  | 57 | 
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|                               |  | Ten-Year Summary of Selected Historical Financial
    Data (Unaudited)                                  |                              |      | 58                                                                                                                             |   
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|INDEX TO EXHIBITS              |  |                                                                                                         | 61                           |     



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PART I



Item 1. Business.

The principal business activities of The
Washington Post Company (the Company) consist of
newspaper publishing (principally The Washington Post),
television broadcasting (through the ownership and operation of
six VHF television stations), the ownership and operation of
cable television systems, magazine publishing (principally
Newsweekmagazine), and (through its Kaplan subsidiary)
the provision of educational services.

Information concerning the consolidated operating
revenues, consolidated income from operations and identifiable
assets attributable to the principal segments of the
Companys business for the last three fiscal years is
contained in Note M to the Companys Consolidated
Financial Statements appearing elsewhere in this Annual Report
on Form 10-K. (Revenues for each segment are shown in such
Note M net of intersegment sales, which did not exceed 0.1% of
consolidated operating revenues.)

During each of the last three years the
Companys operations in geographic areas outside the United
States (consisting primarily of the publication of the
international editions of Newsweek) accounted for less
than 4% of the Companys consolidated revenues and the
identifiable assets attributable to such operations represented
less than 2% of the Companys consolidated assets.

Newspaper Publishing

The Washington Post

The Washington Postis a morning and Sunday newspaper
primarily distributed by home delivery in the Washington, D.C.
metropolitan area, including large portions of Virginia and
Maryland.

The following table shows the average paid daily
(including Saturday) and Sunday circulation of The Postfor the twelve-month periods ended September 30 in each
of the last five years, as reported by the Audit Bureau of
Circulations (ABC) for the years 1998-2001 and as
estimated by The Postfor the twelve-month period ended
September 30, 2002 (for which period ABC had not completed
its audit as of the date of this report) from the semi-annual
publishers statements submitted to ABC for the six-month
periods ended March 31, 2002 and September 30, 2002:

|     |  |                          |         |        |  |  |           | 
|---- |  | ------------------------ | ------- | ------ |  |  | --------- | 
|     |  |                         
|     |  | Average Paid Circulation
|     |  |                         
|     |  | Daily                    |         | Sunday | 
|     |  |                         
|     |  |                         
|1998 |  |                          | 774,414 |        |  |  | 1,095,091 | 
|    
|    
|    
|    
|1999 |  |                          | 775,005 |        |  |  | 1,085,060 | 
|    
|    
|    
|    
|2000 |  |                          | 777,521 |        |  |  | 1,075,918 | 
|    
|    
|    
|    
|2001 |  |                          | 771,614 |        |  |  | 1,066,723 | 
|    
|    
|    
|    
|2002 |  |                          | 768,600 |        |  |  | 1,058,889 | 

The newsstand price for the daily newspaper was
increased from $0.25 (which had been the price since 1981) to
$0.35 effective December 31, 2001. The newsstand price for
the Sunday newspaper has been $1.50 since 1992. In
July 2002 the rate charged for home-delivered copies of the
daily and Sunday newspaper for each four-week period was
increased to $12.60 from $11.88, which had been the rate since
February 2001. The corresponding rate charged for
Sunday-only home-delivery has been $6.00 since 1991.

General advertising rates were increased by an
average of 4.8% on January 1, 2002, and by another 3.2% on
January 1, 2003. Rates for most categories of classified
and retail advertising were increased by an average of 4.5% on
February 1, 2002, and by an additional 3.7% on
February 1, 2003.

The following table sets forth The
Posts advertising inches (excluding preprints) and
number of preprints for the past five years:

|                            |                 |      |       |       |      |  |       |       |      |  |       |       |  |  |       |       |  |  |       |       | 
|--------------------------- | --------------- | ---- | ----- | ----- | ---- |  | ----- | ----- | ---- |  | ----- | ----- |  |  | ----- | ----- |  |  | ----- | ----- | 
|                            |                 | 1998 |       |       | 1999 |  | 2000  |       | 2001 |  | 2002 
|                            |                 |     
|                            |                 |     
|Total Inches (in thousands) |                 |      | 3,199 |       |      |  | 3,288 |       |      |  | 3,363 |       |  |  | 2,714 |       |  |  | 2,657 |      
|                           
|                           
|                           
|                           
|                            | Full-Run Inches |      |       | 2,806 |      |  |       | 2,745 |      |  |       | 2,634 |  |  |       | 2,296 |  |  |       | 2,180 | 
|                           
|                           
|                           
|                           
|                            | Part-Run Inches |      |       | 393   |      |  |       | 543   |      |  |       | 729   |  |  |       | 418   |  |  |       | 477   | 
|                           
|                           
|                           
|                           
|Preprints (in millions)     |                 |      | 1,650 |       |      |  | 1,647 |       |      |  | 1,602 |       |  |  | 1,556 |       |  |  | 1,656 |      



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The Postalso
publishes The Washington Post National Weekly Edition, a
tabloid which contains selected articles and features from
The Washington Postedited for a national audience. The
National Weekly Editionhas a basic subscription price of
$78 per year and is delivered by second class mail to
approximately 47,000 subscribers.

The Posthas about
675 full-time editors, correspondents, reporters and
photographers on its staff, draws upon the news reporting
facilities of the major wire services and maintains
correspondents in 20 news centers abroad and in New York City;
Los Angeles; Chicago; Miami; and Austin, Texas. The Postalso maintains reporters in 12 local news bureaus.

Washingtonpost.Newsweek Interactive

Washingtonpost.Newsweek Interactive Company, LLC
(WPNI) develops news and information products for
electronic distribution. Since July 1996 this subsidiary of
the Company has produced washingtonpost.com, an Internet site
that features the full editorial text of The Washington Postand most of The Posts classified advertising as
well as original content created by WPNIs staff and
content obtained from other sources. This site is currently
generating more than 160 million page views per month. The
washingtonpost.com site also features comprehensive information
about activities, groups and businesses in the Washington, D.C.
area, including an arts and entertainment section and a news
section focusing on technology businesses and related policy
issues. This site has developed a substantial audience of users
who are outside of the Washington, D.C. area, and WPNI believes
that at least three-quarters of the unique users accessing the
site each month are in that category. During the fall of 2002
WPNI began requiring most users accessing the washingtonpost.com
site to register and provide their year of birth, gender and zip
code. The resulting information helps WPNI provide online
advertisers with opportunities to target specific geographic
areas and demographic groups.

WPNI also produces the NewsweekInternet
site, which was launched in 1998 and contains editorial content
from the print edition of Newsweekas well as daily news
updates and analysis, photo galleries, Web guides and other
features.

WPNI holds a minority equity interest in
Classified Ventures, LLC, a company formed to compete in the
business of providing nationwide classified advertising
databases on the Internet. The Classified Ventures databases
cover the product categories of automobiles, apartment rentals
and real estate. Listings for these databases come from various
sources, including direct sales and classified listings from the
newspapers of participating companies. Links to the Classified
Ventures databases are included in the washingtonpost.com site.

Under an agreement signed in June 2000, WPNI
and several other business units of the Company have been
sharing certain news material and promotional resources with NBC
News and MSNBC. Among other things, under this agreement the
NewsweekWeb site has become a feature on MSNBC.com, and
MSNBC.com is being provided access to certain content from
The Washington Post. Similarly, washingtonpost.com is
being provided access to certain MSNBC.com multimedia content.

Community Newspaper Division of Post-Newsweek
Media

The Community Newspaper Division of Post-Newsweek
Media, Inc. publishes two weekly paid-circulation, three
twice-weekly paid-circulation and 39 controlled-circulation
weekly community newspapers. This divisions newspapers are
divided into two groups: The Gazette Newspapers, which
circulate in Montgomery, Prince Georges and Frederick
Counties and in parts of Carroll, Anne Arundel and Howard
Counties, Maryland; and Southern Maryland Newspapers,
which circulate in southern Prince Georges County and in
Charles, St. Marys and Calvert Counties, Maryland. During
2002 these newspapers had a combined average circulation of
approximately 670,000 copies. This division also produces
military newspapers (most of which are weekly) under agreements
where editorial material is supplied by local military bases; in
2002 the 11 military newspapers produced by this division had a
combined average circulation of over 200,000 copies.

The Gazette Newspapersand Southern Maryland Newspaperstogether employ approximately 165 editors, reporters and
photographers.

This division also operates two commercial
printing businesses in suburban Maryland.

The Herald

The Company owns The Daily Herald Company,
publisher of The Heraldin Everett, Washington, about 30
miles north of Seattle. The Heraldis published mornings
seven days a week and is primarily distributed by home delivery
in



2




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Snohomish County. The Daily Herald Company also
provides commercial printing services and publishes six
controlled-circulation weekly community newspapers (collectively
known as The Enterprise Newspapers) that are distributed
in south Snohomish and north King Counties.


The Heralds
average paid circulation as reported to ABC for the twelve
months ended September 30, 2002, was 50,004 daily
(including Saturday) and 58,203 Sunday. The aggregate average
weekly circulation of The Enterprise Newspapersduring
the twelve-month period ended December 31, 2002, was
approximately 69,000 copies.

The Heraldand
The Enterprise Newspaperstogether employ approximately
75 editors, reporters and photographers.

Greater Washington Publishing

The Companys Greater Washington Publishing,
Inc. subsidiary publishes several free-circulation advertising
periodicals which have little or no editorial content and are
distributed in the greater Washington, D.C. metropolitan area
using sidewalk distribution boxes. Greater Washington
Publishings two largest periodicals are The Washington
Post Apartment Showcase, which is published monthly and has
an average circulation of about 55,000 copies, and New Homes
Guide, which is published six times a year and also has an
average circulation of about 55,000 copies.

Television Broadcasting

Through subsidiaries the Company owns six VHF
television stations located in Detroit, Michigan; Houston,
Texas; Miami, Florida; Orlando, Florida; San Antonio, Texas; and
Jacksonville, Florida; which are respectively the 10th, 11th,
17th, 20th, 37th and 51st largest broadcasting markets in the
United States.

Five of the Companys television stations
are affiliated with one or another of the major national
networks. The Companys Jacksonville station, WJXT, ended
its affiliation with the CBS network in July 2002 when the
parties were unable to negotiate mutually acceptable terms for a
renewal of the stations network affiliation agreement.
Subsequent to that date WJXT has been operated as an independent
station.

The following table sets forth certain
information with respect to each of the Companys
television stations:

|                     |  |            |      |             |  |            |      |            |  |                    |         |           |  |  |          |  |  |  |        |  |  |  |        | 
|-------------------- |  | ---------- | ---- | ----------- |  | ---------- | ---- | ---------- |  | ------------------ | ------- | --------- |  |  | -------- |  |  |  | ------ |  |  |  | ------ | 
|                     |  |            |      |             |  |            |      |            |  |                   
|Station Location and |  |            |      |             |  | Expiration |      | Expiration |  | Total Commercial  
|Year Commercial      |  | National   |      |             |  | Date of    |      | Date of    |  | Stations in DMA(b)
|Operation            |  | Market     |      | Network     |  | FCC        |      | Network    |  |                   
|Commenced            |  | Ranking(a) |      | Affiliation |  | License    |      | Agreement  |  | Allocated          |         | Operating
|                    
|                    
|WDIV                 |  |            | 10th |             |  |            | NBC  |            |  |                    | Oct. 1, |           |  |  | Dec. 31, |  |  |  | VHF-4  |  |  |  | VHF-4  | 
|Detroit, Mich.       |  |            |      |             |  |            |      |            |  |                    | 2005    |           |  |  | 2011     |  |  |  | UHF-6  |  |  |  | UHF-5  | 
|1947                 |  |            |      |             |  |            |      |            |  |                    |         |           |  |  |          |  |  |  |        |  |  |  |        | 
|KPRC                 |  |            | 11th |             |  |            | NBC  |            |  |                    | Aug. 1, |           |  |  | Dec. 31, |  |  |  | VHF-3  |  |  |  | VHF-3  | 
|Houston, Tx.         |  |            |      |             |  |            |      |            |  |                    | 2006    |           |  |  | 2011     |  |  |  | UHF-11 |  |  |  | UHF-11 | 
|1949                 |  |            |      |             |  |            |      |            |  |                    |         |           |  |  |          |  |  |  |        |  |  |  |        | 
|WPLG                 |  |            | 17th |             |  |            | ABC  |            |  |                    | Feb. 1, |           |  |  | Dec. 31, |  |  |  | VHF-5  |  |  |  | VHF-5  | 
|Miami, Fla.          |  |            |      |             |  |            |      |            |  |                    | 2005    |           |  |  | 2004     |  |  |  | UHF-8  |  |  |  | UHF-8  | 
|1961                 |  |            |      |             |  |            |      |            |  |                    |         |           |  |  |          |  |  |  |        |  |  |  |        | 
|WKMG                 |  |            | 20th |             |  |            | CBS  |            |  |                    | Feb. 1, |           |  |  | Apr. 6,  |  |  |  | VHF-3  |  |  |  | VHF-3  | 
|Orlando, Fla.        |  |            |      |             |  |            |      |            |  |                    | 2005    |           |  |  | 2005     |  |  |  | UHF-11 |  |  |  | UHF-10 | 
|1954                 |  |            |      |             |  |            |      |            |  |                    |         |           |  |  |          |  |  |  |        |  |  |  |        | 
|KSAT                 |  |            | 37th |             |  |            | ABC  |            |  |                    | Aug. 1, |           |  |  | Dec. 31, |  |  |  | VHF-4  |  |  |  | VHF-4  | 
|San Antonio, Tx.     |  |            |      |             |  |            |      |            |  |                    | 2006    |           |  |  | 2004     |  |  |  | UHF-6  |  |  |  | UHF-6  | 
|1957                 |  |            |      |             |  |            |      |            |  |                    |         |           |  |  |          |  |  |  |        |  |  |  |        | 
|WJXT                 |  |            | 51st |             |  |            | None |            |  |                    | Feb. 1, |           |  |  |         |  |  |  | VHF-2  |  |  |  | VHF-2  | 
|Jacksonville, Fla.   |  |            |      |             |  |            |      |            |  |                    | 2005    |           |  |  |          |  |  |  | UHF-6  |  |  |  | UHF-5  | 
|1947                 |  |            |      |             |  |            |      |            |  |                    |         |           |  |  |          |  |  |  |        |  |  |  |        | 



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|    |                                                                                                                                                                              
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | Source: 2002/2003 DMA Market Rankings, Nielsen
    Media Research, Fall 2002, based on television homes in DMA (see
    note (b) below).                                     
|   
|(b) | Designated Market Area (DMA) is a
    market designation of A.C. Nielsen which defines each television
    market exclusive of another, based on measured viewing patterns.



3




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##### 



The Companys 2002 net operating revenues
from national and local television advertising and network
compensation were as follows:

|         |       |   |             |             | 
|-------- | ----- | - | ----------- | ----------- | 
|        
|        
|        
|        
|National |       | $ | 118,124,000 |            
|        
|        
|        
|        
|Local    |       |   | 205,326,000 |            
|        
|        
|        
|        
|Network  |       |   | 18,409,000  |            
|         |       |   |             |            
|         | Total |   | $           | 341,859,000 | 
|         |       |   |             |            

Regulation of Broadcasting and Related
Matters

The Companys television broadcasting
operations are subject to the jurisdiction of the Federal
Communications Commission under the Communications Act of 1934,
as amended. Under authority of such Act the FCC, among other
things, assigns frequency bands for broadcast and other uses;
issues, revokes, modifies and renews broadcasting licenses for
particular frequencies; determines the location and power of
stations and establishes areas to be served; regulates equipment
used by stations; and adopts and implements regulations and
policies which directly or indirectly affect the ownership,
operations and profitability of broadcasting stations.

Each of the Companys television stations
holds an FCC license which is renewable upon application for an
eight-year period.

In December 1996 the FCC formally approved
technical standards for digital advanced television
(DTV). DTV is a flexible system that permits
broadcasters to utilize a single digital channel in various
ways, including providing one channel of high-definition
television (HDTV) programming with greatly enhanced
image and sound quality or several channels of lower-definition
television programming (multicasting), and also is
capable of accommodating subscription video and data services.
Recent advances in compression technology may also allow
broadcasters to transmit simultaneously one channel of HDTV
programming and at least one channel of lower-definition
programming. Broadcasters may offer a combination of services as
long as they transmit at least one stream of free video
programming on the DTV channel. The FCC has assigned to each
existing full-power television station (including each station
owned by the Company) a second channel to implement DTV while
present television operations are continued on that
stations existing channel. Although in some cases a
stations DTV channel may only permit operation over a
smaller geographic service area than that available using its
existing channel, the FCCs stated goal in assigning
channels was to provide stations with DTV service areas that are
generally consistent with their existing service areas. The
FCCs DTV rules also permit stations to request
modifications to their assigned DTV facilities, allowing them to
expand their DTV service areas if certain interference criteria
are met. Under FCC rules and the Balanced Budget Act of 1997, if
specified DTV household penetration levels are met, station
owners will be required to surrender one channel in 2006 and
thereafter provide service solely in the DTV format.

The Companys Detroit, Houston and Miami
stations each commenced DTV broadcast operations during 1999,
while the Companys Orlando station commenced such
operations in 2001. The Companys two other stations (San
Antonio and Jacksonville) began DTV broadcast operations during
2002.

In November 1998 the FCC issued a decision
implementing the requirement of the Telecommunications Act of
1996 that it charge broadcasters a fee for offering certain
ancillary and supplementary services on the DTV
channel. These services include data, video or other services
that are offered on a subscription basis or for which
broadcasters receive compensation other than from advertising
revenue. In its decision, the FCC imposed a fee of 5% of the
gross revenues generated by such services. In rules adopted in
April 2000, the FCC also implemented the Community
Broadcasters Protection Act of 1999, which provides interference
protection to certain low-power television stations. These rules
provide several hundred low-power stations with the same
protection from interference enjoyed by full-power stations,
with the result that it may be more difficult for some existing
full-power stations to alter their analog or DTV transmission
facilities. Separately, in January 2001 the FCC issued an
order governing the mandatory carriage of DTV signals by cable
television operators. The FCC decided that, pending further
inquiry, only stations that broadcast in a DTV-only mode would
be entitled to mandatory carriage of their DTV signals. In
defining how a DTV signal should be carried, the FCC ruled that
only a single stream of video (that is, a single channel of
programming) together with any additional
program-related material is eligible for mandatory
carriage. The determination of what constitutes
program-related material has not yet been made.
Cable operators will be required to carry the DTV signal of any
DTV station eligible for mandatory carriage in the same
definition in which the signal was originally broadcast. Thus,
an HDTV signal of a station eligible for mandatory carriage
could not be converted into a lower definition format by cable
operators. However, until this FCC order is clarified it is



4




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##### 



unclear whether cable operators will be
responsible for ensuring that their set-top boxes are capable of
passing DTV signals in their full definition to the
consumers DTV receiver.


The FCC has a policy of reviewing its DTV rules
every two years to determine whether those rules need to be
adjusted in light of new developments. In January 2003 the
FCC released a Notice of Proposed Rule Making, initiating
the second periodic review of its DTV rules. This review will
examine broadly the rules and policies governing
broadcasters DTV operations, including interference
protection rules, operating requirements, and extensions of the
2006 deadline for ceasing analog operations. As a part of this
review, the FCC sought further comment in long-pending
proceedings to determine what public interest obligations should
apply to broadcasters DTV operations. Among other things,
the FCC has asked whether it should require broadcasters to
provide free time to political candidates, increase the amount
of programming intended to meet the needs of minorities and
women, and increase communication with the public regarding
programming decisions.

The Telecommunications Act of 1996 requires the
FCC to review its broadcast ownership rules every two years and
to repeal or modify any rule it determines is no longer in the
public interest. In August 1999 the FCC amended its local
ownership rule to permit one company to own two television
stations in the same market if there are at least eight
independently owned full-power television stations in that
market (including non-commercial stations and counting the
co-owned stations as one), and if at least one of the co-owned
stations is not among the top four ranked television stations in
that market. The FCC also decided to permit common ownership of
stations in a single market if their signals do not overlap, and
to permit common ownership where one of the stations is failing
or unbuilt. These rule changes permitted increases in the
concentration of station ownership in local markets, and all of
the Companys stations are now competing against
two-station combinations in their respective markets.
Separately, the rule governing the aggregate number of
television stations a single company can own was relaxed by
amendments to the Communications Act enacted in 1996, and
broadcast companies are now permitted to own an unlimited number
of television stations as long as the combined service areas of
such stations do not include more than 35% of nationwide
television households. The 35% limit is subject to the
FCCs periodic review, and in 1999 the agency decided to
leave the rule unchanged. However, in February 2002 the
U.S. Court of Appeals for the District of Columbia Circuit found
that the reasons given by the FCC for retaining the 35% limit
were insufficient as a matter of law and remanded the matter to
the FCC for further consideration. In addition, in
April 2002 the same court found that the FCCs rule
permitting co-owned stations in markets with at least eight
independent full-power stations had not been adequately
justified because of a failure to consider the significance of
other types of media and also remanded that rule to the FCC for
further consideration. In September 2002 the FCC began a
new periodic review of its broadcast ownership rules, including
the two rules remanded to it by the U.S. Court of Appeals. This
review will also examine four other broadcast ownership rules,
including the rule that prohibits common ownership of a
television station and an English-language daily newspaper in
the same community and the rule that prohibits common ownership
of any two of the four major television networks (ABC, CBS, NBC
and Fox). This proceeding could result in the FCCs
relaxing or eliminating one or more of its broadcast ownership
rules.

Pursuant to the must-carry
requirements of the Cable Television Consumer Protection and
Competition Act of 1992 (the 1992 Cable Act), a
commercial television broadcast station may, under certain
circumstances, insist on carriage of its signal on cable systems
serving the stations market area. Alternatively, such
stations may elect, at three-year intervals that began in
October 1993, to forego must-carry rights and insist instead
that their signals not be carried without their prior consent
pursuant to a retransmission consent agreement. The Satellite
Home Viewer Improvement Act of 1999 gave commercial television
stations similar rights to elect either must-carry or
retransmission consent with respect to the carriage of their
signals on direct broadcast satellite (DBS) systems
that choose to provide local-into-local service
(i.e., to distribute the signals of local television
stations to viewers in the local market area). Stations made
their first DBS carriage election in July 2001 and will make
subsequent elections at three-year intervals beginning in
October 2005. Stations that elect retransmission consent may
negotiate for compensation from cable and DBS systems in the
form of such things as mandatory advertising purchases by the
system operator, station promotional announcements on the
system, and cash payments to the station. The Companys
television stations, with the exception of WJXT, are being
carried on all of the major cable systems in their respective
local markets pursuant to retransmission consent agreements.
WJXT is being carried on cable in its local market pursuant to
its must-carry rights. All of the Companys television
stations are being carried by DBS providers EchoStar and DirecTV
on a local-into-local basis pursuant to retransmission consent
agreements. As noted previously, all of the Companys
television stations are transmitting both analog and digital
broadcast signals; most of those stations digital signals
are being carried on at least some local cable systems pursuant
to retransmission consent agreements.



5




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The FCC is conducting proceedings dealing with
various issues in addition to those described elsewhere in this
section, including proposals to modify its regulations relating
to the operation of cable television systems (which regulations
are discussed below under Cable Television
Division  Regulation of Cable Television and Related
Matters), and proposals that could affect the development
of alternative video delivery systems that would compete in
varying degrees with both cable television and television
broadcasting operations.

The Company is unable to determine what impact
the various rule changes and other matters described in this
section may ultimately have on the Companys television
broadcasting operations.

Cable Television Operations

At the end of 2002 the Company (through its Cable
One subsidiary) provided basic cable service to approximately
718,000 subscribers (representing about 57% of the 1,255,000
homes passed by the systems) and had in force approximately
340,000 subscriptions to premium program services, 196,000
subscriptions to digital video service (which number does not
include approximately 19,000 free trials of that service then
being offered by Cable One) and 78,000 subscriptions to cable
modem service. Digital video and cable modem services are each
currently available in markets serving more than 93% of Cable
Ones subscriber base.

On November 1, 2002, Cable One transferred
its Akron, Ohio system, together with a cash payment, to a unit
of AOL Time Warner in return for cable systems serving the
communities of Chanute, Emporia, Independence and Parsons,
Kansas. That transaction had the effect of increasing by
approximately 5,000 the number of subscribers being served by
the Companys cable systems.

The Companys cable systems are located in
19 Midwestern, Southern and Western states and typically serve
smaller communities: thus 21 of the Companys current
systems pass fewer than 10,000 dwelling units, 17 pass
10,000-25,000 dwelling units, and 18 pass more than 25,000
dwelling units. The largest cluster of systems (which together
serve about 89,000 subscribers) is located on the Gulf Coast of
Mississippi.

Regulation of Cable Television and Related
Matters

The Companys cable operations are subject
to various requirements imposed by local, state and federal
governmental authorities. The franchises granted by local
governmental authorities are typically nonexclusive and limited
in time and generally contain various conditions and limitations
relating to payment of fees to the local authority, determined
generally as a percentage of revenues. Additionally, franchises
often regulate the conditions of service and technical
performance, and contain various types of restrictions on
transferability. Failure to comply with such conditions and
limitations may give rise to rights of termination by the
franchising authority.

The 1992 Cable Act requires or authorizes the
imposition of a wide range of regulations on cable television
operations. The three major areas of regulation are (i) the
rates charged for certain cable television services,
(ii) required carriage (must carry) of some
local broadcast stations, and (iii) retransmission consent
rights for commercial broadcast stations.

Among other things, the Telecommunications Act of
1996 altered the preexisting regulatory environment by expanding
the definition of effective competition (a condition
that precludes any regulation of the rates charged by a cable
system), terminating rate regulation for some small cable
systems, and sunsetting the FCCs authority to regulate the
rates charged for optional tiers of service (which authority
expired on March 31, 1999). Since none of the cable systems
owned by the Company falls within the effective-competition or
small-system exemptions, monthly subscription rates charged by
the Companys cable systems for the basic tier of cable
service (i.e., the tier that includes the signals of
local over-the-air stations and any public, educational or
governmental channels required to be carried under the
applicable franchise agreement), as well as rates charged for
equipment rentals and service calls, may be regulated by
municipalities, subject to procedures and criteria established
by the FCC. However, rates charged by cable television systems
for pay-per-view service, for per-channel premium program
services and for advertising are all exempt from regulation.

In April 1993 the FCC adopted a
freeze on rate increases for regulated services
(i.e., the basic and, prior to March 1999, optional
tiers). Later that year the FCC promulgated benchmarks for
determining the reasonableness of rates for such services. The
benchmarks provided for a percentage reduction in the rates that
were in effect when the benchmarks were announced. Pursuant to
the FCCs rules, cable operators can increase their
benchmarked rates for regulated services to offset the effects
of inflation, equipment upgrades, and higher programming,
franchising and regulatory fees. Under the FCCs approach
cable operators may exceed their benchmarked rates if they can
show in



6




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a cost-of-service proceeding that higher rates
are needed to earn a reasonable return on investment, which the
Commission established in March 1994 to be 11.25%. The
FCCs rules also permit franchising authorities to regulate
equipment rentals and service and installation rates on the
basis of a cable operators actual costs plus an allowable
profit which is calculated from the operators net
investment, income tax rate and other factors.


As discussed in the preceding section, under the
must-carry requirements of the 1992 Cable Act, a
commercial television broadcast station may, subject to certain
limitations, insist on carriage of its signal on cable systems
located within the stations market area. Similarly, a
noncommercial public station may insist on carriage of its
signal on cable systems located within either the stations
predicted Grade B signal contour or 50 miles of the
stations transmitter. As a result of these obligations
(the constitutionality of which has been upheld by the U.S.
Supreme Court), certain of the Companys cable systems have
had to carry broadcast stations that they might not otherwise
have elected to carry, and the freedom the Companys
systems would otherwise have to drop signals previously carried
has been reduced.

Also as explained in the preceding section, at
three-year intervals beginning in October 1993 commercial
broadcasters have had the right to forego must-carry rights and
insist instead that their signals not be carried without their
prior consent. The Companys cable systems have been able
to continue carrying virtually all of the stations insisting on
retransmission consent without having to agree to pay any
stations for the privilege of carrying their signals. However,
some commitments have been made to carry other program services
offered by a station or an affiliated company, to provide
advertising availabilities on cable for sale by a station and to
distribute promotional announcements with respect to a station.
Many of these agreements between broadcast stations and the
Companys cable systems expired at the end of 2002 and the
expired agreements were replaced by new agreements having
comparable terms.

As has already been noted, in January 2001
the FCC determined that, pending further inquiry, only
television stations broadcasting in a DTV-only mode could
require local cable systems to carry their DTV signals. The FCC
currently is conducting another inquiry to decide whether it
should require cable systems to carry both the analog and the
DTV signals of local television stations. Such an extension of
must-carry requirements could result in the Companys cable
systems being required to delete some existing programming to
make room for broadcasters DTV channels.

Various other provisions in current federal law
may significantly affect the costs or profits of cable
television systems. These matters include a prohibition on
exclusive franchises, restrictions on the ownership of competing
video delivery services, restrictions on transfers of cable
television ownership, a variety of consumer protection measures,
and various regulations intended to facilitate the development
of competing video delivery services. Other provisions benefit
the owners of cable systems by restricting regulation of cable
television in many significant respects, requiring that
franchises be granted for reasonable periods of time, providing
various remedies and safeguards to protect cable operators
against arbitrary refusals to renew franchises, and limiting
franchise fees to 5% of revenues.

Apart from its authority under the 1992 Cable Act
and the Telecommunications Act of 1996, the FCC regulates
various other aspects of cable television operations. Since 1990
cable systems have been required to black out from the distant
broadcast stations they carry syndicated programs for which
local stations have purchased exclusive rights and requested
exclusivity. Other long-standing FCC rules require cable systems
to delete under certain circumstances duplicative network
programs broadcast by distant stations. The FCC also imposes
certain technical standards on cable television operators,
exercises the power to license various microwave and other radio
facilities frequently used in cable television operations, and
regulates the assignment and transfer of control of such
licenses. In addition, pursuant to the Pole Attachment Act, the
FCC exercises authority to disapprove unreasonable rates charged
to cable operators by telephone and power utilities for
utilizing space on utility poles or in underground conduits
(although states may reclaim exclusive jurisdiction over these
matters by certifying to the FCC that they regulate the rates,
terms and conditions of pole attachments, and some states in
which the Company has cable operations have so certified). A
number of cable operators (including the Companys Cable
One subsidiary) are using their cable systems to provide not
only television programming but also Internet access. In
January 2002, the U.S. Supreme Court ruled that the
FCCs authority under the Pole Attachment Act extends to
all pole attachments by cable operators, including those
attachments used to provide Internet access. Thus, except where
individual states have assumed regulatory responsibility, the
rates charged by utilities for pole or conduit access by cable
companies are subject to FCC rate regulation regardless of
whether or not the cable companies are providing Internet access
as well as the delivery of television programming.



7




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The Copyright Act of 1976 grants to cable
television systems, under certain terms and conditions, the
right to retransmit the signals of television stations pursuant
to a compulsory copyright license. Those terms and conditions
permit cable systems to retransmit the signals of local
television stations on a royalty-free basis; however in most
cases cable systems retransmitting the signals of distant
stations are required to pay certain license fees set forth in
the statute or established by subsequent administrative
regulations. The compulsory license fees have been increased on
several occasions since this Act went into effect. In 1994 the
availability of a compulsory copyright license was extended to
wireless cable for both local and distant television
signals and to direct broadcast satellite (DBS)
operators for distant signals only, although in the latter case
the license was limited to the signals of distant
network-affiliated stations delivered to subscribers who could
not receive an over-the-air signal of a station affiliated with
the same network. However, in November 1999 Congress
enacted the Satellite Home Viewer Improvement Act, which created
a royalty-free compulsory copyright license for DBS operators
who wish to distribute the signals of local television stations
to satellite subscribers in the markets served by such stations.
This Act continued the limitation on importing the signals of
distant network-affiliated stations contained in the original
compulsory license for DBS operators.

The general prohibition on telephone companies
operating cable systems in areas where they provide local
telephone service was eliminated by the Telecommunications Act
of 1996. Telephone companies now can provide video services in
their telephone service areas under four different regulatory
plans. First, they can provide traditional cable television
service and be subject to the same regulations as the
Companys cable television systems (including compliance
with local franchise and any other local or state regulatory
requirements). Second, they can provide wireless
cable service, which is described below, and not be
subject to either cable regulations or franchise requirements.
Third, they can provide video services on a common-carrier
basis, under which they would not be required to obtain local
franchises but would be subject to common-carrier regulation
(including a prohibition against exercising control over
programming content). Finally, they can operate so-called
open video systems without local franchises
(although local communities can choose to require a franchise)
and be subject to reduced regulatory burdens. The Act contains
detailed requirements governing the operation of open video
systems, including the nondiscriminatory offering of capacity to
third parties and limiting to one-third of total system capacity
the number of channels the operator can program when demand
exceeds available capacity. In addition, the rates charged by an
open video system operator to a third party for the carriage of
video programming must be just and reasonable as determined in
accordance with standards established by the FCC. (Cable
operators and others not affiliated with a telephone company may
also become operators of open video systems.) The Act also
generally prohibits telephone companies from acquiring or owning
an interest in existing cable systems operating in their service
areas.

The Telecommunications Act of 1996 balances this
grant of video authority to telephone companies by removing
various regulatory barriers to the offering of telephone
services by cable companies and others. The Act preempts state
and local laws that have barred local telephone competition in
some states. In addition, the Act requires local telephone
companies to permit cable companies and other competitors to
connect with the telephone network and requires telephone
companies to give competitors access to the essential features
and functionalities of the local telephone network (such as
switching capability, signal carriage from the subscribers
residence to the switching center, and directory assistance) on
an unbundled basis. As an alternative method of providing local
telephone service, the Act permits cable companies and others to
purchase telephone service on a wholesale basis and then resell
it to their subscribers.

At various times during the last decade, the FCC
adopted rule changes intended to facilitate the development of
multichannel multipoint distribution systems, also known as
wireless cable or MMDS, a video and data
service that is capable of distributing approximately 30
television channels in a local area by over-the-air microwave
transmission using analog technology and a greater number of
channels using digital compression technologies. The use of
digital technology and a 1998 change in the FCCs rules to
permit reverse path transmission over wireless facilities also
make it possible for such systems to deliver additional
services, including Internet access. Also, in late 1998 the FCC
auctioned a sizeable amount of spectrum in the 31 gigahertz band
for use by a new wireless service, which is referred to as the
Local Multipoint Distribution Service or LMDS, that
has the potential to deliver television programming directly to
subscribers homes as well as provide Internet access and
telephony services. To date, however, there are no LMDS systems
in operation that deliver television programming or provide
either Internet access or telephony. Separately, in
November 2000 the FCC approved the use of spectrum in the
12.2-12.7 gigahertz band (the same band used by DBS operators)
to provide a new land-based interactive video and data delivery
service known as the Multichannel Video Distribution and Data
Service (MVDDS). MVDDS providers will use
reharvested DBS spectrum to transmit programming on
a non-harmful interference basis using terrestrial microwave
transmitters. (While DBS subscribers point their dishes south to
pick up their providers signal, MVDDS



8




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customers will aim their antennas north.) The
Commission has not yet granted any licenses to operate MVDDS
systems. MVDDS providers, like providers of other forms of
wireless cable, will not be required to obtain franchises from
local governmental authorities and generally will operate under
fewer regulatory requirements than conventional cable systems.


In October 1999 the FCC amended its cable
ownership rule, which governs the number of subscribers an owner
of cable systems may reach on a national basis. Before revision,
this rule provided that a single company could not serve more
than 30% of potential cable subscribers (or homes
passed by cable) nationwide. The revised rule allowed a
cable operator to provide service to 30% of all actual
subscribers to cable, satellite and other competing services
nationwide, rather than to 30% of homes passed by cable. This
revision had the effect of increasing the number of communities
that could be served by a single cable operator and may have
resulted in more consolidation in the cable industry. In
March 2001 the U.S. Court of Appeals for the D.C. Circuit
voided the FCCs revised rule on constitutional and
procedural grounds and remanded the matter to the FCC for
further proceedings. The FCC has since opened a proceeding to
determine what the ownership limit should be, if any. If the FCC
eliminates the limit or adopts a new rule with a higher
percentage of nationwide subscribers a single cable operator is
permitted to serve, that action could lead to even greater
consolidation in the industry.

In 1996 Congress repealed the statutory provision
which generally prohibited a party from owning an interest in
both a television broadcast station and a cable television
system within that stations Grade B contour. However
Congress left the FCCs parallel rule in place, subject to
a Congressionally mandated periodic review by the agency. The
FCC, in its subsequent review, decided to retain the prohibition
for various competitive and diversity reasons. However in
February 2002 the U.S. Court of Appeals for the District of
Columbia Circuit struck down the rule, holding that the
FCCs decision to retain the rule was arbitrary and
capricious.

On March 14, 2002, the FCC issued a
declaratory ruling classifying cable modem service as an
interstate information service. Concurrently the FCC
issued a notice of proposed rulemaking to consider the
regulatory implications of this classification. Among the issues
to be decided are whether local authorities can require cable
operators to provide competing Internet service providers with
access to the cable operators facilities, the extent to
which local authorities can regulate cable modem service, and
whether local authorities can impose fees on the provision of
cable modem service. The Companys Cable One subsidiary
currently offers Internet access on most of its cable systems
and is the sole Internet service provider on those systems.
Thus, depending on the outcome, this proceeding has the
potential to interfere with the Companys ability to
deliver Internet access on a profitable basis.

Litigation also is pending in various courts in
which various franchise requirements are being challenged as
unlawful under the First Amendment, the Communications Act, the
antitrust laws and on other grounds. One of the issues raised in
these cases is whether local franchising authorities have the
power to regulate the provision of Internet access by cable
systems. Depending on the outcomes, such litigation could
facilitate the development of duplicative cable facilities that
would compete with existing cable systems, enable cable
operators to offer certain services outside of cable regulation
or otherwise materially affect cable television operations.

The regulation of certain cable television rates
pursuant to the authority granted to the FCC has negatively
impacted the revenues of the Companys cable systems. The
Company is unable to predict what effect the other matters
discussed in this section may ultimately have on its cable
television business.

Magazine Publishing

Newsweek

Newsweekis a weekly
news magazine published both domestically and internationally by
Newsweek, Inc., a subsidiary of the Company. In gathering,
reporting and writing news and other material for publication,
Newsweekmaintains news bureaus in 9 U.S. and 11 foreign
cities.

