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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 28, 2003

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 þ No o

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. o

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

Aggregate market value of the Companys common stock held by non-affiliates on
June 29, 2003, based on the closing price for the Companys Class B Common
Stock on the New York Stock Exchange on such date: approximately
$3,984,000,000.

Shares of common stock outstanding at
February 27, 2004:

Class A Common Stock  1,722,250 shares
Class B Common Stock  7,832,774 shares

Documents partially incorporated by reference:

Definitive Proxy Statement for the
Companys 2004 Annual Meeting of Stockholders
(incorporated in Part III to the extent provided in Items 10, 11, 12,
13 and 14 hereof).



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THE WASHINGTON POST COMPANY 2003 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          |      |    | 10 | 
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|                                                                                                                                                        |  |                                                                                                                          | Competition                  |      |    | 15 | 
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|                                                                                                                                                        |  |                                                                                                                          | Executive Officers           |      |    | 17 | 
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|                                                                                                                                                        |  |                                                                                                                          | Employees                    |      |    | 18 | 
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|                                                                                                                                                        |  |                                                                                                                          | Forward-Looking Statements   |      |    | 18 | 
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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                                                                  |                              |      | 20 |   
|PART II                                                                                                                                                
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|Item 5.                                                                                                                                                 |  | Market for the Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities |                              |      | 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                                |                              |      | 21 |   
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|Item 7A.                                                                                                                                                |  | Quantitative and Qualitative Disclosures About
    Market Risk                                                           |                              |      | 21 |   
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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                                 |                              |      | 22 |   
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|Item 9A.                                                                                                                                                |  | Controls and Procedures                                                                                                  |                              |      | 22 |   
|PART III                                                                                                                                               
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|Item 10.                                                                                                                                                |  | Directors and Executive Officers of the Registrant                                                                       |                              |      | 22 |   
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|Item 11.                                                                                                                                                |  | Executive Compensation                                                                                                   |                              |      | 23 |   
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|Item 12.                                                                                                                                                |  | Security Ownership of Certain Beneficial Owners
    and Management and Related Stockholder Matters                       |                              |      | 23 |   
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|Item 13.                                                                                                                                                |  | Certain Relationships and Related Transactions                                                                           |                              |      | 23 |   
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|Item 14.                                                                                                                                                |  | Principal Accountant Fees and Services                                                                                   |                              |      | 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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|INDEX TO FINANCIAL INFORMATION                                                                                                                          |  |                                                                                                                          | 25                           |     
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|Managements Discussion and
    Analysis of Results of Operations and FinancialCondition (Unaudited)                                                    |  |                                                                                                                          | 27                           |     
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|Financial Statements and Schedules:                                                                                                                     |  |                                                                                                                          |                              |     
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|Report of Independent
    Auditors                                                                                                                      |  |                                                                                                                          | 38                           |     
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|Consolidated Statements
    of Income and Consolidated Statements of Comprehensive
           Income for the Three Fiscal Years Ended December 28, 2003 |  |                                                                                                                          | 39                           |     
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|Consolidated Balance
    Sheets at December 28, 2003 and December 29, 2002                                                                              |  |                                                                                                                          | 40                           |     
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|Consolidated Statements
    of Cash Flows for the Three Fiscal Years Ended
             December 28, 2003                                               |  |                                                                                                                          | 42                           |     
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|Consolidated Statements
    of Changes in Common Shareholders Equity for the Three 
              Fiscal Years Ended December 28, 2003                 |  |                                                                                                                          | 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 28, 2003:                                                                    |  |                                                                                                                          |                              |     
|                                                                                                                                                       
|                                                                                                                                                       
|                                                                                                                                                       
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|II 
    Valuation and Qualifying Accounts                                                                                                              |  |                                                                                                                          | 59                           |     
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|Ten-Year Summary of Selected
    Historical Financial Data (Unaudited)                                                                                  |  |                                                                                                                          | 60                           |     
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|                                                                                                                                                       
|INDEX TO EXHIBITS                                                                                                                                       |  |                                                                                                                          | 63                           |     



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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 television broadcast 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 N 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 N 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 Kaplans foreign operations
and the publication of the international editions of
Newsweek) accounted for less than 5% of the
Companys consolidated revenues, and the identifiable
assets attributable to such operations represented approximately
6% of the Companys consolidated assets at
December 28, 2003, and less than 2% of the Companys
consolidated assets at December 29, 2002, and
December 30, 2001.

Newspaper Publishing

The Washington Post

WP Company LLC (WP Company), a
subsidiary of the Company, publishes The Washington Post,which is 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 1999-2002 and as
estimated by The Postfor the twelve-month period ended
September 30, 2003 (for which period ABC had not completed
its audit as of the date of this report) from the semiannual
publishers statements submitted to ABC for the six-month
periods ended March 31, 2003 and September 30, 2003:

|     |  |                          |         |  |        |  |           | 
|---- |  | ------------------------ | ------- |  | ------ |  | --------- | 
|     |  |                         
|     |  | Average Paid Circulation
|     |  |                         
|     |  | Daily                    |         |  | Sunday | 
|     |  |                         
|     |  |                         
|1999 |  |                          | 775,005 |  |        |  | 1,085,060 | 
|    
|    
|    
|    
|2000 |  |                          | 777,521 |  |        |  | 1,075,918 | 
|    
|    
|    
|    
|2001 |  |                          | 771,614 |  |        |  | 1,066,723 | 
|    
|    
|    
|    
|2002 |  |                          | 767,843 |  |        |  | 1,058,458 | 
|    
|    
|    
|    
|2003 |  |                          | 753,845 |  |        |  | 1,039,644 | 

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 2003 the
rate charged for home-delivered copies of the daily and Sunday
newspaper for each four-week period was increased to $13.44 from
$12.60, which had been the rate since July 2002. The
corresponding rate charged for Sunday-only home delivery has
been $6.00 since 1991.