The domestic edition of Newsweekincludes
more than 100 different geographic or demographic editions which
carry substantially identical news and feature material but
enable advertisers to direct messages to specific market areas
or demographic groups. Domestically, Newsweekranks
second in circulation among the three leading weekly news
magazines (Newsweek, Timeand U.S. News &
World Report). For each of the last five years
Newsweeks average weekly domestic circulation rate
base has been 3,100,000 copies. In 1998 and 1999
Newsweeks percentage of the total weekly domestic
circulation rate base of the three leading weekly news magazines
was 33.5%. Since 2000 that percentage has been 34.0%.



9




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Newsweekis sold on
newsstands and through subscription mail order sales derived
from a number of sources, principally direct mail promotion. The
basic one-year subscription price is $41.08. Most subscriptions
are sold at a discount from the basic price. In May 2001,
Newsweeks newsstand cover price was increased from
$3.50 per copy (which price had been in effect since April 1999)
to $3.95 per copy.

The total number of Newsweeks
domestic advertising pages and gross domestic advertising
revenues as reported by Publishers Information Bureau,
Inc., together with Newsweeks percentages of the
total number of advertising pages and total advertising revenues
of the three leading weekly news magazines, for the past five
years have been as follows:

|     |  |             |       |               |  |             |      |                |  |   |             |  |  |  |      |  
|---- |  | ----------- | ----- | ------------- |  | ----------- | ---- | -------------- |  | - | ----------- |  |  |  | ---- | -
|     |  |             |       | Percentage of |  | Newsweek    |      |               
|     |  | Newsweek    |       | Three Leading |  | Gross       |      | Percentage of 
|     |  | Advertising |       | News          |  | Advertising |      | Three Leading 
|     |  | Pages*      |       | Magazines     |  | Revenues*   |      | News Magazines
|     |  |            
|     |  |            
|1998 |  |             | 2,472 |               |  |             | 34.4 | %              |  | $ | 393,168,000 |  |  |  | 33.8 | %
|    
|    
|    
|    
|1999 |  |             | 2,567 |               |  |             | 33.5 | %              |  |   | 432,701,000 |  |  |  | 32.8 | %
|    
|    
|    
|    
|2000 |  |             | 2,383 |               |  |             | 33.8 | %              |  |   | 433,932,000 |  |  |  | 34.2 | %
|    
|    
|    
|    
|2001 |  |             | 1,822 |               |  |             | 33.6 | %              |  |   | 334,179,000 |  |  |  | 32.5 | %
|    
|    
|    
|    
|2002 |  |             | 1,971 |               |  |             | 35.2 | %              |  |   | 387,698,000 |  |  |  | 34.8 | %



---

|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|* | Advertising pages and gross advertising revenues
    are those reported by Publishers Information Bureau, Inc.
    PIB computes gross advertising revenues from published basic
    one-time rates and the number of advertising pages carried. PIB
    figures therefore materially exceed actual gross advertising
    revenues, which reflect lower rates for multiple insertions and
    other discounts from published rates. Net revenues as reported
    in the Companys Consolidated Statements of Income also
    exclude agency commissions, which are included in the gross
    advertising revenues shown above. Page and revenue figures
    exclude affiliated advertising.

Newsweeks
published advertising rates are based on its average weekly
circulation rate base and are competitive with those of the
other weekly news magazines. As is common in the magazine
industry, advertising typically is sold at varying discounts
from Newsweeks published rates. Effective with the
January 14, 2002 issue, Newsweeks published
national advertising rates for all categories of such
advertising were increased by 5.0%. Beginning with the issue
dated January 13, 2003, such rates were increased by an
additional 4.8%.

Internationally, Newsweekis published in
an Atlantic edition covering Europe, the Middle East and Africa,
a Pacific edition covering Japan, Korea and south Asia, and a
Latin American edition, all of which are in the English
language. Editorial copy solely of domestic interest is
eliminated in the international editions and is replaced by
other international, business or national coverage primarily of
interest abroad.

Since 1984 a section of Newsweekarticles
has been included in The Bulletin, an Australian weekly
news magazine which also circulates in New Zealand. A
Japanese-language edition of Newsweek, Newsweek Nihon Ban,has been published in Tokyo since 1986 pursuant to an
arrangement with a Japanese publishing company which translates
editorial copy, sells advertising in Japan and prints and
distributes the edition. Newsweek Hankuk Pan,a
Korean-language edition of Newsweek,began publication in
1991 pursuant to a similar arrangement with a Korean publishing
company. Since 1996 Newsweek en Español, a
Spanish-language edition of Newsweekdistributed in Latin
America, has been published under an agreement with a
Miami-based publishing company which translates editorial copy,
prints and distributes the edition and jointly sells advertising
with Newsweek. In June 2000, Newsweek Bil Logha
Al-Arabia, an Arabic-language edition of Newsweek,
was launched under a similar arrangement with a Kuwaiti
publishing company. Also, Newsweek Polska, a
Polish-language newsweekly, was launched in September 2001
under a licensing agreement with a Polish publishing company
which, in addition to translating selected stories from
Newsweeks various U.S. and foreign editions, has
established a staff of Polish reporters and editors for the
magazine. In December 2002 Newsweek announced an agreement
with a Hong Kong-based publisher to publish Newsweek
Select, a Chinese-language magazine which will be based
primarily on selected content translated from
Newsweeks U.S. and international editions.



10




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The average weekly circulation rate base,
advertising pages and gross advertising revenues of
Newsweeks international editions (not including
The Bulletininsertions or the foreign-language editions
of Newsweek) for the past five years have been as follows:

|     |  |                |         |             |  |             |       |  |  |   |             | 
|---- |  | -------------- | ------- | ----------- |  | ----------- | ----- |  |  | - | ----------- | 
|     |  | Average Weekly |         |             |  | Gross      
|     |  | Circulation    |         | Advertising |  | Advertising
|     |  | Rate Base      |         | Pages*      |  | Revenues*  
|     |  |               
|     |  |               
|1998 |  |                | 660,000 |             |  |             | 2,120 |  |  | $ | 83,051,000  | 
|    
|    
|    
|    
|1999 |  |                | 660,000 |             |  |             | 2,492 |  |  |   | 90,023,000  | 
|    
|    
|    
|    
|2000 |  |                | 663,000 |             |  |             | 2,606 |  |  |   | 104,868,000 | 
|    
|    
|    
|    
|2001 |  |                | 666,000 |             |  |             | 1,979 |  |  |   | 81,453,000  | 
|    
|    
|    
|    
|2002 |  |                | 646,000 |             |  |             | 1,882 |  |  |   | 76,711,000  | 



---

|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|* | Advertising pages and gross advertising revenues
    are those reported by CMR International. CMR computes gross
    advertising revenues from published basic one-time rates and the
    number of advertising pages carried. CMR figures therefore
    materially exceed actual gross advertising revenues, which
    reflect lower rates for multiple insertions and other discounts
    from published rates. Net revenues as reported in the
    Companys Consolidated Statements of Income also exclude
    agency commissions, which are included in the gross advertising
    revenues shown above. Page and revenue figures exclude
    affiliated advertising.

For 2003 the average weekly circulation rate base
for Newsweeks English-language international
editions (not including The Bulletininsertions) will be
646,000 copies. Newsweeks rate card estimates the
average weekly circulation in 2003 for The Bulletininsertions will be 70,000 copies and for the Japanese-,
Korean-, Arabic- and Spanish- and Polish-language editions will
be 110,000, 70,000, 30,000, 50,750 and 262,000 copies,
respectively.

The online version of Newsweek, which
includes stories from Newsweeks print edition as
well as other material, has been a co-branded feature on the
MSNBC.com Web site since 2000. This feature is being produced by
Washingtonpost.Newsweek Interactive Company, another subsidiary
of the Company.

Arthur Frommers Budget Travelmagazine, another Newsweek
publication, was published eight times during 2002 and had a
circulation of 450,000 copies. Budget Travelis
headquartered in New York City and has its own editorial staff.

During recent years Congress has considered a
range of proposals intended to restrict the marketing of tobacco
products. The Company cannot now predict what actions may
eventually be taken to limit or restrict tobacco advertising.
However, such advertising accounts for only about 1% of
Newsweeks operating revenues and negligible revenues at
The Washington Postand the Companys other
publications. Moreover, federal law has prohibited the carrying
of advertisements for cigarettes and smokeless tobacco by
commercial radio and television stations for many years. Thus
the Company believes that any restrictions on tobacco
advertising which may eventually be put into effect would not
have a material adverse effect on Newsweek or on any of the
Companys other business operations.

PostNewsweek Tech Media

This division of Post-Newsweek Media, Inc.
publishes controlled-circulation trade periodicals and produces
trade shows and conferences for the government information
technology industry.

Specifically, PostNewsweek Tech Media publishes
Washington Technology, a twice-monthly news magazine for
government information technology systems integrators,
Government Computer News, a news magazine published 30
times per year serving government managers who buy information
technology products and services, and GCN Technology, a
news magazine published four times per year providing
information technology product reviews and other buying
information for government information technology managers.
Washington Technology, Computer Government News,
and GCN Technologyhave circulations of about 40,000,
87,000, and 120,000 copies, respectively. This division also
publishes Tech Almanac, an annual directory of technology
industry executives serving the government information
technology community.

PostNewsweek Tech Media also produces the FOSEtrade show, which is held each spring in Washington, D.C.
for information technology decision makers in government and
industry, and the PSXtrade show, which attracts
government procurement officers and vendors of the services such
officers purchase. This division also produces a



11




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##### 



number of smaller conferences and events,
including awards dinners honoring leading individuals and
companies in the government information technology community.


Education

Kaplan, Inc., a subsidiary of the Company,
provides an extensive range of educational services for
children, students and professionals. Kaplans historical
focus on test preparation has been expanded as new educational
and career services businesses have been acquired or initiated.

Through its Test Preparation and Admissions
Division, Kaplan prepares students for a broad range of
admissions and licensing examinations including the SATs, LSATs,
GMATs, MCATs, GREs, and nursing and medical boards. This
business can be subdivided into four categories: K-12 (serving
schools and school districts seeking assistance in preparing
students for state assessment tests and for the SATs and ACTs);
Graduate and Pre-College (serving high school and college
students and professionals, primarily with preparation for
admissions tests to college and to graduate, medical and law
schools); Medical (serving medical professionals preparing for
licensing exams); and English Language Training (serving foreign
students and professionals wishing to study or work in the
U.S.). Many of this divisions test preparation courses
have been available to students via the Internet since 1999.
During 2002 the Test Preparation and Admissions Division
enrolled nearly 250,000 students (including over 60,000 enrolled
in online programs), and provided courses at 157 permanent
centers located throughout the United States and in Canada,
Puerto Rico, London and Paris. In addition, Kaplan licenses
material for certain of these courses to third parties who
during 2002 offered such courses at 29 centers located in 13
countries.

The Test Preparation and Admissions Division also
includes Kaplans publishing activities. Kaplan currently
co-publishes more than 150 book titles, predominately in the
areas of test preparation, admissions, career guidance and life
skills, through a joint venture with Simon & Schuster, and
also develops educational software for the K through 12 and
graduate markets which is sold through arrangements with a third
party who is responsible for production and distribution. Kaplan
also produces a college newsstand guide in conjunction with
Newsweek.

Kaplans Professional Division offers
licensing, continuing education, certification and professional
development services for corporations and for individuals
seeking to advance their careers. This division includes
Dearborn Publishing Group, a provider of pre-licensing training
and continuing education for securities, insurance and real
estate professionals; Perfect Access Speer, a provider of
software education and consulting services to law firms and
businesses; Schwesers Study Program, a provider of
materials aimed at preparing individuals for the Chartered
Financial Analyst examination; Self Test Software, a provider of
preparation services for software proficiency certification
examinations; and Contact Center Solutions, a provider of
assessment and training services for the call-center industry.

Kaplans Score Education Division offers
computer-based learning and individualized tutoring for children
in grades K through 10. In 2002 this business, which provides
educational after-school enrichment services through 147 Score
centers located in various areas of the United States, served
nearly 70,000 students, up from 60,000 students in 2001.
Scores services are provided in facilities separate from
Kaplans test preparation centers due to differing
configuration and equipment requirements.

The Higher Education Division of Kaplan consists
of 46 schools in 14 states which provide classroom-based
instruction and three institutions which specialize in distance
education. The schools providing classroom-based instruction
offer a variety of bachelor degree, associate degree and diploma
programs in the fields of healthcare, business, paralegal
studies, information technology, criminal justice and fashion
and design. These schools were serving more than 20,600 students
at year-end 2002 (which total includes the classroom-based
programs of Kaplan College), with approximately half of such
students enrolled in accredited bachelor or associate degree
programs. Each of these schools has its own accreditation from
one of several regional or national accrediting agencies
recognized by the U.S. Department of Education. The institutions
which specialize in distance education are Kaplan College,
Concord University School of Law and The College for
Professional Studies. Kaplan College offers various bachelor
degree, associate degree and certificate programs, principally
in the fields of financial planning, criminal justice, paralegal
studies, information technology and management, and is
accredited by the Higher Learning Commission of the North
Central Association of Colleges and Schools. Some of Kaplan
Colleges programs are offered online while others are
offered in a traditional classroom format at the schools
Davenport, Iowa campus. At year-end 2002, Kaplan College had
approximately 6,000 students enrolled in online programs. The
College for Professional Studies had over 4,400 students
enrolled at year-end 2002. Concord University School of Law, the
nations first online law school, offers Juris Doctor and
LLM degrees wholly online. At year-end 2002, approximately



12




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##### 



1,200 students were enrolled at Concord. Concord
is accredited by the Accrediting Commission of the Distance
Education and Training Council and has received operating
approval from the California Bureau of Private Post-Secondary
and Vocational Education. Concord also has complied with the
registration requirements of the State Bar of California;
graduates are, therefore, able to apply for admission to the
California Bar. The College for Professional Studies, which had
over 4,400 students enrolled at year-end 2002, offers bachelor
and associate degree and diploma correspondence programs in the
fields of legal nurse consulting, paralegal studies and criminal
justice; however, that school is no longer enrolling students
and will discontinue operations after its current students
complete their programs.


One of the ways a foreign national wishing to
enter the United States to study may do so is to obtain an F-1
student visa. For many years, most of Kaplans Test
Preparation and Admissions Division centers in the United States
have been authorized by what is now the U.S. Bureau of
Citizenship and Immigration Services (the BCIS) to
issue certificates of eligibility to prospective students to
assist those students in applying for F-1 visas through a U.S.
Embassy or Consulate. Under a program that became effective
early in 2003, educational institutions are required to report
electronically to the BCIS specified enrollment, departure and
other information about the F-1 students to whom they have
issued certificates of eligibility. Most of Kaplans U.S.
Test Preparation and Admissions Division centers have been
designated to participate in this new program, and the
applications of the other centers where Kaplan is seeking such a
designation are pending. During 2002 students holding F-1 visas
accounted for approximately 2.5% of the enrollment at
Kaplans Test Preparation and Admissions Division and an
insignificant number of students at Kaplans Higher
Education Division.

Title IV Student Financial Assistance
Programs

Funds provided under the student financial
assistance programs that have been created under Title IV of the
Higher Education Act of 1965, as amended, historically have been
responsible for a majority of the net revenues of the schools in
Kaplans Higher Education Division which provide
classroom-based instruction (including Kaplan College),
accounting, for example, for slightly more than
$160 million of the net revenues of such schools for the
Companys 2002 fiscal year. The significant role of Title
IV funding in the operations of these schools is expected to
continue.

To maintain Title IV eligibility a school must
comply with extensive statutory and regulatory requirements
relating to its financial aid management, educational programs,
financial strength, recruiting practices and various other
matters. Among other things, the school must be authorized to
offer its educational programs by the appropriate governmental
body in the state or states in which it is located, be
accredited by an accrediting agency recognized by the U.S.
Department of Education (the Department of
Education), and enter into a program participation
agreement with the Department of Education.

A school may lose its eligibility to participate
in Title IV programs if student defaults on the repayment
of Title IV loans exceed specified default rates (referred
to as cohort default rates). A school whose cohort
default rate exceeds 40% for any single year may have its
eligibility to participate in Title IV programs limited,
suspended or terminated at the discretion of the Department of
Education. A school whose cohort default rate equals or exceeds
25% for three consecutive years will automatically lose its
Title IV eligibility for at least two years unless the
school can demonstrate exceptional circumstances justifying its
continued eligibility. Moreover, a for-profit postsecondary
institution, like each of these Kaplan schools, will lose its
Title IV eligibility for at least one year if more than 90%
of the institutions cash receipts for any fiscal year are
derived from Title IV programs.

The Title IV program regulations also
provide that not more than 50% of an eligible institutions
courses can be provided online and that, in some cases, not more
than 50% of an eligible institutions students can be
enrolled in online courses, and impose certain other
requirements intended to insure that individual programs
(including online programs) eligible for Title IV funding
include minimum amounts of instructional activity. However,
Kaplan College currently is a participant in the distance
education demonstration program of the Department of Education
and as a result is exempt from the foregoing requirements until
at least June 30, 2004. Legislation currently is pending in
Congress which, if enacted, would exempt online courses from
those requirements under certain circumstances, including the
maintenance by the institution offering such courses of a cohort
default rate of less than 10% for three consecutive years.

No proceeding by the Department of Education is
pending to fine any Kaplan school for a failure to comply with
any Title IV requirement, or to limit, suspend or terminate
the Title IV eligibility of any Kaplan school. However no
assurance can be given that the Kaplan schools which currently
participate in Title IV programs will maintain their



13




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##### 



Title IV eligibility in the future or that
the Department of Education might not successfully assert that
one or more of such schools have previously failed to comply
with Title IV requirements. Most schools within
Kaplans Higher Education Division are considered
separately for the purpose of determining compliance with
Title IV requirements. Thus if the Department of Education
were to find that one or more of such schools had failed to
comply with any applicable Title IV requirement and as a
result suspended or terminated the Title IV eligibility of
those schools, that action normally would not affect the
Title IV eligibility of other Kaplan schools that had
continued to comply with Title IV requirements.


As a general matter, schools participating in
Title IV programs are not financially responsible for the
failure of their students to repay Title IV loans. However
the Department of Education may fine a school for a failure to
comply with Title IV requirements and may require a school
to repay Title IV program funds if it finds that such funds
have been improperly disbursed. In addition, there may be other
legal theories under which a school could be subject to suit as
a result of alleged irregularities in the administration of
student financial aid.

Pursuant to Title IV program regulations, a
school that undergoes a change in control must be reviewed and
recertified by the Department of Education. Certifications
obtained following a change in control are granted on a
provisional basis which permits the school to continue
participating in Title IV programs but provides fewer procedural
protections if the Department of Education asserts a material
violation of Title IV requirements. As a result of
Kaplans acquisition of Quest Education Corporation in
2000, all of the schools owned by Quest at that time were
provisionally certified by the Department of Education for a
term expiring in June 2004; Kaplan will be eligible to
apply for full certification for such schools (which constitute
most of the schools in Kaplans Higher Educational
Division) in the spring of 2004. The schools acquired by
Kaplans Higher Education Division subsequent to the Quest
acquisition have also been provisionally certified by the
Department of Education, generally for terms expiring
approximately three years after the date of the acquisition.

Several Title IV programs are subject to
periodic legislative review and reauthorization, and the next
reauthorization is scheduled to take place during the current
Congressional term. In addition, the availability of funding for
each Title IV program is wholly contingent upon the outcome
of the annual federal appropriations process.

Whether as a result of changes in the laws and
regulations governing Title IV programs, a reduction in
Title IV program funding levels, or a failure of schools
included in Kaplans Higher Education Division to maintain
eligibility to participate in Title IV programs, a material
reduction in the amount of Title IV financial assistance
available to the students of these schools would have a
significant negative impact on Kaplans operating results.

Other Activities

International Herald Tribune

On January 1, 2003, the Company sold its 50%
beneficial interest in the Paris-based International Herald
Tribuneto The New York Times Company.

BrassRing

The Company beneficially owns a 49.4% equity
interest in BrassRing LLC, an Internet-based career-assistance
and hiring management company. The other principal members of
BrassRing are the Tribune Company with a 26.9% interest, Gannett
Co., Inc. with a 12.4% interest, and the venture capital firm
Accel Partners with a 10.5% interest.

Production and Raw Materials

The Washington Postis produced at the Companys
printing plants in Fairfax County, Virginia and Prince
Georges County, Maryland. The Heraldand The
Enterprise Newspapersare produced at The Daily Herald
Companys plant in Everett, Washington, while The
Gazette Newspapersand the Southern Maryland Newspapersare all printed at the commercial printing facilities owned
by Post-Newsweek Media, Inc. Greater Washington
Publishings periodicals are produced by independent
contract printers with the exception of one periodical which is
printed at one of the commercial printing facilities owned by
Post-Newsweek Media, Inc. All PostNewsweek Tech Media
publications are produced by independent contract printers.

Newsweeks
domestic edition is produced by three independent contract
printers at five separate plants in the United States;
advertising inserts and photo-offset films for the domestic
edition are also produced by independent contrac-



14




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##### 



tors. The international editions of Newsweekare printed in England, Singapore, Switzerland, the
Netherlands, South Africa and Hollywood, Florida; insertions for
The Bulletinare printed in Australia. Since 1997
Newsweek and a subsidiary of AOL Time Warner have used a jointly
owned company based in England to provide production and
distribution services for the Atlantic editions of both
Newsweekand Time. In 2002 this jointly owned
company began providing certain production and distribution
services for the Asian editions of these magazines. Budget
Travelis produced by one of the independent contract
printers that also prints Newsweeks domestic
edition.


In 2002 The Washington Postconsumed about
191,000* tons of newsprint purchased from a number of suppliers,
including Bowater Incorporated, which supplied approximately 39%
of The Posts 2002 newsprint requirements. Although
for many years some of the newsprint The Postpurchased
from Bowater Incorporated typically was provided by Bowater
Mersey Paper Company Limited, 49% of the common stock of which
is owned by the Company (the majority interest being held by a
subsidiary of Bowater Incorporated), since 1999 none of the
newsprint consumed by The Posthas come from that source.
Bowater Mersey owns and operates a newsprint mill near Halifax,
Nova Scotia, and owns extensive woodlands that provide part of
the mills wood requirements. In 2002 Bowater Mersey
produced about 255,000 tons of newsprint.

The announced price of newsprint (excluding
discounts) was approximately $750 per ton throughout 2002.
Discounts from the announced price of newsprint can be
substantial and prevailing discounts increased during the first
three quarters of the year and decreased slightly during the
fourth quarter. The Postbelieves it has adequate
newsprint available through contracts with its various
suppliers. Over 90% of the newsprint used by The Postincludes some recycled content. The Company owns 80% of the
stock of Capitol Fiber Inc., which handles and sells to
recycling industries old newspapers and other paper collected in
Washington, D.C., Maryland and northern Virginia.

In 2002 the operations of The Daily Herald
Company and Post-Newsweek Media, Inc. consumed approximately
6,500 and 20,600 tons of newsprint, respectively, which was
obtained in each case from various suppliers. Approximately 85%
of the newsprint used by The Daily Herald Company and 35% of the
newsprint used by Post-Newsweek Media, Inc. includes some
recycled content.

The domestic edition of Newsweekconsumed
about 29,200 tons of paper in 2002, the bulk of which was
purchased from six major suppliers. The current cost of body
paper (the principal paper component of the magazine) is
approximately $860 per ton.

Over 90% of the aggregate domestic circulation of
both Newsweekand Budget Travelis delivered by
periodical (formerly second-class) mail, most subscriptions for
such publications are solicited by either first-class or
standard A (formerly third-class) mail, and all PostNewsweek
Tech Media publications are delivered by periodical mail. Thus,
substantial increases in postal rates for these classes of mail
could have a significant negative impact on the operating income
of these business units. In March 2002 the Postal Rate
Commission approved a rate increase of approximately 8% for both
periodical and standard A mail and 9% for first-class mail,
which increases became effective on June 30, 2002. This
action had the effect of increasing annual postage costs by
about $2.9 million at Newsweekand by nominal
amounts at PostNewsweek Tech Media. On the other hand, since
advertising distributed by standard A mail competes to some
degree with newspaper advertising, the Company believes
increases in standard A rates could have a positive impact on
the advertising revenues of The Washington Post, The
Herald, The Gazette Newspapersand Southern
Maryland Newspapers, although the Company is unable to
quantify the amount of such impact.

Competition

The Washington Postcompetes in the Washington, D.C.
metropolitan area with The Washington Times, a newspaper
which has published weekday editions since 1982 and Saturday and
Sunday editions since 1991. The Postalso encounters
competition in varying degrees from newspapers published in
suburban and outlying areas, other nationally circulated
newspapers, and from television, radio, magazines and other
advertising media, including direct mail advertising. Since 1997
The New York Timeshas produced a Washington Edition
which is printed locally and includes television channel
listings and weather for the Washington, D.C. area.

---

|  |                                                                                                                                                                                                  
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|* | All references in this report to newsprint
    tonnage and prices refer to short tons (2,000) and not to metric
    tons (2,204.6 pounds) which are often used in newsprint price
    quotations.



15




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##### 



Washingtonpost.Newsweek Interactive faces
competition from many other Internet services, particularly
services that feature national and international news, as well
as from alternative methods of delivering news and information.
In addition, other Internet-based services are carrying
increasing amounts of advertising and over time such services
could also adversely affect the Companys print
publications and television broadcasting operations, all of
which rely on advertising for the majority of their revenues.
Several companies are offering online services containing
information and advertising tailored for specific metropolitan
areas, including the Washington, D.C. metropolitan area. For
example, Digital City (a unit of AOL Time Warner) produces
Digital City Washington, DC, which is part of
AOLs nationwide network of local online sites. National
online classified advertising is becoming a particularly crowded
field, with competitors such as Yahoo! and eBay aggregating
large volumes of content into a national classified database
covering a broad range of product lines. Other competitors are
focusing on vertical niches in specific content areas:
autos.msn.com (which is majority owned by Microsoft),
AutoTrader.com and Autobytel.com, for example, aggregate
national car listings; Realtor.com aggregates national real
estate listings; while Monster.com, HotJobs.com (which is owned
by Yahoo!) and CareerBuilder.com (which is jointly owned by
Gannett, Knight-Ridder and Tribune Co.) aggregate employment
listings.

The Heraldcirculates principally in Snohomish
County, Washington; its chief competitors are the Seattle
Timesand the Seattle Post-Intelligencer, which are
daily and Sunday newspapers published in Seattle and whose
Snohomish County circulation is principally in the southwest
portion of the county. Since 1983 the two Seattle newspapers
have consolidated their business and production operations and
combined their Sunday editions pursuant to a joint operating
agreement, although they continue to publish separate daily
newspapers. The Enterprise Newspapersare distributed in
south Snohomish and north King Counties where their principal
competitors are the Seattle Timesand The Journal
Newspapers, a group of weekly controlled-circulation
newspapers. Numerous other weekly and semi-weekly newspapers and
shoppers are distributed in The Heralds and The
Enterprise Newspapersprincipal circulation areas.

The circulation of The Gazette Newspapersis limited to Montgomery, Prince Georges and Frederick
Counties and parts of Carroll, Anne Arundel and Howard Counties,
Maryland. The Gazette Newspaperscompete with many other
advertising vehicles available in their service areas, including
The Potomacand Bethesda/ Chevy Chase Almanacs,
The Western Montgomery Bulletin, The Bowie
Blade-News, The West County Newsand The Laurel
Leader, weekly controlled-circulation community newspapers,
The Montgomery Sentinel, a weekly paid-circulation
community newspaper, The Prince Georges Sentinel, a
weekly controlled-circulation community newspaper (which also
has a weekly paid-circulation edition), The Montgomeryand Prince Georges Journals, daily
paid-circulation community newspapers, and The Frederick
News-Post, a daily paid-circulation community newspaper. The
Southern Maryland Newspaperscirculate in southern Prince
Georges County and in Charles, Calvert and St. Marys
Counties, Maryland, where they also compete with many other
advertising vehicles available in their service areas, including
the Calvert County Independentand St. Marys
Today, weekly paid-circulation community newspapers.

The advertising periodicals published by Greater
Washington Publishing compete both with many other forms of
advertising available in their distribution area as well as with
various other free-circulation advertising periodicals.

The Companys television stations compete
for audiences and advertising revenues with television and radio
stations and cable television systems serving the same or nearby
areas, with direct broadcast satellite services and to a lesser
degree with other video programming providers and with other
media such as newspapers and magazines. Cable television systems
operate in substantial portions of the Companys broadcast
markets where they compete for television viewers by importing
out-of-market television signals and by distributing pay-cable,
advertiser-supported and other programming that is originated
for cable systems. In addition, direct broadcast satellite
(DBS) services provide nationwide distribution of
television programming (including in some cases pay-per-view
programming and programming packages unique to DBS) using small
receiving dishes and digital transmission technologies. In
November 1999, Congress passed the Satellite Home Viewer
Improvement Act, which gives DBS operators the ability to
distribute the signals of local television stations to
subscribers in the stations local market area
(local-into-local service), although since
April 2000 the DBS operator has been required to obtain the
consent of each local television station included in such a
service. All of the Companys television stations are
currently being distributed locally by satellite. Under an FCC
rule implementing provisions of this Act, since
January 2002 DBS operators that offer local-into-local
service have been required to carry all full-power television
stations that request such carriage in the markets in which the
DBS operators have chosen to offer local-into-local service. The
FCC has also adopted rules that require certain
program-exclusivity rules applicable to cable television to be
applied to DBS operators, although certain of these rules,
primarily relating to sports blackouts, are subject to
reconsideration by the FCC. The Satellite Home Viewer
Improvement Act also continues restrictions on the transmission
of distant network stations by DBS



16




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##### 



operators. Under these restrictions, DBS
operators are prohibited from distributing in a local market the
signals of any distant network-affiliated television station
except in areas where the over-the-air signal of the same
networks local affiliate is not available or where the
local affiliate grants a waiver. Several lawsuits were filed
beginning in 1996 in which plaintiffs (including all four major
broadcast networks and network-affiliated stations including one
of the Companys Florida stations) alleged that certain DBS
operators had not been complying with this restriction. The
plaintiffs have entered into a settlement with DBS operator
DirecTV, under which it will discontinue distant-network service
to certain subscribers and alter the method by which it
determines eligibility for this service. Litigation against DBS
operator EchoStar is continuing. The Satellite Home Viewer
Improvement Act also provides that certain distant-network
subscribers whose service would have been discontinued as a
result of this litigation will continue to have access to
distant-network service through 2004. In addition to the matters
discussed above, the Companys television stations may also
become subject to increased competition from low-power
television stations, wireless cable services, satellite master
antenna systems (which can carry pay-cable and similar program
material) and prerecorded video programming. Further, the
deployment of digital and other improved television technologies
may enhance the ability of some of these other video providers
to compete more effectively for viewers with the local
television broadcasting stations owned by the Company.


Cable television systems operate in a highly
competitive environment. In addition to competing with the
direct reception of television broadcast signals by the
viewers own antenna, such systems (like existing
television stations) are subject to competition from various
other forms of television program delivery. In particular, DBS
services (which are discussed in more detail in the preceding
paragraph) have been growing rapidly and are now a significant
competitive factor. The ability of DBS operators to provide
local-into-local service (as described above) has increased
competition between cable and DBS operators in markets where
local-into-local service is provided. DBS operators are not
required to provide local-into-local service, and some smaller
markets may not receive this service for several years. However,
in December 2000 Congress passed and the President signed
legislation to provide $1.25 billion in federal loan
guarantees to help satellite carriers (and cable operators)
provide local TV signals to rural areas, and DBS operators have
stated that they intend to provide local-into-local service in a
greater number of markets in the future. Local-into-local
service is not yet offered in most markets in which the Company
provides cable television service, but such services could be
launched by DBS operators at any time. The Companys cable
television systems also compete with wireless cable services in
several of their markets and may face additional competition
from such services in the future. Moreover, the
Telecommunications Act of 1996 permits telephone companies to
own and operate cable television systems in the same areas where
they provide telephone services and thus may lead to the
provision of competing program delivery services by local
telephone companies.

According to figures compiled by Publishers
Information Bureau, Inc., of the 239 magazines reported on by
the Bureau, Newsweekranked fifth in total advertising
revenues in 2002, when it received approximately 2.3% of all
advertising revenues of the magazines included in the report.
The magazine industry is highly competitive both within itself
and with other advertising media which compete for audience and
advertising revenue.

PostNewsweek Tech Medias publications and
trade shows compete with many other advertising vehicles and
sources of similar information.

Kaplan competes in each of its test preparation
product lines with a variety of regional and national test
preparation businesses, as well as with individual tutors and
in-school preparation for standardized tests. Kaplans
Score Education subsidiary competes with other regional and
national learning centers, individual tutors and other
educational businesses that target parents and students.
Kaplans Professional Division competes with other
companies which provide alternative or similar professional
training, test-preparation and consulting services.
Kaplans Higher Education Division competes with both
facilities-based and other distance learning providers of
similar educational services, including not-for-profit colleges
and universities and for-profit businesses.

The Companys publications and television
broadcasting and cable operations also compete for readers
and viewers time with various other leisure-time
activities.

The future of the Companys various business
activities depends on a number of factors, including the general
strength of the economy, population growth and the level of
economic activity in the particular geographic and other markets
it serves, the impact of technological innovations on
entertainment, news and information dissemination systems,
overall advertising revenues, the relative efficiency of
publishing and broadcasting compared to other forms of
advertising and, particularly in the case of television
broadcasting and cable operations, the extent and nature of
government regulations.



17




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##### 



Executive Officers

The executive officers of the Company, each of
whom is elected for a one-year term at the meeting of the Board
of Directors immediately following the Annual Meeting of
Stockholders held in May of each year, are as follows:

Donald E. Graham, age 57, has been Chairman of
the Board of the Company since September 1993 and Chief
Executive Officer of the Company since May 1991.
Mr. Graham served as President of the Company from
May 1991 until September 1993 and prior to that had been a
Vice President of the Company for more than five years.
Mr. Graham also served as Publisher of The Washington
Postfrom 1979 until September 2000.

Diana M. Daniels, age 53, has been Vice President
and General Counsel of the Company since November 1988 and
Secretary of the Company since September 1991. Ms. Daniels
served as General Counsel of the Company from January 1988
to November 1988 and prior to that had been Vice President
and General Counsel of Newsweek, Inc. since 1979.

Ann L. McDaniel, age 47, became Vice
President-Human Resources of the Company in September 2001.
Ms. McDaniel had previously served as Senior Director of
Human Resources of the Company since January 2001, and
prior to that held various editorial positions at Newsweekfor more than five years, most recently as Managing Editor,
a position she assumed in November 1998.

John B. Morse, Jr., age 56, has been Vice
President-Finance of the Company since November 1989. He
joined the Company as Vice President and Controller in
July 1989, and prior to that had been a partner of Price
Waterhouse.

Gerald M. Rosberg, age 56, was named Vice
President-Planning and Development of the Company in
February 1999. Mr. Rosberg had previously served as
Vice President-Affiliates at The Washington Post, a
position he assumed in November 1997. Mr. Rosberg
joined the Company in January 1996 as The
Posts Director of Affiliate Relations.

Employees

The Company and its subsidiaries employ
approximately 11,600 persons on a full-time basis.

The Washington Posthas approximately 2,610 full-time
employees. About 1,600 of The Posts full-time
employees and about 480 part-time employees are represented by
one or another of seven unions. Collective bargaining agreements
are currently in effect with locals of the following unions
covering the full-time and part-time employees and expiring on
the dates indicated: 1,460 editorial, newsroom and commercial
department employees represented by the Communications Workers
of America (November 7, 2005); 66 paperhandlers and general
workers represented by the Graphic Communications International
Union (November 20, 2004); 44 machinists represented by the
International Association of Machinists (January 10, 2004);
29 photoengravers-platemakers represented by the Graphic
Communications International Union (February 14, 2004); 28
electricians represented by the International Brotherhood of
Electrical Workers (June 17, 2004); 33 engineers,
carpenters and painters represented by the International Union
of Operating Engineers (April 9, 2005); and 420 mailers and
mailroom helpers represented by the Communications Workers of
America (May 18, 2003).

Washingtonpost.Newsweek Interactive has
approximately 220 full-time and 40 part-time employees, none of
whom is represented by a union.

Of the approximately 270 full-time and 95
part-time employees at The Daily Herald Company, about 65
full-time and 20 part-time employees are represented by one or
another of three unions. The newspapers collective
bargaining agreement with the Graphic Communications
International Union, which represents press operators, expires
on March 15, 2005, and its agreement with the International
Brotherhood of Teamsters, which represents bundle haulers, will
expire on September 22, 2003. The Newspapers
agreement with the Communications Workers of America, which
represents printers and mailers, will expire on October 31,
2005.

The Companys broadcasting operations have
approximately 980 full-time employees, of whom about 240 are
union-represented. Of the eight collective bargaining agreements
covering union-represented employees, three have expired and are
being renegotiated. Two other collective bargaining agreements
will expire in 2003.

The Companys Cable Television Division has
approximately 1,610 full-time employees, none of whom is
represented by a union.



18




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##### 



Newsweek has approximately 650 full-time
employees (including about 135 editorial employees represented
by the Communications Workers of America under a collective
bargaining agreement which expired at the end of 2002 and
currently is being renegotiated).

Kaplan employs approximately 4,470 persons on a
full-time basis. Kaplan also employs substantial numbers of
part-time employees who serve in instructional and
administrative capacities. During peak seasonal periods
Kaplans part-time workforce exceeds 10,000 employees. None
of Kaplans employees is represented by a union.

Post-Newsweek Media, Inc. has approximately 680
full-time and 130 part-time employees. Robinson Terminal
Warehouse Corporation (the Companys newsprint warehousing
and distribution subsidiary) and Greater Washington Publishing
each employ fewer than 100 persons. None of these units
employees is represented by a union.

Forward-Looking Statements

All public statements made by the Company and its
representatives which are not statements of historical fact,
including certain statements in this Annual Report on
Form 10-K and elsewhere in the Companys 2002 Annual
Report to Stockholders, are forward-looking
statements within the meaning of the Private Securities
Litigation Reform Act of 1995. Forward-looking statements
include comments about the Companys business strategies
and objectives, the prospects for growth in the Companys
various business operations, and the Companys future
financial performance. As with any projection or forecast,
forward-looking statements are subject to various risks and
uncertainties that could cause actual results or events to
differ materially from those anticipated in such statements. In
addition to the various matters discussed elsewhere in this
Annual Report on Form 10-K (including the financial
statements and other items filed herewith), specific factors
identified by the Company that might cause such a difference
include the following: changes in prevailing economic
conditions, particularly in the specific geographic and other
markets served by the Company; actions of competitors, including
price changes and the introduction of competitive service
offerings; changes in the preferences of readers, viewers and
advertisers, particularly in response to the growth of
Internet-based media; changes in communications and broadcast
technologies; the effects of changing cost or availability of
raw materials, including changes in the cost or availability of
newsprint and magazine body paper; changes in the extent to
which standardized tests are used in the admissions process by
colleges and graduate schools; changes in the extent to which
licensing or proficiency examinations are used to qualify
individuals to pursue certain careers; changes in laws or
regulations, including changes that affect the way business
entities are taxed; and changes in accounting principles or in
the way such principles are applied.

Available Information

The Companys Internet address is
www.washpostco.com. The Company makes available free of
charge through its website its annual report on Form 10-K,
quarterly reports on Form 10-Q, current reports on
Form 8-K and amendments to those reports filed or furnished
pursuant to Section 13(a) or 15(d) of the Exchange Act as
soon as reasonably practicable after such documents are
electronically filed with the Securities and Exchange Commission.

Item 2. Properties.

The Company owns the principal offices of The
Washington Postin downtown Washington, D.C., including both
a seven-story building in use since 1950 and a connected
nine-story office building on contiguous property completed in
1972 in which the Companys principal executive offices are
located. Additionally, the Company owns land on the corner of
15th and L Streets, N.W., in Washington, D.C., adjacent to
The Washington Postoffice building. This land is leased
on a long-term basis to the owner of a multi-story office
building which was constructed on the site in 1982. The Company
rents a number of floors in this building. The Company also owns
and occupies a small office building on L Street which is next
to The Posts downtown office building.

The Company owns a printing plant in Fairfax
County, Virginia which was built in 1980 and expanded in 1998.
That facility is located on 19 acres of land owned by the
Company. Also in 1998 the Company completed construction of a
new printing plant and distribution facility for The Poston a 17-acre tract of land in Prince Georges County,
Maryland which was purchased by the Company in 1996. In
addition, the Company owns undeveloped land near Dulles Airport
in Fairfax County, Virginia (39 acres) and in Prince
Georges County, Maryland (34 acres).

The Heraldowns its
plant and office building in Everett, Washington; it also owns
two warehouses adjacent to its plant and a small office building
in Lynnwood, Washington.



19




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##### 



Post-Newsweek Media, Inc. owns a two-story brick
building that serves as its headquarters and as headquarters for
The Gazette Newspapersand a separate two-story brick
building that houses its Montgomery County commercial printing
business. All of these properties are located in Gaithersburg,
Maryland. In addition, Post-Newsweek Media, Inc. owns a
one-story brick building in Waldorf, Maryland that houses its
Charles County commercial printing business and also serves as
the headquarters for two of the Southern Maryland
Newspapers. The other editorial and sales offices for The
Gazette Newspapersand the Southern Maryland Newspapersare located in leased premises. The PostNewsweek Tech Media
Division leases office space in Washington, D.C. and San
Francisco, California.

The headquarters offices of the Companys
broadcasting operations are located in Detroit, Michigan in the
same facilities that house the offices and studios of WDIV. That
facility and those that house the operations of each of the
Companys other television stations are all owned by
subsidiaries of the Company, as are the related tower sites
(except in Houston, Orlando and Jacksonville where the tower
sites are 50% owned).

The headquarters offices of the Cable Television
Division are located in a three-story office building in
Phoenix, Arizona which was purchased by Cable One in 1998. The
majority of the offices and head-end facilities of the
Divisions individual cable systems are located in
buildings owned by Cable One. Substantially all the tower sites
used by the Division are leased.

The principal offices of Newsweek are located at
251 West 57th Street in New York City, where Newsweek rents
space on nine floors. The lease on this space will expire in
2009 but is renewable for a 15-year period at Newsweeks
option at rentals to be negotiated or arbitrated. Budget
Travels offices are also located in New York City
where they occupy premises under a lease which expires in 2010.
In 1997 Newsweek sold its Mountain Lakes, N.J. facility to a
third party and leased back a portion of this building to house
its accounting, production and distribution departments. The
lease on this space will expire in 2007 but is renewable for two
5-year periods at Newsweeks option.

Robinson Terminal Warehouse Corporation owns two
wharves and several warehouses in Alexandria, Virginia. These
facilities are adjacent to the business district and occupy
approximately seven acres of land. Robinson also owns two
partially developed tracts of land in Fairfax County, Virginia,
aggregating about 20 acres. These tracts are near The
Washington Posts Virginia printing plant and include
several warehouses. In 1992 Robinson purchased approximately 23
acres of undeveloped land on the Potomac River in Charles
County, Maryland, for the possible construction of additional
warehouse capacity.

Kaplan owns a total of eight buildings including
a six-story building located at 131 West 56th Street in New York
City, which serves as an educational center primarily for
international students, and a 2,300 square foot office
condominium in Chapel Hill, North Carolina which it utilizes for
its Test Prep business. Kaplan also owns a 15,000 square foot
three-story building in Berkeley, California utilized for its
Test Prep and English Language businesses, a 39,000 square foot
four-story brick building and a 19,000 square foot two-story
brick building in Lincoln, Nebraska which are used by the
Lincoln School of Commerce, a 25,000 square foot one-story
building in Omaha, Nebraska used by the Nebraska College of
Business, a 131,000 square foot five-story brick building in
Manchester, New Hampshire used by Hesser College, and an 18,000
square foot one-story brick building in Dayton, Ohio used by the
Ohio Institute of Photography and Technology. Kaplans
principal educational center in New York City for other than
international students is located at 16 Cooper Square, where
Kaplan rents two floors under a lease expiring in 2013.
Kaplans distribution facilities are located in a 169,000
square foot warehouse in Aurora, Illinois which has been rented
under a lease which expires in 2010. Kaplans headquarters
offices are located at 888 Seventh Avenue in New York City,
where Kaplan rents space on three floors under a lease which
expires in 2007. All other Kaplan facilities (including
administrative offices and instructional locations) occupy
leased premises.

The offices of Washingtonpost.Newsweek
Interactive occupy 85,000 square feet of office space in
Arlington, Virginia under a lease which expires in 2010.

Greater Washington Publishings offices are
located in leased space in Fairfax, Virginia.

Item 3. Legal Proceedings.

The Company, its wholly owned subsidiary The
Gazette Newspapers, Inc. (now Post-Newsweek Media, Inc.), and
the Washington Suburban Press Network, Inc. (a corporation
jointly owned by Post-Newsweek Media and another media
investor), are parties to an antitrust lawsuit filed on
February 28, 2001, by the owners of several local Maryland
newspapers in the United States District Court for the District
of Maryland. This suit alleges violations of the Sherman Act,
the Clayton Act and the Maryland Antitrust Act, and asserts
state law claims for unfair competition,



20




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##### 



breach of contract and tortious interference. The
allegations largely stem from the Gazettes acquisition of
the Southern Maryland Newspapersin 2001 and Press
Networks treatment of newspapers published by certain of
the plaintiffs in connection with membership in the network and
the placement of newspaper advertising. The suit seeks
unspecified damages (which in certain instances may be trebled
by statute) and attorneys fees, as well as injunctive
relief (including the divestiture of the Gazette by the
Company). The District Court granted summary judgment for
defendants on all of plaintiffs claims on August 16,
2002. Plaintiffs filed a notice of appeal on September 27,
2002, and the case is currently before the United States Court
of Appeals for the Fourth Circuit.


Kaplan, Inc., a wholly owned subsidiary of the
Company, is the named defendant in a class action filed on
December 20, 2002, in Superior Court of the State of
California, County of Alameda, brought by individuals who were
engaged as Kaplan lecturers, teachers and tutors in California
since December 20, 1998. The suit alleges breaches of implied
contracts as well as violations of the California wage and hour
laws and the California Business and Professions Code
prohibitions against unfair competition by means of unlawful,
unfair or fraudulent business practices or acts. The case arose
out of claims that Kaplan failed to pay its instructors for time
spent preparing for lectures, classes and tutoring sessions,
time spent after class answering students questions, and
time spent traveling to and from different teaching locations.
The suit seeks unspecified damages (which may in certain
instances include penalties).

The Company and its subsidiaries are also
defendants in various other civil lawsuits that have arisen in
the ordinary course of their businesses, including actions for
libel and invasion of privacy. While it is not possible to
predict the outcome of these lawsuits and the lawsuits described
in the preceding two paragraphs, in the opinion of management
their ultimate disposition should not have a material adverse
effect on the financial position, liquidity or results of
operations of the Company.



|        |                                                         
|------- | --------------------------------------------------------
|Item 4. | Submission of Matters to a Vote of Security
    Holders.

Not applicable.

PART II



|        |                                                                               
|------- | ------------------------------------------------------------------------------
|Item 5. | Market for the Registrants Common Equity
    and Related Stockholder Matters.

The Companys Class B Common Stock is
traded on the New York Stock Exchange under the symbol
WPO. The Companys Class A Common Stock is
not publicly traded.

The high and low sales prices of the
Companys Class B Common Stock during the last two
years were:

|                   |  |      |      |      |     |  |      |      |  |  |      |  |  |  |      | 
|------------------ |  | ---- | ---- | ---- | --- |  | ---- | ---- |  |  | ---- |  |  |  | ---- | 
|                   |  |      |      |     
|                   |  | 2002 |      | 2001
|                   |  |      |      |     
|Quarter            |  | High |      |      | Low |  |      | High |  |  | Low  | 
|                  
|                  
|January  March    |  |      | $618 |      |     |  | $520 |      |  |  | $652 |  |  |  | $524 | 
|                  
|                  
|                  
|                  
|April  June       |  |      | 634  |      |     |  | 545  |      |  |  | 608  |  |  |  | 542  | 
|                  
|                  
|                  
|                  
|July  September   |  |      | 675  |      |     |  | 516  |      |  |  | 599  |  |  |  | 470  | 
|                  
|                  
|                  
|                  
|October  December |  |      | 743  |      |     |  | 646  |      |  |  | 540  |  |  |  | 479  | 

During 2002 the Company repurchased 1,229 shares
of its Class B Common Stock.

At January 28, 2003, there were 28 holders
of record of the Companys Class A Common Stock and
1,046 holders of record of the Companys Class B
Common Stock.

Both classes of the Companys Common Stock
participate equally as to dividends. Quarterly dividends were
paid at the rate of $1.40 per share during both 2002 and 2001.

Item 6. Selected Financial
Data.

See the information for the years 1998 through
2002 contained in the table titled Ten-Year Summary of
Selected Historical Financial Data which is included in
this Annual Report on Form 10-K and listed in the index to
financial information on page 27 hereof (with only the
information for such years to be deemed filed as part of this
Annual Report on Form 10-K).



21




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##### 





|        |                                                                                           
|------- | ------------------------------------------------------------------------------------------
|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
February 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




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##### 





|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|Item 9. | Changes in and Disagreements with Accountants
    on Accounting and Financial Disclosure.

Not applicable.

PART III



|         |                                                        
|-------- | -------------------------------------------------------
|Item 10. | Directors and Executive Officers of the
    Registrant.

The information contained under the heading
Executive Officers in Item 1 hereof and the
information contained under the headings Nominees for
Election by Class A Stockholders, Nominees for
Election by Class B Stockholders and
Section 16(a) Beneficial Ownership Reporting
Compliance in the definitive Proxy Statement for the
Companys 2003 Annual Meeting of Stockholders is
incorporated herein by reference thereto.



|         |                        
|-------- | -----------------------
|Item 11. | Executive Compensation.

The information contained under the headings
Director Compensation, Executive
Compensation, Retirement Plans,
Compensation Committee Report on Executive
Compensation, Compensation Committee Interlocks and
Insider Participation, and Performance Graph
in the definitive Proxy Statement for the Companys 2003
Annual Meeting of Stockholders is incorporated herein by
reference thereto.



|         |                                                                                                    
|-------- | ---------------------------------------------------------------------------------------------------
|Item 12. | Security Ownership of Certain Beneficial
    Owners and Management and Related Stockholder Matters.

The information contained under the heading
Stock Holdings of Certain Beneficial Owners and
Management and in the table titled Equity
Compensation Plan Information in the definitive Proxy
Statement for the Companys 2003 Annual Meeting of
Stockholders is incorporated herein by reference thereto.



|         |                                                    
|-------- | ---------------------------------------------------
|Item 13. | Certain Relationships and Related
    Transactions.

The information contained under the heading
Certain Relationships and Related Transactions in
the definitive Proxy Statement for the Companys 2003
Annual Meeting of Stockholders is incorporated herein by
reference thereto.



|         |                         
|-------- | ------------------------
|Item 14. | Controls and Procedures.

A review and evaluation was performed by the
Companys management, at the direction of the
Companys Chief Executive Officer (the Companys
principal executive officer) and the Companys Vice
PresidentFinance (the Companys principal financial
officer), of the effectiveness of the design and operation of
the Companys disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14(c) and 15d-14(c), as
of a date within 90 days prior to the filing of this annual
report. Based on that review and evaluation, the Companys
Chief Executive Officer and Vice PresidentFinance have
concluded that the Companys disclosure controls and
procedures, as designed and implemented, are effective in
ensuring that all material information required to be disclosed
in the reports that the Company files or submits under the
Exchange Act have been made known to them in a timely fashion.
There have been no significant changes in the Companys
internal controls or in other factors that could significantly
affect the Companys internal controls subsequent to the
date of such evaluation.

PART IV



|         |                                                                      
|-------- | ---------------------------------------------------------------------
|Item 15. | Exhibits, Financial Statement Schedules, and
    Reports on Form 8-K.



|    |                                                              
|--- | -------------------------------------------------------------
|(a) | The following documents are filed as part of
    this report:



| |                                                               
| | --------------------------------------------------------------
| | (i) Financial Statements and
    Financial Statement Schedules



| |                                                                       
| | ----------------------------------------------------------------------
| | As listed in the index to financial information
    on page 27 hereof.



| |              
| | -------------
| | (ii) Exhibits



| |                                                          
| | ---------------------------------------------------------
| | As listed in the index to exhibits on
    page 61 hereof.



|    |                     
|--- | --------------------
|(b) | Reports on Form 8-K.



| |                                                                                                    
| | ---------------------------------------------------------------------------------------------------
| | No reports on Form 8-K were filed during the
    last quarter of the period covered by this report.



23




---



##### 



SIGNATURES

Pursuant to the requirements of
Section 13 or 15(d) of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized, on
March 14, 2003.



| |                            
| | ---------------------------
| | THE WASHINGTON POST COMPANY
| | (Registrant)               



| |    |                       
| | -- | ----------------------
| | By | /s/ JOHN B. MORSE, JR.

| |                       
| | ----------------------
| |                       
| | John B. Morse, Jr.    
| | Vice President-Finance

Pursuant to the requirements of the Securities
Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the Registrant and in the
capacities indicated on March 14, 2003:

|                         |  |                                                                                                  |  | 
|------------------------ |  | ------------------------------------------------------------------------------------------------ |  | 
|                        
|Donald E. Graham         |  | Chairman of the Board and Chief Executive Officer
    (Principal Executive Officer) and Director |  | 
|                        
|John B. Morse, Jr.       |  | Vice President-Finance (Principal Financial and
    Accounting Officer)                          |  | 
|                        
|Warren E. Buffett        |  | Director                                                                                         |  | 
|                        
|Daniel B. Burke          |  | Director                                                                                         |  | 
|                        
|Barry Diller             |  | Director                                                                                         |  | 
|                        
|John L. Dotson Jr.       |  | Director                                                                                         |  | 
|                        
|George J. Gillespie, III |  | Director                                                                                         |  | 
|                        
|Ralph E. Gomory          |  | Director                                                                                         |  | 
|                        
|Alice M. Rivlin          |  | Director                                                                                         |  | 
|                        
|Richard D. Simmons       |  | Director                                                                                         |  | 
|                        
|George W. Wilson         |  | Director                                                                                         |  | 



| |    |                       
| | -- | ----------------------
| | By | /s/ JOHN B. MORSE, JR.

| |                   
| | ------------------
| |                   
| | John B. Morse, Jr.
| | Attorney-in-Fact  

An original power of attorney authorizing Donald
E. Graham, John B. Morse, Jr. and Diana M. Daniels, and each of
them, to sign all reports required to be filed by the Registrant
pursuant to the Securities Exchange Act of 1934 on behalf of the
above-named directors and officers has been filed with the
Securities and Exchange Commission.



24




---



##### 



CERTIFICATIONS

I, Donald E. Graham, Chief Executive Officer
(principal executive officer) of The Washington Post Company
(the Registrant), certify that:



| |                                                                                                                                                                                                                                                                                                                                                
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 1. I have reviewed this annual report on
    Form 10-K of the Registrant;                                                                                                                                                                                                                                                                      
|
|
| | 2. Based on my knowledge, this annual report does
    not contain any untrue statement of a material fact or omit to
    state a material fact necessary to make the statements made, in
    light of the circumstances under which such statements were
    made, not misleading with respect to the period covered by this
    annual report;
|
|
| | 3. Based on my knowledge, the financial
    statements and other financial information included in this
    annual report, fairly present in all material respects the
    financial condition, results of operations and cash flows of the
    Registrant as of, and for, the periods presented in this annual
    report;                    
|
|
| | 4. The Registrants other certifying officer
    and I are responsible for establishing and maintaining
    disclosure controls and procedures (as defined in Exchange Act
    Rules 13a-14 and 15d-14) for the Registrant and have:                                                                                                           



| |                                                                                                                                                                                                                                                                                                                 
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) designed such disclosure controls and
    procedures to ensure that material information relating to the
    Registrant, including its consolidated subsidiaries, is made
    known to us by others within those entities, particularly during
    the period in which this annual report is being prepared;
|
|
| | (b) evaluated the effectiveness of the
    Registrants disclosure controls and procedures as of a
    date within 90 days prior to the filing date of this annual
    report (the Evaluation Date); and                                                                                                      
|
|
| | (c) presented in this annual report our
    conclusions about the effectiveness of the disclosure controls
    and procedures based on our evaluation as of the Evaluation Date;                                                                                                                                



| |                                                                                                                                                                                                                                                                  
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 5. The Registrants other certifying officer
    and I have disclosed, based on our most recent evaluation, to
    the Registrants auditors and the audit committee of
    Registrants board of directors (or persons performing the
    equivalent functions):



| |                                                                                                                                                                                                                                                                                                                       
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) all significant deficiencies in the
    design or operation of internal controls which could adversely
    affect the Registrants ability to record, process,
    summarize and report financial data and have identified for the
    Registrants auditors any material weaknesses in internal
    controls; and
|
|
| | (b) any fraud, whether or not material, that
    involves management or other employees who have a significant
    role in the Registrants internal controls; and                                                                                                                                                    



| |                                                                                                                                                                                                                                                                                                                                                                                                          
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 6. The Registrants other certifying officer
    and I have indicated in this annual report whether there were
    significant changes in internal controls or in other factors
    that could significantly affect internal controls subsequent to
    the date of our most recent evaluation, including any corrective
    actions with regard to significant deficiencies and material
    weaknesses.

Date: March 14, 2003



| |                        
| | -----------------------
| | /s/ DONALD E. GRAHAM   
| |                        
| | Donald E. Graham,      
| | Chief Executive Officer



25




---



##### 



I, John B. Morse, Jr., Vice
PresidentFinance (principal financial officer) of The
Washington Post Company (the Registrant), certify
that:



| |                                                                                                                                                                                                                                                                                                                                                
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 1. I have reviewed this annual report on
    Form 10-K of the Registrant;                                                                                                                                                                                                                                                                      
|
|
| | 2. Based on my knowledge, this annual report does
    not contain any untrue statement of a material fact or omit to
    state a material fact necessary to make the statements made, in
    light of the circumstances under which such statements were
    made, not misleading with respect to the period covered by this
    annual report;
|
|
| | 3. Based on my knowledge, the financial
    statements and other financial information included in this
    annual report, fairly present in all material respects the
    financial condition, results of operations and cash flows of the
    Registrant as of, and for, the periods presented in this annual
    report;                    
|
|
| | 4. The Registrants other certifying officer
    and I are responsible for establishing and maintaining
    disclosure controls and procedures (as defined in Exchange Act
    Rules 13a-14 and 15d-14) for the Registrant and have:                                                                                                           



| |                                                                                                                                                                                                                                                                                                                 
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) designed such disclosure controls and
    procedures to ensure that material information relating to the
    Registrant, including its consolidated subsidiaries, is made
    known to us by others within those entities, particularly during
    the period in which this annual report is being prepared;
|
|
| | (b) evaluated the effectiveness of the
    Registrants disclosure controls and procedures as of a
    date within 90 days prior to the filing date of this annual
    report (the Evaluation Date); and                                                                                                      
|
|
| | (c) presented in this annual report our
    conclusions about the effectiveness of the disclosure controls
    and procedures based on our evaluation as of the Evaluation Date;                                                                                                                                



| |                                                                                                                                                                                                                                                                  
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 5. The Registrants other certifying officer
    and I have disclosed, based on our most recent evaluation, to
    the Registrants auditors and the audit committee of
    Registrants board of directors (or persons performing the
    equivalent functions):



| |                                                                                                                                                                                                                                                                                                                       
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) all significant deficiencies in the
    design or operation of internal controls which could adversely
    affect the Registrants ability to record, process,
    summarize and report financial data and have identified for the
    Registrants auditors any material weaknesses in internal
    controls; and
|
|
| | (b) any fraud, whether or not material, that
    involves management or other employees who have a significant
    role in the Registrants internal controls; and                                                                                                                                                    



| |                                                                                                                                                                                                                                                                                                                                                                                                          
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 6. The Registrants other certifying officer
    and I have indicated in this annual report whether there were
    significant changes in internal controls or in other factors
    that could significantly affect internal controls subsequent to
    the date of our most recent evaluation, including any corrective
    actions with regard to significant deficiencies and material
    weaknesses.

Date: March 14, 2003



| |                       
| | ----------------------
| | /s/ JOHN B. MORSE, JR.
| |                       
| | John B. Morse, Jr.,   
| | Vice PresidentFinance



26




---



##### 



INDEX TO FINANCIAL INFORMATION



---

THE WASHINGTON POST COMPANY

|                                                                                                      |                                                                                                                              |                                            |    |    |    | 
|----------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | -- | -- | -- | 
|                                                                                                      |                                                                                                                              | Page                                      
|                                                                                                      |                                                                                                                              |                                           
|Managements Discussion and Analysis of
    Results of Operations and Financial Condition (Unaudited) |                                                                                                                              |                                            | 29 |   
|                                                                                                     
|                                                                                                     
|                                                                                                     
|                                                                                                     
|                                                                                                     
|Financial Statements and Schedules:                                                                   |                                                                                                                              |                                            |    |   
|                                                                                                     
|                                                                                                     
|                                                                                                     
|                                                                                                     
|                                                                                                     
|                                                                                                      | Report of Independent Accountants                                                                                            |                                            |    | 38 |   
|                                                                                                     
|                                                                                                     
|                                                                                                     
|                                                                                                     
|                                                                                                     
|                                                                                                      | Consolidated Statements of Income for the Three
    Fiscal Years Ended December 29, 2002                                     |                                            |    | 39 |   
|                                                                                                     
|                                                                                                     
|                                                                                                     
|                                                                                                     
|                                                                                                     
|                                                                                                      | Consolidated Statements of Comprehensive Income
    for the Three Fiscal Years Ended December 29, 2002                       |                                            |    | 39 |   
|                                                                                                     
|                                                                                                     
|                                                                                                     
|                                                                                                     
|                                                                                                     
|                                                                                                      | Consolidated Balance Sheets at December 29, 2002
    and December 30, 2001                                                   |                                            |    | 40 |   
|                                                                                                     
|                                                                                                     
|                                                                                                     
|                                                                                                     
|                                                                                                     
|                                                                                                      | Consolidated Statements of Cash Flows for the
    Three Fiscal Years Ended December 29, 2002                                 |                                            |    | 42 |   
|                                                                                                     
|                                                                                                     
|                                                                                                     
|                                                                                                     
|                                                                                                     
|                                                                                                      | Consolidated Statements of Changes in Common
    Shareholders Equity for the Three Fiscal Years Ended
    December 29, 2002 |                                            |    | 43 |   
|                                                                                                     
|                                                                                                     
|                                                                                                     
|                                                                                                     
|                                                                                                     
|                                                                                                      | Notes to Consolidated Financial Statements                                                                                   |                                            |    | 44 |   
|                                                                                                     
|                                                                                                     
|                                                                                                     
|                                                                                                     
|                                                                                                     
|                                                                                                      | Financial Statement Schedule for the Three Fiscal
    Years Ended December 29, 2002:                                         |                                            |    |    |   
|                                                                                                     
|                                                                                                     
|                                                                                                     
|                                                                                                     
|                                                                                                     
|                                                                                                      |                                                                                                                              | II  Valuation and Qualifying
    Accounts |    |    | 57 | 
|                                                                                                     
|                                                                                                     
|                                                                                                     
|                                                                                                     
|                                                                                                     
|Ten-Year Summary of Selected Historical Financial
    Data (Unaudited)                                |                                                                                                                              |                                            | 58 |   



---

All other schedules
have been omitted either because they are not applicable or
because the required information is included in the consolidated
financial statements or the notes thereto referred to above.



27




---



##### 



[This Page Intentionally Left Blank]





28




---



##### 



MANAGEMENTS DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION

This analysis should be read in conjunction with
the consolidated financial statements and the notes thereto.

RESULTS OF OPERATIONS  2002
COMPARED TO 2001

Net income for the fiscal year ended
December 29, 2002 was $204.3 million ($21.34 per
share), compared with net income for the fiscal year ended
December 30, 2001 of $229.6 million ($24.06 per share). The
Companys 2002 results include a net non-operating gain
from the exchange of certain cable systems (after-tax impact of
$16.7 million, or $1.75 per share), a transitional goodwill
impairment loss (after-tax impact of $12.1 million, or
$1.27 per share), charges from early retirement programs
(after-tax impact of $11.3 million, or $1.18 per share), and a
net non-operating loss from the write-down of certain of the
Companys investments (after-tax impact of
$2.3 million, or $0.24 per share). The Companys 2001
results included net non-operating gains from the sale and
exchange of certain cable systems (after-tax impact of $196.5
million, or $20.69 per share), a non-cash goodwill and other
intangibles impairment charge recorded by one of the
Companys affiliates (after-tax impact of
$19.9 million, or $2.10 per share), losses from the
write-down of a non-operating parcel of land and certain cost
method investments to their estimated fair value (after-tax
impact of $18.3 million, or $1.93 per share) and an
after-tax charge of $55.0 million, or $5.79 per share, for
amortization of goodwill and other intangible assets that are no
longer amortized under Statement of Financial Accounting
Standards No. 142 (SFAS 142), Goodwill and Other
Intangible Assets. The Company adopted SFAS 142
effective on the first day of its 2002 fiscal year.

Revenue for 2002 was $2,584.2 million, up
7 percent compared to revenue of $2,411.0 million in
2001, with significant revenue growth at the education, cable
and broadcast divisions. Advertising revenue increased
1 percent in 2002, and circulation and subscriber revenue
increased 3 percent. Education revenue increased
26 percent in 2002, and other revenue increased
10 percent. The increase in advertising revenue is due
primarily to significant political revenues at the broadcast
division in 2002. The increase in circulation and subscriber
revenue is due to an 11 percent increase in subscriber
revenue at the cable division from rapidly growing cable modem
and digital service revenues, and a 4 percent increase in
circulation revenue at The Post due to circulation price
increases. This increase was offset by a 14 percent
decrease in Newsweek domestic circulation revenue due to
difficult comparisons with 2001, when Newsweek saw spikes in
newsstand sales from regular and special editions surrounding
the events of September 11. Revenue growth at Kaplan, Inc.
(about one-third of which was from acquisitions) accounted for
the increase in education revenue.

Operating costs and expenses for the year
increased 4 percent to $2,206.6 million, from
$2,112.8 million in 2001 (excluding amortization of
goodwill and other intangible assets that are no longer
amortized under SFAS 142). The increase is primarily due to
higher depreciation expense, higher stock-based compensation at
the education division, early retirement program charges, and a
reduced net pension credit, offset by lower expenses at the
newspaper publishing and magazine publishing segments due to
lower newsprint prices and tight cost controls.

Operating income increased 27 percent to
$377.6 million, from $298.3 million in 2001, adjusted
as if SFAS 142 had been adopted at the beginning of 2001.
Operating results for 2002 include $19.0 million in pre-tax
charges from early retirement programs. The Company benefited
from improved operating results at the education and broadcast
divisions, along with improved earnings at The Washington Post
newspaper and the cable division. These factors were offset in
part by increased depreciation expense, a reduced net pension
credit, the early retirement program charges noted above and
higher stock-based compensation expense accruals at the
education division.

The Companys 2002 operating income includes
$64.4 million of net pension credits, compared to
$76.9 million in 2001. These amounts exclude $19.0 million
and $3.3 million in charges related to early retirement
programs in 2002 and 2001, respectively.

DIVISION RESULTS

As discussed above, the Company adopted SFAS 142
effective on the first day of its 2002 fiscal year. All
operating income comparisons presented below are on a pro forma
basis as if SFAS 142 had been adopted at the beginning of 2001.
Therefore, 2001 pro forma operating results exclude amortization
charges of goodwill and certain other intangible assets that are
no longer amortized under SFAS 142.

Newspaper Publishing Division.Newspaper publishing division revenue
in 2002 decreased slightly to $842.0 million, from
$842.7 million in 2001. Division operating income for 2002
totaled $109.0 million, an increase of 23 percent from
pro forma operating income of $88.6 million in 2001.
Improved operating results for 2002 reflect the benefits of cost
control initiatives employed throughout the division and a
22 percent decrease in newsprint expense; these savings
were partially offset by a pre-tax early retirement program
charge of $2.9 million and a reduced net pension credit.

Print advertising revenue at The Washington Post
newspaper decreased 3 percent to $555.7 million, from
$574.3 million in 2001. The decrease in print advertising
revenue for 2002 is due to a continued decline in recruitment
advertising revenue, with volume decreases of 32 percent,
offset by higher revenue from several advertising categories,
including preprints, real estate and other classified
advertising.

Circulation revenues at The Post were up
4 percent for 2002 due to increases in single copy
newsstand and home delivery prices in 2002. Daily circulation at
The Post declined 1.7 percent, and Sunday circulation
declined 1.2 percent in 2002. For



29




---



##### 



the year ended December 29, 2002, average
daily circulation at The Post totaled 760,000 (unaudited) and
average Sunday circulation totaled 1,054,000 (unaudited).


Revenue generated by the Companys online
publishing activities, primarily washingtonpost.com, increased
18 percent to $35.9 million during the year, from
$30.4 million in 2001. Local and national online
advertising revenues grew 60 percent in 2002, while revenue at
the Jobs section of washingtonpost.com decreased 1 percent
in 2002.

Television Broadcasting Division.Revenue at the television broadcasting
division increased 9 percent to $343.6 million in
2002, from $314.0 million in 2001, due primarily to
$31.8 million in political advertising, as well as
Olympics-related advertising at the Companys NBC
affiliates in the first quarter of 2002. Additionally, revenues
in 2001 were lower due to a general softness in advertising and
several days of commercial-free coverage following the events of
September 11. These increases were partially offset by
reduced network compensation revenues in 2002.

Competitive market position remained strong for
the Companys television stations. WDIV in Detroit was
ranked number one in the latest ratings period, Monday through
Friday, sign-on to sign-off; KSAT in San Antonio was tied for
number one; WJXT in Jacksonville ranked second; WPLG was tied
for second among English-language stations in the Miami market;
and KPRC in Houston and WKMG in Orlando ranked third in their
respective markets.

Operating income for 2002 increased
16 percent to $168.8 million, from pro forma operating
income of $146.0 million in 2001. Operating income growth
for 2002 is due to strong revenue growth, along with tight cost
controls, partially offset by a reduced pension credit.
Operating margin at the broadcast division was 49 percent
for 2002 and 46 percent for 2001, excluding amortization of
goodwill and other intangibles.

In July 2002, WJXT in Jacksonville, Florida,
began operations as an independent station when its network
affiliation with CBS ended.

Magazine Publishing Division.Revenue for the magazine publishing
division totaled $349.1 million for 2002, a 7 percent
decrease from $374.6 million in 2001. Revenues for 2001
reflect a significant spike in newsstand circulation revenue at
Newsweek due to regular and special editions related to the
events of September 11. Advertising revenues were down for
2002, primarily due to declines in the international division.
Operating income totaled $25.7 million for 2002, a decrease
of 20 percent from pro forma operating income of $32.0
million in 2001. Operating results for 2002 include
$16.1 million in pre-tax charges in connection with early
retirement programs at Newsweek. Expenses for 2001 included
approximately $5.0 million in nonrecurring costs associated
with regular and special editions related to September 11.
Costs for 2002 also have declined due to payroll and other
related cost savings from employees accepting early retirement
programs offered by Newsweek, and from significant cost savings
programs put into place at Newsweeks international
operations.

Excluding amortization of goodwill and other
intangibles, operating margin at the magazine publishing
division was 7 percent for 2002 and 9 percent for 2001.

Cable Television Division.Cable division revenue of
$428.5 million for 2002 represents an 11 percent
increase from revenues of $386.0 in 2001. The 2002 revenue
increase is principally due to rapid growth in the
divisions cable modem and digital service revenues. Cable
division operating income increased 15 percent in 2002 to
$80.9 million, from pro forma operating income of $70.6
million in 2001. The increase in operating income for 2002 is
due mostly to the divisions revenue growth, offset by
higher depreciation expense and increased programming expense.

Cable division cash flow (operating income
excluding depreciation and amortization expense) totaled
$169.8 million for 2002, an increase of 25 percent from
$135.3 million for 2001.

The increase in depreciation expense for 2002 is
primarily due to significant capital spending, primarily in 2001
and 2000, which has enabled the cable division to offer digital
and broadband cable services to its subscribers; depreciation
expense for 2002 also includes $5.4 million in charges for
obsolete assets. The cable division began its rollout plan for
these services in the third quarter of 2000. At
December 31, 2002, the cable division had approximately
214,900 digital cable subscribers, representing a
30 percent penetration of the subscriber base in the
markets where digital services are offered. Digital services are
currently offered in markets serving 98 percent of the
cable divisions subscriber base. The initial rollout plan
for the new digital cable services included an offer for the
cable divisions customers to obtain these services free
for one year. At December 31, 2002, the cable division had
194,200 paying digital subscribers, compared to 31,000 at the
end of 2001. Most of the benefits from these services began to
show in the first quarter of 2002 and continued throughout the
year, with the remaining portion of free one-year periods
generally having ended by the close of 2002.

At December 31, 2002, the cable division had
718,000 basic subscribers, compared to 752,700 at the end of
December 2001, with the decrease due primarily to the difficult
economic environment over the past year; basic customer
disconnects for non-payment of bills have increased
significantly. At December 31, 2002, the cable division had
79,400 CableONE.net service subscribers, compared to 46,400 at
the end of December 2001, due to a large increase in the
Companys cable modem deployment (offered to
93 percent of homes passed at the end of December 2002) and
subscriber penetration rates. Of these subscribers, 78,100 and
32,900 were cable modem subscribers at the end of 2002 and 2001,
respectively, with the remainder being dial-up subscribers.



30




---



##### 



Education Division.Education division revenue in 2002
increased 26 percent to $621.1 million, from
$493.7 million in 2001. Kaplan reported operating income
for the year of $20.5 million, compared to a pro forma
operating loss of $13.1 million in 2001. Approximately one-third
of the increase in Kaplan revenue and approximately
$9 million of the increase in Kaplan operating income is
from newly acquired businesses, primarily in the higher
education division. Excluding goodwill amortization in 2001, a
summary of operating results for 2002 compared to 2001 is as
follows (in thousands):

|                        |                           |      |         |         |      |   |         |          |   |  |     |      |  
|----------------------- | ------------------------- | ---- | ------- | ------- | ---- | - | ------- | -------- | - |  | --- | ---- | -
|                        |                           | 2002 |         |         | 2001 |   |         | % Change |  
|                       
|                       
|Revenue                 |                           |      |         |         |      |   |         |          |   |  |     |     
|                       
|                       
|                       
|                       
|                        | Supplemental education    |      | $       | 371,248 |      |   | $       | 328,039  |   |  |     | 13%  |  
|                       
|                       
|                       
|                       
|                        | Higher education          |      |         | 249,877 |      |   |         | 165,642  |   |  |     | 51%  |  
|                        |                           |     
|                       
|                        |                           | $    | 621,125 |         |      | $ | 493,681 |          |   |  | 26% |     
|                        |                           |     
|                       
|                       
|                       
|                       
|Operating income (loss) |                           |      |         |         |      |   |         |          |   |  |     |     
|                       
|                       
|                       
|                       
|                        | Supplemental education    |      | $       | 54,103  |      |   | $       | 27,509   |   |  |     | 97%  |  
|                       
|                       
|                       
|                       
|                        | Higher education          |      |         | 27,569  |      |   |         | 9,149    |   |  |     | 201% |  
|                       
|                       
|                       
|                       
|                        | Kaplan corporate overhead |      |         | (26,143 | )    |   |         | (23,981  | ) |  |     | (9%  | )
|                       
|                       
|                       
|                       
|                        | Other                     |      |         | (35,017 | )    |   |         | (25,738  | ) |  |     | (36% | )
|                        |                           |     
|                       
|                        |                           | $    | 20,512  |         |      | $ | (13,061 | )        |   |  |    |     
|                        |                           |     

Supplemental education includes Kaplans
test preparation, professional training and Score! businesses.
The improvement in supplemental education results for 2002 is
due mostly to higher enrollments and to a lesser extent, higher
prices at Kaplans traditional test preparation business
(particularly the LSAT, MCAT and GRE prep courses), as well as
higher revenues and operating income from Kaplans
CFA® and real estate licensure preparation services. Score!
also contributed to the improved results, with increased
enrollment, higher prices and strong cost controls.

Higher education includes all of Kaplans
post-secondary education businesses, including the
fixed-facility colleges that were formerly part of Quest
Education, as well as online post-secondary and career programs
(various distance-learning businesses). Higher education results
are showing significant growth due to student enrollment
increases, high student retention rates and several acquisitions.

Corporate overhead represents unallocated
expenses of Kaplan, Inc.s corporate office, including
expenses associated with the design and development of
educational software that, if successfully completed, will
benefit all of Kaplans business units.