General advertising rates were increased by an
average of approximately 4.6% on January 1, 2003, and by
approximately another 5.3% on January 1, 2004. Rates for
most categories of classified and retail advertising were
increased by an average of approximately 3.9% on
February 1, 2003, and by approximately an additional 3.1%
on February 1, 2004.

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

|                            |                 |      |       |       |      |  |       |       |      |  |       |       |  |  |       |       |  |  |       |       | 
|--------------------------- | --------------- | ---- | ----- | ----- | ---- |  | ----- | ----- | ---- |  | ----- | ----- |  |  | ----- | ----- |  |  | ----- | ----- | 
|                            |                 | 1999 |       |       | 2000 |  | 2001  |       | 2002 |  | 2003 
|                            |                 |     
|                            |                 |     
|Total Inches (in thousands) |                 |      | 3,288 |       |      |  | 3,363 |       |      |  | 2,714 |       |  |  | 2,657 |       |  |  | 2,675 |      
|                           
|                           
|                           
|                           
|                            | Full-Run Inches |      |       | 2,745 |      |  |       | 2,634 |      |  |       | 2,296 |  |  |       | 2,180 |  |  |       | 2,121 | 
|                           
|                           
|                           
|                           
|                            | Part-Run Inches |      |       | 543   |      |  |       | 729   |      |  |       | 418   |  |  |       | 477   |  |  |       | 554   | 
|                           
|                           
|                           
|                           
|Preprints (in millions)     |                 |      | 1,647 |       |      |  | 1,602 |       |      |  | 1,556 |       |  |  | 1,656 |       |  |  | 1,835 |      

WP Company also publishes The Washington Post
National Weekly Edition, a tabloid that contains selected
articles and features from The Washington Post edited 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 46,000 subscribers.



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The Posthas about
635 full-time editors, 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; Austin,
Texas; and Seattle, Washington. The Postalso maintains
reporters in 12 local news bureaus.

On August 4, 2003, Express Publications
Company, LLC (Express Publications), another
subsidiary of the Company, began publishing a weekday tabloid
newspaper named Express, which is distributed free of
charge using hawkers and news boxes near Metro Stations and in
other locations in Washington, D.C. and nearby suburbs with
heavy daytime sidewalk traffic. A typical edition of Expressis 24 to 28 pages long and contains short news,
entertainment and sports stories as well as both classified and
display advertising. Current daily circulation is approximately
145,000 copies. Expressrelies primarily on wire service
and syndicated content and is edited by a newsroom staff of 13.
Advertising sales, production, and certain other services for
Expressare provided by WP Company.

Washingtonpost.Newsweek Interactive

Washingtonpost.Newsweek Interactive Company, LLC
(WPNI) develops news and information products for
electronic distribution. Since 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 The Posts and
WPNIs staffs and content obtained from other sources. This
site is currently generating more than 180 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 who access the site each month are in that
category. Since 2002 WPNI has required 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. In February 2004 this
registration process was modified to begin collecting additional
information from users, including job title and the type of
industry in which the user works. WPNI also offers registered
users the option of receiving various e-mail newsletters that
cover specific topics, including political news and analysis,
personal technology, and entertainment.

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 2000 and amended in
2003, 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 Newsweekwebsite 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
2003 these newspapers had a combined average circulation of
approximately 680,000 copies. This division also produces
military newspapers (most of which are weekly) under agreements
where editorial material is supplied by local military bases; in
2003 the 12 military newspapers produced by this division had a
combined average circulation of over 170,000 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.






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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 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, 2003, was 51,455 daily
(including Saturday) and 56,928 Sunday. The aggregate average
weekly circulation of The Enterprise Newspapers during
the twelve-month period ended December 31, 2003, was
approximately 77,500 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 52nd 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, has
operated as an independent station since July 2002.

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                 |  |            | 52nd |             |  |            | None |            |  |                    | Feb. 1, |           |  |  |         |  |  |  | VHF-2  |  |  |  | VHF-2  | 
|Jacksonville, Fla.   |  |            |      |             |  |            |      |            |  |                    | 2005    |           |  |  |          |  |  |  | UHF-6  |  |  |  | UHF-5  | 
|1947                 |  |            |      |             |  |            |      |            |  |                    |         |           |  |  |          |  |  |  |        |  |  |  |        | 



---



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | Source: 2003/2004 DMA Market Rankings, Nielsen
    Media Research, Fall 2003, 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.
    References to stations that are operating in each market are to
    stations that are broadcasting analog signals. However most of
    the stations in these markets are also engaged in digital
    broadcasting using the FCC-assigned channels for DTV operations.



3




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##### 



The Companys 2003 net operating revenues
from national and local television advertising and network
compensation were as follows:

|         |       |   |             |             | 
|-------- | ----- | - | ----------- | ----------- | 
|        
|        
|        
|        
|National |       | $ | 100,237,000 |            
|        
|        
|        
|        
|Local    |       |   | 194,533,000 |            
|        
|        
|        
|        
|Network  |       |   | 18,281,000  |            
|         |       |   |             |            
|         | Total |   | $           | 313,051,000 | 
|         |       |   |             |            

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 that 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.
Available 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 analog 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 analog 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 in 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 in 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 August 2003 the
FCC began a proceeding to set rules for the DTV operations of
low-power television stations. Among other things, the FCC is
considering whether to allow certain low-power television
stations to use a second channel for DTV operations while
continuing analog operations on their existing channels. The use
of second channels by low-power television stations could cause
additional interference with the signals of full-power stations
and limit the ability of full-power stations to modify their
analog or DTV transmission facilities.

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 is broadly
examining 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.
Pursuant to the must-carry requirements of the Cable
Television Consumer Protection and



4




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##### 



Competition Act of 1992 (the 1992 Cable
Act), a commercial television broadcast station may, under
certain circumstances, insist on carriage of its analog 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.


Stations that elect retransmission consent may
negotiate for compensation from cable 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 analog signal of each of the
Companys television stations, with the exception of WJXT,
is being carried on all of the major cable systems in the
stations respective local markets pursuant to
retransmission consent agreements. WJXTs analog signal is
being carried on cable in WJXTs local market pursuant to
that stations must-carry rights. 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 analog 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. The
analog signal of each of the Companys television stations
is being carried by DBS providers EchoStar and DirecTV on a
local-into-local basis pursuant to retransmission consent
agreements.

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 a pending
proceeding, the FCC has sought comment on issues related to
whether broadcasters should be able to seek mandatory cable
carriage rights for both their analog and their digital signals,
including the need for such carriage to further the transition
to DTV and the burden of such carriage on cable operators. (The
FCC also has sought comment on how it should apply digital
signal carriage rules to DBS providers.) At present, stations
broadcasting both analog and digital signals may negotiate
retransmission consent agreements for carriage of part or all of
their digital signals. In determining what parts of a DTV signal
must be carried by cable operators, the FCC has 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. In the pending cable DTV proceeding, the FCC is
considering the scope of what constitutes
program-related material in the digital context.
Cable operators will be required to carry the DTV signal of any
DTV station eligible for mandatory carriage in the same format
in which the signal was originally broadcast. Thus, an HDTV
signal of a station eligible for mandatory carriage must be
carried in HDTV format by cable operators. However, until the
FCCs January 2001 order is clarified, it is 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. As noted
previously, all of the Companys television stations are
transmitting both analog and digital broadcasting signals; most
of those stations digital signals are being carried on at
least some local cable systems pursuant to retransmission
consent agreements.

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 June 2003, following such a review, the FCC
modified its national television ownership limit to permit a
broadcast company to own an unlimited number of television
stations as long as the combined service areas of such stations
do not include more than 45% of nationwide television
households, an increase from the previous limit of 35%.
Subsequently, the fiscal 2004 omnibus appropriations bill was
signed into law by the President on January 23, 2004, and
that bill included a provision that fixes the national ownership
limit at 39% of nationwide television households, removes the
national ownership limit from the periodic review process and
also changes the frequency of such reviews from every two years
to every four years.

In August 1999 the FCC amended its local
television 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. In April
2002 the U.S. Court of Appeals for the District of Columbia
Circuit 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
remanded the rule to the FCC for further consideration.

On June 2, 2003, the FCC issued an order
that modified several of its broadcast ownership rules and
responded to the remand from the D.C. Circuit. In its decision,
the FCC further relaxed the local television ownership rule and
also relaxed



5




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##### 



two FCC cross-ownership rules restricting common
ownership of television stations and newspapers and of
television stations and radio stations in the same market. This
decision has been appealed to the U.S. Court of Appeals for the
Third Circuit, and that court has stayed the effectiveness of
the new rules pending the outcome of the appeal. As a result,
the former local ownership and cross-ownership rules remain in
effect. The rule changes approved by the FCC in June 2003,
would, if upheld, allow co-ownership of two television stations
in a market as long as the two stations are not both ranked in
the top four, and would also allow co-ownership of three
television stations if there are 18 or more television stations
in the market. Waivers of those limits would also be available
where a station is failing and under certain other
circumstances. In addition, the rule changes would liberalize
the FCCs restrictions on owning a combination of radio
stations, television stations, and daily newspapers in the same
market, and would, for example, allow one entity to own a daily
newspaper and a TV station in the same market as long as there
are four or more television stations in the market. Petitions
for reconsideration of the FCCs new rules are also pending
at the FCC.


On December 10, 2003, the United States
Supreme Court issued its decision in McConnell v. Federal
Election Commission, which upheld in the face of various
First Amendment and other constitutional challenges virtually
all of the provisions of the Bipartisan Campaign Reform Act of
2002. Among the provisions upheld were those that
(i) prohibit most soft-money contributions to
political parties in federal elections, and (ii) impose the
contribution-limit and disclosure requirements of the Federal
Election Campaign Act on any broadcast, cable television or DBS
advertisement that refers to a candidate for Federal office and
is run within 60 days of a general election or 30 days
of a primary election, even if the advertisement in question is
not produced by or coordinated with a candidate or a political
party. These prohibitions and requirements may reduce the amount
of money political parties and independent groups have available
to purchase advertising in Federal election campaigns or
otherwise discourage such advertising and thus may adversely
affect the advertising revenues of the Companys television
stations.