Other expense is comprised primarily of accrued
charges for stock-based incentive compensation arising from a
stock option plan established for certain members of
Kaplans management (the general provisions of which are
discussed in Note G to the Consolidated Financial
Statements) and amortization of certain intangibles. Under the
stock-based incentive plan, the amount of compensation expense
varies directly with the estimated fair value of Kaplans
common stock and the number of options outstanding. For 2002 and
2001, the Company recorded expense of $34.5 million and
$25.3 million, respectively, related to this plan. The
increase in other expense for 2002 is attributable to an
increase in stock-based incentive compensation, which is due to
an increase in Kaplans estimated value.

Equity in Losses of Affiliates.The Companys equity in losses of
affiliates for 2002 was $19.3 million, compared to losses
of $68.7 million for 2001. The improvements were primarily
due to better operating results at BrassRing LLC, which
accounted for approximately $13.9 million of 2002 equity in
losses of affiliates, compared to $75.1 million in equity
losses for 2001. The Companys affiliate investments at the
end of 2002 consisted of a 49.4 percent interest in
BrassRing LLC, a 50 percent interest in the International
Herald Tribune, and a 49 percent interest in Bowater Mersey
Paper Company Limited.

On January 1, 2003, the Company sold its
50 percent interest in the International Herald Tribune for
$65 million; the Company will report an after-tax
non-operating gain of approximately $32 million in the
first quarter of 2003.

Non-Operating Items.The Company recorded other
non-operating income, net, of $28.9 million in 2002,
compared to $283.7 million of non-operating income, net,
for 2001. The 2002 non-operating income includes a pre-tax gain
of $27.8 million on the exchange of certain cable systems in the
fourth quarter of 2002 and a gain on the sale of marketable
securities; these gains were offset by write-downs recorded on
certain investments. The 2001 non-operating income mostly
comprised gains arising from the sale and exchange of certain
cable systems completed in the first quarter of 2001, offset by
write-downs recorded on certain investments and a parcel of
non-operating land to their estimated fair value.

The Company incurred net interest expense of
$33.5 million in 2002, compared to $47.5 million in
2001. At December 29, 2002, the Company had
$664.8 million in borrowings outstanding at an average
interest rate of 4.0 percent; at December 30, 2001,
the Company had $933.1 million in borrowings outstanding.

Income Taxes.The
effective tax rate was 38.8 percent for 2002, compared to
40.7 percent for 2001. Excluding the effect of the cable
gain transactions, the Companys effective rate
approximated 38.7 percent for 2002 and 50.2 percent for
2001. The effective tax rate for 2002 declined primarily because
the Company no longer has any permanent difference from goodwill
amortization not deductible for tax purposes as a result of the
adoption of SFAS 142. The Companys effective tax rate also
has declined due to an increase in operating earnings and a
decrease in the overall state tax rate.

Cumulative Effect of Change in Accounting
Principle.In 2002, the Company
completed its SFAS 142 transitional goodwill impairment test,
resulting in an after-tax impairment loss of $12.1 million,
or $1.27 per share, related to PostNewsweek Tech Media (part of
the magazine publishing segment). This loss is included in the
Companys 2002 results as a cumulative effect of change in
accounting principle.



31




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RESULTS OF OPERATIONS  2001
COMPARED TO 2000

Net income for 2001 was $229.6 million,
compared with net income of $136.5 million for 2000. Diluted
earnings per share totaled $24.06 in 2001, compared with $14.32
in 2000. The Companys 2001 results include after-tax gains
of $196.5 million, or $20.69 per share, from the sale and
exchange of certain cable systems in the first quarter; a
non-cash goodwill and other intangibles impairment charge
recorded by the Companys BrassRing affiliate (after-tax
impact of $19.9 million, or $2.10 per share); and losses
from the write-down of a non-operating parcel of land and
certain cost method investments to their estimated fair value
(after-tax impact of $18.3 million, or $1.93 per share).

Revenue for 2001 totaled $2,411.0 million,
or flat compared to revenue of $2,409.6 million in 2000.
Advertising revenue decreased 13 percent in 2001, and
circulation and subscriber revenue increased 9 percent.
Education revenue increased 40 percent in 2001, and other
revenue decreased 10 percent. The large decrease in
advertising revenue is due to declines at the newspaper,
broadcast and magazine divisions. The increase in circulation
and subscriber revenue is due to a 20 percent increase in
Newsweek domestic circulation revenue and a 10 percent
increase in subscriber revenue at the cable division. Revenue
growth at Kaplan, Inc. (about two-thirds of which was from
acquisitions) accounted for the increase in education revenue.

Operating costs and expenses for the year
increased 6 percent to $2,191.1 million, from
$2,069.8 million in 2000. The cost and expense increase is
primarily attributable to companies acquired in 2001 and 2000,
higher depreciation and amortization expense, and higher
stock-based compensation expense accruals at the education
division, offset by a higher pension credit and lower expenses
at the newspaper publishing, television broadcasting and
magazine publishing segments due to extensive cost control
initiatives.

Operating income decreased 35 percent to
$219.9 million in 2001, from $339.9 million in 2000. The
decline in 2001 operating income is largely due to a significant
decline in advertising revenue, increased depreciation and
amortization expenses, and higher stock-based compensation
expense accruals at the education division. These factors were
offset in part by increased operating income contributed by
Quest Education (acquired in August 2000), higher profits from
Kaplans test preparation and professional training
businesses, reduced operating losses at Kaplans new
business development activities, and an increased pension
credit. In addition, 2000 earnings included a fourth quarter
after-tax charge of $16.5 million, or $1.74 per share,
arising from an early retirement program at The Washington Post.

The Companys 2001 operating income includes
$76.9 million of net pension credits, compared to
$65.3 million in 2000. These amounts exclude
$3.3 million and $29.0 million in charges related to
early retirement programs in 2001 and 2000, respectively.

DIVISION RESULTS

Newspaper Publishing Division.Newspaper publishing division revenues
in 2001 decreased 8 percent to $842.7 million, from
$918.2 million in 2000. Division operating income for 2001
totaled $84.7 million, a decrease of 26 percent from
operating income of $114.4 million in 2000.

The decrease in operating income for 2001 is due
to a significant decline in print advertising, offset in part by
a higher pension credit, higher online advertising revenue,
lower newsprint expense, cost control initiatives employed
throughout the division, and the $27.5 million charge
recorded in the fourth quarter of 2000 in connection with an
early retirement program completed at The Post.

Print advertising revenue at The Washington Post
newspaper decreased 14 percent to $574.3 million, from
$664.1 million in 2000. Volume declines of 41 percent
in classified recruitment advertising for 2001 caused classified
recruitment advertising revenue declines of 37 percent. The
economic environment surrounding most of the other advertising
categories at The Post (i.e., retail, general, preprints) was
also sluggish for fiscal 2001 compared to the prior year. In
these categories, rate increases only partially offset volume
declines ranging from 3 percent to 28 percent during
2001. The soft advertising climate worsened late in the third
quarter of 2001 as the Company experienced further reductions in
advertising revenue and volumes following the events of
September 11.

Daily and Sunday circulation at The Post declined
0.5 percent and 0.7 percent, respectively, in 2001.
For the year ended December 30, 2001, average daily
circulation at The Post totaled 773,000 (unaudited) and average
Sunday circulation totaled 1,067,000 (unaudited). Newsprint
expense at the newspaper publishing division decreased 6 percent
for 2001 due to reduced consumption offset by overall higher
prices during the year.

Revenues generated by the Companys online
publishing activities, primarily washingtonpost.com, increased
12 percent to $30.4 million during the year.

Television Broadcasting Division.Revenue for the television
broadcasting division totaled $314.0 million for 2001, a
14 percent decline from 2000. Excluding approximately
$42 million in political and Olympics advertising in 2000,
revenue in 2001 decreased 3 percent due to a general
softness in advertising (particularly national advertising) and
several days of commercial-free coverage following the events of
September 11.

Competitive market position remained strong for
the Companys television stations. WJXT in Jacksonville and
WDIV in Detroit were ranked number one in the latest ratings
period, sign-on to sign-off, in their respective markets; KSAT
in San Antonio ranked second; WPLG was tied for second among
English-language stations in the Miami market; and KPRC in
Houston and WKMG in Orlando ranked third in their respective
markets.



32




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Operating income for 2001 declined
26 percent to $131.8 million, from $177.4 million in
2000, due to revenue declines discussed above. Operating margin
at the broadcast division was 42 percent for 2001 and
49 percent for 2000. Excluding amortization of goodwill and
intangibles, operating margin was 46 percent for 2001 and
53 percent for 2000.

Magazine Publishing Division.Revenue for the magazine publishing
division totaled $374.6 million for 2001, a 9 percent
decrease from revenue of $413.9 million in 2000. Operating
income totaled $25.3 million for 2001, a decrease of
48 percent from 2000. The decline in 2001 operating income
resulted from a 24 percent decrease in advertising revenue
at Newsweek due to fewer advertising pages at both the domestic
and international editions. The decline was offset in part by
increased newsstand sales on regular and special editions
related to the September 11 terrorist attacks, a higher
pension credit and reduced operating expenses.

Operating margin at the magazine publishing
division decreased to 7 percent for 2001, compared to
12 percent in 2000.

Cable Television Division.Cable division revenue of
$386.0 million for 2001 represents an 8 percent
increase over 2000. The 2001 revenue increase is due to rapid
growth in the divisions digital and cable modem service
revenues, along with an increased number of basic subscribers
from the cable exchange transactions completed in the first
quarter of 2001. Cable division operating income declined
51 percent in 2001 to $32.2 million, due mostly to a
$25.3 million increase in depreciation and amortization expense
compared to 2000.

Cable division cash flow (operating income
excluding depreciation and amortization expense) totaled
$135.3 million for 2001, a decrease of 6 percent from
2000. The decline in cable division cash flow is mostly due to
higher programming expense, costs associated with the launch of
digital services, and comparatively lower cash flow margin
subscribers acquired in the cable system exchanges completed in
the first quarter of 2001.

The increase in depreciation expense is due to
capital spending, which is enabling the Company to offer digital
cable services to its subscribers. The cable division began its
rollout plan for these services in the third quarter of 2000. At
December 31, 2001, the cable division had approximately
239,500 digital cable subscribers, representing a
35 percent penetration of the subscriber base in the
markets where digital services are offered. Digital services
were offered in markets serving 91 percent of the cable
divisions subscriber base. The rollout plan for the new
digital cable services included an offer for the cable
divisions customers to obtain these services free for one
year. At the end of December 2001, the cable division had about
31,000 paying digital subscribers. Of these, 24,000 were from
the new Idaho subscribers and were not offered one-year free
digital service. Most of the benefits from these new services
are expected to show beginning in 2002 and thereafter.

At December 31, 2001, the cable division had
752,700 basic subscribers, compared to 735,400 at the end of
December 2000. The increase in basic subscribers is largely due
to a net gain in subscribers arising from cable system exchanges
and sale transactions completed in the first quarter of 2001. At
December 31, 2001, the cable division had 46,400
CableONE.net service subscribers, compared to 18,200 at the end
of 2000, with the increase due to a large increase in the
Companys cable modem deployment (offered to
89 percent of homes passed at the end of December 2001) and
take-up rates. Of these subscribers, 32,900 and 3,600 were cable
modem subscribers at the end of 2001 and 2000, respectively,
with the remainder being dial-up subscribers.

Education Division.Education revenue in 2001 increased
40 percent to $493.7 million, from $353.8 million in
2000; excluding Quest Education (acquired in August 2000),
education division revenue increased 15 percent to
$342.3 million for 2001, compared to $296.9 million
for 2000. Excluding goodwill amortization, a summary of
operating results for 2001 compared to 2000 is as follows (in
thousands):

|                        |                           |      |         |         |      |   |         |          |   |  |     |       |  
|----------------------- | ------------------------- | ---- | ------- | ------- | ---- | - | ------- | -------- | - |  | --- | ----- | -
|                        |                           | 2001 |         |         | 2000 |   |         | % Change |  
|                       
|                       
|Revenue                 |                           |      |         |         |      |   |         |          |   |  |     |      
|                       
|                       
|                       
|                       
|                        | Supplemental education    |      | $       | 328,039 |      |   | $       | 286,386  |   |  |     | 15%   |  
|                       
|                       
|                       
|                       
|                        | Higher education          |      |         | 165,642 |      |   |         | 67,435   |   |  |     | 146%  |  
|                        |                           |     
|                       
|                        |                           | $    | 493,681 |         |      | $ | 353,821 |          |   |  | 40% |      
|                        |                           |     
|                       
|                       
|                       
|                       
|Operating income (loss) |                           |      |         |         |      |   |         |          |   |  |     |      
|                       
|                       
|                       
|                       
|                        | Supplemental education    |      | $       | 27,509  |      |   | $       | 18,636   |   |  |     | 48%   |  
|                       
|                       
|                       
|                       
|                        | Higher education          |      |         | 9,149   |      |   |         | (5,705   | ) |  |     |      |  
|                       
|                       
|                       
|                       
|                        | Kaplan corporate overhead |      |         | (23,981 | )    |   |         | (38,693  | ) |  |     | 38%   |  
|                       
|                       
|                       
|                       
|                        | Other                     |      |         | (25,738 | )    |   |         | (6,250   | ) |  |     | (312% | )
|                        |                           |     
|                       
|                        |                           | $    | (13,061 | )       |      | $ | (32,012 | )        |   |  | 59% |      
|                        |                           |     

Supplemental education includes Kaplans
test preparation, professional training and Score! businesses.
The improvement in supplemental education results for 2001 is
due mostly to higher enrollments and, to a lesser extent, higher
prices at Kaplans traditional test preparation business
(particularly the GMAT and the LSAT prep courses) and higher
revenues and profits from Kaplans CFA® and real
estate licensure preparation services. Score! also contributed
to the improved results, with both increased enrollment from new
learning centers opened (147 centers at the end of 2001 versus
142 centers at the end of 2000) and rate increases implemented
early in 2001.

Higher education includes all of Kaplans
post-secondary education businesses, including the
fixed-facility colleges that were formerly part of Quest
Education, as well as online post-secondary and career programs
(various distance-learning businesses). Higher education results
increased as 2001 includes a full year of Quest results versus
five months of activity in 2000.

Corporate overhead represents unallocated
expenses of Kaplan, Inc.s corporate office, including
expenses associated with the design and development of
educational software that, if successfully completed, will
benefit all of Kaplans business



33




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##### 



units. Also included in 2000 corporate overhead
results are costs associated with eScore.com.


Other expense is comprised primarily of accrued
charges for stock-based incentive compensation arising from a
stock option plan established for certain members of
Kaplans management and amortization of certain
intangibles. Under the stock-based incentive plan, the amount of
compensation expense varies directly with the estimated fair
value of Kaplans common stock and the number of options
outstanding. For 2001 and 2000, the Company recorded expense of
$25.3 million and $6.0 million, respectively, related
to this plan. The increase in other expense for 2001 is
attributable to an increase in stock-based incentive
compensation, which is due to an increase in Kaplans
estimated value.

Equity in Losses of Affiliates.The Companys equity in losses of
affiliates for 2001 was $68.7 million, compared to losses
of $36.5 million for 2000. The Companys affiliate
investments consisted of a 39.7 percent common interest in
BrassRing LLC, a 50 percent interest in the International
Herald Tribune, and a 49 percent interest in Bowater Mersey
Paper Company Limited.

BrassRing accounted for approximately
$75.1 million of the 2001 equity in losses of affiliates,
compared to $37.0 million in 2000. The increase in 2001
equity in affiliate losses from BrassRing is largely due to a
non-cash goodwill and other intangibles impairment charge that
BrassRing recorded in 2001 primarily to reduce the carrying
value of its career fair business. As a substantial portion of
BrassRings losses arose from goodwill and intangible
amortization expense for both 2001 and 2000, the
$75.1 million and $37.0 million of equity in affiliate
losses recorded by the Company in 2001 and 2000 did not require
significant funding by the Company.

In December 2001, BrassRing, Inc. was
restructured and the Companys interest in BrassRing, Inc.
was converted into an interest in the newly-formed BrassRing
LLC. At December 30, 2001, the Company held a
39.7 percent interest in the BrassRing LLC common equity
and a $14.9 million Subordinated Convertible Promissory
Note (Note) from BrassRing LLC. In February 2002,
the Note was converted into Preferred Units, which are
convertible at the Companys option to BrassRing LLC common
equity. Assuming the conversion of the Preferred Units, the
Companys common equity interest in BrassRing LLC would
have been approximately 49.5 percent.

Non-Operating Items.The Company recorded other
non-operating income of $283.7 million in 2001, compared to
$19.8 million in non-operating expense for 2000. The 2001
non-operating income mostly comprised gains arising from the
sale and exchange of certain cable systems completed in January
and March of 2001. Offsetting these gains were losses from the
write-downs of a non-operating parcel of land and certain
investments to their estimated fair value. For income tax
purposes, substantial components of the cable system sale and
exchange transactions qualify as like-kind exchanges, and
therefore, a large portion of these transactions does not result
in a current tax liability.

The Company incurred net interest expense of
$47.5 million in 2001, compared to $53.8 million in
2000. At December 30, 2001, the Company had
$933.1 million in borrowings outstanding at an average
interest rate of 3.5 percent.

Income Taxes.The
effective rate was 40.7 percent for 2001, compared to 40.6
percent for 2000. Excluding the effect of the cable gain
transactions, the Companys effective tax rate approximated
50.2 percent for 2001, with the increase in rate due mostly
to the decline in pre-tax income.

FINANCIAL CONDITION: CAPITAL RESOURCES AND
LIQUIDITY

Acquisitions, Exchanges and Dispositions.During 2002, Kaplan acquired several
businesses in its higher education and test preparation
divisions for approximately $42.2 million. About
$9.6 million remains to be paid on these acquisitions, of
which $2.2 million has been classified in current
liabilities and $7.4 million as long-term debt at
December 29, 2002.

In November 2002, the Company completed a cable
system exchange transaction with Time Warner Cable which
consisted of the exchange by the Company of its cable system in
Akron, Ohio serving about 15,500 subscribers, and
$5.2 million to Time Warner Cable, for cable systems
serving about 20,300 subscribers in Kansas. The non-cash,
non-operating gain resulting from the exchange transaction
increased net income by $16.7 million, or $1.75 per share.

During 2001, the Company spent approximately
$104.4 million on business acquisitions and exchanges,
which principally included the purchase of Southern Maryland
Newspapers, a division of Chesapeake Publishing Corporation, and
amounts paid as part of a cable system exchange with AT&T
Broadband. During 2001, the Company also acquired a provider of
CFA® exam preparation services and a company that provides
pre-certification training for real estate, insurance and
securities professionals.

Southern Maryland Newspapers publishes the
Maryland Independent in Charles County, Maryland; The Enterprise
in St. Marys County, Maryland; and The Calvert Recorder in
Calvert County, Maryland, with a combined total paid circulation
of approximately 50,000.

The cable system exchange with AT&T Broadband
was completed in March 2001 and consisted of the exchange by the
Company of its cable systems in Modesto and Santa Rosa,
California, and approximately $42.0 million to AT&T
Broadband for cable systems serving approximately 155,000
subscribers principally located in Idaho. In a related
transaction in January 2001, the Company completed the sale of a
cable system serving about 15,000 subscribers in Greenwood,
Indiana, for $61.9 million. The gain resulting from the
cable system sale and exchange transactions increased net income
by $196.5 million, or $20.69 per share. For income tax
purposes, substantial components of the cable system sale and
exchange transactions qualify as like-kind exchanges and
therefore, a large portion of these transactions does not result
in a current tax liability.



34




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##### 



During 2000, the Company spent
$212.3 million on business acquisitions. These acquisitions
included $177.7 million for Quest Education Corporation, a
provider of post-secondary education; $16.2 million for two
cable systems serving 8,500 subscribers; and $18.4 million
for various other small businesses (principally consisting of
educational services companies). There were no significant
business dispositions in 2000.

Capital Expenditures.During 2002, the Companys
capital expenditures totaled $153.0 million. The
Companys capital expenditures for 2002, 2001 and 2000 are
disclosed in Note M to the Consolidated Financial
Statements. The Company estimates that its capital expenditures
will total $180 million in 2003.

Investments in Marketable Equity Securities.At December 29, 2002, the fair
value of the Companys investments in marketable equity
securities was $216.5 million, which includes
$214.8 million in Berkshire Hathaway Inc. Class A and
B common stock and $1.7 million of various common stocks of
publicly traded companies with e-commerce business
concentrations.

At December 29, 2002, the gross unrealized
gain related to the Companys Berkshire Hathaway Inc. stock
investment totaled $29.9 million; the gross unrealized gain
on this investment was $34.1 million at December 30,
2001. The Company presently intends to hold the Berkshire
Hathaway stock long term.

Cost Method Investments.At December 29, 2002 and
December 30, 2001, the Company held minority investments in
various non-public companies. The companies represented by these
investments have products or services that in most cases have
potential strategic relevance to the Companys operating
units. The Company records its investment in these companies at
the lower of cost or estimated fair value. During 2002 and 2001,
the Company invested $0.3 million and $11.7 million,
respectively, in various cost method investees. At
December 29, 2002 and December 30, 2001, the carrying
value of the Companys cost method investments totaled
$9.5 million and $29.6 million, respectively.

Common Stock Repurchases and Dividend Rate.During 2002, 2001 and 2000, the
Company repurchased 1,229 shares, 714 shares and 200 shares,
respectively, of its Class B common stock at a cost of
$0.8 million, $0.4 million and $0.1 million. At
December 29, 2002, the Company had authorization from the
Board of Directors to purchase up to 544,796 shares of
Class B common stock. The annual dividend rate for 2003 was
increased to $5.80 per share, from $5.60 per share in 2002 and
2001.

Liquidity.At
December 29, 2002, the Company had $28.8 million in
cash and cash equivalents.

At December 29, 2002, the Company had
$259.3 million in commercial paper borrowings outstanding
at an average interest rate of 1.6 percent with various
maturities throughout the first and second quarters of 2003. In
addition, the Company had outstanding $398.4 million of
5.5 percent, 10-year unsecured notes due February 2009.
These notes require semiannual interest payments of $11.0
million payable on February 15 and August 15. The
Company also had $7.1 million in other debt.

In the third quarter of 2002, the Company
replaced its revolving credit facility agreements with a
five-year $350 million revolving credit facility, which
expires in August 2007, and a 364-day $350 million
revolving credit facility, which expires in August 2003. These
revolving credit facility agreements support the issuance of the
Companys short-term commercial paper and provide for
general corporate purposes. In May 2002, Moodys downgraded
the Companys long-term debt ratings to A1 from Aa3 and
affirmed the Companys short-term debt rating at P-1.

During 2002, the Companys borrowings, net
of repayments, decreased by $268.3 million, with the decrease
primarily due to cash flow from operations.

The Company expects to fund its estimated capital
needs primarily through internally generated funds and, to a
lesser extent, commercial paper borrowings. In managements
opinion, the Company will have ample liquidity to meet its
various cash needs in 2003.

CRITICAL ACCOUNTING POLICIES AND
ESTIMATES

The preparation of financial statements in
conformity with generally accepted accounting principles
requires management to make estimates and assumptions that
affect the amounts reported in the financial statements. In
preparing these financial statements, management has made their
best estimates and judgments of certain amounts included in the
financial statements. Actual results will inevitably differ to
some extent from these estimates.

The following are accounting policies that
management believes are the most important to the Companys
portrayal of the Companys financial condition and results
and require managements most difficult, subjective, or
complex judgments.

Revenue Recognition and Trade Accounts
Receivable, Less Estimated Returns, Doubtful Accounts and
Allowances.Revenues from magazine
retail sales are recognized on the later of delivery or the
cover date, with adequate provision made for anticipated sales
returns. The Company bases its estimates for sales returns on
historical experience and has not experienced significant
fluctuations between estimated and actual return activity.
Education revenue is recognized ratably over the period during
which educational services are delivered. For example, at
Kaplans test preparation division, estimates of average
student course length are developed for each course and these
estimates are evaluated on an ongoing basis and adjusted as
necessary. As Kaplans businesses and related course
offerings have expanded, including distance-learning businesses,
the complexity and significance of management estimates have
increased.

Accounts receivable have been reduced by an
allowance for amounts that may be uncollectible in the future.
This estimated allowance is based primarily on the aging
category, historical trends and managements evaluation of
the financial condition of the customer. Accounts receivable
also have been reduced by



35




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##### 



an estimate of advertising rate adjustments and
discounts, based on estimates of advertising volumes for
contract customers that are eligible for advertising rate
adjustments and discounts.


Pension Costs.Excluding special termination benefits
related to early retirement programs, the Companys net
pension credit was $64.4 million, $76.9 million and
$65.3 million for 2002, 2001 and 2000, respectively. The
Companys pension benefit costs are actuarially determined
and are impacted significantly by the Companys assumptions
related to future events including the discount rate, expected
return on plan assets and rate of compensation increases. At
December 30, 2001, the Company modified certain assumptions
surrounding the Companys pension plans. Specifically, the
Company reduced its assumptions on discount rate from
7.5 percent to 7.0 percent and expected return on plan
assets from 9.0 percent to 7.5 percent. These
assumption changes resulted in a reduction of approximately
$20 million in the Companys net pension credit in
2002. At December 29, 2002, the Company reduced its
discount rate assumption to 6.75 percent. Due to the
reduction in the discount rate and lower than expected
investment returns in 2002, the pension credit for 2003 is
expected to be down by about $10 million compared to 2002.
For each one-half percent increase or decrease to the
Companys assumed expected return on plan assets, the
pension credit increases or decreases by approximately
$6.5 million. For each one-half percent increase or
decrease to the Companys assumed discount rate, the
pension credit increases or decreases by approximately
$5 million. The Companys actual rate of return on
plan assets was a decline of 2.3 percent in 2002, an increase of
10.9 percent in 2001, and an increase of 19.0 percent in 2000,
based on plan assets at the beginning of each year. Note H
to the Consolidated Financial Statements provides additional
details surrounding pension costs and related assumptions.

Goodwill and Other Intangibles.The Company reviews the carrying value
of goodwill and indefinite-lived intangible assets at least
annually utilizing a discounted cash flow model (in the case of
the Companys cable systems, both a discounted cash flow
model and an estimated fair market value per cable subscriber
approach are used). The Company must make assumptions regarding
estimated future cash flows and market values to determine a
reporting units estimated fair value. In reviewing the
carrying value of goodwill and indefinite-lived intangible
assets at the cable division, the Company aggregates its cable
systems on a regional basis. If these estimates or related
assumptions change in the future, the Company may be required to
record an impairment charge. At December 29, 2002, the
Company has $1,255.4 million in goodwill and other
intangibles.

Cost Method Investments.The Company uses the cost method of
accounting for its minority investments in non-public companies
where it does not have significant influence over the operations
and management of the investee. Most of the companies
represented by these cost method investments have concentrations
in Internet-related business activities. Investments are
recorded at the lower of cost or fair value as estimated by
management. Fair value estimates are based on a review of the
investees product development activities, historical
financial results and projected discounted cash flows. These
estimates are highly judgmental, given the inherent lack of
marketability of investments in private companies. The Company
has recorded write-down charges on cost method investments of
$19.2 million, $29.4 million and $23.1 million in
2002, 2001 and 2000, respectively. Note C to the Consolidated
Financial Statements provides additional details surrounding
cost method investments.

Kaplan Stock Option Plan.The Company maintains a stock option
plan at its Kaplan subsidiary that provides for the issuance of
stock options representing 10.6 percent of Kaplan, Inc.
common stock to certain members of Kaplans management.
Under the provisions of this plan, options are issued with an
exercise price equal to the estimated fair value of
Kaplans common stock. In general, options vest ratably
over five years. Upon exercise, an option holder may either
purchase vested shares at the exercise price or elect to receive
cash equal to the difference between the exercise price and the
then fair value. The fair value of Kaplans common stock is
determined by the compensation committee of the Companys
Board of Directors, with input from management and an
independent outside valuation firm. The compensation committee
has historically modified the fair value of Kaplan stock on an
annual basis and management expects this practice to continue.
At December 29, 2002, options representing
10.4 percent of Kaplans common stock were issued and
outstanding, and 69 percent of Kaplan stock options were
fully vested and exercisable. For 2002, 2001 and 2000, the
Company recorded expense of $34.5 million,
$25.3 million and $6.0 million, respectively, related
to this plan. In 2002 and 2001, payouts from option exercises
totaled $0.2 million and $2.1 million, respectively.
At December 29, 2002, the Companys Kaplan stock-based
compensation accrual balance totaled $74.4 million.
Management expects Kaplans profits and related fair value
to increase again in 2003, with a corresponding increase in the
stock-based compensation expense for 2003 as compared to 2002.
Note G to the Consolidated Financial Statements provides
additional details surrounding the Kaplan Stock Option Plan.

Other.The Company
does not have any off-balance sheet arrangements or financing
activities with special-purpose entities (SPEs). Transactions
with related parties, as discussed in Note C to the
Consolidated Financial Statements, are in the ordinary course of
business and are conducted on an arms-length basis.

OTHER

New Accounting Pronouncements.The Company adopted SFAS 142
effective on the first day of its 2002 fiscal year. As a result
of the adoption of SFAS 142, the Company ceased most of the
periodic charges previously recorded from the amortization of
goodwill and other intangibles.

As required under SFAS 142, the Company completed
its transitional impairment review of indefinite-lived
intangible assets and goodwill. The expected future cash flows
of PostNewsweek Tech Media (part of the magazine publishing
segment), on a dis-



36




---



##### 



counted basis, did not support the net carrying
value of the related goodwill. Accordingly, an after-tax
goodwill impairment loss of $12.1 million, or $1.27 per
share was recorded. The loss is included in the Companys
2002 results as a cumulative effect of change in accounting
principle.


Stock Options  Change in Accounting
Method.Effective the first day of the
Companys 2002 fiscal year, the Company adopted the
fair-value-based method of accounting for Company stock options
as outlined in Statement of Financial Accounting Standards
No. 123 (SFAS 123), Accounting for Stock-Based
Compensation. This change in accounting method was applied
prospectively to all awards granted from the beginning of the
Companys fiscal year 2002 and thereafter. Stock options
awarded prior to fiscal year 2002 will continue to be accounted
for under the intrinsic value method under Accounting Principles
Board Opinion No. 25, Accounting for Stock Issued to
Employees.

In December 2002, the Company awarded 11,500
stock options, resulting in total stock option compensation
expense of $45,000 for 2002.

The accounting treatment for the Companys
Kaplan stock option plan is not impacted by this change in
accounting method, as the expense related to the Kaplan stock
option plan has been and will continue to be recorded in the
Companys results of operations.



37




---



##### 



REPORT OF INDEPENDENT ACCOUNTANTS

To The Board of Directors and Shareholders of

The Washington Post Company


In our opinion, the consolidated financial
statements referred to under Item 15(a)(i) on page 23 and
listed in the index on page 27 present fairly, in all
material respects, the financial position of The Washington Post
Company and its subsidiaries at December 29, 2002 and
December 30, 2001, and the results of their operations and
their cash flows for each of the three fiscal years in the
period ended December 29, 2002, in conformity with
accounting principles generally accepted in the United States of
America. In addition, in our opinion, the financial statement
schedule referred to under Item 15(a)(i) on page 23
presents fairly, in all material respects, the information set
forth therein when read in conjunction with the related
consolidated financial statements. These financial statements
and financial statement schedule are the responsibility of the
Companys management; our responsibility is to express an
opinion on these financial statements and financial statement
schedule based on our audits. We conducted our audits of these
statements in accordance with auditing standards generally
accepted in the United States of America which require that we
plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the
overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

As discussed in Note A to the financial
statements, the Company ceased amortizing certain goodwill and
intangibles as a result of the adoption of Statement of
Financial Accounting Standards No. 142, Goodwill and
Other Intangible Assets, effective on the first day of its
2002 fiscal year. Also as discussed in Note A, the Company
adopted the fair-value-based method of accounting for stock
options as outlined in Statement of Financial Accounting
Standards No. 123, Accounting for Stock-Based
Compensation, beginning with stock options granted in
fiscal 2002 and thereafter.

PricewaterhouseCoopers LLP

Washington, D.C.

January 24, 2003




38




---



##### 



CONSOLIDATED STATEMENTS OF INCOME

|                                                                                                                   |                                                |                   |           |              |   |              |           |           |   |   |           |           |  
|------------------------------------------------------------------------------------------------------------------ | ---------------------------------------------- | ----------------- | --------- | ------------ | - | ------------ | --------- | --------- | - | - | --------- | --------- | -
|                                                                                                                   |                                                |                  
|                                                                                                                   |                                                | Fiscal year ended
|                                                                                                                   |                                                |                  
|                                                                                                                   |                                                | December 29,      |           | December 30, |   | December 31,
|(in thousands, except per share amounts)                                                                           |                                                | 2002              |           | 2001         |   | 2000        
|                                                                                                                  
|                                                                                                                  
|Operating Revenues                                                                                                 |                                                |                   |           |              |   |              |           |           |   |   |           |          
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                   | Advertising                                    |                   | $         | 1,226,834    |   |              | $         | 1,209,327 |   |   | $         | 1,396,583 |  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                   | Circulation and subscriber                     |                   |           | 675,136      |   |              |           | 653,028   |   |   |           | 598,741   |  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                   | Education                                      |                   |           | 621,125      |   |              |           | 493,271   |   |   |           | 352,753   |  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                   | Other                                          |                   |           | 61,108       |   |              |           | 55,398    |   |   |           | 61,556    |  
|                                                                                                                   |                                                |                  
|                                                                                                                  
|                                                                                                                   |                                                |                   | 2,584,203 |              |   |              | 2,411,024 |           |   |   | 2,409,633 |          
|                                                                                                                   |                                                |                  
|Operating Costs and Expenses                                                                                       |                                                |                   |           |              |   |              |           |           |   |   |           |          
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                   | Operating                                      |                   |           | 1,369,955    |   |              |           | 1,387,101 |   |   |           | 1,305,546 |  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                   | Selling, general and administrative            |                   |           | 664,095      |   |              |           | 586,758   |   |   |           | 583,623   |  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                   | Depreciation of property, plant and equipment  |                   |           | 171,908      |   |              |           | 138,300   |   |   |           | 117,948   |  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                   | Amortization of goodwill and other intangibles |                   |           | 655          |   |              |           | 78,933    |   |   |           | 62,634    |  
|                                                                                                                   |                                                |                  
|                                                                                                                  
|                                                                                                                   |                                                |                   | 2,206,613 |              |   |              | 2,191,092 |           |   |   | 2,069,751 |          
|                                                                                                                   |                                                |                  
|Income from Operations                                                                                             |                                                |                   | 377,590   |              |   |              | 219,932   |           |   |   | 339,882   |          
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                   | Equity in losses of affiliates                 |                   |           | (19,308      | ) |              |           | (68,659   | ) |   |           | (36,466   | )
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                   | Interest income                                |                   |           | 332          |   |              |           | 2,167     |   |   |           | 967       |  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                   | Interest expense                               |                   |           | (33,819      | ) |              |           | (49,640   | ) |   |           | (54,731   | )
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                   | Other income (expense), net                    |                   |           | 28,873       |   |              |           | 283,739   |   |   |           | (19,782   | )
|                                                                                                                   |                                                |                  
|Income Before Income Taxes and Cumulative
    Effect of Change in Accounting Principle                             |                                                |                   | 353,668   |              |   |              | 387,539   |           |   |   | 229,870   |          
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|Provision for Income Taxes                                                                                         |                                                |                   | 137,300   |              |   |              | 157,900   |           |   |   | 93,400    |          
|                                                                                                                   |                                                |                  
|Income Before Cumulative Effect of Change in
    Accounting Principle                                              |                                                |                   | 216,368   |              |   |              | 229,639   |           |   |   | 136,470   |          
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|Cumulative Effect of Change in Method of
    Accounting for Goodwill and Other Intangible Assets, Net of
    Taxes |                                                |                   | (12,100   | )            |   |              |          |           |   |   |          |          
|                                                                                                                   |                                                |                  
|                                                                                                                  
|Net Income                                                                                                         |                                                |                   | 204,268   |              |   |              | 229,639   |           |   |   | 136,470   |          
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|Redeemable Preferred Stock Dividends                                                                               |                                                |                   | (1,033    | )            |   |              | (1,052    | )         |   |   | (1,026    | )        
|                                                                                                                   |                                                |                  
|                                                                                                                  
|Net Income Available for Common
    Shares                                                                         |                                                | $                 | 203,235   |              |   | $            | 228,587   |           |   | $ | 135,444   |          
|                                                                                                                   |                                                |                  
|Basic Earnings per Common Share:                                                                                   |                                                |                   |           |              |   |              |           |           |   |   |           |          
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|Before Cumulative Effect of Change in
    Accounting Principle                                                     |                                                | $                 | 22.65     |              |   | $            | 24.10     |           |   | $ | 14.34     |          
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|Cumulative Effect of Change in Accounting
    Principle                                                            |                                                |                   | (1.27     | )            |   |              |          |           |   |   |          |          
|                                                                                                                   |                                                |                  
|                                                                                                                  
|Net Income Available for Common
    Shares                                                                         |                                                | $                 | 21.38     |              |   | $            | 24.10     |           |   | $ | 14.34     |          
|                                                                                                                   |                                                |                  
|Diluted Earnings per Common Share:                                                                                 |                                                |                   |           |              |   |              |           |           |   |   |           |          
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|Before Cumulative Effect of Change in
    Accounting Principle                                                     |                                                | $                 | 22.61     |              |   | $            | 24.06     |           |   | $ | 14.32     |          
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|Cumulative Effect of Change in Accounting
    Principle                                                            |                                                |                   | (1.27     | )            |   |              |          |           |   |   |          |          
|                                                                                                                   |                                                |                  
|                                                                                                                  
|Net Income Available for Common
    Shares                                                                         |                                                | $                 | 21.34     |              |   | $            | 24.06     |           |   | $ | 14.32     |          
|                                                                                                                   |                                                |                  