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
Operations  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. Also, in August 2003 the FCC
announced that it will be opening an inquiry to examine its
rules and policies concerning broadcasters service to
their local communities and has scheduled a number of public
hearings across the country to examine the extent to and ways in
which stations are meeting their local service obligations. The
FCC has indicated that the information gathered during those
hearings will assist it in evaluating license renewal
applications for TV and radio stations across the country.

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 2003 the Company (through its Cable
One subsidiary) provided basic cable service to approximately
721,000 subscribers (representing about 57% of the 1,274,000
homes passed by the systems) and had in force approximately
300,000 subscriptions to premium program services, 223,000
subscriptions to digital video service (which number does not
include approximately 4,000 free trials of that service then
being offered by Cable One) and 134,000 subscriptions to cable
modem service. Digital video and cable modem services are each
currently available in markets serving virtually all of Cable
Ones subscriber base.

The Companys cable systems are located in
19 Midwestern, Southern and Western states and typically serve
smaller communities: thus 18 of the Companys current
systems pass fewer than 10,000 dwelling units, 17 pass
10,000-25,000 dwelling units, and 19 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.



6




---



##### 



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 very few of the cable
systems owned by the Company fall within the
effective-competition or small-system exemptions, monthly
subscription rates charged by most of 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 tiers of service other than the basic
tier, for pay-per-view and 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 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.

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 gross 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



7




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##### 



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.


The Copyright Act of 1976 gives cable television
systems the ability, under certain terms and conditions and
assuming that any applicable retransmission consents have been
obtained, 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 requiring 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.



8




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##### 



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 customers will aim
their antennas north.) Although the Commission has not yet
granted any licenses to operate MVDDS systems, in January 2004
it commenced an auction for the purpose of selecting MVDDS
licensees. 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
that 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.

In March 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. In October 2003 the U.S. Court of Appeals for the Ninth
Circuit, on an appeal from the FCCs declaratory ruling
noted above, ruled that cable modem service is partly an
information service and partly a
telecommunications service. Several parties have
filed petitions for rehearing by the full Ninth Circuit panel.
If this ruling stands, the characterization of cable modem
service as partly a telecommunications service will
likely affect the FCCs decision on many of the issues in
its pending rulemaking. Moreover, the Pole Attachment Act
permits utilities to charge significantly higher rates for
attachments made by entities that are providing a
telecommunications service. The Companys Cable
One subsidiary currently offers Internet access on virtually all
of its cable systems and is the sole Internet service provider
on those systems. Thus, depending on the outcome, these judicial
and regulatory proceedings have 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



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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,
Newsweek maintains 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 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%.

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.

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 13, 2003 issue, Newsweeks published
national advertising rates for all categories of such
advertising were increased by 4.8%. Beginning with the issue
dated January 12, 2004, such rates were increased again, in
this case by an average of approximately 4.5%.

Internationally, Newsweekis published in
a Europe, Middle East and Africa edition (formerly called the
Atlantic edition); 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. Newsweek estimates that the combined average
weekly paid circulation for these English-language international
editions of Newsweekin 2003 was approximately 600,000
copies.

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. Newsweek en Español, a Spanish-language
edition of Newsweekwhich has been distributed in Latin
America since 1996, is currently being published under an
agreement with a Mexico-based company which translates editorial
copy, prints and distributes the edition and jointly sells
advertising with Newsweek. Newsweek Bil Logha Al-Arabia,
an Arabic-language edition of Newsweek, began publication
in 2000 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
based primarily on selected content translated from
Newsweeks U.S. and international editions. Limited
distribution of Newsweek Selectbegan in Hong Kong the
second half of 2003. Newsweek estimates that the combined
average weekly paid circulation of The Bulletininsertions and the foreign-language international editions
of Newsweekwas more than 500,000 copies in 2003.



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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 website 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 ten times during 2003 and had an
average paid circulation of more than 500,000 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 that 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, Government Computer News, and
GCN Technologyhave circulations of about 40,000, 87,000,
and 100,000 copies, respectively. This division also publishes
the Federal Technology Almanac, an annual reference guide
for federal government information technology managers and
private-sector information technology executives.

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 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.
The Company divides Kaplans various businesses into two
categories: supplemental education, which consists of
Kaplans Test Preparation and Admissions, Professional, and
Score Education Divisions; and higher education, which consists
of Kaplans Higher Education Division.

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
and providing professional training for teachers); 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 2003
the Test Preparation and Admissions Division enrolled nearly
270,000 students (including over 76,000 enrolled in online
programs) and provided courses at 159 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 2003 offered such
courses at 27 centers located in 12 foreign countries. The Test
Preparation and Admissions Division also currently co-publishes
more than 180 book titles, predominantly in the areas of test
preparation, admissions, career guidance and life skills,
through a joint venture with Simon & Schuster, and 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. This division also
produces a college newsstand guide in conjunction with Newsweek.



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Kaplans Professional Division offers
continuing education, certification, licensing, exam preparation
and professional development to corporations and to individuals
seeking to advance their careers in a variety of disciplines.
This division includes Deaborn Financial Services, a provider of
continuing education and test preparation courses for financial
services and insurance industry professionals; Dearborn
Publishing, publisher of a variety of business and real estate
books as well as printed and online materials for licensing,
test preparation and continuing education in the real estate,
architecture, home inspection, engineering and construction
industries; The Schweser Study Program, a provider of test
preparation courses for the Chartered Financial Analyst and
Financial Risk Manager examinations; Kaplan CPA, which offers
test preparation courses for the Certified Public Accounting
Exam; Kaplan Professional Schools, a provider of courses for
real estate and financial services licensing examinations and
continuing education; Perfect Access Speer, a provider of
software consulting and software training products, primarily to
the legal profession; and Kaplan IT, which offers online test
preparation courses for technical certifications in the
information technology industry.

Kaplans Score Education Division offers
computer-based learning and individualized tutoring for children
in grades K through 10. In 2003 this business, which provides
educational after-school enrichment services through 153 Score
centers located in various areas of the United States, served
more than 80,000 students, up from nearly 70,000 students in
2002. Scores services are provided in facilities separate
from Kaplans test preparation centers.

The Higher Education Division of Kaplan currently
consists of 63 schools in 15 states that provide classroom-based
instruction and three institutions that specialize in distance
education. The schools providing classroom-based instruction
offer a variety of bachelor degree, associate degree and diploma
programs primarily in the fields of healthcare, business,
paralegal studies, information technology, criminal justice and
fashion and design. These schools were serving more than 26,700
students at year-end 2003 (which total includes the
classroom-based programs of Kaplan College), with approximately
40% 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 that 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 2003, Kaplan
College had approximately 12,000 students enrolled in online
programs. Concord University School of Law, the nations
first online law school, offers Juris Doctor and Executive Juris
Doctor degrees wholly online. At year-end 2003, approximately
1,650 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 1,300
students enrolled at year-end 2003, 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. Citizenship and
Immigration Services (the USCIS) 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 USCIS specified enrollment, departure and
other information about the F-1 students to whom they have
issued certificates of eligibility. All of the Kaplan U.S. Test
Preparation and Admissions Division centers that applied have
been certified to participate in this program. Once certified, a
center must apply for recertification every two years. During
2003 students holding F-1 visas accounted for approximately 1.6%
of the enrollment at Kaplans Test Preparation and
Admissions Division and an insignificant number of students at
Kaplans Higher Education Division.

In addition to its four divisions, during 2003
Kaplan acquired a number of foreign-based schools and other
businesses that provide educational services. The largest
acquisition was The Financial Training Company
(FTC), a U.K.-based provider of training and test
preparation services for accounting and financial services
professionals. Kaplan also acquired several other related
businesses which are now operated through FTC. At year-end 2003,
FTC was the publisher of more than 100 textbooks and
manuals and during the year had provided courses to over 30,000
students. Headquartered in London, FTC has 28 training
centers around the UK as well as operations in Hong Kong,
Shanghai and Singapore. During 2003 Kaplan also acquired Dublin
Business School (DBS), an undergraduate institution
located in Dublin, Ireland. DBS



12




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provides various undergraduate and graduate
degree programs in business and the liberal arts. All of these
overseas businesses were included in the supplemental education
category in 2003.


Title IV Federal Student Financial Aid
Programs

Funds provided under the student financial aid
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, accounting, for
example, for approximately $250 million of the revenues of
such schools for the Companys 2003 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. Pursuant to another program requirement, any
for-profit postsecondary institution (a category that includes
all of the schools in Kaplans Higher Education Division)
will lose its Title IV eligibility for at least one year if more
than 90% of that institutions 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, 2005.
Several bills are currently pending in both houses of Congress
that would exempt online courses from the 50% rules and certain
other existing requirements if various other conditions set
forth in such legislation or to be specified in future
Department of Education regulations can be satisfied. The
Company cannot now predict whether any of those bills will
ultimately be enacted into law and whether Kaplan College will
be able to satisfy whatever conditions may ultimately be imposed
on the availability of Title IV funding for online programs.

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 that 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 Education 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.

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 currently
participating in Title IV programs will maintain their
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.



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In accordance with Department of Education
regulations, a number of the schools in Kaplans Higher
Education Division are combined into groups of two or more
schools for the purpose of determining compliance with
Title IV requirements. Including schools that are not
combined with other schools for that purpose, the Higher
Education Division currently has 36 Title IV reporting
units, the largest of which in terms of revenue accounted for
approximately 17% of the Divisions 2003 revenues. If the
Department of Education were to find that one reporting unit had
failed to comply with any applicable Title IV requirement
and as a result limited, suspended or terminated the
Title IV eligibility of the school or schools in that unit,
that action normally would not affect the Title IV
eligibility of the schools in other reporting units that had
continued to comply with Title IV requirements. For the most
recent year for which data is available from the Department of
Education, the cohort default rate for the Title IV
reporting units in Kaplans Higher Education Division
averaged 10.9%, and no unit had a cohort default rate of 25% or
more. In 2003 those reporting units derived an average of less
than 80% of their receipts from Title IV programs, with no unit
deriving more than 88.5% of its receipts from such programs.