CONSOLIDATED STATEMENTS OF COMPREHENSIVE
INCOME

|                                                                                            |                                                                                             |                   |         |              |   |              |         |        |   |   |         |        |  
|------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------- | ----------------- | ------- | ------------ | - | ------------ | ------- | ------ | - | - | ------- | ------ | -
|                                                                                            |                                                                                             |                  
|                                                                                            |                                                                                             | Fiscal year ended
|                                                                                            |                                                                                             |                  
|                                                                                            |                                                                                             | December 29,      |         | December 30, |   | December 31,
|(in thousands)                                                                              |                                                                                             | 2002              |         | 2001         |   | 2000        
|                                                                                           
|                                                                                           
|Net Income                                                                                  |                                                                                             | $                 | 204,268 |              |   | $            | 229,639 |        |   | $ | 136,470 |       
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Other Comprehensive Income (Loss)                                                           |                                                                                             |                   |         |              |   |              |         |        |   |   |         |       
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Foreign currency translation adjustments                                                    |                   |         | 2,167        |   |              |         | (3,104 | ) |   |         | (1,685 | )
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Change in net unrealized gain on
    available-for-sale securities                          |                   |         | 829          |   |              |         | 14,528 |   |   |         | 13,527 |  
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Less reclassification adjustment for realized
    (gains)
    losses included in net income |                   |         | (11,209      | ) |              |         | 3,238  |   |   |         | (197   | )
|                                                                                            |                                                                                             |                  
|                                                                                           
|                                                                                            |                                                                                             |                   | (8,213  | )            |   |              | 14,662  |        |   |   | 11,645  |       
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Income tax benefit (expense) related to other
    comprehensive income (loss)               |                   |         | 4,012        |   |              |         | (6,987 | ) |   |         | (5,097 | )
|                                                                                            |                                                                                             |                  
|                                                                                           
|                                                                                            |                                                                                             |                   | (4,201  | )            |   |              | 7,675   |        |   |   | 6,548   |       
|                                                                                            |                                                                                             |                  
|Comprehensive Income                                                                        |                                                                                             | $                 | 200,067 |              |   | $            | 237,314 |        |   | $ | 143,018 |       
|                                                                                            |                                                                                             |                  
|The information on pages 44 through 56 is an
    integral part of the financial statements. |                                                                                             |                   |         |              |   |              |         |       



39




---



##### 



CONSOLIDATED BALANCE SHEETS

|                                                                                            |                                                            |              |           |              |   |   |           |           |  
|------------------------------------------------------------------------------------------- | ---------------------------------------------------------- | ------------ | --------- | ------------ | - | - | --------- | --------- | -
|                                                                                            |                                                            | December 29, |           | December 30,
|(in thousands)                                                                              |                                                            | 2002         |           | 2001        
|                                                                                           
|                                                                                           
|Assets                                                                                      |                                                            |              |           |              |   |   |           |          
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Current Assets                                                                              |                                                            |              |           |              |   |   |           |          
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Cash and cash equivalents                                  |              | $         | 28,771       |   |   | $         | 31,480    |  
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Investments in marketable equity securities                |              |           | 1,753        |   |   |           | 16,366    |  
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Accounts receivable, net                                   |              |           | 285,374      |   |   |           | 279,328   |  
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Federal and state income taxes                             |              |           |             |   |   |           | 10,253    |  
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Inventories                                                |              |           | 27,629       |   |   |           | 19,042    |  
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Other current assets                                       |              |           | 39,428       |   |   |           | 40,388    |  
|                                                                                            |                                                            |             
|                                                                                           
|                                                                                            |                                                            |              | 382,955   |              |   |   | 396,857   |          
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Property, Plant and Equipment                                                               |                                                            |              |           |              |   |   |           |          
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Buildings                                                  |              |           | 283,233      |   |   |           | 267,658   |  
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Machinery, equipment and fixtures                          |              |           | 1,551,931    |   |   |           | 1,422,228 |  
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Leasehold improvements                                     |              |           | 85,720       |   |   |           | 79,108    |  
|                                                                                            |                                                            |             
|                                                                                           
|                                                                                            |                                                            |              | 1,920,884 |              |   |   | 1,768,994 |          
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Less accumulated depreciation                              |              |           | (926,385     | ) |   |           | (794,596  | )
|                                                                                            |                                                            |             
|                                                                                           
|                                                                                            |                                                            |              | 994,499   |              |   |   | 974,398   |          
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Land                                                       |              |           | 34,530       |   |   |           | 34,733    |  
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Construction in progress                                   |              |           | 65,371       |   |   |           | 89,080    |  
|                                                                                            |                                                            |             
|                                                                                           
|                                                                                            |                                                            |              | 1,094,400 |              |   |   | 1,098,211 |          
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Investments in Marketable Equity
    Securities                                             |                                                            |              | 214,780   |              |   |   | 219,039   |          
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Investments in Affiliates                                                                   |                                                            |              | 70,703    |              |   |   | 80,936    |          
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Goodwill and Other Intangibles,                                                             |                                                            |              |           |              |   |   |           |          
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | less accumulated amortization of
    $463,580 and $443,925 |              |           | 1,255,433    |   |   |           | 1,206,761 |  
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Prepaid Pension Cost                                                                        |                                                            |              | 493,786   |              |   |   | 447,688   |          
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Deferred Charges and Other Assets                                                           |                                                            |              | 71,837    |              |   |   | 109,606   |          
|                                                                                            |                                                            |             
|                                                                                           
|                                                                                            |                                                            | $            | 3,583,894 |              |   | $ | 3,559,098 |          
|                                                                                            |                                                            |             
|The information on pages 44 through 56 is an
    integral part of the financial statements. |                                                            |              |           |             



40




---



##### 





|                                                                                                                                                                                                      |                                                                                       |                                                                                                                                                |           |              |        |   |           |            |        |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------- | --------- | ------------ | ------ | - | --------- | ---------- | ------ | -
|                                                                                                                                                                                                      |                                                                                       | December 29,                                                                                                                                   |           | December 30,
|(in thousands, except share amounts)                                                                                                                                                                  |                                                                                       | 2002                                                                                                                                           |           | 2001        
|                                                                                                                                                                                                     
|                                                                                                                                                                                                     
|Liabilities and Shareholders
    Equity                                                                                                                                                              |                                                                                       |                                                                                                                                                |           |              |        |   |           |           
|                                                                                                                                                                                                     
|                                                                                                                                                                                                     
|                                                                                                                                                                                                     
|                                                                                                                                                                                                     
|Current Liabilities                                                                                                                                                                                   |                                                                                       |                                                                                                                                                |           |              |        |   |           |           
|                                                                                                                                                                                                     
|                                                                                                                                                                                                     
|                                                                                                                                                                                                     
|                                                                                                                                                                                                     
|                                                                                                                                                                                                      | Accounts payable and accrued liabilities                                              |                                                                                                                                                | $         | 336,582      |        |   | $         | 253,346    |       
|                                                                                                                                                                                                     
|                                                                                                                                                                                                     
|                                                                                                                                                                                                     
|                                                                                                                                                                                                     
|                                                                                                                                                                                                      | Deferred revenue                                                                      |                                                                                                                                                |           | 135,419      |        |   |           | 130,744    |       
|                                                                                                                                                                                                     
|                                                                                                                                                                                                     
|                                                                                                                                                                                                     
|                                                                                                                                                                                                     
|                                                                                                                                                                                                      | Federal and state income taxes                                                        |                                                                                                                                                |           | 4,853        |        |   |           |           |       
|                                                                                                                                                                                                     
|                                                                                                                                                                                                     
|                                                                                                                                                                                                     
|                                                                                                                                                                                                     
|                                                                                                                                                                                                      | Short-term borrowings                                                                 |                                                                                                                                                |           | 259,258      |        |   |           | 50,000     |       
|                                                                                                                                                                                                      |                                                                                       |                                                                                                                                               
|                                                                                                                                                                                                     
|                                                                                                                                                                                                      |                                                                                       |                                                                                                                                                | 736,112   |              |        |   | 434,090   |           
|                                                                                                                                                                                                     
|                                                                                                                                                                                                     
|                                                                                                                                                                                                     
|                                                                                                                                                                                                     
|Postretirement Benefits Other Than
    Pensions                                                                                                                                                       |                                                                                       |                                                                                                                                                | 136,393   |              |        |   | 130,824   |           
|                                                                                                                                                                                                     
|                                                                                                                                                                                                     
|                                                                                                                                                                                                     
|                                                                                                                                                                                                     
|Other Liabilities                                                                                                                                                                                     |                                                                                       |                                                                                                                                                | 194,480   |              |        |   | 192,540   |           
|                                                                                                                                                                                                     
|                                                                                                                                                                                                     
|                                                                                                                                                                                                     
|                                                                                                                                                                                                     
|Deferred Income Taxes                                                                                                                                                                                 |                                                                                       |                                                                                                                                                | 261,153   |              |        |   | 221,949   |           
|                                                                                                                                                                                                     
|                                                                                                                                                                                                     
|                                                                                                                                                                                                     
|                                                                                                                                                                                                     
|Long-Term Debt                                                                                                                                                                                        |                                                                                       |                                                                                                                                                | 405,547   |              |        |   | 883,078   |           
|                                                                                                                                                                                                      |                                                                                       |                                                                                                                                               
|                                                                                                                                                                                                     
|                                                                                                                                                                                                      |                                                                                       |                                                                                                                                                | 1,733,685 |              |        |   | 1,862,481 |           
|                                                                                                                                                                                                      |                                                                                       |                                                                                                                                               
|                                                                                                                                                                                                     
|                                                                                                                                                                                                     
|                                                                                                                                                                                                     
|                                                                                                                                                                                                     
|Commitments and Contingencies                                                                                                                                                                         |                                                                                       |                                                                                                                                                |           |              |        |   |           |           
|                                                                                                                                                                                                     
|                                                                                                                                                                                                     
|                                                                                                                                                                                                     
|                                                                                                                                                                                                     
|Redeemable Preferred Stock,Series A, $1 par value, with a
    redemption and liquidation value of $1,000 per share; 23,000
    shares authorized; 12,916 and 13,132 shares issued and
    outstanding |                                                                                       |                                                                                                                                                | 12,916    |              |        |   | 13,132    |           
|                                                                                                                                                                                                      |                                                                                       |                                                                                                                                               
|                                                                                                                                                                                                     
|Preferred Stock, $1
    par value; 977,000 shares authorized, none issued                                                                                                                             |                                                                                       |                                                                                                                                                |          |              |        |   |          |           
|                                                                                                                                                                                                      |                                                                                       |                                                                                                                                               
|                                                                                                                                                                                                     
|                                                                                                                                                                                                     
|                                                                                                                                                                                                     
|                                                                                                                                                                                                     
|Common Shareholders Equity                                                                                                                                                                           |                                                                                       |                                                                                                                                                |           |              |        |   |           |           
|                                                                                                                                                                                                      | Common stock                                                                          |                                                                                                                                                |           |              |        |   |           |            |       
|                                                                                                                                                                                                     
|                                                                                                                                                                                                     
|                                                                                                                                                                                                     
|                                                                                                                                                                                                     
|                                                                                                                                                                                                      |                                                                                       | Class A common stock, $1 par value;
    7,000,000 shares authorized; 1,722,250 shares issued and
    outstanding                               |           |              | 1,722  |   |           |            | 1,722  |  
|                                                                                                                                                                                                     
|                                                                                                                                                                                                     
|                                                                                                                                                                                                     
|                                                                                                                                                                                                     
|                                                                                                                                                                                                      |                                                                                       | Class B common stock, $1 par value;
    40,000,000 shares authorized; 18,277,750 shares issued;
    7,788,543 and 7,772,616 shares outstanding |           |              | 18,278 |   |           |            | 18,278 |  
|                                                                                                                                                                                                     
|                                                                                                                                                                                                     
|                                                                                                                                                                                                     
|                                                                                                                                                                                                     
|                                                                                                                                                                                                      | Capital in excess of par value                                                        |                                                                                                                                                |           | 149,090      |        |   |           | 142,814    |       
|                                                                                                                                                                                                     
|                                                                                                                                                                                                     
|                                                                                                                                                                                                     
|                                                                                                                                                                                                     
|                                                                                                                                                                                                      | Retained earnings                                                                     |                                                                                                                                                |           | 3,179,607    |        |   |           | 3,029,595  |       
|                                                                                                                                                                                                      | Accumulated other comprehensive income (loss),
    net of taxes                       |                                                                                                                                                |           |              |        |   |           |            |       
|                                                                                                                                                                                                     
|                                                                                                                                                                                                     
|                                                                                                                                                                                                     
|                                                                                                                                                                                                     
|                                                                                                                                                                                                      |                                                                                       | Cumulative foreign currency translation adjustment                                                                                             |           |              | (7,511 | ) |           |            | (9,678 | )
|                                                                                                                                                                                                     
|                                                                                                                                                                                                     
|                                                                                                                                                                                                     
|                                                                                                                                                                                                     
|                                                                                                                                                                                                      |                                                                                       | Unrealized gain on available-for-sale securities                                                                                               |           |              | 17,913 |   |           |            | 24,281 |  
|                                                                                                                                                                                                     
|                                                                                                                                                                                                     
|                                                                                                                                                                                                     
|                                                                                                                                                                                                     
|                                                                                                                                                                                                      | Cost of 10,489,207 and 10,505,134 shares of
    Class B common stock held in treasury |                                                                                                                                                |           | (1,521,806   | )      |   |           | (1,523,527 | )     
|                                                                                                                                                                                                      |                                                                                       |                                                                                                                                               
|                                                                                                                                                                                                     
|                                                                                                                                                                                                      |                                                                                       |                                                                                                                                                | 1,837,293 |              |        |   | 1,683,485 |           
|                                                                                                                                                                                                      |                                                                                       |                                                                                                                                               
|                                                                                                                                                                                                     
|                                                                                                                                                                                                      |                                                                                       | $                                                                                                                                              | 3,583,894 |              |        | $ | 3,559,098 |           
|                                                                                                                                                                                                      |                                                                                       |                                                                                                                                               
|The information on pages 44 through 56 is an
    integral part of the financial statements.                                                                                                           |                                                                                       |                                                                                                                                                |           |             



41




---



##### 



CONSOLIDATED STATEMENTS OF CASH
FLOWS

|                                                         |                                                                                       |                                                                                                     |                                                          |              |          |              |        |          |          |         |         |          |          |         |  
|-------------------------------------------------------- | ------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------- | -------------------------------------------------------- | ------------ | -------- | ------------ | ------ | -------- | -------- | ------- | ------- | -------- | -------- | ------- | -
|                                                         |                                                                                       |                                                                                                    
|                                                         |                                                                                       | Fiscal year ended                                                                                  
|                                                         |                                                                                       |                                                                                                    
|                                                         |                                                                                       | December 29,                                                                                        |                                                          | December 30, |          | December 31, |       
|(in thousands)                                           |                                                                                       | 2002                                                                                                |                                                          | 2001         |          | 2000        
|                                                        
|                                                        
|Cash Flows from Operating
    Activities:                |                                                                                       |                                                                                                     |                                                          |              |          |              |        |          |          |         |         |         
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Net income                                                                            |                                                                                                     | $                                                        | 204,268      |          |              | $      | 229,639  |          |         | $       | 136,470  |         
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Adjustments to reconcile net income to net
    cash provided by operating activities: |                                                                                                     |                                                          |              |          |              |        |          |          |         |         |          |         
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         |                                                                                       | Cumulative effect of change in accounting
    principle                                             |                                                          |              | 12,100   |              |        |          |         |         |         |          |         |        
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         |                                                                                       | Depreciation of property, plant and equipment                                                       |                                                          |              | 171,908  |              |        |          | 138,300  |         |         |          | 117,948  |        
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         |                                                                                       | Amortization of goodwill and other intangibles                                                      |                                                          |              | 655      |              |        |          | 78,933   |         |         |          | 62,634   |        
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         |                                                                                       | Net pension benefit                                                                                 |                                                          |              | (64,447  | )            |        |          | (76,945  | )       |         |          | (65,312  | )      
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         |                                                                                       | Early retirement program expense                                                                    |                                                          |              | 19,001   |              |        |          | 3,344    |         |         |          | 29,049   |        
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         |                                                                                       | Gain from sale or exchange of businesses                                                            |                                                          |              | (27,844  | )            |        |          | (321,091 | )       |         |          |         |        
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         |                                                                                       | (Gain) loss on disposition of marketable
    equity
    securities and cost method investments, net |                                                          |              | (13,209  | )            |        |          | 511      |         |         |          | (11,588  | )      
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         |                                                                                       | Cost method investment and other write-downs                                                        |                                                          |              | 21,194   |              |        |          | 36,672   |         |         |          | 23,097   |        
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         |                                                                                       | Equity in losses of affiliates, net of
    distributions                                            |                                                          |              | 20,018   |              |        |          | 69,359   |         |         |          | 37,406   |        
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         |                                                                                       | Provision for deferred income taxes                                                                 |                                                          |              | 50,115   |              |        |          | 97,302   |         |         |          | (7,743   | )      
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         |                                                                                       | Change in assets and liabilities:                                                                   |                                                          |              |          |              |        |          |          |         |         |          |          |        
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         |                                                                                       |                                                                                                     | (Increase) decrease in accounts receivable, net          |              |          | (1,116       | )      |          |          | 28,803  |         |          |          | (44,413 | )
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         |                                                                                       |                                                                                                     | Increase in inventories                                  |              |          | (11,142      | )      |          |          | (3,390  | )       |          |          | (1,265  | )
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         |                                                                                       |                                                                                                     | Increase in accounts payable and accrued
    liabilities |              |          | 73,653       |        |          |          | 24,756  |         |          |          | 22,192  |  
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         |                                                                                       |                                                                                                     | Decrease in income taxes receivable                      |              |          | 15,106       |        |          |          | 1,591   |         |          |          | 36,227  |  
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         |                                                                                       |                                                                                                     | Decrease in other assets and other liabilities,
    net  |              |          | 21,360       |        |          |          | 38,294  |         |          |          | 23,141  |  
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         |                                                                                       | Other                                                                                               |                                                          |              | 5,846    |              |        |          | 2,752    |         |         |          | 10,701   |        
|                                                         |                                                                                       |                                                                                                    
|                                                        
|                                                         |                                                                                       |                                                                                                     | Net cash provided by operating activities                |              |          | 497,466      |        |          |          | 348,830 |         |          |          | 368,544 |  
|                                                         |                                                                                       |                                                                                                    
|                                                        
|                                                        
|                                                        
|                                                        
|Cash Flows from Investing
    Activities:                |                                                                                       |                                                                                                     |                                                          |              |          |              |        |          |          |         |         |         
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Investments in certain businesses                                                     |                                                                                                     |                                                          | (36,016      | )        |              |        | (104,356 | )        |         |         | (212,274 | )       
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Net proceeds from sale of businesses                                                  |                                                                                                     |                                                          |             |          |              |        | 61,921   |          |         |         | 1,650    |         
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Purchases of property, plant and equipment                                            |                                                                                                     |                                                          | (152,992     | )        |              |        | (224,227 | )        |         |         | (172,383 | )       
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Purchases of cost method investments                                                  |                                                                                                     |                                                          | (250         | )        |              |        | (11,675  | )        |         |         | (42,459  | )       
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Investments in affiliates                                                             |                                                                                                     |                                                          | (7,610       | )        |              |        | (21,112  | )        |         |         | (12,430  | )       
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Proceeds from sale of marketable equity securities                                    |                                                                                                     |                                                          | 19,701       |          |              |        | 145      |          |         |         | 6,332    |         
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Other                                                                                 |                                                                                                     |                                                          | 1,484        |          |              |        | 1,477    |          |         |         | 8,036    |         
|                                                         |                                                                                       |                                                                                                    
|                                                        
|                                                         |                                                                                       | Net cash used in investing activities                                                               |                                                          |              | (175,683 | )            |        |          | (297,827 | )       |         |          | (423,528 | )      
|                                                         |                                                                                       |                                                                                                    
|                                                        
|                                                        
|                                                        
|                                                        
|Cash Flows from Financing
    Activities:                |                                                                                       |                                                                                                     |                                                          |              |          |              |        |          |          |         |         |         
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | (Repayment) issuance of commercial paper, net                                         |                                                                                                     |                                                          | (276,189     | )        |              |        | 10,072   |          |         |         | 35,071   |         
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Dividends paid                                                                        |                                                                                                     |                                                          | (54,256      | )        |              |        | (54,166  | )        |         |         | (52,024  | )       
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Common shares repurchased                                                             |                                                                                                     |                                                          | (786         | )        |              |        | (445     | )        |         |         | (96      | )       
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Proceeds from exercise of stock options                                               |                                                                                                     |                                                          | 6,739        |          |              |        | 4,671    |          |         |         | 7,056    |         
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Other                                                                                 |                                                                                                     |                                                          |             |          |              |        |         |          |         |         | 9,843    |         
|                                                         |                                                                                       |                                                                                                    
|                                                        
|                                                         |                                                                                       | Net cash used in financing activities                                                               |                                                          |              | (324,492 | )            |        |          | (39,868  | )       |         |          | (150     | )      
|                                                         |                                                                                       |                                                                                                    
|                                                        
|                                                        
|                                                        
|                                                        
|Net (Decrease) Increase in Cash and Cash
    Equivalents |                                                                                       |                                                                                                     | (2,709                                                   | )            |          |              | 11,135 |          |          |         | (55,134 | )       
|                                                        
|                                                        
|                                                        
|                                                        
|Cash and Cash Equivalents at Beginning of
    Year       |                                                                                       |                                                                                                     | 31,480                                                   |              |          |              | 20,345 |          |          |         | 75,479  |         
|                                                         |                                                                                       |                                                                                                    
|                                                        
|                                                        
|                                                        
|                                                        
|Cash and Cash Equivalents at End of
    Year             |                                                                                       | $                                                                                                   | 28,771                                                   |              |          | $            | 31,480 |          |          | $       | 20,345  |         
|                                                         |                                                                                       |                                                                                                    
|                                                        
|                                                        
|                                                        
|                                                        
|Supplemental Cash Flow Information:                      |                                                                                       |                                                                                                     |                                                          |              |          |              |        |          |          |         |         |         
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Cash paid during the year for:                                                        |                                                                                                     |                                                          |              |          |              |        |          |          |         |         |          |         
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         |                                                                                       | Income taxes                                                                                        |                                                          | $            | 68,900   |              |        | $        | 52,600   |         |         | $        | 95,000   |        
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         |                                                                                       | Interest, net of amounts capitalized                                                                |                                                          | $            | 30,600   |              |        | $        | 48,000   |         |         | $        | 52,700   |        

The information on pages 44 through 56 is an
integral part of the financial statements.



42




---



##### 



CONSOLIDATED STATEMENTS OF CHANGES IN COMMON
SHAREHOLDERS EQUITY

|                                                                                            |                                                                                                  |         |       |         |   |            |        |          |  |             |         |            |  |          |           |         |   |   |        |        |   |   |        |        |   |   |            |       |  
|------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------ | ------- | ----- | ------- | - | ---------- | ------ | -------- |  | ----------- | ------- | ---------- |  | -------- | --------- | ------- | - | - | ------ | ------ | - | - | ------ | ------ | - | - | ---------- | ----- | -
|                                                                                            |                                                                                                  |         |       |         |   |            |        |          |  | Cumulative  |         | Unrealized |  |         
|                                                                                            |                                                                                                  |         |       |         |   |            |        |          |  | Foreign     |         | Gain on    |  |         
|                                                                                            |                                                                                                  | Class A |       | Class B |   | Capital in |        |          |  | Currency    |         | Available- |  |         
|                                                                                            |                                                                                                  | Common  |       | Common  |   | Excess of  |        | Retained |  | Translation |         | for-Sale   |  | Treasury
|(in thousands)                                                                              |                                                                                                  | Stock   |       | Stock   |   | Par Value  |        | Earnings |  | Adjustment  |         | Securities |  | Stock   
|                                                                                           
|                                                                                           
|Balance, January 2, 2000                                                                    |                                                                                                  | $       | 1,739 |         |   | $          | 18,261 |          |  | $           | 108,867 |            |  | $        | 2,769,676 |         |   | $ | (4,889 | )      |   | $ | 5,269  |        |   | $ | (1,531,133 | )    
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Net income for the year                                                                          |         |       |         |   |            |        |          |  |             |         |            |  |          |           | 136,470 |   |   |        |        |   |   |        |        |   |   |            |       |  
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Dividends paid on common stock  $5.40
    per share                                             |         |       |         |   |            |        |          |  |             |         |            |  |          |           | (50,998 | ) |   |        |        |   |   |        |        |   |   |            |       |  
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Dividends paid on redeemable preferred stock                                                     |         |       |         |   |            |        |          |  |             |         |            |  |          |           | (1,026  | ) |   |        |        |   |   |        |        |   |   |            |       |  
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Repurchase of 200 shares of Class B common
    stock                                             |         |       |         |   |            |        |          |  |             |         |            |  |          |           |         |   |   |        |        |   |   |        |        |   |   |            | (96   | )
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Issuance of 21,279 shares of Class B common
    stock, net of restricted stock award forfeitures |         |       |         |   |            |        |          |  |             |         | 4,433      |  |          |           |         |   |   |        |        |   |   |        |        |   |   |            | 3,027 |  
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Change in foreign currency translation adjustment
    (net of taxes)                             |         |       |         |   |            |        |          |  |             |         |            |  |          |           |         |   |   |        | (1,685 | ) |   |        |        |   |   |            |       |  
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Change in unrealized gain on available-for-sale
    securities (net of taxes)                    |         |       |         |   |            |        |          |  |             |         |            |  |          |           |         |   |   |        |        |   |   |        | 8,233  |   |   |            |       |  
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Issuance of subsidiary stock (net of taxes)                                                      |         |       |         |   |            |        |          |  |             |         | 13,332     |  |          |           |         |   |   |        |        |   |   |        |        |   |   |            |       |  
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Tax benefits arising from employee stock plans                                                   |         |       |         |   |            |        |          |  |             |         | 1,527      |  |          |           |         |   |   |        |        |   |   |        |        |   |   |            |       |  
|                                                                                            |                                                                                                  |        
|                                                                                           
|Balance, December 31, 2000                                                                  |                                                                                                  |         | 1,739 |         |   |            | 18,261 |          |  |             | 128,159 |            |  |          | 2,854,122 |         |   |   | (6,574 | )      |   |   | 13,502 |        |   |   | (1,528,202 | )    
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Net income for the year                                                                          |         |       |         |   |            |        |          |  |             |         |            |  |          |           | 229,639 |   |   |        |        |   |   |        |        |   |   |            |       |  
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Dividends paid on common stock  $5.60
    per share                                             |         |       |         |   |            |        |          |  |             |         |            |  |          |           | (53,114 | ) |   |        |        |   |   |        |        |   |   |            |       |  
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Dividends paid on redeemable preferred stock                                                     |         |       |         |   |            |        |          |  |             |         |            |  |          |           | (1,052  | ) |   |        |        |   |   |        |        |   |   |            |       |  
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Repurchase of 714 shares of Class B common
    stock                                             |         |       |         |   |            |        |          |  |             |         |            |  |          |           |         |   |   |        |        |   |   |        |        |   |   |            | (445  | )
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Issuance of 35,105 shares of Class B common
    stock, net of restricted stock award forfeitures |         |       |         |   |            |        |          |  |             |         | 10,639     |  |          |           |         |   |   |        |        |   |   |        |        |   |   |            | 5,120 |  
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Change in foreign currency translation adjustment
    (net of taxes)                             |         |       |         |   |            |        |          |  |             |         |            |  |          |           |         |   |   |        | (3,104 | ) |   |        |        |   |   |            |       |  
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Change in unrealized gain on available-for-sale
    securities (net of taxes)                    |         |       |         |   |            |        |          |  |             |         |            |  |          |           |         |   |   |        |        |   |   |        | 10,779 |   |   |            |       |  
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Conversion of Class A common stock to
    Class B common stock                                   |         |       | (17     | ) |            |        | 17       |  |             |         |            |  |          |           |         |   |   |        |        |   |   |        |        |   |   |            |       |  
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Tax benefits arising from employee stock plans                                                   |         |       |         |   |            |        |          |  |             |         | 4,016      |  |          |           |         |   |   |        |        |   |   |        |        |   |   |            |       |  
|                                                                                            |                                                                                                  |        
|                                                                                           
|Balance, December 30, 2001                                                                  |                                                                                                  |         | 1,722 |         |   |            | 18,278 |          |  |             | 142,814 |            |  |          | 3,029,595 |         |   |   | (9,678 | )      |   |   | 24,281 |        |   |   | (1,523,527 | )    
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Net income for the year                                                                          |         |       |         |   |            |        |          |  |             |         |            |  |          |           | 204,268 |   |   |        |        |   |   |        |        |   |   |            |       |  
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Dividends paid on common stock  $5.60
    per share                                             |         |       |         |   |            |        |          |  |             |         |            |  |          |           | (53,223 | ) |   |        |        |   |   |        |        |   |   |            |       |  
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Dividends paid on redeemable preferred stock                                                     |         |       |         |   |            |        |          |  |             |         |            |  |          |           | (1,033  | ) |   |        |        |   |   |        |        |   |   |            |       |  
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Repurchase of 1,229 shares of Class B common
    stock                                           |         |       |         |   |            |        |          |  |             |         |            |  |          |           |         |   |   |        |        |   |   |        |        |   |   |            | (786  | )
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Issuance of 17,156 shares of Class B common
    stock, net of restricted stock award forfeitures |         |       |         |   |            |        |          |  |             |         | 4,440      |  |          |           |         |   |   |        |        |   |   |        |        |   |   |            | 2,507 |  
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Change in foreign currency translation adjustment
    (net of taxes)                             |         |       |         |   |            |        |          |  |             |         |            |  |          |           |         |   |   |        | 2,167  |   |   |        |        |   |   |            |       |  
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Change in unrealized gain on available-for-sale
    securities (net of taxes)                    |         |       |         |   |            |        |          |  |             |         |            |  |          |           |         |   |   |        |        |   |   |        | (6,368 | ) |   |            |       |  
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Stock option expense                                                                             |         |       |         |   |            |        |          |  |             |         | 45         |  |          |           |         |   |   |        |        |   |   |        |        |   |   |            |       |  
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Tax benefits arising from employee stock plans                                                   |         |       |         |   |            |        |          |  |             |         | 1,791      |  |          |           |         |   |   |        |        |   |   |        |        |   |   |            |       |  
|                                                                                            |                                                                                                  |        
|                                                                                           
|Balance, December 29, 2002                                                                  |                                                                                                  | $       | 1,722 |         |   | $          | 18,278 |          |  | $           | 149,090 |            |  | $        | 3,179,607 |         |   | $ | (7,511 | )      |   | $ | 17,913 |        |   | $ | (1,521,806 | )    
|                                                                                            |                                                                                                  |        
|The information on pages 44 through 56 is an
    integral part of the financial statements. |                                                                                                  |         |       |         |   |            |        |         



43




---



##### 



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

A. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES

Fiscal Year.The
Company reports on a 52-53 week fiscal year ending on the
Sunday nearest December 31. The fiscal years 2002, 2001 and
2000, which ended on December 29, 2002, December 30,
2001, and December 31, 2000, respectively, included
52 weeks. With the exception of the newspaper publishing
operations, subsidiaries of the Company report on a
calendar-year basis.

Principles of Consolidation.The accompanying financial statements
include the accounts of the Company and its subsidiaries;
significant intercompany transactions have been eliminated.

Presentation.Certain amounts in previously issued
financial statements have been reclassified to conform with the
2002 presentation.

Use of Estimates.The preparation of financial
statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions
that affect the amounts reported in the financial statements.
Actual results could differ from those estimates.

Cash Equivalents.Short-term investments with original
maturities of 90 days or less are considered cash
equivalents.

Investments in Marketable Equity Securities.The Companys investments in
marketable equity securities are classified as
available-for-sale and therefore are recorded at fair value in
the Consolidated Balance Sheets, with the change in fair value
during the period excluded from earnings and recorded net of tax
as a separate component of comprehensive income. Marketable
equity securities that the Company expects to hold long term are
classified as non-current assets.

Inventories.Inventories are valued at the lower of
cost or market. Cost of newsprint is determined by the first-in,
first-out method, and cost of magazine paper is determined by
the specific-cost method.

Property, Plant and Equipment.Property, plant and equipment is
recorded at cost and includes interest capitalized in connection
with major long-term construction projects. Replacements and
major improvements are capitalized; maintenance and repairs are
charged to operations as incurred.

Depreciation is calculated using the
straight-line method over the estimated useful lives of the
property, plant and equipment: 3 to 20 years for machinery
and equipment, and 20 to 50 years for buildings. The costs
of leasehold improvements are amortized over the lesser of the
useful lives or the terms of the respective leases.

Investments in Affiliates.The Company uses the equity method of
accounting for its investments in and earnings or losses of
affiliates that it does not control but over which it does exert
significant influence.

Cost Method Investments.The Company uses the cost method of
accounting for its minority investments in non-public companies
where it does not have significant influence over the operations
and management of the investee. Investments are recorded at the
lower of cost or fair value as estimated by management. Charges
recorded to write-down cost method investments to their
estimated fair value and gross realized gains or losses upon the
sale of cost method investments are included in Other
income (expense), net in the Consolidated Statements of
Income.

Goodwill and Other Intangibles.Prior to 2002, goodwill and other
intangibles were amortized by use of the straight-line method
over periods ranging from 15 to 40 years (with the majority
being amortized over 15 to 25 years). In 2002, the Company
adopted Statement of Financial Accounting Standards No. 142
(SFAS 142), Goodwill and Other Intangible Assets. As
a result of the adoption of SFAS 142, goodwill and
indefinite-lived intangibles are no longer amortized, but are
reviewed at least annually for impairment. All other intangible
assets are amortized over their useful lives.

Long-Lived Assets.The recoverability of long-lived
assets is assessed whenever adverse events and changes in
circumstances indicate that previously anticipated undiscounted
cash flows warrant assessment.

Program Rights.The
broadcast subsidiaries are parties to agreements that entitle
them to show syndicated and other programs on television. The
costs of such program rights are recorded when the programs are
available for broadcasting, and such costs are charged to
operations as the programming is aired.

Revenue Recognition.Revenue from media advertising is
recognized, net of agency commissions, when the underlying
advertisement is published or broadcast. Revenues from newspaper
and magazine subscriptions are recognized upon delivery.
Revenues from newspaper retail sales are recognized upon
delivery, and revenues from magazine retail sales are recognized
on the later of delivery or cover date, with adequate provision
made for anticipated sales returns. Cable subscriber revenue is
recognized monthly as services are delivered. Education revenue
is recognized ratably over the period during which educational
services are delivered. For example, at Kaplans test
preparation division, estimates of average student course length
are developed for each course and these estimates are evaluated
on an ongoing basis and adjusted as necessary.

The Company bases its estimates for sales returns
on historical experience and has not experienced significant
fluctuations between estimated and actual return activity.
Amounts received from customers in advance of revenue
recognition are deferred as liabilities. Deferred revenue to be
earned after one year is included in Other
Liabilities in the Consolidated Balance Sheets.

Postretirement Benefits Other Than Pensions.The Company provides health care and
life insurance benefits for certain



44




---



##### 



retired employees. The expected cost of providing
these postretirement benefits is accrued over the years that
employees render services.


Income Taxes.The
provision for income taxes is determined using the asset and
liability approach. Under this approach, deferred income taxes
represent the expected future tax consequences of temporary
differences between the carrying amounts and tax bases of assets
and liabilities.

Foreign Currency Translation.Gains and losses on foreign currency
transactions and the translation of the accounts of the
Companys foreign operations where the U.S. dollar is the
functional currency are recognized currently in the Consolidated
Statements of Income. Gains and losses on translation of the
accounts of the Companys foreign operations, where the
local currency is the functional currency, and the
Companys equity investments in its foreign affiliates are
accumulated and reported as a separate component of equity and
comprehensive income.

Stock Options.Effective the first day of the
Companys 2002 fiscal year, the Company adopted the
fair-value-based method of accounting for Company stock options
as outlined in Statement of Financial Accounting Standards
No. 123 (SFAS 123), Accounting for Stock-Based
Compensation. This change in accounting method was applied
prospectively to all awards granted from the beginning of the
Companys fiscal year 2002 and thereafter. Stock options
awarded prior to fiscal year 2002 will continue to be accounted
for under the intrinsic value method under Accounting Principles
Board Opinion No. 25, Accounting for Stock Issued to
Employees.

Sale of Subsidiary/Affiliate Securities.The Company records investment basis
gains arising from the sale of equity interests in subsidiaries
and affiliates that are in the early stages of development as
capital in excess of par value, net of taxes.



|   |                                                                     
|-- | --------------------------------------------------------------------
|B. | ACCOUNTS RECEIVABLE AND ACCOUNTS PAYABLE AND
    ACCRUED LIABILITIES

Accounts receivable at December 29, 2002 and
December 30, 2001 consist of the following (in thousands):

|                                                                                                                       |  |      |         |  |      |   |         | 
|---------------------------------------------------------------------------------------------------------------------- |  | ---- | ------- |  | ---- | - | ------- | 
|                                                                                                                       |  | 2002 |         |  | 2001 |  
|                                                                                                                      
|                                                                                                                      
|Trade accounts receivable,
    less estimated returns, doubtful
    accounts and allowances of
    $65,396 and $73,248 |  | $    | 266,319 |  |      | $ | 261,898 | 
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|Other accounts receivable                                                                                              |  |      | 19,055  |  |      |   | 17,430  | 
|                                                                                                                       |  |     
|                                                                                                                      
|                                                                                                                       |  | $    | 285,374 |  |      | $ | 279,328 | 
|                                                                                                                       |  |     

Accounts payable and accrued liabilities at
December 29, 2002 and December 30, 2001 consist of the
following (in thousands):

|                                          |  |      |         |  |      |   |         | 
|----------------------------------------- |  | ---- | ------- |  | ---- | - | ------- | 
|                                          |  | 2002 |         |  | 2001 |  
|                                         
|                                         
|Accounts payable and accrued expenses     |  | $    | 175,174 |  |      | $ | 158,744 | 
|                                         
|                                         
|                                         
|                                         
|Accrued compensation and related benefits |  |      | 154,666 |  |      |   | 89,061  | 
|                                         
|                                         
|                                         
|                                         
|Due to affiliates (newsprint)             |  |      | 6,742   |  |      |   | 5,541   | 
|                                          |  |     
|                                         
|                                          |  | $    | 336,582 |  |      | $ | 253,346 | 
|                                          |  |     

C. INVESTMENTS

Investments in Marketable Equity Securities.Investments in marketable equity
securities at December 29, 2002 and December 30, 2001
consist of the following (in thousands):

|                     |  |      |         |  |      |   |         | 
|-------------------- |  | ---- | ------- |  | ---- | - | ------- | 
|                     |  | 2002 |         |  | 2001 |  
|                    
|                    
|Total cost           |  | $    | 187,169 |  |      | $ | 195,661 | 
|                    
|                    
|                    
|                    
|Net unrealized gains |  |      | 29,364  |  |      |   | 39,744  | 
|                     |  |     
|                    
|Total fair value     |  | $    | 216,533 |  |      | $ | 235,405 | 
|                     |  |     

At December 29, 2002 and December 30,
2001, the Companys ownership of 2,634 shares of Berkshire
Hathaway Inc. (Berkshire) Class A common stock
and 9,845 shares of Berkshire Class B common stock
accounted for $214.8 million or 99 percent and
$219.0 million or 93 percent, respectively, of the
total fair value of the Companys investments in marketable
equity securities. The remaining investments in marketable
equity securities at December 29, 2002 and December 30,
2001 consisted of common stock investments in various publicly
traded companies, most of which have concentrations in Internet
business activities. In most cases, the Company obtained
ownership of these common stocks as a result of merger or
acquisition transactions in which these companies merged or
acquired various small Internet-related companies in which the
Company held minor investments.