All of the Title IV financial aid 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 the Title IV programs that provide
non-repayable grants 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

BrassRing

The Company beneficially owns a 49.3% equity
interest in BrassRing LLC, an Internet-based 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 Postand Expressare produced at the
printing plants of WP Company 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 that 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 six separate plants in the United States;
advertising inserts and photo-offset films for the domestic
edition are also produced by independent contractors. 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
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 2003 The Washington Postand Expressconsumed about 190,000 tons* and 700 tons of newsprint,
respectively. Such newsprint was purchased from a number of
suppliers, including Bowater Incorporated, which supplied
approximately 33% of the 2003 newsprint requirements for these
newspapers. Although for many years some of the newsprint
purchased for The Postfrom 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
either The Postor Expresshas 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 2003 Bowater
Mersey produced about 268,000 tons of newsprint.





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



14




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The announced price of newsprint (excluding
discounts) was approximately $750 per ton throughout 2003.
Discounts from the announced price of newsprint can be
substantial, and prevailing discounts increased slightly during
the first quarter of the year and then decreased during the
second and fourth quarters. The Company believes adequate
supplies of newsprint are available to The Post and
Expressthrough contracts with various suppliers. Over
90% of the newsprint used by The Postand Expressincludes 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 2003 the operations of The Daily Herald
Company and Post-Newsweek Media, Inc. consumed approximately
6,800 and 21,800 tons of newsprint, respectively, which were
obtained in each case from various suppliers. Approximately 85%
of the newsprint used by The Daily Herald Company and 45% of the
newsprint used by Post-Newsweek Media, Inc. include some
recycled content.

The domestic edition of Newsweekconsumed
about 30,000 tons of paper in 2003, 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. 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, Express, 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. Expresssimilarly competes with various other advertising media in
its service area, including both daily and weekly
free-distribution newspapers.

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, including search
engines, are carrying increasing amounts of advertising, and
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 Time Warner) produces a
Washington, D.C. city guide 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.



15




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##### 



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-Postand
Carroll County Times, daily paid-circulation community
newspapers. 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 DBS operators have been required to obtain the consent of
each local television station included in such a service. The
analog signal of each of the Companys television stations
is 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.
The Satellite Home Viewer Improvement Act also continues
restrictions on the transmission of distant network stations by
DBS 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 analog 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 legislation was enacted 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. In December 2003 News Corporation Limited (News
Corp), a global media company that in the United States
owns the



16




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##### 



Fox Television Network, 35 broadcast television
stations, a group of regional sports networks and ten nationally
distributed cable networks (including the Fox News Channel, FX,
Speedvision and the National Geographic Channel), acquired a
controlling interest in DirecTV. This acquisition was approved
by the FCC in an order that, among other things, requires News
Corp to offer carriage of its broadcast television stations and
access to its cable programming services to cable television
systems and other multichannel video programming distributors on
nonexclusive and nondiscriminatory terms and conditions.
Notwithstanding the requirements imposed by the FCC, this
acquisition has the potential not only to enhance DirecTVs
effectiveness as a competitor, but also to limit the access of
cable television systems to desirable programming and to
increase the costs of such programming. 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 228 magazines reported on by
the Bureau, Newsweekranked fifth in total advertising
revenues in 2003, 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 that 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 that 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. Overseas, both The
Financial Training Company and Dublin Business School compete
with other for-profit companies and with governmentally
supported schools and institutions that provide similar training
and educational programs.

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.

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 58, 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 54, 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 48, 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 57, 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.



17




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##### 



Gerald M. Rosberg, age 57, became Vice
President-Planning and Development of the Company in February
1999. He 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 13,200 persons on a full-time basis.

WP Company has approximately 2,470 full-time
employees. About 1,500 of that units full-time employees
and about 400 part-time employees are represented by one or
another of five 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: 1,260 editorial, newsroom and commercial department
employees represented by the Communications Workers of America
(November 7, 2005); 65 paper handlers and general workers
represented by the Graphic Communications International Union
(November 20, 2004); 43 machinists represented by the
International Association of Machinists (January 11, 2007);
33 photoengravers-platemakers represented by the Graphic
Communications International Union (February 11, 2007); 28
electricians represented by the International Brotherhood of
Electrical Workers (June 17, 2004); and 31 engineers,
carpenters and painters represented by the International Union
of Operating Engineers (April 9, 2005). The agreement
covering 420 mailroom workers represented by the Communications
Workers of America expired on May 18, 2003, and efforts to
negotiate a new agreement are continuing.

Washingtonpost.Newsweek Interactive has
approximately 205 full-time and 35 part-time employees, none of
whom is represented by a union.

Of the approximately 250 full-time and 100
part-time employees at The Daily Herald Company, about 70
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
Communications Workers of America, which represents printers and
mailers, expires on October 31, 2005. The Newspapers
agreement with the International Brotherhood of Teamsters, which
represents bundle haulers, expired on September 22, 2003, and a
new agreement is currently being negotiated.

The Companys broadcasting operations have
approximately 980 full-time employees, of whom about 230 are
union-represented. Of the eight collective bargaining agreements
covering union-represented employees, one has expired and is
being renegotiated. Two other collective bargaining agreements
will expire in 2004.

The Companys Cable Television Division has
approximately 1,700 full-time employees, none of whom is
represented by a union.

Newsweek has approximately 640 full-time
employees (including about 125 editorial employees represented
by the Communications Workers of America under a collective
bargaining agreement that will expire on December 31, 2005).

Kaplan employs approximately 6,150 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 12,000 employees. None
of Kaplans employees is represented by a union.

Post-Newsweek Media, Inc. has approximately 650
full-time and 105 part-time employees. Robinson Terminal
Warehouse Corporation (the Companys newsprint warehousing
and distribution subsidiary), Greater Washington Publishing and
Express Publications Company 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 that are not statements of historical fact,
including certain statements in this Annual Report on
Form 10-K and elsewhere in the Companys 2003 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



18




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##### 



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.

WP 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, WP Company owns land on the corner of
15th and L Streets, N.W., in Washington, D.C., adjacent to
The Posts office building. This land is leased on a
long-term basis to the owner of a multi-story office building
that was constructed on the site in 1982. WP Company rents a
number of floors in this building. WP Company also owns and
occupies a small office building on L Street which is connected
to The Posts office building. On December 22,
2003, WP Company sold a 35,000-square-foot lot on 15th Street
next to the lot containing The Posts office
building. The lot that was sold contained a two-level parking
facility that had been used by Postemployees for many
years but was no longer needed for that purpose since the
basement under The Posts office building had been
converted into a parking garage in 2002.

WP 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 WP
Company. WP Company also owns a printing plant and distribution
facility in Prince Georges County, Maryland, which was
built in 1998 on a 17-acre tract of land owned by WP Company. In
addition, WP 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.

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 that 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 of 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 that expires in 2010.
In 1997 Newsweek sold its Mountain Lakes, N.J. facility to a
third party and



19




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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 Training 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
distribution facilities for most of its domestic publications
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 2017. All other
Kaplan facilities in the United States and overseas (including
administrative offices and instructional locations) occupy
leased premises.

The offices of Washingtonpost.Newsweek
Interactive occupies 85,000 square feet of office space in
Arlington, Virginia under a lease which expires in 2010. Express
Publications Company subleases part of this space.

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)
were parties to an antitrust lawsuit filed in February 2001 by
the owners of several local Maryland newspapers in the United
States District Court for the District of Maryland. This suit
alleged violations of the Sherman Act, the Clayton Act and the
Maryland Antitrust Act and asserted state law claims for unfair
competition, breach of contract and tortuous interference. The
allegations largely stemmed 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 District Court
granted summary judgment for defendants on all of
plaintiffs claims in August 2002, which ruling was
affirmed by the United States Court of Appeals for the Fourth
Circuit in August 2003.

The class action lawsuit filed against Kaplan,
Inc. in December 2002 in the Superior Court of the State of
California, County of Alameda, which alleged violations of the
California wage and hour laws, among other things, was settled
in July 2003.

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
alleging libel, invasion of privacy and violations of applicable
wage and hour laws. While it is not possible to predict the
outcome of these lawsuits, 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.



20




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##### 



PART II



|        |                                                                                                                          
|------- | -------------------------------------------------------------------------------------------------------------------------
|Item 5. | Market for the Registrants Common
    Equity, Related Stockholder Matters and Issuer Purchases of
    Equity Securities.

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:

|                   |  |      |      |      |     |  |      |      |  |  |      |  |  |  |      | 
|------------------ |  | ---- | ---- | ---- | --- |  | ---- | ---- |  |  | ---- |  |  |  | ---- | 
|                   |  |      |      |     
|                   |  | 2003 |      | 2002
|                   |  |      |      |     
|Quarter            |  | High |      |      | Low |  |      | High |  |  | Low  | 
|                  
|                  
|January  March    |  |      | $764 |      |     |  | $659 |      |  |  | $618 |  |  |  | $520 | 
|                  
|                  
|                  
|                  
|April  June       |  |      | 741  |      |     |  | 679  |      |  |  | 634  |  |  |  | 545  | 
|                  
|                  
|                  
|                  
|July  September   |  |      | 752  |      |     |  | 650  |      |  |  | 675  |  |  |  | 516  | 
|                  
|                  
|                  
|                  
|October  December |  |      | 820  |      |     |  | 667  |      |  |  | 743  |  |  |  | 646  | 

During 2003 the Company repurchased 910 shares of
its Class B Common Stock.

At January 30, 2004, there were
28 holders of record of the Companys Class A
Common Stock and 998 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 $1.45 per share during 2003 and $1.40 per
share during 2002.



|        |                         
|------- | ------------------------
|Item 6. | Selected Financial Data.

See the information for the years 1999 through
2003 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 25 hereof (with only the
information for such years to be deemed filed as part of this
Annual Report on Form 10-K).



|        |                                                                                           
|------- | ------------------------------------------------------------------------------------------
|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 25 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 $247,958,000 at
December 28, 2003.

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%
|                                  |             |                                   |  |      |             |      |  |      |             |     
|$                                 | 173,571,000 |                                   |  | $    | 198,366,000 |      |  | $    | 223,162,000 |      |  | $ | 272,754,000 |  |  | $ | 297,550,000 |  |  | $ | 322,345,000 | 

During the 20 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 five quarters and by
less than 10% in each of the other 14 quarters.