Berkshire is a holding company owning
subsidiaries engaged in a number of diverse business activities,
the most significant of which consist of property and casualty
insurance business conducted on both a direct and reinsurance
basis. Berkshire also owns approximately 18 percent of the
common stock of the Company. The chairman, chief executive
officer and largest shareholder of Berkshire, Mr. Warren
Buffett, is a member of the Companys Board of Directors.
Neither Berkshire nor Mr. Buffett participated in the
Companys evaluation, approval or execution of its decision
to invest in Berkshire common stock. The Companys
investment in Berkshire common stock is less than 1 percent
of the consolidated equity of Berkshire. At December 29,
2002 and December 30, 2001, the unrealized gain related to
the Companys Berkshire stock investment totaled
$29.9 million and $34.1 million, respectively. The
Company presently intends to hold the Berkshire common stock
investment long term, thus the investment has been classified as
a non-current asset in the Consolidated Balance Sheets.



45




---



##### 



During 2002, 2001 and 2000, proceeds from sales
of marketable equity securities were $19.7 million,
$0.1 million and $6.3 million, respectively, and gross
realized gains (losses) on such sales were
$13.2 million, ($0.3 million) and $4.9 million,
respectively. During 2002 and 2001, the Company recorded
write-downs on marketable equity securities of $2.0 million
and $3.0 million, respectively. Realized gains or losses on
marketable equity securities are included in Other income
(expense), net in the Consolidated Statements of Income.
For purposes of computing realized gains and losses, the cost
basis of securities sold is determined by specific
identification.

Investments in Affiliates.The Companys investments in
affiliates at December 29, 2002 and December 30, 2001
include the following (in thousands):

|                             |  |      |        |  |      |   |        | 
|---------------------------- |  | ---- | ------ |  | ---- | - | ------ | 
|                             |  | 2002 |        |  | 2001 |  
|                            
|                            
|BrassRing                    |  | $    | 13,658 |  |      | $ | 19,992 | 
|                            
|                            
|                            
|                            
|Bowater Mersey Paper Company |  |      | 42,519 |  |      |   | 45,822 | 
|                            
|                            
|                            
|                            
|International Herald Tribune |  |      | 13,776 |  |      |   | 14,480 | 
|                            
|                            
|                            
|                            
|Other                        |  |      | 750    |  |      |   | 642    | 
|                             |  |     
|                            
|                             |  | $    | 70,703 |  |      | $ | 80,936 | 
|                             |  |     

At the end of 2002, the Companys
investments in affiliates consisted of a 49.4 percent
interest in BrassRing LLC, which provides recruiting, career
development and hiring management services for employers and job
candidates; a 49 percent interest in the common stock of
Bowater Mersey Paper Company Limited, which owns and operates a
newsprint mill in Nova Scotia; a 50 percent interest in the
International Herald Tribune newspaper, published near Paris,
France; and a 50 percent common stock interest in the Los
Angeles Times-Washington Post News Service, Inc.

Summarized financial data for the
affiliates operations are as follows (in thousands):

|                       |                               |      |   |         |      |  |   |          |   |  |   |         |  
|---------------------- | ----------------------------- | ---- | - | ------- | ---- |  | - | -------- | - |  | - | ------- | -
|                       |                               | 2002 |   |         | 2001 |  |   | 2000     |  
|                      
|                      
|Financial Position:    |                               |      |   |         |      |  |   |          |   |  |   |        
|                      
|                      
|                      
|                      
|                       | Working capital               |      | $ | 10,366  |      |  | $ | (8,767   | ) |  | $ | 29,427  |  
|                      
|                      
|                      
|                      
|                       | Property, plant and equipment |      |   | 135,013 |      |  |   | 126,682  |   |  |   | 143,749 |  
|                      
|                      
|                      
|                      
|                       | Total assets                  |      |   | 235,208 |      |  |   | 246,321  |   |  |   | 432,458 |  
|                      
|                      
|                      
|                      
|                       | Long-term debt                |      |   |        |      |  |   |         |   |  |   |        |  
|                      
|                      
|                      
|                      
|                       | Net equity                    |      |   | 138,723 |      |  |   | 125,211  |   |  |   | 291,481 |  
|                      
|                      
|                      
|                      
|Results of Operations: |                               |      |   |         |      |  |   |          |   |  |   |        
|                      
|                      
|                      
|                      
|                       | Operating revenues            |      | $ | 263,709 |      |  | $ | 317,389  |   |  | $ | 345,913 |  
|                      
|                      
|                      
|                      
|                       | Operating loss                |      |   | (21,725 | )    |  |   | (14,793  | ) |  |   | (27,505 | )
|                      
|                      
|                      
|                      
|                       | Net loss                      |      |   | (36,326 | )    |  |   | (157,409 | ) |  |   | (77,739 | )

The following table summarizes the status and
results of the Companys investments in affiliates (in
thousands):

|                                     |  |      |         |   |      |   |         |  
|------------------------------------ |  | ---- | ------- | - | ---- | - | ------- | -
|                                     |  | 2002 |         |   | 2001 |  
|                                    
|                                    
|Beginning investment                 |  | $    | 80,936  |   |      | $ | 131,629 |  
|                                    
|                                    
|                                    
|                                    
|Additional investment                |  |      | 7,610   |   |      |   | 21,112  |  
|                                    
|                                    
|                                    
|                                    
|Equity in losses                     |  |      | (19,308 | ) |      |   | (68,659 | )
|                                    
|                                    
|                                    
|                                    
|Dividends and distributions received |  |      | (710    | ) |      |   | (700    | )
|                                    
|                                    
|                                    
|                                    
|Foreign currency translation         |  |      | 2,175   |   |      |   | (3,122  | )
|                                    
|                                    
|                                    
|                                    
|Other                                |  |      |        |   |      |   | 676     |  
|                                     |  |     
|                                    
|Ending investment                    |  | $    | 70,703  |   |      | $ | 80,936  |  
|                                     |  |     

During 2000, BrassRing issued stock to various
parties in connection with its acquisitions of various career
fair and recruiting services companies. The effect of these
transactions reduced the Companys investment interest in
BrassRing to 42 percent, from 54 percent at
January 2, 2000, and increased the Companys
investment basis in BrassRing by $13.3 million, net of
taxes. The increase in investment basis was recorded as
contributed capital.

In December 2001, BrassRing, Inc. was
restructured and the Companys interest in BrassRing, Inc.
was converted into an interest in the newly-formed
BrassRing LLC. At December 30, 2001, the Company held
a 39.7 percent interest in the BrassRing LLC common
equity and a $14.9 million Subordinated Convertible
Promissory Note (Note) from BrassRing LLC. In
February 2002, the Note was converted into Preferred Units,
which are convertible at the Companys option to BrassRing
LLC common equity. Assuming the conversion of the Preferred
Units, the Companys common equity interest in BrassRing
LLC would have been approximately 49.5 percent.

BrassRing accounted for approximately
$13.9 million of the 2002 equity in losses of affiliates,
compared to $75.1 million in 2001. The decrease from 2001
equity in affiliate losses from BrassRing is largely due to a
non-cash goodwill and other intangibles impairment charge that
BrassRing recorded in 2001 primarily to reduce the carrying
value of its career fair business. As a substantial portion of
BrassRings losses arose from goodwill and intangible
amortization expense for 2001, the $75.1 million of equity
in affiliate losses recorded by the Company in 2001 did not
require significant funding by the Company.

On January 1, 2003, the Company sold its
50 percent interest in The International Herald Tribune
newspaper for $65 million; the Company will report an
after-tax non-operating gain of approximately $32 million
in the first quarter of 2003.

Cost Method Investments.Most of the companies represented by
the Companys cost method investments have concentrations
in Internet-related business activities. At December 29,
2002 and December 30, 2001, the carrying value of the
Companys cost method investments was $9.5 million and
$29.6 million, respectively. Cost method investments are
included in Deferred Charges and Other Assets in the
Consolidated Balance Sheets.



46




---



##### 



During 2002, 2001 and 2000, the Company invested
$0.3 million, $11.7 million and $42.5 million,
respectively, in companies constituting cost method investments
and recorded charges of $19.2 million, $29.4 million
and $23.1 million, respectively, to write-down cost method
investments to estimated fair value. Charges recorded to
write-down cost method investments are included in Other
income (expense), net in the Consolidated Statements of
Income.

During 2002, 2001 and 2000, proceeds from sales
of cost method investments were $1.2 million,
$0.5 million and $7.1 million, respectively, and gross
realized (losses) gains on such sales were $0,
($0.2 million) and $6.6 million, respectively. Gross
realized gains or losses on the sale of cost method investments
are included in Other income (expense), net in the
Consolidated Statements of Income.



|   |             
|-- | ------------
|D. | INCOME TAXES

The provision for income taxes consists of the
following (in thousands):

|     |                 |         |         |        |          |   |        |         |   |   |         |         | 
|---- | --------------- | ------- | ------- | ------ | -------- | - | ------ | ------- | - | - | ------- | ------- | 
|     |                 | Current |         |        | Deferred |   |        | Total   |  
|    
|    
|2002 |                 |         |         |        |          |   |        |         |   |   |         |        
|    
|    
|    
|    
|     | U.S. Federal    |         | $       | 75,654 |          |   | $      | 38,934  |   |   | $       | 114,588 | 
|    
|    
|    
|    
|     | Foreign         |         |         | 1,634  |          |   |        | (499    | ) |   |         | 1,135   | 
|    
|    
|    
|    
|     | State and local |         |         | 9,897  |          |   |        | 11,680  |   |   |         | 21,577  | 
|     |                 |        
|    
|     |                 | $       | 87,185  |        |          | $ | 50,115 |         |   | $ | 137,300 |        
|     |                 |        
|2001 |                 |         |         |        |          |   |        |         |   |   |         |        
|    
|    
|    
|    
|     | U.S. Federal    |         | $       | 48,253 |          |   | $      | 86,384  |   |   | $       | 134,637 | 
|    
|    
|    
|    
|     | Foreign         |         |         | 1,270  |          |   |        | 714     |   |   |         | 1,984   | 
|    
|    
|    
|    
|     | State and local |         |         | 11,075 |          |   |        | 10,204  |   |   |         | 21,279  | 
|     |                 |        
|    
|     |                 | $       | 60,598  |        |          | $ | 97,302 |         |   | $ | 157,900 |        
|     |                 |        
|2000 |                 |         |         |        |          |   |        |         |   |   |         |        
|    
|    
|    
|    
|     | U.S. Federal    |         | $       | 77,517 |          |   | $      | 4,854   |   |   | $       | 82,371  | 
|    
|    
|    
|    
|     | Foreign         |         |         | 1,033  |          |   |        | 75      |   |   |         | 1,108   | 
|    
|    
|    
|    
|     | State and local |         |         | 22,593 |          |   |        | (12,672 | ) |   |         | 9,921   | 
|     |                 |        
|    
|     |                 | $       | 101,143 |        |          | $ | (7,743 | )       |   | $ | 93,400  |        
|     |                 |        

In addition to the income tax provision presented
above, in 2002, the Company recorded a federal and state income
tax benefit of $6.9 million on the impairment loss recorded
as a cumulative effect of change in accounting principle in
connection with the adoption of SFAS 142.

The provision for income taxes exceeds the amount
of income tax determined by applying the U.S. Federal statutory
rate of 35 percent to income before taxes as a result of
the following (in thousands):

|                                                                    |  |      |         |   |      |   |         |      |  |   |        | 
|------------------------------------------------------------------- |  | ---- | ------- | - | ---- | - | ------- | ---- |  | - | ------ | 
|                                                                    |  | 2002 |         |   | 2001 |   |         | 2000 | 
|                                                                   
|                                                                   
|U.S. Federal statutory taxes                                        |  | $    | 123,784 |   |      | $ | 135,639 |      |  | $ | 80,455 | 
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|State and local taxes, net of U.S. Federal income
    tax benefit   |  |      | 14,025  |   |      |   | 13,832  |      |  |   | 6,449  | 
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|Amortization of goodwill not deductible for
    income tax purposes |  |      |        |   |      |   | 6,988   |      |  |   | 5,011  | 
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|Other, net                                                          |  |      | (509    | ) |      |   | 1,441   |      |  |   | 1,485  | 
|                                                                    |  |     
|                                                                   
|Provision for income taxes                                          |  | $    | 137,300 |   |      | $ | 157,900 |      |  | $ | 93,400 | 
|                                                                    |  |     

Deferred income taxes at December 29, 2002
and December 30, 2001 consist of the following (in
thousands):

|                                                 |  |      |         |  |      |   |         |  
|------------------------------------------------ |  | ---- | ------- |  | ---- | - | ------- | -
|                                                 |  | 2002 |         |  | 2001 |  
|                                                
|                                                
|Accrued postretirement benefits                  |  | $    | 58,874  |  |      | $ | 56,955  |  
|                                                
|                                                
|                                                
|                                                
|Other benefit obligations                        |  |      | 94,280  |  |      |   | 73,080  |  
|                                                
|                                                
|                                                
|                                                
|Accounts receivable                              |  |      | 16,252  |  |      |   | 15,949  |  
|                                                
|                                                
|                                                
|                                                
|State income tax loss carryforwards              |  |      | 13,693  |  |      |   | 17,218  |  
|                                                
|                                                
|                                                
|                                                
|Other                                            |  |      | 22,140  |  |      |   | 14,612  |  
|                                                 |  |     
|                                                
|Deferred tax asset                               |  |      | 205,239 |  |      |   | 177,814 |  
|                                                 |  |     
|                                                
|Property, plant and equipment                    |  |      | 135,520 |  |      |   | 110,763 |  
|                                                
|                                                
|                                                
|                                                
|Prepaid pension cost                             |  |      | 200,315 |  |      |   | 181,434 |  
|                                                
|                                                
|                                                
|                                                
|Affiliate operations                             |  |      | 180     |  |      |   | (1,195  | )
|                                                
|                                                
|                                                
|                                                
|Unrealized gain on available-for-sale securities |  |      | 11,463  |  |      |   | 15,475  |  
|                                                
|                                                
|                                                
|                                                
|Goodwill and other intangibles                   |  |      | 118,914 |  |      |   | 93,286  |  
|                                                 |  |     
|                                                
|Deferred tax liability                           |  |      | 466,392 |  |      |   | 399,763 |  
|                                                 |  |     
|                                                
|Deferred income taxes                            |  | $    | 261,153 |  |      | $ | 221,949 |  
|                                                 |  |     

E. DEBT

At December 29, 2002, the Company had
$664.8 million in total debt outstanding at an average
interest rate of 4.0 percent. Debt was comprised of $259.3
million in commercial paper borrowings, $398.4 million of
5.5 percent unsecured notes due February 15, 2009, and
$7.1 million in other debt.

Interest on the 5.5 percent unsecured notes
is payable semi-annually on February 15 and August 15.

At December 29, 2002, and December 30,
2001, the average interest rate on the Companys
outstanding commercial paper borrowings was 1.6 percent and
2.0 percent, respectively. In the third quarter of 2002,
the Company replaced its revolving credit facility agreements
with a new five-year $350 million revolving credit
facility, which expires in August 2007, and a new 364-day $350
million revolving credit facility, which expires in August 2003.
These revolving credit facility agreements support the issuance
of the Companys short-term commercial paper.

Under the terms of the five-year
$350 million revolving credit facility, interest on
borrowings is at floating rates, and depending on the
Companys long-term debt rating, the Company is required to
pay an annual fee of 0.07 percent to 0.15 percent



47




---



##### 



on the unused portion of the facility, and
0.25 percent to 0.75 percent on the used portion of the
facility. Under the terms of the $350 million 364-day revolving
credit facility, interest on borrowings is at floating rates,
and based on the Companys long-term debt rating, the
Company is required to pay an annual fee of 0.05 percent to
0.125 percent on the unused portion of the facility, and
0.25 percent to 0.75 percent on the used portion of
the facility. Also under the terms of the $350 million
364-day revolving credit facility, the Company has the right to
extend the term of any borrowings for up to one year from the
credit facilitys maturity date for an additional fee of
0.125 percent. Both revolving credit facilities contain certain
covenants, including a financial covenant that the Company
maintain at least $1 billion of consolidated
shareholders equity.


During 2002 and 2001, the Company had average
borrowings outstanding of approximately $793.7 million and
$965.8 million, respectively, at average annual interest
rates of approximately 3.7 percent and 4.9 percent,
respectively. The Company incurred net interest costs on its
borrowings of $33.5 million and $47.5 million during
2002 and 2001, respectively. No interest expense was capitalized
in 2002 or 2001.

At December 29, 2002 and December 30,
2001, the fair value of the Companys 5.5 percent
unsecured notes, based on quoted market prices, totaled
$426.6 million and $387.7 million, respectively,
compared with the carrying amount of $398.4 million and
$398.1 million, respectively.

The carrying value of the Companys
commercial paper borrowings and other unsecured debt at
December 29, 2002 and December 30, 2001 approximates
fair value.



|   |                           
|-- | --------------------------
|F. | REDEEMABLE PREFERRED STOCK

In connection with the acquisition of a cable
television system in 1996, the Company issued 11,947 shares of
its Series A Preferred Stock. On February 23, 2000,
the Company issued an additional 1,275 shares related to this
transaction. From 1998 to 2002, 306 shares of Series A
Preferred Stock were redeemed at the request of Series A
Preferred Stockholders.

The Series A Preferred Stock has a par value
of $1.00 per share and a liquidation preference of $1,000 per
share; it is redeemable by the Company at any time on or after
October 1, 2015 at a redemption price of $1,000 per share.
In addition, the holders of such stock have a right to require
the Company to purchase their shares at the redemption price
during an annual 60-day election period; the first such period
began on February 23, 2001. Dividends on the Series A
Preferred Stock are payable four times a year at the annual rate
of $80.00 per share and in preference to any dividends on the
Companys common stock. The Series A Preferred Stock
is not convertible into any other security of the Company, and
the holders thereof have no voting rights except with respect to
any proposed changes in the preferences and special rights of
such stock.



|   |                                                   
|-- | --------------------------------------------------
|G. | CAPITAL STOCK, STOCK AWARDS, AND STOCK
    OPTIONS

Capital Stock.Each
share of Class A common stock and Class B common stock
participates equally in dividends. The Class B stock has
limited voting rights and as a class has the right to elect
30 percent of the Board of Directors; the Class A
stock has unlimited voting rights, including the right to elect
a majority of the Board of Directors.

During 2002, 2001 and 2000, the Company purchased
a total of 1,229 shares, 714 shares and 200 shares,
respectively, of its Class B common stock at a cost of
approximately $0.8 million, $0.4 million and
$0.1 million. At December 29, 2002, the Company has
authorization from the Board of Directors to purchase up to
544,796 shares of Class B common stock.

Stock Awards.In
1982, the Company adopted a long-term incentive compensation
plan, which, among other provisions, authorizes the awarding of
Class B common stock to key employees. Stock awards made
under this incentive compensation plan are subject to the
general restriction that stock awarded to a participant will be
forfeited and revert to Company ownership if the
participants employment terminates before the end of a
specified period of service to the Company. At December 29,
2002, there were 68,290 shares reserved for issuance under the
incentive compensation plan. Of this number, 27,625 shares were
subject to awards outstanding, and 40,665 shares were available
for future awards. Activity related to stock awards under the
long-term incentive compensation plan for the years ended
December 29, 2002, December 30, 2001 and
December 31, 2000, was as follows:

|                   |           |        |        |         |   |        |         |         |  |        |        |         |   |  |         |        |  |  |        |        |   |  |         |        | 
|------------------ | --------- | ------ | ------ | ------- | - | ------ | ------- | ------- |  | ------ | ------ | ------- | - |  | ------- | ------ |  |  | ------ | ------ | - |  | ------- | ------ | 
|                   |           |        |        |         |   |       
|                   |           | 2002   |        | 2001    |   | 2000  
|                   |           |        |        |         |   |       
|                   |           | Number |        | Average |   | Number |         | Average |  | Number |        | Average
|                   |           | of     |        | Award   |   | of     |         | Award   |  | of     |        | Award  
|                   |           | Shares |        | Price   |   | Shares |         | Price   |  | Shares |        | Price  
|                  
|                  
|Awards Outstanding |           |        |        |         |   |        |         |         |  |        |        |        
|                  
|                  
|                  
|                  
|Beginning of year  |           |        | 29,895 |         |   |        | $539.25 |         |  |        | 30,165 |         |   |  | $413.28 |        |  |  | 31,360 |        |   |  | $412.86 |       
|                  
|                  
|                  
|                  
|                   | Awarded   |        |        | 215     |   |        |         | 563.36  |  |        |        | 16,865  |   |  |         | 608.96 |  |  |        | 1,155  |   |  |         | 501.72 | 
|                  
|                  
|                  
|                  
|                   | Vested    |        |        | (601    | ) |        |         | 540.61  |  |        |        | (15,200 | ) |  |         | 364.13 |  |  |        | (99    | ) |  |         | 330.75 | 
|                  
|                  
|                  
|                  
|                   | Forfeited |        |        | (1,884  | ) |        |         | 578.37  |  |        |        | (1,935  | ) |  |         | 555.02 |  |  |        | (2,251 | ) |  |         | 456.41 | 
|                   |           |       
|                  
|End of year        |           |        | 27,625 |         |   |        | $536.74 |         |  |        | 29,895 |         |   |  | $539.25 |        |  |  | 30,165 |        |   |  | $413.28 |       
|                   |           |       

In addition to stock awards granted under the
long-term incentive compensation plan, the Company also made
stock awards of 2,150 shares in 2002, 3,300 shares in 2001 and
1,950 shares in 2000.

For the share awards outstanding at
December 29, 2002, the aforementioned restriction will
lapse in 2003 for 14,861 shares, in 2004 for 2,637 shares, in
2005 for 17,623 shares, and in 2006 for 1,438 shares.
Stock-based compensation costs resulting from stock awards
reduced net income by $3.5 million ($0.37 per share, basic
and diluted), $2.6 million ($0.27 per share, basic and
diluted), and $2.4 million ($0.25 per share, basic and
diluted) in 2002, 2001 and 2000, respectively.

Stock Options.The
Companys employee stock option plan, which was adopted in
1971 and amended in 1993, reserves 1,900,000 shares of the
Companys Class B common stock for



48




---



##### 



options to be granted under the plan. The
purchase price of the shares covered by an option cannot be less
than the fair value on the granting date. At December 29,
2002, there were 470,025 shares reserved for issuance under the
stock option plan, of which 163,900 shares were subject to
options outstanding, and 306,125 shares were available for
future grants.


Changes in options outstanding for the years
ended December 29, 2002, December 30, 2001, and
December 31, 2000, were as follows:

|                  |           |        |         |         |         |        |         |        |         |        |         |         |         |  |         |        |  |  |         |         |   |  |         |        | 
|----------------- | --------- | ------ | ------- | ------- | ------- | ------ | ------- | ------ | ------- | ------ | ------- | ------- | ------- |  | ------- | ------ |  |  | ------- | ------- | - |  | ------- | ------ | 
|                  |           |        |         |         |         |       
|                  |           | 2002   |         | 2001    |         | 2000  
|                  |           |        |         |         |         |       
|                  |           | Number |         |         | Average |        | Number  |        | Average |        | Number  |         | Average
|                  |           | of     |         | Option  |         | of     |         | Option |         | of     |         | Option 
|                  |           | Shares |         | Price   |         | Shares |         | Price  |         | Shares |         | Price  
|                 
|                 
|Beginning of year |           |        | 170,575 |         |         |        | $490.86 |        |         |        | 166,450 |         |         |  | $465.55 |        |  |  | 156,497 |         |   |  | $470.64 |       
|                 
|                 
|                 
|                 
|                  | Granted   |        |         | 11,500  |         |        |         | 729.00 |         |        |         | 24,000  |         |  |         | 522.75 |  |  |         | 89,500  |   |  |         | 544.90 | 
|                 
|                 
|                 
|                 
|                  | Exercised |        |         | (16,675 | )       |        |         | 404.14 |         |        |         | (16,875 | )       |  |         | 276.79 |  |  |         | (20,425 | ) |  |         | 345.46 | 
|                 
|                 
|                 
|                 
|                  | Forfeited |        |         | (1,500  | )       |        |         | 561.77 |         |        |         | (3,000  | )       |  |         | 546.04 |  |  |         | (59,122 | ) |  |         | 643.71 | 
|                  |           |       
|                 
|End of year       |           |        | 163,900 |         |         |        | $515.74 |        |         |        | 170,575 |         |         |  | $490.86 |        |  |  | 166,450 |         |   |  | $465.55 |       
|                  |           |       

Of the shares covered by options outstanding at
the end of 2002, 102,650 are now exercisable, 27,875 will become
exercisable in 2003, 21,875 will become exercisable in 2004,
8,625 will become exercisable in 2005, and 2,875 will become
exercisable in 2006. Information related to stock options
outstanding at December 29, 2002, is as follows:

|                |          |             |  |             |         |          |  |             |      |          |  |   |        |  |  |  |        |  |  |   |        | 
|--------------- | -------- | ----------- |  | ----------- | ------- | -------- |  | ----------- | ---- | -------- |  | - | ------ |  |  |  | ------ |  |  | - | ------ | 
|                |          |             |  | Weighted    |         |          |  |             |      |         
|                |          |             |  | Average     |         | Weighted |  |             |      | Weighted
|                |          | Number      |  | Remaining   |         | Average  |  | Number      |      | Average 
|Range of        |          | Outstanding |  | Contractual |         | Exercise |  | Exercisable |      | Exercise
|Exercise Prices |          | at 12/29/02 |  | Life (yrs.) |         | Price    |  | at 12/29/02 |      | Price   
|               
|               
|                | $222319 |             |  |             | 8,800   |          |  |             | 2.3  |          |  | $ | 261.49 |  |  |  | 8,800  |  |  | $ | 261.49 | 
|                | 344      |             |  |             | 9,850   |          |  |             | 4.0  |          |  |   | 343.94 |  |  |  | 9,850  |  |  |   | 343.94 | 
|                | 472484  |             |  |             | 24,750  |          |  |             | 5.8  |          |  |   | 474.34 |  |  |  | 21,750 |  |  |   | 473.43 | 
|                | 500596  |             |  |             | 109,000 |          |  |             | 7.7  |          |  |   | 538.70 |  |  |  | 62,250 |  |  |   | 537.47 | 
|                | 729      |             |  |             | 11,500  |          |  |             | 10.0 |          |  |   | 729.00 |  |  |  |       |  |  |   |       | 

All options were granted at an exercise price
equal to or greater than the fair market value of the
Companys common stock at the date of grant. The weighted
average fair value for options granted during 2002, 2001 and
2000 was $197.89, $107.78 and $161.15, respectively. The fair
value of options at date of grant was estimated using the
Black-Scholes method utilizing the following assumptions:

|                      |  |      |        |  |      |  |        |      |  |  |       | 
|--------------------- |  | ---- | ------ |  | ---- |  | ------ | ---- |  |  | ----- | 
|                      |  | 2002 |        |  | 2001 |  |        | 2000 | 
|                     
|                     
|Expected life (years) |  |      | 7      |  |      |  | 7      |      |  |  | 7     | 
|                     
|                     
|                     
|                     
|Interest rate         |  |      | 3.69%  |  |      |  | 2.30%  |      |  |  | 5.98% | 
|                     
|                     
|                     
|                     
|Volatility            |  |      | 21.74% |  |      |  | 19.46% |      |  |  | 17.9% | 
|                     
|                     
|                     
|                     
|Dividend yield        |  |      | 0.77%  |  |      |  | 1.1%   |      |  |  | 1.0%  | 

Effective the first day of the Companys
2002 fiscal year, the Company adopted the fair-value-based
method of accounting for Company stock options as outlined in
SFAS 123. This change in accounting method was applied
prospectively to all awards granted from the beginning of the
Companys fiscal year 2002 and thereafter. Stock options
awarded prior to fiscal year 2002 will continue to be accounted
for under the intrinsic value method under Accounting Principles
Board Opinion No. 25, Accounting for Stock Issued to
Employees. The following table presents what the
Companys results would have been had the fair values of
options granted after 1995, but prior to 2002, been recognized
as compensation expense in 2002, 2001 and 2000 (in thousands,
except per share amounts).

|                                                                |  |      |         |  |      |   |         |      |  |   |         | 
|--------------------------------------------------------------- |  | ---- | ------- |  | ---- | - | ------- | ---- |  | - | ------- | 
|                                                                |  | 2002 |         |  | 2001 |   |         | 2000 | 
|                                                               
|                                                               
|Stock-based compensation expense included in net
    income     |  | $    | 45      |  |      | $ |        |      |  | $ |        | 
|                                                               
|                                                               
|                                                               
|                                                               
|Net income available for common shares, as
    reported         |  |      | 203,235 |  |      |   | 228,587 |      |  |   | 135,444 | 
|                                                               
|                                                               
|                                                               
|                                                               
|Stock-based compensation expense not included in
    net income |  |      | 3,617   |  |      |   | 4,309   |      |  |   | 2,139   | 
|                                                                |  |      |         |  |      |   |         |      |  |   |         | 
|Pro forma net income available for common shares                |  | $    | 199,618 |  |      | $ | 224,278 |      |  | $ | 133,305 | 
|                                                                |  |      |         |  |      |   |         |      |  |   |         | 
|Basic earnings per share, as reported                           |  | $    | 21.38   |  |      | $ | 24.10   |      |  | $ | 14.34   | 
|                                                               
|                                                               
|                                                               
|                                                               
|Pro forma basic earnings per share                              |  | $    | 21.00   |  |      | $ | 23.64   |      |  | $ | 14.11   | 
|                                                               
|                                                               
|                                                               
|                                                               
|Diluted earnings per share, as reported                         |  | $    | 21.34   |  |      | $ | 24.06   |      |  | $ | 14.32   | 
|                                                               
|                                                               
|                                                               
|                                                               
|Pro forma diluted earnings per share                            |  | $    | 20.96   |  |      | $ | 23.61   |      |  | $ | 14.09   | 

The Company also maintains a stock option plan at
its Kaplan subsidiary that provides for the issuance of Kaplan
stock options to certain members of Kaplans management.
The Kaplan stock option plan was adopted in 1998 and reserves
10.6 percent, or 150,000 shares, of Kaplans common
stock for options to be granted under the plan. At
December 29, 2002, 147,463 shares were subject to options
outstanding. The balance of 2,537 shares have been granted with
vesting beginning as of January 1, 2003. Under the
provisions of this plan, options are issued with an exercise
price equal to the estimated fair value of Kaplans common
stock. In general, options vest ratably over five years. Upon
exercise, an option holder may either purchase vested shares at
the exercise price or elect to receive cash equal to the
difference between the exercise price and the then fair value.
The fair value of Kaplans common stock is determined by
the Companys compensation committee of the Board of
Directors. In January 2003, the committee set the fair value
price of Kaplan common stock at $861 per share, which is
determined after deducting intercompany debt from Kaplans
enterprise value.

For 2002, 2001 and 2000, the Company recorded
expense of $34.5 million, $25.3 million and
$6.0 million, respectively, related to this plan. In 2002
and 2001, payouts from option exercises totaled
$0.2 million and $2.1 million, respectively. At
December 29, 2002, the Companys stock-based
compensation accrual balance totaled $74.4 million.



49




---



##### 



Changes in Kaplan stock options outstanding for
the years ended December 29, 2002, December 30, 2001,
and December 31, 2000, were as follows:

|                  |           |        |         |         |   |        |         |         |  |        |         |         |   |  |         |        |  |  |         |        |  |  |         |        | 
|----------------- | --------- | ------ | ------- | ------- | - | ------ | ------- | ------- |  | ------ | ------- | ------- | - |  | ------- | ------ |  |  | ------- | ------ |  |  | ------- | ------ | 
|                  |           |        |         |         |   |       
|                  |           | 2002   |         | 2001    |   | 2000  
|                  |           |        |         |         |   |       
|                  |           | Number |         | Average |   | Number |         | Average |  | Number |         | Average
|                  |           | of     |         | Option  |   | of     |         | Option  |  | of     |         | Option 
|                  |           | Shares |         | Price   |   | Shares |         | Price   |  | Shares |         | Price  
|                 
|                 
|Beginning of year |           |        | 142,578 |         |   |        | $296.69 |         |  |        | 131,880 |         |   |  | $246.14 |        |  |  | 95,100  |        |  |  | $196.31 |       
|                 
|                 
|                 
|                 
|                  | Granted   |        |         | 6,475   |   |        |         | 652.00  |  |        |         | 27,962  |   |  |         | 526.00 |  |  |         | 36,780 |  |  |         | 375.00 | 
|                 
|                 
|                 
|                 
|                  | Exercised |        |         | (540    | ) |        |         | 375.00  |  |        |         | (7,247  | ) |  |         | 227.20 |  |  |         |       |  |  |         |       | 
|                 
|                 
|                 
|                 
|                  | Forfeited |        |         | (1,050  | ) |        |         | 403.76  |  |        |         | (10,017 | ) |  |         | 321.67 |  |  |         |       |  |  |         |       | 
|                  |           |        |         |         |   |        |         |         |  |        |         |         |   |  |         |        |  |  |         |        |  |  |         |       
|End of year       |           |        | 147,463 |         |   |        | $311.24 |         |  |        | 142,578 |         |   |  | $296.69 |        |  |  | 131,880 |        |  |  | $246.14 |       
|                  |           |        |         |         |   |        |         |         |  |        |         |         |   |  |         |        |  |  |         |        |  |  |         |       

Of the shares covered by options outstanding at
the end of 2002, 101,804 are now exercisable, 12,755 will become
exercisable in 2003, 12,755 will become exercisable in 2004,
12,005 will become exercisable in 2005, 6,849 will become
exercisable in 2006, and 1,295 will become exercisable in 2007.
Information related to stock options outstanding at
December 29, 2002, is as follows:

|                |         |             |  |             |        |          |  |             |     |          |  |   |     |  |  |  |        |  |  |   |     | 
|--------------- | ------- | ----------- |  | ----------- | ------ | -------- |  | ----------- | --- | -------- |  | - | --- |  |  |  | ------ |  |  | - | --- | 
|                |         |             |  | Weighted    |        |          |  |             |     |         
|                |         |             |  | Average     |        | Weighted |  |             |     | Weighted
|                |         | Number      |  | Remaining   |        | Average  |  | Number      |     | Average 
|Range of        |         | Outstanding |  | Contractual |        | Exercise |  | Exercisable |     | Exercise
|Exercise Prices |         | at 12/29/02 |  | Life (yrs.) |        | Price    |  | at 12/29/02 |     | Price   
|               
|               
|                | $   190 |             |  |             | 83,686 |          |  |             | 5.0 |          |  | $ | 190 |  |  |  | 83,686 |  |  | $ | 190 | 
|                | 350375 |             |  |             | 29,540 |          |  |             | 6.9 |          |  |   | 372 |  |  |  | 12,566 |  |  |   | 371 | 
|                | 526     |             |  |             | 27,762 |          |  |             | 8.0 |          |  |   | 526 |  |  |  | 5,552  |  |  |   | 526 | 
|                | 652     |             |  |             | 6,475  |          |  |             | 8.0 |          |  |   | 652 |  |  |  |       |  |  |   | 652 | 

Average Number of Shares Outstanding.Basic earnings per share are based on
the weighted average number of shares of common stock
outstanding during each year. Diluted earnings per common share
are based upon the weighted average number of shares of common
stock outstanding each year, adjusted for the dilutive effect of
shares issuable under outstanding stock options. Basic and
diluted weighted average share information for 2002, 2001 and
2000 is as follows:

|     |  |          |           |           |  |          |        |  |  |  |           | 
|---- |  | -------- | --------- | --------- |  | -------- | ------ |  |  |  | --------- | 
|     |  | Basic    |           | Dilutive  |  | Diluted 
|     |  | Weighted |           | Effect of |  | Weighted
|     |  | Average  |           | Stock     |  | Average 
|     |  | Shares   |           | Options   |  | Shares  
|    
|    
|2002 |  |          | 9,503,983 |           |  |          | 18,671 |  |  |  | 9,522,654 | 
|    
|    
|    
|    
|2001 |  |          | 9,486,386 |           |  |          | 13,173 |  |  |  | 9,499,559 | 
|    
|    
|    
|    
|2000 |  |          | 9,445,466 |           |  |          | 14,362 |  |  |  | 9,459,828 | 



|   |                                            
|-- | -------------------------------------------
|H. | PENSIONS AND OTHER POSTRETIREMENT
    PLANS

The Company maintains various pension and
incentive savings plans and contributes to several
multi-employer plans on behalf of certain union-represented
employee groups. Substantially all of the Companys
employees are covered by these plans.

The Company also provides health care and life
insurance benefits to certain retired employees. These employees
become eligible for benefits after meeting age and service
requirements.

The following table sets forth obligation, asset
and funding information for the Companys defined benefit
pension and postretirement plans at December 29, 2002 and
December 30, 2001 (in thousands):

|                             |                                           |               |   |                      |   |      |   |           |   |  |   |          |   |  |   |          |  
|---------------------------- | ----------------------------------------- | ------------- | - | -------------------- | - | ---- | - | --------- | - |  | - | -------- | - |  | - | -------- | -
|                             |                                           |               |   |                     
|                             |                                           | Pension Plans |   | Postretirement Plans
|                             |                                           |               |   |                     
|                             |                                           | 2002          |   | 2001                 |   | 2002 |   | 2001     
|                            
|                            
|Change in benefit obligation |                                           |               |   |                      |   |      |   |           |   |  |   |          |   |  |   |         
|                            
|                            
|                            
|                            
|                             | Benefit obligation at beginning of year   |               | $ | 431,017              |   |      | $ | 391,166   |   |  | $ | 105,392  |   |  | $ | 93,243   |  
|                            
|                            
|                            
|                            
|                             | Service cost                              |               |   | 17,489               |   |      |   | 15,393    |   |  |   | 5,418    |   |  |   | 3,707    |  
|                            
|                            
|                            
|                            
|                             | Interest cost                             |               |   | 30,820               |   |      |   | 27,526    |   |  |   | 7,997    |   |  |   | 6,811    |  
|                            
|                            
|                            
|                            
|                             | Amendments                                |               |   | 28,817               |   |      |   | 5,182     |   |  |   | (3,130   | ) |  |   |         |  
|                            
|                            
|                            
|                            
|                             | Actuarial loss                            |               |   | 22,851               |   |      |   | 22,334    |   |  |   | 1,487    |   |  |   | 6,519    |  
|                            
|                            
|                            
|                            
|                             | Benefits paid                             |               |   | (32,042              | ) |      |   | (30,584   | ) |  |   | (4,990   | ) |  |   | (4,888   | )
|                             |                                           |              
|                            
|                             | Benefit obligation at end of year         |               | $ | 498,952              |   |      | $ | 431,017   |   |  | $ | 112,174  |   |  | $ | 105,392  |  
|                             |                                           |              
|                            
|                            
|                            
|                            
|Change in plan assets        |                                           |               |   |                      |   |      |   |           |   |  |   |          |   |  |   |         
|                            
|                            
|                            
|                            
|                             | Fair value of assets at beginning of year |               | $ | 1,427,554            |   |      | $ | 1,314,885 |   |  |   |         |   |  |   |         |  
|                            
|                            
|                            
|                            
|                             | Actual return on plan assets              |               |   | (33,428              | ) |      |   | 143,253   |   |  |   |         |   |  |   |         |  
|                            
|                            
|                            
|                            
|                             | Employer contributions                    |               |   |                     |   |      |   |          |   |  | $ | 4,990    |   |  | $ | 4,888    |  
|                            
|                            
|                            
|                            
|                             | Benefits paid                             |               |   | (32,042              | ) |      |   | (30,584   | ) |  |   | (4,990   | ) |  |   | (4,888   | )
|                             |                                           |              
|                            
|                             | Fair value of assets at end of year       |               | $ | 1,362,084            |   |      | $ | 1,427,554 |   |  | $ |         |   |  | $ |         |  
|                             |                                           |              
|                            
|                            
|                            
|                            
|                             | Funded status                             |               | $ | 863,132              |   |      | $ | 996,537   |   |  | $ | (112,174 | ) |  | $ | (105,392 | )
|                            
|                            
|                            
|                            
|                             | Unrecognized transition asset             |               |   | (3,631               | ) |      |   | (8,852    | ) |  |   |         |   |  |   |         |  
|                            
|                            
|                            
|                            
|                             | Unrecognized prior service cost           |               |   | 24,553               |   |      |   | 16,949    |   |  |   | (3,469   | ) |  |   | (501     | )
|                            
|                            
|                            
|                            
|                             | Unrecognized actuarial gain               |               |   | (390,268             | ) |      |   | (556,946  | ) |  |   | (20,750  | ) |  |   | (24,931  | )
|                             |                                           |              
|                            
|                             | Net prepaid (accrued) cost                |               | $ | 493,786              |   |      | $ | 447,688   |   |  | $ | (136,393 | ) |  | $ | (130,824 | )
|                             |                                           |              

The total (income) cost arising from the
Companys defined benefit pension and postretirement plans
for the years ended December 29, 2002, December 30,
2001, and December 31, 2000, consists of the following
components (in thousands):

|                                         |  |               |         |                      |  |      |         |      |  |      |         |      |  |   |        |   |  |   |        |   |  |   |        |  
|---------------------------------------- |  | ------------- | ------- | -------------------- |  | ---- | ------- | ---- |  | ---- | ------- | ---- |  | - | ------ | - |  | - | ------ | - |  | - | ------ | -
|                                         |  |               |         |                     
|                                         |  | Pension Plans |         | Postretirement Plans
|                                         |  |               |         |                     
|                                         |  | 2002          |         | 2001                 |  | 2000 |         | 2002 |  | 2001 |         | 2000
|                                        
|                                        
|Service cost                             |  | $             | 17,489  |                      |  | $    | 15,393  |      |  | $    | 14,566  |      |  | $ | 5,418  |   |  | $ | 3,707  |   |  | $ | 3,496  |  
|                                        
|                                        
|                                        
|                                        
|Interest cost                            |  |               | 30,820  |                      |  |      | 27,526  |      |  |      | 24,962  |      |  |   | 7,997  |   |  |   | 6,811  |   |  |   | 6,338  |  
|                                        
|                                        
|                                        
|                                        
|Expected return on assets                |  |               | (92,192 | )                    |  |      | (97,567 | )    |  |      | (85,522 | )    |  |   |       |   |  |   |       |   |  |   |       |  
|                                        
|                                        
|                                        
|                                        
|Amortization of transition asset         |  |               | (5,221  | )                    |  |      | (6,502  | )    |  |      | (7,585  | )    |  |   |       |   |  |   |       |   |  |   |       |  
|                                        
|                                        
|                                        
|                                        
|Amortization of prior service cost       |  |               | 2,185   |                      |  |      | 2,122   |      |  |      | 2,091   |      |  |   | (421   | ) |  |   | (162   | ) |  |   | (162   | )
|                                        
|                                        
|                                        
|                                        
|Recognized actuarial gain                |  |               | (17,528 | )                    |  |      | (17,917 | )    |  |      | (13,824 | )    |  |   | (2,435 | ) |  |   | (3,408 | ) |  |   | (2,870 | )
|                                         |  |              
|                                        
|Net periodic (benefit) cost for the year |  |               | (64,447 | )                    |  |      | (76,945 | )    |  |      | (65,312 | )    |  |   | 10,559 |   |  |   | 6,948  |   |  |   | 6,802  |  
|                                        
|                                        
|                                        
|                                        
|Early retirement programs expense        |  |               | 19,001  |                      |  |      | 3,344   |      |  |      | 29,049  |      |  |   |       |   |  |   |       |   |  |   | 1,968  |  
|                                         |  |              
|                                        
|Total (benefit) cost for the year        |  | $             | (45,446 | )                    |  | $    | (73,601 | )    |  | $    | (36,263 | )    |  | $ | 10,559 |   |  | $ | 6,948  |   |  | $ | 8,770  |  
|                                         |  |              

The costs for the Companys defined benefit
pension and postretirement plans are actuarially determined. Key
assumptions utilized at December 29, 2002,
December 30, 2001, and December 31, 2000, include the
following:

|                               |  |               |       |                      |  |      |      |      |  |      |      |      |  |  |       |  |  |  |      |  |  |  |      | 
|------------------------------ |  | ------------- | ----- | -------------------- |  | ---- | ---- | ---- |  | ---- | ---- | ---- |  |  | ----- |  |  |  | ---- |  |  |  | ---- | 
|                               |  |               |       |                     
|                               |  | Pension Plans |       | Postretirement Plans
|                               |  |               |       |                     
|                               |  | 2002          |       | 2001                 |  | 2000 |      | 2002 |  | 2001 |      | 2000
|                              
|                              
|Discount rate                  |  |               | 6.75% |                      |  |      | 7.0% |      |  |      | 7.5% |      |  |  | 6.75% |  |  |  | 7.0% |  |  |  | 7.5% | 
|                              
|                              
|                              
|                              
|Expected return on plan assets |  |               | 7.5%  |                      |  |      | 7.5% |      |  |      | 9.0% |      |  |  |      |  |  |  |     |  |  |  |     | 
|                              
|                              
|                              
|                              
|Rate of compensation increase  |  |               | 4.0%  |                      |  |      | 4.0% |      |  |      | 4.0% |      |  |  |      |  |  |  |     |  |  |  |     | 



50




---



##### 



The assumed health care cost trend rate used in
measuring the postretirement benefit obligation at
December 29, 2002 was 10.5 percent for both pre-age 65
and post-age 65 benefits decreasing to 5 percent in the
year 2013 and thereafter.

Assumed health care cost trend rates have a
significant effect on the amounts reported for the health care
plans. A change of 1 percentage point in the assumed health
care cost trend rates would have the following effects (in
thousands):

|                                  |  |          |        |          |  |   |         |  
|--------------------------------- |  | -------- | ------ | -------- |  | - | ------- | -
|                                  |  | 1%       |        | 1%      
|                                  |  | Increase |        | Decrease
|                                 
|                                 
|Benefit obligation at end of year |  | $        | 16,740 |          |  | $ | (15,637 | )
|                                 
|                                 
|                                 
|                                 
|Service cost plus interest cost   |  |          | 2,115  |          |  |   | (2,050  | )

Contributions to multi-employer pension plans,
which are generally based on hours worked, amounted to
$2.0 million in 2002, $1.8 million in 2001 and $1.1
million in 2000.

The Company recorded expense associated with
retirement benefits provided under incentive savings plans
(primarily 401(k) plans) of approximately $15.4 million in
2002, $14.5 million in 2001 and $13.3 million in 2000.

I. LEASE AND OTHER COMMITMENTS

The Company leases real property under operating
agreements. Many of the leases contain renewal options and
escalation clauses that require payments of additional rent to
the extent of increases in the related operating costs.

At December 29, 2002, future minimum rental
payments under noncancelable operating leases approximate the
following (in thousands):

|           |  |   |         | 
|---------- |  | - | ------- | 
|          
|          
|          
|          
|2003       |  | $ | 55,335  | 
|          
|          
|          
|          
|2004       |  |   | 49,650  | 
|          
|          
|          
|          
|2005       |  |   | 43,178  | 
|          
|          
|          
|          
|2006       |  |   | 37,915  | 
|          
|          
|          
|          
|2007       |  |   | 32,855  | 
|          
|          
|          
|          
|Thereafter |  |   | 74,039  | 
|           |  |   |         | 
|          
|           |  | $ | 292,972 | 
|           |  |   |         | 

Minimum payments have not been reduced by minimum
sublease rentals of $4.4 million due in the future under
noncancelable subleases.

Rent expense under operating leases included in
operating costs and expenses was approximately
$60.7 million, $58.3 million and $49.7 million in
2002, 2001 and 2000, respectively. Sublease income was
approximately $0.6 million, $1.5 million and
$1.2 million in 2002, 2001 and 2000, respectively.

The Companys broadcast subsidiaries are
parties to certain agreements that commit them to purchase
programming to be produced in future years. At December 29,
2002, such commitments amounted to approximately
$52.3 million. If such programs are not produced, the
Companys commitment would expire without obligation.

J. ACQUISITIONS, EXCHANGES AND
DISPOSITIONS

The Company completed business acquisitions and
exchanges totaling approximately $47.4 million in 2002,
$104.4 million in 2001 and $212.3 million in 2000
(including assumed debt and related acquisition costs). All of
these acquisitions were accounted for using the purchase method,
and accordingly, the assets and liabilities of the companies
acquired have been recorded at their estimated fair values at
the date of acquisition. The purchase price allocations for
these acquisitions mostly comprised goodwill and other
intangibles and property, plant and equipment.

During 2002, Kaplan acquired several businesses
in their higher education and test preparation divisions for
approximately $42.2 million. About $9.6 million remains to
be paid on these acquisitions, of which $2.2 million has
been classified in current liabilities and $7.4 million as
long-term debt at December 29, 2002.

In November 2002, the Company completed a cable
system exchange transaction with Time Warner Cable which
consisted of the exchange by the Company of its cable system in
Akron, Ohio serving about 15,500 subscribers, and
$5.2 million to Time Warner Cable, for cable systems
serving about 20,300 subscribers in Kansas. The Kansas systems
acquired in the exchange transaction were recorded at their
estimated fair value. The non-cash, non-operating gain resulting
from the exchange transaction increased net income by
$16.7 million, or $1.75 per share.

The Companys acquisitions in 2001
principally included the purchase of Southern Maryland
Newspapers, a division of Chesapeake Publishing Corporation, and
amounts paid as part of a cable system exchange with AT&T
Broadband. During 2001, the Company also acquired a provider of
CFA® exam preparation services and a company that provides
pre-certification training for real estate, insurance and
securities professionals.

Southern Maryland Newspapers publishes the
Maryland Independent in Charles County, Maryland; The Enterprise
in St. Marys County, Maryland; and The Calvert Recorder in
Calvert County, Maryland, with a combined total paid circulation
of approximately 50,000.

The cable system exchange with AT&T Broadband
was completed in March 2001 and consisted of the exchange by the
Company of its cable systems in Modesto and Santa Rosa,
California, and approximately $42.0 million to AT&T
Broadband for cable systems serving approximately 155,000
subscribers principally located in Idaho. The Idaho systems
acquired in the exchange transactions were recorded at their
estimated fair value. In a related transaction in January 2001,
the Company completed the sale of a cable system serving about
15,000 subscribers in Greenwood, Indiana, for
$61.9 million. The gain resulting from the cable system
sale and exchange transactions increased net income by
$196.5 million, or $20.69 per share. For income tax
purposes, substantial components of the cable



51




---



##### 



system sale and exchange transactions qualify as
like-kind exchanges and therefore, a large portion of these
transactions does not result in a current tax liability.


In August 2000, the Company acquired Quest
Education Corporation (Quest) for approximately
$177.7 million, including assumed debt. The acquisition of
Quest was completed through an all cash tender offer in which
the Company purchased substantially all of the outstanding stock
of Quest for $18.35 per share. The acquisition was financed
through the issuance of additional borrowings. Quest is a
provider of post-secondary education offering Bachelors
degrees, Associates degrees and diploma programs primarily
in the fields of health care, business and information
technology.

In addition, the Company acquired two cable
systems serving approximately 8,500 subscribers in Nebraska (in
June 2000) and Mississippi (in August 2000) for approximately
$16.2 million, as well as various other smaller businesses
throughout 2000 for $18.4 million (principally consisting
of educational services companies).

The results of operations for each of the
businesses acquired are included in the Consolidated Statements
of Income from their respective dates of acquisition. Pro forma
results of operations for 2002, 2001 and 2000, assuming the
acquisitions and exchanges occurred at the beginning of 2000,
are not materially different from reported results of operations.

K. GOODWILL AND OTHER INTANGIBLE
ASSETS

The Company adopted Statement of Financial
Accounting Standards No. 142 (SFAS 142),
Goodwill and Other Intangible Assets effective on
the first day of its 2002 fiscal year. As a result of the
adoption of SFAS 142, the Company ceased most of the periodic
charges previously recorded from the amortization of goodwill
and other intangibles.

As required under SFAS 142, earlier this year,
the Company completed its transitional impairment review of
indefinite-lived intangible assets and goodwill. The expected
future cash flows for PostNewsweek Tech Media (part of the
magazine publishing segment), on a discounted basis, did not
support the net carrying value of the related goodwill.
Accordingly, an after-tax goodwill impairment loss of
$12.1 million, or $1.27 per share, was recorded. The loss
is included in the Companys fiscal year results as a
cumulative effect of change in accounting principle.

On a pro forma basis, the Companys 2001 and
2000 operating income would have been $298.3 million and
$402.1 million, respectively, if SFAS 142 had been adopted
at the beginning of fiscal 2000, compared to $377.6 million
for 2002.

Other pro forma results for the years ended
December 30, 2001, and December 30, 2000, to exclude
amortization of goodwill and indefinite-lived intangible assets,
were as follows (in thousands, except per share amounts):

|                                                                                                                 |                                                                             |      |         |       |      |   |         |       |  |   |         |       | 
|---------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------- | ---- | ------- | ----- | ---- | - | ------- | ----- |  | - | ------- | ----- | 
|                                                                                                                 |                                                                             | 2002 |         |       | 2001 |   |         | 2000  | 
|                                                                                                                
|                                                                                                                
|Income before cumulative effect of change in
    accounting principle,
    as reported                           |                                                                             | $    | 216,368 |       |      | $ | 229,639 |       |  | $ | 136,470 |      
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|Amortization of goodwill and other intangibles,
    net of tax                                                   |                                                                             |      |        |       |      |   | 54,989  |       |  |   | 43,079  |      
|                                                                                                                 |                                                                             |     
|                                                                                                                
|Pro forma income before cumulative effect of
    change in
    accounting principle                              |                                                                             |      | 216,368 |       |      |   | 284,628 |       |  |   | 179,549 |      
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|Cumulative effect of change in method of
    accounting for goodwill
    and other intangible assets, net of tax |                                                                             |      | (12,100 | )     |      |   |        |       |  |   |        |      
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|Redeemable preferred stock dividends                                                                             |                                                                             |      | (1,033  | )     |      |   | (1,052  | )     |  |   | (1,026  | )    
|                                                                                                                 |                                                                             |     
|                                                                                                                
|Pro forma net income available for common shares                                                                 |                                                                             | $    | 203,235 |       |      | $ | 283,576 |       |  | $ | 178,523 |      
|                                                                                                                 |                                                                             |     
|                                                                                                                
|Basic earnings per share:                                                                                        |                                                                             |      |         |       |      |   |         |       |  |   |         |      
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                 | Before cumulative effect of change in accounting
    principle, as reported |      | $       | 22.65 |      |   |         | 24.10 |  |   |         | 14.34 | 
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                 | Cumulative effect of change in accounting
    principle                     |      |         | (1.27 | )    |   |         |      |  |   |         |      | 
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                 | Amortization of goodwill and other intangibles                              |      |         |      |      |   |         | 5.79  |  |   |         | 4.56  | 
|                                                                                                                 |                                                                             |     
|                                                                                                                
|                                                                                                                 | Pro forma net income available for common shares                            |      | $       | 21.38 |      |   | $       | 29.89 |  |   | $       | 18.90 | 
|                                                                                                                 |                                                                             |     
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|Diluted earnings per share:                                                                                      |                                                                             |      |         |       |      |   |         |       |  |   |         |      
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                 | Before cumulative effect of change in accounting
    principle, as reported |      | $       | 22.61 |      |   | $       | 24.06 |  |   | $       | 14.32 | 
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                 | Cumulative effect of change in accounting
    principle                     |      |         | (1.27 | )    |   |         |      |  |   |         |      | 
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                 | Amortization of goodwill and other intangibles                              |      |         |      |      |   |         | 5.79  |  |   |         | 4.55  | 
|                                                                                                                 |                                                                             |     
|                                                                                                                
|                                                                                                                 | Pro forma net income available for common shares                            |      | $       | 21.34 |      |   | $       | 29.85 |  |   | $       | 18.87 | 
|                                                                                                                 |                                                                             |     

In accordance with SFAS 142, the Company has
reviewed its goodwill and other intangible assets and classified
them in three categories (goodwill, indefinite-lived intangible
assets and amortized intangible assets). The Companys
intangible assets with an indefinite life are from franchise
agreements at its cable division. Amortized intangible assets
are primarily non-compete agreements, with amortization periods
up to five years. The Companys amortized intangible assets
increased $1.4 million in 2002 due to acquisitions.
Amortization expense was $655,000 in 2002, and is estimated to
be less than $1 million in each of the next five years.

The Companys goodwill and other intangible
assets as of December 29, 2002 and December 30, 2001
were as follows (in thousands):

|      |                                    |       |           |             |              |   |         |         |  |   |           |           | 
|----- | ---------------------------------- | ----- | --------- | ----------- | ------------ | - | ------- | ------- |  | - | --------- | --------- | 
|      |                                    |       |           | Accumulated |              |   |        
|      |                                    | Gross |           |             | Amortization |   | Net     |        
|     
|     
|2002: |                                    |       |           |             |              |   |         |         |  |   |           |          
|     
|     
|     
|     
|      | Goodwill                           |       | $         | 1,069,263   |              |   | $       | 298,402 |  |   | $         | 770,861   | 
|     
|     
|     
|     
|      | Indefinite-lived intangible assets |       |           | 646,225     |              |   |         | 163,806 |  |   |           | 482,419   | 
|     
|     
|     
|     
|      | Amortized intangible assets        |       |           | 3,525       |              |   |         | 1,372   |  |   |           | 2,153     | 
|      |                                    |      
|     
|      |                                    | $     | 1,719,013 |             |              | $ | 463,580 |         |  | $ | 1,255,433 |          
|      |                                    |      
|     
|     
|     
|     
|2001: |                                    |       |           |             |              |   |         |         |  |   |           |          
|     
|     
|     
|     
|      | Goodwill                           |       | $         | 1,033,956   |              |   | $       | 279,402 |  |   | $         | 754,554   | 
|     
|     
|     
|     
|      | Indefinite-lived intangible assets |       |           | 614,565     |              |   |         | 163,806 |  |   |           | 450,759   | 
|     
|     
|     
|     
|      | Amortized intangible assets        |       |           | 2,165       |              |   |         | 717     |  |   |           | 1,448     | 
|      |                                    |      
|      |                                    |       | $         | 1,650,686   |              |   | $       | 443,925 |  |   | $         | 1,206,761 | 
|      |                                    |      



52




---



##### 



Activity related to the Companys goodwill
and intangible assets during 2002 was as follows (in thousands):

|                                  |                   |            |   |              |  |            |   |            |  |           |   |         |   |  |   |         |   |  |   |         |  |  |   |         |  
|--------------------------------- | ----------------- | ---------- | - | ------------ |  | ---------- | - | ---------- |  | --------- | - | ------- | - |  | - | ------- | - |  | - | ------- |  |  | - | ------- | -
|                                  |                   | Newspaper  |   | Television   |  | Magazine   |   | Cable      |  |           |   |        
|                                  |                   | Publishing |   | Broadcasting |  | Publishing |   | Television |  | Education |   | Total  
|                                 
|                                 
|Goodwill, net                     |                   |            |   |              |  |            |   |            |  |           |   |         |   |  |   |         |   |  |   |         |  |  |   |        
|                                 
|                                 
|                                 
|                                 
|                                  | Beginning of year |            | $ | 72,738       |  |            | $ | 203,165    |  |           | $ | 88,556  |   |  | $ | 88,197  |   |  | $ | 301,898 |  |  | $ | 754,554 |  
|                                 
|                                 
|                                 
|                                 
|                                  | Acquisitions      |            |   |              |  |            |   |            |  |           |   |         |   |  |   |         |   |  |   | 37,838  |  |  |   | 37,838  |  
|                                 
|                                 
|                                 
|                                 
|                                  | Disposition       |            |   |              |  |            |   |            |  |           |   |         |   |  |   | (2,531  | ) |  |   |         |  |  |   | (2,531  | )
|                                 
|                                 
|                                 
|                                 
|                                  | Impairment        |            |   |              |  |            |   |            |  |           |   | (19,000 | ) |  |   |         |   |  |   |         |  |  |   | (19,000 | )
|                                  |                   |           
|                                 
|                                  | End of year       |            | $ | 72,738       |  |            | $ | 203,165    |  |           | $ | 69,556  |   |  | $ | 85,666  |   |  | $ | 339,736 |  |  | $ | 770,861 |  
|                                  |                   |           
|                                 
|                                 
|                                 
|                                 
|Indefinite-lived intangibles, net |                   |            |   |              |  |            |   |            |  |           |   |         |   |  |   |         |   |  |   |         |  |  |   |        
|                                 
|                                 
|                                 
|                                 
|                                  | Beginning of year |            |   |              |  |            |   |            |  |           |   |         |   |  | $ | 450,759 |   |  |   |         |  |  | $ | 450,759 |  
|                                 
|                                 
|                                 
|                                 
|                                  | Acquisitions      |            |   |              |  |            |   |            |  |           |   |         |   |  |   | 32,160  |   |  |   |         |  |  |   | 32,160  |  
|                                 
|                                 
|                                 
|                                 
|                                  | Disposition       |            |   |              |  |            |   |            |  |           |   |         |   |  |   | (500    | ) |  |   |         |  |  |   | (500    | )
|                                 
|                                 
|                                 
|                                 
|                                  | Impairment        |            |   |              |  |            |   |            |  |           |   |         |   |  |   |        |   |  |   |         |  |  |   |        |  
|                                  |                   |           
|                                 
|                                  | End of year       |            |   |              |  |            |   |            |  |           |   |         |   |  | $ | 482,419 |   |  |   |         |  |  | $ | 482,419 |  
|                                  |                   |           

L. CONTINGENCIES

The Company and its subsidiaries are parties to
various civil lawsuits that have arisen in the ordinary course
of their businesses, including actions for libel and invasion of
privacy, and also to an antitrust lawsuit related to the
acquisition by a subsidiary of a group of community newspapers
in 2001. Management does not believe that any litigation pending
against the Company will have a material adverse effect on its
business or financial condition.

The Companys education division derives a
portion of its net revenues from financial aid received by its
students under Title IV programs administered by the United
States Department of Education pursuant to the Federal Higher
Education Act of 1965 (HEA), as amended. In order to
participate in Title IV Programs, the Company must comply
with complex standards set forth in the HEA and the regulations
promulgated thereunder (the Regulations). The
failure to comply with the requirements of HEA or the
Regulations could result in the restriction or loss of the
ability to participate in Title IV Programs and subject the
Company to financial penalties. For the years ended
December 29, 2002, December 30, 2001, and
December 31, 2000, approximately $161.7 million,
$101.5 million and $35.0 million, respectively, of the
Companys education division revenues were derived from
financial aid received by students under Title IV Programs.
These revenues were earned and recognized by Quest following the
Companys acquisition of Quest in August 2000. Management
believes that the Companys education division schools that
participate in Title IV Programs are in material compliance
with the standards set forth in the HEA and the Regulations.

M. BUSINESS SEGMENTS

The Company operates principally in four areas of
the media business: newspaper publishing, television
broadcasting, magazine publishing and cable television. Through
its subsidiary Kaplan, Inc., the Company also provides
educational services for individuals, schools and businesses.

Newspaper operations involve the publication of
newspapers in the Washington, D.C. area and Everett, Washington;
newsprint warehousing and recycling facilities; and the
Companys electronic media publishing business (primarily
washingtonpost.com).

Magazine operations consist principally of the
publication of a weekly news magazine, Newsweek, which has one
domestic and three international editions, the publication of a
travel magazine and the publication of business periodicals for
the computer services industry and the Washington-area
technology community.

Revenues from both newspaper and magazine
publishing operations are derived from advertising and, to a
lesser extent, from circulation.

Broadcast operations are conducted through six
VHF television stations. All stations are network affiliated
(except for WJXT in Jacksonville, Florida) with revenues derived
primarily from sales of advertising time.

Cable television operations consist of cable
systems offering basic cable, digital cable, pay television,
cable modem and other services to approximately 718,000
subscribers in 19 midwestern, western and southern states. The
principal source of revenues is monthly subscription fees
charged for services.

Education products and services are provided
through the Companys wholly-owned subsidiary Kaplan, Inc.
Kaplans businesses include supplemental education
services, which is made up of test preparation and admissions,
providing test preparation services for college and graduate
school entrance exams; Kaplan Professional, providing education
and career services to business people and other professionals;
and Score!, offering multimedia learning and private tutoring to
children and educational resources to parents. Kaplans
businesses also include higher education services, which
includes all of Kaplans post-secondary education
businesses, including the fixed facility colleges that were
formerly part of Quest Education, which offers Bachelors
degrees, Associates degrees and diploma programs primarily
in the fields of health care, business and information
technology; and online post-secondary and career programs
(various distance-learning businesses, including
kaplancollege.com).

Corporate office includes the expenses of the
Companys corporate office.

Income from operations is the excess of operating
revenues over operating expenses. In computing income from
operations by segment, the effects of equity in earnings of
affiliates, interest income, interest expense, other
non-operating income and expense items, and income taxes are not
included.

Identifiable assets by segment are those assets
used in the Companys operations in each business segment.
Investments in marketable equity securities and investments in
affiliates are discussed in Note C.



53




---



##### 



|               |                                                |                            |   |              |   |            |   |            |  |           |   |           |  |              |   |           |   |  |   |         |   |  |   |         |   |  |   |           |           | 
|-------------- | ---------------------------------------------- | -------------------------- | - | ------------ | - | ---------- | - | ---------- |  | --------- | - | --------- |  | ------------ | - | --------- | - |  | - | ------- | - |  | - | ------- | - |  | - | --------- | --------- | 
|               |                                                | Newspaper                  |   | Television   |   | Magazine   |   | Cable      |  |           |   | Corporate |  |             
|(in thousands) |                                                | Publishing                 |   | Broadcasting |   | Publishing |   | Television |  | Education |   | Office    |  | Consolidated
|              
|              
|2002           |                                                |                            |   |              |   |            |   |            |  |           |   |           |  |              |   |           |   |  |   |         |   |  |   |         |   |  |   |          
|              
|              
|              
|              
|               | Operating revenues                             |                            | $ | 841,984      |   |            | $ | 343,552    |  |           | $ | 349,050   |  |              | $ | 428,492   |   |  | $ | 621,125 |   |  | $ |        |   |  | $ | 2,584,203 |          
|              
|              
|              
|              
|               | Income (loss) from operations                  |                            | $ | 109,006      |   |            | $ | 168,826    |  |           | $ | 25,728    |  |              | $ | 80,937    |   |  | $ | 20,512  |   |  | $ | (27,419 | ) |  | $ | 377,590   |          
|              
|              
|              
|              
|               | Equity in losses of affiliates                 |                            |   |              |   |            |   |            |  |           |   |           |  |              |   |           |   |  |   |         |   |  |   |         |   |  |   | (19,308   | )        
|              
|              
|              
|              
|               | Interest expense, net                          |                            |   |              |   |            |   |            |  |           |   |           |  |              |   |           |   |  |   |         |   |  |   |         |   |  |   | (33,487   | )        
|              
|              
|              
|              
|               | Other income, net                              |                            |   |              |   |            |   |            |  |           |   |           |  |              |   |           |   |  |   |         |   |  |   |         |   |  |   | 28,873    |          
|               |                                                |                           
|              
|               |                                                | Income before income taxes |   |              |   |            |   |            |  |           |   |           |  |              |   |           |   |  |   |         |   |  |   |         |   |  |   | $         | 353,668   | 
|               |                                                |                           
|               | Identifiable assets                            |                            | $ | 690,197      |   |            | $ | 413,663    |  |           | $ | 488,562   |  |              | $ | 1,142,995 |   |  | $ | 542,251 |   |  | $ | 18,990  |   |  | $ | 3,296,658 |          
|              
|              
|              
|              
|               | Investments in marketable equity securities    |                            |   |              |   |            |   |            |  |           |   |           |  |              |   |           |   |  |   |         |   |  |   |         |   |  |   | 216,533   |          
|              
|              
|              
|              
|               | Investments in affiliates                      |                            |   |              |   |            |   |            |  |           |   |           |  |              |   |           |   |  |   |         |   |  |   |         |   |  |   | 70,703    |          
|               |                                                |                           
|              
|               |                                                | Total assets               |   |              |   |            |   |            |  |           |   |           |  |              |   |           |   |  |   |         |   |  |   |         |   |  |   | $         | 3,583,894 | 
|               |                                                |                           
|               | Depreciation of property, plant and equipment  |                            | $ | 42,961       |   |            | $ | 11,187     |  |           | $ | 4,124     |  |              | $ | 88,751    |   |  | $ | 24,885  |   |  | $ |        |   |  | $ | 171,908   |          
|              
|              
|              
|              
|               | Amortization expense                           |                            | $ | 15           |   |            | $ |           |  |           | $ |          |  |              | $ | 155       |   |  | $ | 485     |   |  | $ |        |   |  | $ | 655       |          
|              
|              
|              
|              
|               | Pension credit (expense)                       |                            | $ | 18,902       |   |            | $ | 4,730      |  |           | $ | 23,814    |  |              | $ | (814      | ) |  | $ | (1,186  | ) |  | $ |        |   |  | $ | 45,446    |          
|              
|              
|              
|              
|               | Kaplan stock-based incentive compensation      |                            |   |              |   |            |   |            |  |           |   |           |  |              |   |           |   |  | $ | 34,531  |   |  |   |         |   |  | $ | 34,531    |          
|              
|              
|              
|              
|               | Capital expenditures                           |                            | $ | 27,280       |   |            | $ | 8,784      |  |           | $ | 1,672     |  |              | $ | 92,499    |   |  | $ | 22,757  |   |  | $ |        |   |  | $ | 152,992   |          
|              
|              
|              
|              
|2001           |                                                |                            |   |              |   |            |   |            |  |           |   |           |  |              |   |           |   |  |   |         |   |  |   |         |   |  |   |          
|              
|              
|              
|              
|               | Operating revenues                             |                            | $ | 842,721      |   |            | $ | 314,010    |  |           | $ | 374,575   |  |              | $ | 386,037   |   |  | $ | 493,681 |   |  | $ |        |   |  | $ | 2,411,024 |          
|              
|              
|              
|              
|               | Income (loss) from operations                  |                            | $ | 84,744       |   |            | $ | 131,847    |  |           | $ | 25,306    |  |              | $ | 32,237    |   |  | $ | (28,337 | ) |  | $ | (25,865 | ) |  | $ | 219,932   |          
|              
|              
|              
|              
|               | Equity in losses of affiliates                 |                            |   |              |   |            |   |            |  |           |   |           |  |              |   |           |   |  |   |         |   |  |   |         |   |  |   | (68,659   | )        
|              
|              
|              
|              
|               | Interest expense, net                          |                            |   |              |   |            |   |            |  |           |   |           |  |              |   |           |   |  |   |         |   |  |   |         |   |  |   | (47,473   | )        
|              
|              
|              
|              
|               | Other income, net                              |                            |   |              |   |            |   |            |  |           |   |           |  |              |   |           |   |  |   |         |   |  |   |         |   |  |   | 283,739   |          
|               |                                                |                           
|              
|               |                                                | Income before income taxes |   |              |   |            |   |            |  |           |   |           |  |              |   |           |   |  |   |         |   |  |   |         |   |  |   | $         | 387,539   | 
|               |                                                |                           
|               | Pro forma income (loss) from
    operations(1) |                            | $ | 88,592       |   |            | $ | 145,982    |  |           | $ | 31,975    |  |              | $ | 70,634    |   |  | $ | (13,061 | ) |  | $ | (25,865 | ) |  | $ | 298,257   |          
|              
|              
|              
|              
|               | Identifiable assets                            |                            | $ | 703,947      |   |            | $ | 419,246    |  |           | $ | 486,804   |  |              | $ | 1,117,426 |   |  | $ | 472,988 |   |  | $ | 42,346  |   |  | $ | 3,242,757 |          
|              
|              
|              
|              
|               | Investments in marketable equity securities    |                            |   |              |   |            |   |            |  |           |   |           |  |              |   |           |   |  |   |         |   |  |   |         |   |  |   | 235,405   |          
|              
|              
|              
|              
|               | Investments in affiliates                      |                            |   |              |   |            |   |            |  |           |   |           |  |              |   |           |   |  |   |         |   |  |   |         |   |  |   | 80,936    |          
|               |                                                |                           
|              
|               |                                                | Total assets               |   |              |   |            |   |            |  |           |   |           |  |              |   |           |   |  |   |         |   |  |   |         |   |  |   | $         | 3,559,098 | 
|               |                                                |                           
|               | Depreciation of property, plant and equipment  |                            | $ | 37,862       |   |            | $ | 11,932     |  |           | $ | 4,654     |  |              | $ | 64,505    |   |  | $ | 19,347  |   |  | $ |        |   |  | $ | 138,300   |          
|              
|              
|              
|              
|               | Amortization expense                           |                            | $ | 3,864        |   |            | $ | 14,135     |  |           | $ | 6,669     |  |              | $ | 38,553    |   |  | $ | 15,712  |   |  | $ |        |   |  | $ | 78,933    |          
|              
|              
|              
|              
|               | Pension credit (expense)                       |                            | $ | 25,197       |   |            | $ | 6,263      |  |           | $ | 44,989    |  |              | $ | (638      | ) |  | $ | (847    | ) |  | $ | (1,363  | ) |  | $ | 73,601    |          
|              
|              
|              
|              
|               | Kaplan stock-based incentive compensation      |                            |   |              |   |            |   |            |  |           |   |           |  |              |   |           |   |  | $ | 25,302  |   |  |   |         |   |  | $ | 25,302    |          
|              
|              
|              
|              
|               | Capital expenditures                           |                            | $ | 32,551       |   |            | $ | 11,032     |  |           | $ | 1,737     |  |              | $ | 166,887   |   |  | $ | 12,020  |   |  | $ |        |   |  | $ | 224,227   |          
|              
|              
|              
|              
|2000           |                                                |                            |   |              |   |            |   |            |  |           |   |           |  |              |   |           |   |  |   |         |   |  |   |         |   |  |   |          
|              
|              
|              
|              
|               | Operating revenues                             |                            | $ | 918,234      |   |            | $ | 364,758    |  |           | $ | 413,904   |  |              | $ | 358,916   |   |  | $ | 353,821 |   |  | $ |        |   |  | $ | 2,409,633 |          
|              
|              
|              
|              
|               | Income (loss) from operations                  |                            | $ | 114,435      |   |            | $ | 177,396    |  |           | $ | 49,119    |  |              | $ | 65,967    |   |  | $ | (41,846 | ) |  | $ | (25,189 | ) |  | $ | 339,882   |          
|              
|              
|              
|              
|               | Equity in losses of affiliates                 |                            |   |              |   |            |   |            |  |           |   |           |  |              |   |           |   |  |   |         |   |  |   |         |   |  |   | (36,466   | )        
|              
|              
|              
|              
|               | Interest expense, net                          |                            |   |              |   |            |   |            |  |           |   |           |  |              |   |           |   |  |   |         |   |  |   |         |   |  |   | (53,764   | )        
|              
|              
|              
|              
|               | Other expense, net                             |                            |   |              |   |            |   |            |  |           |   |           |  |              |   |           |   |  |   |         |   |  |   |         |   |  |   | (19,782   | )        
|               |                                                |                           
|              
|               |                                                | Income before income taxes |   |              |   |            |   |            |  |           |   |           |  |              |   |           |   |  |   |         |   |  |   |         |   |  |   | $         | 229,870   | 
|               |                                                |                           
|               | Pro forma income (loss) from
    operations(1) |                            | $ | 116,023      |   |            | $ | 191,531    |  |           | $ | 55,877    |  |              | $ | 95,906    |   |  | $ | (32,012 | ) |  | $ | (25,189 | ) |  | $ | 402,136   |          
|              
|              
|              
|              
|               | Identifiable assets                            |                            | $ | 684,908      |   |            | $ | 430,444    |  |           | $ | 452,453   |  |              | $ | 757,083   |   |  | $ | 482,014 |   |  | $ | 41,075  |   |  | $ | 2,847,977 |          
|              
|              
|              
|              
|               | Investments in marketable equity securities    |                            |   |              |   |            |   |            |  |           |   |           |  |              |   |           |   |  |   |         |   |  |   |         |   |  |   | 221,137   |          
|              
|              
|              
|              
|               | Investments in affiliates                      |                            |   |              |   |            |   |            |  |           |   |           |  |              |   |           |   |  |   |         |   |  |   |         |   |  |   | 131,629   |          
|               |                                                |                           
|              
|               |                                                | Total assets               |   |              |   |            |   |            |  |           |   |           |  |              |   |           |   |  |   |         |   |  |   |         |   |  |   | $         | 3,200,743 | 
|               |                                                |                           
|               | Depreciation of property, plant and equipment  |                            | $ | 38,579       |   |            | $ | 12,991     |  |           | $ | 5,059     |  |              | $ | 47,670    |   |  | $ | 13,649  |   |  | $ |        |   |  | $ | 117,948   |          
|              
|              
|              
|              
|               | Amortization expense                           |                            | $ | 1,588        |   |            | $ | 14,135     |  |           | $ | 6,758     |  |              | $ | 30,069    |   |  | $ | 10,084  |   |  | $ |        |   |  | $ | 62,634    |          
|              
|              
|              
|              
|               | Pension (expense) credit                       |                            | $ | (5,579       | ) |            | $ | 5,767      |  |           | $ | 37,341    |  |              | $ | (599      | ) |  | $ | (667    | ) |  | $ |        |   |  | $ | 36,263    |          
|              
|              
|              
|              
|               | Kaplan stock-based incentive compensation      |                            |   |              |   |            |   |            |  |           |   |           |  |              |   |           |   |  | $ | 6,000   |   |  |   |         |   |  | $ | 6,000     |          
|              
|              
|              
|              
|               | Capital expenditures                           |                            | $ | 33,117       |   |            | $ | 11,672     |  |           | $ | 1,858     |  |              | $ | 96,167    |   |  | $ | 29,569  |   |  | $ |        |   |  | $ | 172,383   |          

(1) 2001 and 2000 results, adjusted to
exclude amortization of goodwill and indefinite-lived intangible
assets no longer amortized under SFAS 142.



54




---



##### 



N. SUMMARY OF QUARTERLY OPERATING RESULTS
AND COMPREHENSIVE INCOME (UNAUDITED)

Quarterly results of operations and comprehensive
income for the years ended December 29, 2002 and
December 30, 2001 are as follows (in thousands, except per
share amounts):

|                                 |                                                                                                                      |                                                |         |         |         |         |         |         |         |   |         |        |         |   |         |         |         |  
|-------------------------------- | -------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------- | ------- | ------- | ------- | ------- | ------- | ------- | ------- | - | ------- | ------ | ------- | - | ------- | ------- | ------- | -
|                                 |                                                                                                                      | First                                          |         | Second  |         | Third   |         | Fourth 
|                                 |                                                                                                                      | Quarter                                        |         | Quarter |         | Quarter |         | Quarter
|                                
|                                
|2002 Quarterly Operating Results |                                                                                                                      |                                                |         |         |         |         |         |         |         |   |         |        |         |   |         |        
|                                 | Operating revenues                                                                                                   |                                                |         |         |         |         |         |         |         |   |         |        |         |   |         |         |        
|                                
|                                
|                                
|                                
|                                 |                                                                                                                      | Advertising                                    |         | $       | 273,564 |         |         | $       | 316,102 |   |         | $      | 292,523 |   |         | $       | 344,645 |  
|                                
|                                
|                                
|                                
|                                 |                                                                                                                      | Circulation and subscriber                     |         |         | 161,298 |         |         |         | 168,614 |   |         |        | 171,535 |   |         |         | 173,689 |  
|                                
|                                
|                                
|                                
|                                 |                                                                                                                      | Education                                      |         |         | 146,929 |         |         |         | 149,695 |   |         |        | 160,454 |   |         |         | 164,047 |  
|                                
|                                
|                                
|                                
|                                 |                                                                                                                      | Other                                          |         |         | 18,531  |         |         |         | 13,292  |   |         |        | 15,781  |   |         |         | 13,504  |  
|                                 |                                                                                                                      |                                               
|                                
|                                 |                                                                                                                      |                                                | 600,322 |         |         |         | 647,703 |         |         |   | 640,293 |        |         |   | 695,885 |        
|                                 |                                                                                                                      |                                               
|                                 | Operating costs and expenses                                                                                         |                                                |         |         |         |         |         |         |         |   |         |        |         |   |         |         |        
|                                
|                                
|                                
|                                
|                                 |                                                                                                                      | Operating                                      |         |         | 333,239 |         |         |         | 335,443 |   |         |        | 342,411 |   |         |         | 358,862 |  
|                                
|                                
|                                
|                                
|                                 |                                                                                                                      | Selling, general and administrative            |         |         | 176,866 |         |         |         | 160,387 |   |         |        | 162,642 |   |         |         | 164,200 |  
|                                
|                                
|                                
|                                
|                                 |                                                                                                                      | Depreciation of property, plant and equipment  |         |         | 41,173  |         |         |         | 41,286  |   |         |        | 45,808  |   |         |         | 43,641  |  
|                                
|                                
|                                
|                                
|                                 |                                                                                                                      | Amortization of goodwill and other intangibles |         |         | 152     |         |         |         | 159     |   |         |        | 172     |   |         |         | 172     |  
|                                 |                                                                                                                      |                                               
|                                
|                                 |                                                                                                                      |                                                | 551,430 |         |         |         | 537,275 |         |         |   | 551,033 |        |         |   | 566,875 |        
|                                 |                                                                                                                      |                                               
|                                 | Income from operations                                                                                               |                                                |         | 48,892  |         |         |         | 110,428 |         |   |         | 89,260 |         |   |         | 129,010 |        
|                                
|                                
|                                
|                                
|                                 |                                                                                                                      | Equity in losses of affiliates                 |         |         | (6,506  | )       |         |         | (9,183  | ) |         |        | (1,254  | ) |         |         | (2,366  | )
|                                
|                                
|                                
|                                
|                                 |                                                                                                                      | Interest income                                |         |         | 133     |         |         |         | 59      |   |         |        | 69      |   |         |         | 71      |  
|                                
|                                
|                                
|                                
|                                 |                                                                                                                      | Interest expense                               |         |         | (8,867  | )       |         |         | (8,797  | ) |         |        | (8,717  | ) |         |         | (7,438  | )
|                                
|                                
|                                
|                                
|                                 |                                                                                                                      | Other income (expense), net                    |         |         | 6,454   |         |         |         | (5,963  | ) |         |        | 1,115   |   |         |         | 27,268  |  
|                                 |                                                                                                                      |                                               
|                                 | Income before income taxes and cumulative effect
    of change in accounting principle                               |                                                |         | 40,106  |         |         |         | 86,544  |         |   |         | 80,473 |         |   |         | 146,545 |        
|                                
|                                
|                                
|                                
|                                 | Provision for income taxes                                                                                           |                                                |         | 16,400  |         |         |         | 35,400  |         |   |         | 32,700 |         |   |         | 52,800  |        
|                                 |                                                                                                                      |                                               
|                                 | Income before cumulative effect of change in
    accounting principle                                                |                                                |         | 23,706  |         |         |         | 51,144  |         |   |         | 47,773 |         |   |         | 93,745  |        
|                                
|                                
|                                
|                                
|                                 | Cumulative effect of change in method of
    accounting for goodwill and other intangible assets,net of
    taxes(1) |                                                |         | (12,100 | )       |         |         |        |         |   |         |       |         |   |         |        |        
|                                 |                                                                                                                      |                                               
|                                 | Net income                                                                                                           |                                                |         | 11,606  |         |         |         | 51,144  |         |   |         | 47,773 |         |   |         | 93,745  |        
|                                
|                                
|                                
|                                
|                                 | Redeemable preferred stock dividends                                                                                 |                                                |         | (525    | )       |         |         | (259    | )       |   |         | (249   | )       |   |         |        |        
|                                 |                                                                                                                      |                                               
|                                
|                                 | Net income available for common shares                                                                               |                                                | $       | 11,081  |         |         | $       | 50,885  |         |   | $       | 47,524 |         |   | $       | 93,745  |        
|                                 |                                                                                                                      |                                               
|                                 | Basic earnings per common share:                                                                                     |                                                |         |         |         |         |         |         |         |   |         |        |         |   |         |         |        
|                                
|                                
|                                
|                                
|                                 | Before cumulative effect of change in accounting
    principle                                                       |                                                | $       | 2.44    |         |         | $       | 5.35    |         |   | $       | 5.00   |         |   | $       | 9.86    |        
|                                
|                                
|                                
|                                
|                                 | Cumulative effect of change in accounting
    principle                                                              |                                                |         | (1.27   | )       |         |         |        |         |   |         |       |         |   |         |        |        
|                                 |                                                                                                                      |                                               
|                                
|                                 | Net income available for common shares                                                                               |                                                | $       | 1.17    |         |         | $       | 5.35    |         |   | $       | 5.00   |         |   | $       | 9.86    |        
|                                 |                                                                                                                      |                                               
|                                 | Diluted earnings per common share:                                                                                   |                                                |         |         |         |         |         |         |         |   |         |        |         |   |         |         |        
|                                
|                                
|                                
|                                
|                                 | Before cumulative effect of change in accounting
    principle                                                       |                                                | $       | 2.43    |         |         | $       | 5.34    |         |   | $       | 4.99   |         |   | $       | 9.83    |        
|                                
|                                
|                                
|                                
|                                 | Cumulative effect of change in accounting
    principle                                                              |                                                |         | (1.27   | )       |         |         |        |         |   |         |       |         |   |         |        |        
|                                 |                                                                                                                      |                                               
|                                
|                                 | Net income available for common shares                                                                               |                                                | $       | 1.16    |         |         | $       | 5.34    |         |   | $       | 4.99   |         |   | $       | 9.83    |        
|                                 |                                                                                                                      |                                               
|                                 | Basic average number of common shares outstanding                                                                    |                                                |         | 9,498   |         |         |         | 9,503   |         |   |         | 9,506  |         |   |         | 9,509   |        
|                                
|                                
|                                
|                                
|                                 | Diluted average number of common shares
    outstanding                                                              |                                                |         | 9,512   |         |         |         | 9,521   |         |   |         | 9,523  |         |   |         | 9,537   |        
|                                
|                                
|                                
|                                
|                                 | 2002 Quarterly Comprehensive Income                                                                                  |                                                | $       | 3,380   |         |         | $       | 47,493  |         |   | $       | 58,333 |         |   | $       | 90,861  |        
|                                 |                                                                                                                      |                                               

The sum of the four quarters may not necessarily
be equal to the annual amounts reported in the Consolidated
Statements of Income due to rounding.

(1) Cumulative effect charge presented in
the first quarter as required by SFAS 142.




55




---



##### 



|                                         |                                                                |                                                |         |         |         |         |         |         |         |   |         |        |         |   |         |        |         |  
|---------------------------------------- | -------------------------------------------------------------- | ---------------------------------------------- | ------- | ------- | ------- | ------- | ------- | ------- | ------- | - | ------- | ------ | ------- | - | ------- | ------ | ------- | -
|                                         |                                                                | First                                          |         | Second  |         | Third   |         | Fourth 
|(in thousands, except per share amounts) |                                                                | Quarter                                        |         | Quarter |         | Quarter |         | Quarter
|                                        
|                                        
|2001 Quarterly Operating Results         |                                                                |                                                |         |         |         |         |         |         |         |   |         |        |         |   |         |       
|                                         | Operating revenues                                             |                                                |         |         |         |         |         |         |         |   |         |        |         |   |         |        |        
|                                        
|                                        
|                                        
|                                        
|                                         |                                                                | Advertising                                    |         | $       | 297,974 |         |         | $       | 312,881 |   |         | $      | 277,425 |   |         | $      | 321,047 |  
|                                        
|                                        
|                                        
|                                        
|                                         |                                                                | Circulation and subscriber                     |         |         | 148,016 |         |         |         | 161,260 |   |         |        | 174,716 |   |         |        | 169,036 |  
|                                        
|                                        
|                                        
|                                        
|                                         |                                                                | Education                                      |         |         | 121,341 |         |         |         | 119,442 |   |         |        | 127,159 |   |         |        | 125,329 |  
|                                        
|                                        
|                                        
|                                        
|                                         |                                                                | Other                                          |         |         | 19,068  |         |         |         | 10,326  |   |         |        | 13,007  |   |         |        | 12,997  |  
|                                         |                                                                |                                               
|                                        
|                                         |                                                                |                                                | 586,399 |         |         |         | 603,909 |         |         |   | 592,307 |        |         |   | 628,409 |       
|                                         |                                                                |                                               
|                                         | Operating costs and expenses                                   |                                                |         |         |         |         |         |         |         |   |         |        |         |   |         |        |        
|                                        
|                                        
|                                        
|                                        
|                                         |                                                                | Operating                                      |         |         | 343,416 |         |         |         | 340,114 |   |         |        | 345,567 |   |         |        | 358,003 |  
|                                        
|                                        
|                                        
|                                        
|                                         |                                                                | Selling, general and administrative            |         |         | 147,915 |         |         |         | 151,409 |   |         |        | 144,954 |   |         |        | 142,480 |  
|                                        
|                                        
|                                        
|                                        
|                                         |                                                                | Depreciation of property, plant and equipment  |         |         | 34,632  |         |         |         | 35,867  |   |         |        | 34,765  |   |         |        | 33,036  |  
|                                        
|                                        
|                                        
|                                        
|                                         |                                                                | Amortization of goodwill and other intangibles |         |         | 17,192  |         |         |         | 19,926  |   |         |        | 20,068  |   |         |        | 21,748  |  
|                                         |                                                                |                                               
|                                        
|                                         |                                                                |                                                | 543,155 |         |         |         | 547,316 |         |         |   | 545,354 |        |         |   | 555,267 |       
|                                         |                                                                |                                               
|                                         | Income from operations                                         |                                                |         | 43,244  |         |         |         | 56,593  |         |   |         | 46,953 |         |   |         | 73,141 |        
|                                        
|                                        
|                                        
|                                        
|                                         |                                                                | Equity in losses of affiliates                 |         |         | (12,461 | )       |         |         | (6,641  | ) |         |        | (26,535 | ) |         |        | (23,023 | )
|                                        
|                                        
|                                        
|                                        
|                                         |                                                                | Interest income                                |         |         | 325     |         |         |         | 1,047   |   |         |        | 226     |   |         |        | 570     |  
|                                        
|                                        
|                                        
|                                        
|                                         |                                                                | Interest expense                               |         |         | (14,624 | )       |         |         | (13,240 | ) |         |        | (11,861 | ) |         |        | (9,914  | )
|                                        
|                                        
|                                        
|                                        
|                                         |                                                                | Other income (expense), net                    |         |         | 308,769 |         |         |         | (10,717 | ) |         |        | (4,365  | ) |         |        | (9,949  | )
|                                         |                                                                |                                               
|                                        
|                                         | Income before income taxes                                     |                                                |         | 325,253 |         |         |         | 27,042  |         |   |         | 4,418  |         |   |         | 30,825 |        
|                                        
|                                        
|                                        
|                                        
|                                         | Provision for income taxes                                     |                                                |         | 126,200 |         |         |         | 12,550  |         |   |         | 2,850  |         |   |         | 16,300 |        
|                                         |                                                                |                                               
|                                        
|                                         | Net income                                                     |                                                |         | 199,053 |         |         |         | 14,492  |         |   |         | 1,568  |         |   |         | 14,525 |        
|                                        
|                                        
|                                        
|                                        
|                                         | Redeemable preferred stock dividends                           |                                                |         | (526    | )       |         |         | (263    | )       |   |         | (263   | )       |   |         |       |        
|                                         |                                                                |                                               
|                                        
|                                         | Net income available for common shares                         |                                                |         | 198,527 |         |         |         | 14,229  |         |   |         | 1,305  |         |   |         | 14,525 |        
|                                         |                                                                |                                               
|                                         | Basic earnings per common share                                |                                                | $       | 20.94   |         |         | $       | 1.50    |         |   | $       | 0.14   |         |   | $       | 1.53   |        
|                                         |                                                                |                                               
|                                         | Diluted earnings per common share                              |                                                | $       | 20.90   |         |         | $       | 1.50    |         |   | $       | 0.14   |         |   | $       | 1.53   |        
|                                         |                                                                |                                               
|                                         | Basic average number of common shares outstanding              |                                                |         | 9,479   |         |         |         | 9,485   |         |   |         | 9,489  |         |   |         | 9,492  |        
|                                        
|                                        
|                                        
|                                        
|                                         | Diluted average number of common shares
    outstanding        |                                                |         | 9,499   |         |         |         | 9,502   |         |   |         | 9,502  |         |   |         | 9,501  |        
|                                        
|                                        
|                                        
|                                        
|                                         | 2001 Quarterly Comprehensive Income (loss)                     |                                                | $       | 187,049 |         |         | $       | 25,860  |         |   | $       | (937   | )       |   | $       | 25,342 |        
|                                         |                                                                |                                               
|Pro forma results:(1)                    |                                                                |                                                |         |         |         |         |         |         |         |   |         |        |         |   |         |       
|                                        
|                                        
|                                        
|                                        
|                                         | Net income available for common shares, as
    reported        |                                                | $       | 198,527 |         |         | $       | 14,229  |         |   | $       | 1,305  |         |   | $       | 14,525 |        
|                                        
|                                        
|                                        
|                                        
|                                         | Amortization of goodwill and other intangibles,
    net of tax |                                                |         | 12,224  |         |         |         | 13,863  |         |   |         | 13,948 |         |   |         | 14,954 |        
|                                         |                                                                |                                               
|                                        
|                                         | Pro forma net income available for common shares               |                                                | $       | 210,751 |         |         | $       | 28,092  |         |   | $       | 15,253 |         |   | $       | 29,479 |        
|                                         |                                                                |                                               
|                                         | Basic earnings per share                                       |                                                | $       | 22.23   |         |         | $       | 2.96    |         |   | $       | 1.61   |         |   | $       | 3.11   |        
|                                        
|                                        
|                                        
|                                        
|                                         | Diluted earnings per share                                     |                                                | $       | 22.19   |         |         | $       | 2.96    |         |   | $       | 1.61   |         |   | $       | 3.10   |        

The sum of the four quarters may not necessarily
be equal to the annual amounts reported in the Consolidated
Statements of Income due to rounding.

(1) Quarterly 2001 results are adjusted to
exclude amortization of goodwill and indefinite-lived intangible
assets no longer amortized under SFAS 142.



56




---



##### 



SCHEDULE II

THE WASHINGTON POST COMPANY

SCHEDULE II  VALUATION AND
QUALIFYING ACCOUNTS

|                             |                                                              |             |            |            |  |            |             |            |  |   |             |            |  |   |            |            | 
|---------------------------- | ------------------------------------------------------------ | ----------- | ---------- | ---------- |  | ---------- | ----------- | ---------- |  | - | ----------- | ---------- |  | - | ---------- | ---------- | 
|                            
|                            
|Column A                     |                                                              | Column B    |            | Column C   |  | Column D   |             | Column E  
|                            
|                            
|                             |                                                              | Additions - |            |           
|                             |                                                              | Balance at  |            | Charged to |  |            |             | Balance at
|                             |                                                              | beginning   |            | costs and  |  |            |             | end of    
|Description                  |                                                              | of period   |            | expenses   |  | Deductions |             | period    
|                            
|                            
|Year Ended December 31, 2000 |                                                              |             |            |            |  |            |             |            |  |   |             |            |  |   |            |           
|                            
|                            
|                            
|                            
|                             | Allowance for doubtful accounts and returns                  |             | $          | 51,179,000 |  |            | $           | 74,540,000 |  |   | $           | 67,716,000 |  |   | $          | 58,003,000 | 
|                            
|                            
|                            
|                            
|                             | Allowance for advertising rate adjustments
    and discounts |             |            | 9,442,000  |  |            |             | 2,662,000  |  |   |             | 4,909,000  |  |   |            | 7,195,000  | 
|                             |                                                              |            
|                             |                                                              | $           | 60,621,000 |            |  | $          | 77,202,000  |            |  | $ | 72,625,000  |            |  | $ | 65,198,000 |           
|                             |                                                              |            
|Year Ended December 30, 2001 |                                                              |             |            |            |  |            |             |            |  |   |             |            |  |   |            |           
|                            
|                            
|                            
|                            
|                             | Allowance for doubtful accounts and returns                  |             | $          | 58,003,000 |  |            | $           | 98,655,000 |  |   | $           | 88,689,000 |  |   | $          | 67,969,000 | 
|                            
|                            
|                            
|                            
|                             | Allowance for advertising rate adjustments
    and discounts |             |            | 7,195,000  |  |            |             | 4,163,000  |  |   |             | 6,079,000  |  |   |            | 5,279,000  | 
|                             |                                                              |            
|                             |                                                              | $           | 65,198,000 |            |  | $          | 102,818,000 |            |  | $ | 94,768,000  |            |  | $ | 73,248,000 |           
|                             |                                                              |            
|Year Ended December 29, 2002 |                                                              |             |            |            |  |            |             |            |  |   |             |            |  |   |            |           
|                            
|                            
|                            
|                            
|                             | Allowance for doubtful accounts and returns                  |             | $          | 67,969,000 |  |            | $           | 91,091,000 |  |   | $           | 98,820,000 |  |   | $          | 60,240,000 | 
|                            
|                            
|                            
|                            
|                             | Allowance for advertising rate adjustments
    and discounts |             |            | 5,279,000  |  |            |             | 4,938,000  |  |   |             | 5,061,000  |  |   |            | 5,156,000  | 
|                             |                                                              |            
|                             |                                                              | $           | 73,248,000 |            |  | $          | 96,029,000  |            |  | $ | 103,881,000 |            |  | $ | 65,396,000 |           
|                             |                                                              |            



57




---



##### 



TEN-YEAR SUMMARY OF SELECTED HISTORICAL FINANCIAL DATA

See Notes to Consolidated Financial Statements for the summary of significant
accounting policies and additional information relative to the years 2000-2002.
Operating results prior to 2002 include amortization of goodwill and certain
other intangible assets that are no longer amortized under SFAS 142.



|                                         |                                                                                        |                                                                     |   |           |       |      |   |           |       |  |   |           |       | 
|---------------------------------------- | -------------------------------------------------------------------------------------- | ------------------------------------------------------------------- | - | --------- | ----- | ---- | - | --------- | ----- |  | - | --------- | ----- | 
|(in thousands, except per share amounts) |                                                                                        | 2002                                                                |   | 2001      |       | 2000
|                                        
|Results of Operations                    |                                                                                        |                                                                     |   |           |       |      |   |           |       |  |   |          
|                                         | Operating revenues(1)                                                                  |                                                                     | $ | 2,584,203 |       |      | $ | 2,411,024 |       |  | $ | 2,409,633 |      
|                                         | Income from operations                                                                 |                                                                     | $ | 377,590   |       |      | $ | 219,932   |       |  | $ | 339,882   |      
|                                         | Income before cumulative effect of changes in accounting principles                    |                                                                     | $ | 216,368   |       |      | $ | 229,639   |       |  | $ | 136,470   |      
|                                         | Cumulative effect of change in method of accounting for goodwill and other intangibles |                                                                     |   | (12,100   | )     |      |   |          |       |  |   |          |      
|                                         | Cumulative effect of change in method of accounting for income taxes                   |                                                                     |   |          |       |      |   |          |       |  |   |          |      
|                                         |                                                                                        |                                                                    
|                                         | Net income                                                                             |                                                                     | $ | 204,268   |       |      | $ | 229,639   |       |  | $ | 136,470   |      
|                                         |                                                                                        |                                                                    
|Per Share Amounts                        |                                                                                        |                                                                     |   |           |       |      |   |           |       |  |   |          
|                                         | Basic earnings per common share                                                        |                                                                     |   |           |       |      |   |           |       |  |   |           |      
|                                         |                                                                                        | Income before cumulative effect of changes in accounting principles |   | $         | 22.65 |      |   | $         | 24.10 |  |   | $         | 14.34 | 
|                                         |                                                                                        | Cumulative effect of changes in accounting principles               |   |           | (1.27 | )    |   |           |      |  |   |           |      | 
|                                         |                                                                                        |                                                                    
|                                         |                                                                                        | Net income available for common shares                              |   | $         | 21.38 |      |   | $         | 24.10 |  |   | $         | 14.34 | 
|                                         |                                                                                        |                                                                    
|                                         |                                                                                        | Basic average shares outstanding                                    |   |           | 9,504 |      |   |           | 9,486 |  |   |           | 9,445 | 
|                                         | Diluted earnings per share                                                             |                                                                     |   |           |       |      |   |           |       |  |   |           |      
|                                         |                                                                                        | Income before cumulative effect of changes in accounting principles |   | $         | 22.61 |      |   | $         | 24.06 |  |   | $         | 14.32 | 
|                                         |                                                                                        | Cumulative effect of changes in accounting principles               |   |           | (1.27 | )    |   |           |      |  |   |           |      | 
|                                         |                                                                                        |                                                                    
|                                         |                                                                                        | Net income available for common shares                              |   | $         | 21.34 |      |   | $         | 24.06 |  |   | $         | 14.32 | 
|                                         |                                                                                        |                                                                    
|                                         |                                                                                        | Diluted average shares outstanding                                  |   |           | 9,523 |      |   |           | 9,500 |  |   |           | 9,460 | 
|                                         | Cash dividends                                                                         |                                                                     | $ | 5.60      |       |      | $ | 5.60      |       |  | $ | 5.40      |      
|                                         | Common shareholders equity                                                            |                                                                     | $ | 193.18    |       |      | $ | 177.30    |       |  | $ | 156.55    |      
|Financial Position                       |                                                                                        |                                                                     |   |           |       |      |   |           |       |  |   |          
|                                         | Current assets                                                                         |                                                                     | $ | 382,955   |       |      | $ | 396,857   |       |  | $ | 405,067   |      
|                                         | Working capital (deficit)                                                              |                                                                     |   | (353,157  | )     |      |   | (37,233   | )     |  |   | (3,730    | )    
|                                         | Property, plant and equipment                                                          |                                                                     |   | 1,094,400 |       |      |   | 1,098,211 |       |  |   | 927,061   |      
|                                         | Total assets                                                                           |                                                                     |   | 3,583,894 |       |      |   | 3,559,098 |       |  |   | 3,200,743 |      
|                                         | Long-term debt                                                                         |                                                                     |   | 405,547   |       |      |   | 883,078   |       |  |   | 873,267   |      
|                                         | Common shareholders equity                                                            |                                                                     |   | 1,837,293 |       |      |   | 1,683,485 |       |  |   | 1,481,007 |      

(1)    Operating revenues have been reclassified to
conform with the current year presentation.

58



---



##### 



|                                         |                                                                                        |                                                                     |   |           |        |      |   |           |        |      |   |           |        |      |   |           |        |  |   |           |        |  |   |           |        |  |   |           |        | 
|---------------------------------------- | -------------------------------------------------------------------------------------- | ------------------------------------------------------------------- | - | --------- | ------ | ---- | - | --------- | ------ | ---- | - | --------- | ------ | ---- | - | --------- | ------ |  | - | --------- | ------ |  | - | --------- | ------ |  | - | --------- | ------ | 
|(in thousands, except per share amounts) |                                                                                        | 1999                                                                |   | 1998      |        | 1997 |   | 1996      |        | 1995 |   | 1994      |        | 1993
|                                        
|Results of Operations                    |                                                                                        |                                                                     |   |           |        |      |   |           |        |      |   |           |        |      |   |           |        |  |   |           |        |  |   |           |        |  |   |          
|                                         | Operating revenues(1)                                                                  |                                                                     | $ | 2,212,177 |        |      | $ | 2,107,593 |        |      | $ | 1,952,986 |        |      | $ | 1,851,058 |        |  | $ | 1,716,971 |        |  | $ | 1,611,629 |        |  | $ | 1,496,029 |       
|                                         | Income from operations                                                                 |                                                                     | $ | 388,453   |        |      | $ | 378,897   |        |      | $ | 381,351   |        |      | $ | 337,169   |        |  | $ | 271,018   |        |  | $ | 274,875   |        |  | $ | 238,980   |       
|                                         | Income before cumulative effect of changes in accounting principles                    |                                                                     | $ | 225,785   |        |      | $ | 417,259   |        |      | $ | 281,574   |        |      | $ | 220,817   |        |  | $ | 190,096   |        |  | $ | 169,672   |        |  | $ | 153,817   |       
|                                         | Cumulative effect of change in method of accounting for goodwill and other intangibles |                                                                     |   |          |        |      |   |          |        |      |   |          |        |      |   |          |        |  |   |          |        |  |   |          |        |  |   |          |       
|                                         | Cumulative effect of change in method of accounting for income taxes                   |                                                                     |   |          |        |      |   |          |        |      |   |          |        |      |   |          |        |  |   |          |        |  |   |          |        |  |   | 11,600    |       
|                                         |                                                                                        |                                                                     |  
|                                         | Net income                                                                             |                                                                     | $ | 225,785   |        |      | $ | 417,259   |        |      | $ | 281,574   |        |      | $ | 220,817   |        |  | $ | 190,096   |        |  | $ | 169,672   |        |  | $ | 165,417   |       
|                                         |                                                                                        |                                                                     |  
|Per Share Amounts                        |                                                                                        |                                                                     |   |           |        |      |   |           |        |      |   |           |        |      |   |           |        |  |   |           |        |  |   |           |        |  |   |          
|                                         | Basic earnings per common share                                                        |                                                                     |   |           |        |      |   |           |        |      |   |           |        |      |   |           |        |  |   |           |        |  |   |           |        |  |   |           |       
|                                         |                                                                                        | Income before cumulative effect of changes in accounting principles |   | $         | 22.35  |      |   | $         | 41.27  |      |   | $         | 26.23  |      |   | $         | 20.08  |  |   | $         | 17.16  |  |   | $         | 14.66  |  |   | $         | 13.10  | 
|                                         |                                                                                        | Cumulative effect of changes in accounting principles               |   |           |       |      |   |           |       |      |   |           |       |      |   |           |       |  |   |           |       |  |   |           |       |  |   |           | 0.98   | 
|                                         |                                                                                        |                                                                     |  
|                                         |                                                                                        | Net income available for common shares                              |   | $         | 22.35  |      |   | $         | 41.27  |      |   | $         | 26.23  |      |   | $         | 20.08  |  |   | $         | 17.16  |  |   | $         | 14.66  |  |   | $         | 14.08  | 
|                                         |                                                                                        |                                                                     |  
|                                         |                                                                                        | Basic average shares outstanding                                    |   |           | 10,061 |      |   |           | 10,087 |      |   |           | 10,700 |      |   |           | 10,964 |  |   |           | 11,075 |  |   |           | 11,577 |  |   |           | 11,746 | 
|                                         | Diluted earnings per share                                                             |                                                                     |   |           |        |      |   |           |        |      |   |           |        |      |   |           |        |  |   |           |        |  |   |           |        |  |   |           |       
|                                         |                                                                                        | Income before cumulative effect of changes in accounting principles |   | $         | 22.30  |      |   | $         | 41.10  |      |   | $         | 26.15  |      |   | $         | 20.05  |  |   | $         | 17.15  |  |   | $         | 14.65  |  |   | $         | 13.10  | 
|                                         |                                                                                        | Cumulative effect of changes in accounting principles               |   |           |       |      |   |           |       |      |   |           |       |      |   |           |       |  |   |           |       |  |   |           |       |  |   |           | 0.98   | 
|                                         |                                                                                        |                                                                     |  
|                                         |                                                                                        | Net income available for common shares                              |   | $         | 22.30  |      |   | $         | 41.10  |      |   | $         | 26.15  |      |   | $         | 20.05  |  |   | $         | 17.15  |  |   | $         | 14.65  |  |   | $         | 14.08  | 
|                                         |                                                                                        |                                                                     |  
|                                         |                                                                                        | Diluted average shares outstanding                                  |   |           | 10,082 |      |   |           | 10,129 |      |   |           | 10,733 |      |   |           | 10,980 |  |   |           | 11,086 |  |   |           | 11,582 |  |   |           | 11,750 | 
|                                         | Cash dividends                                                                         |                                                                     | $ | 5.20      |        |      | $ | 5.00      |        |      | $ | 4.80      |        |      | $ | 4.60      |        |  | $ | 4.40      |        |  | $ | 4.20      |        |  | $ | 4.20      |       
|                                         | Common shareholders equity                                                            |                                                                     | $ | 144.90    |        |      | $ | 157.34    |        |      | $ | 117.36    |        |      | $ | 121.24    |        |  | $ | 107.60    |        |  | $ | 99.32     |        |  | $ | 92.84     |       
|Financial Position                       |                                                                                        |                                                                     |   |           |        |      |   |           |        |      |   |           |        |      |   |           |        |  |   |           |        |  |   |           |        |  |   |          
|                                         | Current assets                                                                         |                                                                     | $ | 476,159   |        |      | $ | 404,878   |        |      | $ | 308,492   |        |      | $ | 382,631   |        |  | $ | 406,570   |        |  | $ | 375,879   |        |  | $ | 625,574   |       
|                                         | Working capital (deficit)                                                              |                                                                     |   | (346,389  | )      |      |   | 15,799    |        |      |   | (300,264  | )      |      |   | 100,995   |        |  |   | 98,393    |        |  |   | 102,806   |        |  |   | 367,041   |       
|                                         | Property, plant and equipment                                                          |                                                                     |   | 854,906   |        |      |   | 841,062   |        |      |   | 653,750   |        |      |   | 511,363   |        |  |   | 457,359   |        |  |   | 411,396   |        |  |   | 363,718   |       
|                                         | Total assets                                                                           |                                                                     |   | 2,986,944 |        |      |   | 2,729,661 |        |      |   | 2,077,317 |        |      |   | 1,870,411 |        |  |   | 1,732,893 |        |  |   | 1,696,868 |        |  |   | 1,622,504 |       
|                                         | Long-term debt                                                                         |                                                                     |   | 397,620   |        |      |   | 395,000   |        |      |   |          |        |      |   |          |        |  |   |          |        |  |   | 50,297    |        |  |   | 51,768    |       
|                                         | Common shareholders equity                                                            |                                                                     |   | 1,367,790 |        |      |   | 1,588,103 |        |      |   | 1,184,074 |        |      |   | 1,322,803 |        |  |   | 1,184,204 |        |  |   | 1,126,933 |        |  |   | 1,087,419 |       

(1)  Operating revenues have been reclassified to conform with the current year presentation.

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INDEX TO EXHIBITS

|        |    |             |  |                                                                                                                                                                                                                                                                                                                                                                  
|------- | -- | ----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |            
|Number  |    | Description
|       
|       
|        | 3  | .1          |  | Certificate of Incorporation of the Company as
    amended through May 12, 1988, and the Certificate of
    Designation for the Companys Series A Preferred Stock
    filed January 22, 1996 (incorporated by reference to
    Exhibit 3.1 to the Companys Annual Report on
    Form 10-K for the fiscal year ended December 31, 1995).                        
|       
|        | 3  | .2          |  | By-Laws of the Company as amended through
    March 8, 2001 (incorporated by reference to
    Exhibit 3.2 to the Companys Annual Report on
    Form 10-K for the fiscal year ended December 31, 2000).                                                                                                                                                          
|       
|        | 4  | .1          |  | Form of the Companys 5.50% Notes due
    February 15, 2009, issued under the Indenture dated as of
    February 17, 1999, between the Company and The First
    National Bank of Chicago, as Trustee (incorporated by reference
    to Exhibit 4.2 to the Companys Annual Report on
    Form 10-K for the fiscal year ended January 3, 1999).                  
|       
|        | 4  | .2          |  | Indenture dated as of February 17, 1999,
    between the Company and The First National Bank of Chicago, as
    Trustee (incorporated by reference to Exhibit 4.3 to the
    Companys Annual Report on Form 10-K for the fiscal
    year ended January 3, 1999).                                                                                                
|       
|        | 4  | .3          |  | 364-Day Credit Agreement dated as of
    August 14, 2002, among the Company, Citibank, N.A.,
    Wachovia Bank, N.A., SunTrust Bank, JPMorgan Chase Bank, Bank
    One, N.A., The Bank of New York and Riggs Bank (incorporated by
    reference to Exhibit 4.3 to the Companys Quarterly
    Report on Form 10-Q for the quarter ended
    September 29, 2002).
|       
|        | 4  | .4          |  | 5-Year Credit Agreement dated as of
    August 14, 2002, among the Company, Citibank, N.A.,
    Wachovia Bank, N.A., SunTrust Bank, JPMorgan Chase Bank, Bank
    One, N.A., The Bank of New York and Riggs Bank (incorporated by
    reference to Exhibit 4.4 to the Companys Quarterly
    Report on Form 10-Q for the quarter ended
    September 29, 2002). 
|       
|        | 10 | .1          |  | The Washington Post Company Annual Incentive
    Compensation Plan as amended and restated effective
    June 30, 1995 (incorporated by reference to
    Exhibit 10.1 to the Companys Quarterly Report on
    Form 10-Q for the quarter ended March 31, 1996).*                                                                                                 
|       
|        | 10 | .2          |  | The Washington Post Company Long-Term Incentive
    Compensation Plan as amended and restated effective
    March 9, 2000 (incorporated by reference to
    Exhibit 10.2 to the Companys Annual Report on
    Form 10-K for the fiscal year ended January 2, 2000).*                                                                                            
|       
|        | 10 | .3          |  | The Washington Post Company Stock Option Plan as
    amended and restated through March 12, 1998 (corrected
    copy) (incorporated by reference to Exhibit 10.1 to the
    Companys Quarterly Report on Form 10-Q for the
    quarter ended April 1, 2001).*                                                                                                   
|       
|        | 10 | .4          |  | The Washington Post Company Supplemental
    Executive Retirement Plan as amended and restated through
    March 14, 2002 (incorporated by reference to
    Exhibit 10.4 to the Companys Annual Report on
    Form 10-K for the fiscal year ended December 30,
    2001).*                                                                                      
|       
|        | 10 | .5          |  | The Washington Post Company Deferred Compensation
    Plan as amended and restated effective March 9, 2000
    (incorporated by reference to Exhibit 10.5 to the
    Companys Annual Report on Form 10-K for the fiscal
    year ended January 2, 2000).*                                                                                                       
|       
|        | 11 |             |  | Calculation of earnings per share of common stock.                                                                                                                                                                                                                                                                                                               
|       
|        | 21 |             |  | List of subsidiaries of the Company.                                                                                                                                                                                                                                                                                                                             
|       
|        | 23 |             |  | Consent of independent accountants.                                                                                                                                                                                                                                                                                                                              
|       
|        | 24 |             |  | Power of attorney dated March 13, 2003.                                                                                                                                                                                                                                                                                                                          
|       
|        | 99 | .1          |  | Certification of the Chief Executive Officer
    pursuant to 18 U.S.C. Section 1350 as adopted pursuant
    to Section 906 of the Sarbanes-Oxley Act.                                                                                                                                                                                                            
|       
|        | 99 | .2          |  | Certification of the Chief Financial Officer
    pursuant to 18 U.S.C. Section 1350 as adopted pursuant
    to Section 906 of the Sarbanes-Oxley Act.                                                                                                                                                                                                            




* A management contract or compensatory plan
or arrangement required to be included as an exhibit hereto
pursuant to Item 15(c) of 
 Form 10-K.




61