21




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##### 



Interest Rate Risk

At December 28, 2003, the Company had
short-term commercial paper borrowings outstanding of
$188,316,000 at an average interest rate of 1.1%. At
December 29, 2002, the Company had commercial paper
borrowings outstanding of $259,258,000 at an average interest
rate of 1.6%. 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 2003 and 2002 fiscal years, the Companys
interest expense would have been greater by approximately
$1,800,000 in fiscal 2003 and by approximately $4,100,000 in
fiscal 2002.

The Companys long-term debt consists of
$400,000,000 principal amount of 5.5% unsecured notes due
February 15, 2009 (the Notes). At
December 28, 2003, the aggregate fair value of the Notes,
based upon quoted market prices, was $434,560,000. 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
$382,770,000. 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 $418,100,000.



|        |                                                 
|------- | ------------------------------------------------
|Item 8. | Financial Statements and Supplementary
    Data.

See the Companys Consolidated Financial
Statements at December 28, 2003, and for the periods then
ended, together with the report of PricewaterhouseCoopers LLP
thereon and the information contained in Note O to said
Consolidated Financial Statements titled Summary of
Quarterly Operating Results and Comprehensive Income
(Unaudited), which are included in this Annual Report on
Form 10-K and listed in the index to financial information
on page 25 hereof.



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

Not applicable.

Item 9A. Controls and
Procedures.

An evaluation was performed by the Companys
management, with the participation of the Companys Chief
Executive Officer (the Companys principal executive
officer) and the Companys Vice President-Finance (the
Companys principal financial officer), of the
effectiveness of the Companys disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)), as of December 28, 2003. Based on that
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 information required to be
disclosed by the Company in the reports that it files or submits
under the Exchange Act is recorded, processed, summarized and
reported, within the time periods specified in the Securities
and Exchange Commissions rules and forms.

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 2004 Annual Meeting of Stockholders is
incorporated herein by reference thereto.

The Company has adopted codes of conduct that
constitute codes of ethics as that term is defined
in paragraph (b) of Item 406 of Regulation S-K
and that apply to the Companys principal executive
officer, principal financial officer, principal accounting
officer or controller and to any persons performing similar
functions. Such codes of conduct are posted on the
Companys Internet website, the address of which is
www.washpostco.com, and the Company intends to satisfy
the disclosure requirements under Item 10 of Form 8-K
with respect to certain amendments to, and waivers of the
requirements of, the provisions of such codes of conduct
applicable to the officers and persons referred to above by
posting the required information on its Internet website.



22




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##### 



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 2004
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 2004 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 2004
Annual Meeting of Stockholders is incorporated herein by
reference thereto.



|         |                                            
|-------- | -------------------------------------------
|Item 14. | Principal Accountant Fees and
    Services.

The information contained under the heading
Audit Committee Report in the definitive Proxy
Statement for the Companys 2004 Annual Meeting of
Stockholders is incorporated herein by reference thereto.

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 25 hereof.



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



| |                                                          
| | ---------------------------------------------------------
| | As listed in the index to exhibits on
    page 63 hereof.



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



| |                                                                                                                                                                                                                            
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The following reports on Form 8-K were filed
    during the last quarter of the period covered by this report:                                                                                                             
|
| | (i) Current Report on Form 8-K
    dated September 29, 2003, reporting under Item 5 the
    Companys offer to purchase certain options outstanding
    under the Kaplan, Inc. stock option plan.                          
|
| | (ii) Current Report on Form 8-K dated
    October 31, 2003, reporting under Items 7 and 12 the
    Companys third quarter earnings and including as an
    exhibit the Companys press release dated October 31,
    2003.



23




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##### 



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 9, 2004.



| |                            
| | ---------------------------
| | 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 9, 2004:

|                         |  |                                                                                                  |  | 
|------------------------ |  | ------------------------------------------------------------------------------------------------ |  | 
|                        
|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                                                                                         |  | 
|                        
|Ronald L. Olson          |  | 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




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##### 



INDEX TO FINANCIAL INFORMATION



---

THE WASHINGTON POST COMPANY

|                                                                                                      |                                                                                                                                                  |                                        |    |    |    | 
|----------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------ | -------------------------------------- | -- | -- | -- | 
|                                                                                                      |                                                                                                                                                  | Page                                  
|                                                                                                      |                                                                                                                                                  |                                       
|Managements Discussion and Analysis of
    Results of Operations and Financial Condition (Unaudited) |                                                                                                                                                  |                                        | 27 |   
|                                                                                                     
|                                                                                                     
|                                                                                                     
|                                                                                                     
|                                                                                                     
|Financial Statements and Schedules:                                                                   |                                                                                                                                                  |                                        |    |   
|                                                                                                     
|                                                                                                     
|                                                                                                     
|                                                                                                     
|                                                                                                     
|                                                                                                      | Report of Independent Auditors                                                                                                                   |                                        |    | 38 |   
|                                                                                                     
|                                                                                                     
|                                                                                                     
|                                                                                                     
|                                                                                                     
|                                                                                                      | Consolidated Statements of Income and
    Consolidated Statements of Comprehensive Income for the Three
    Fiscal Years Ended December 28, 2003 |                                        |    | 39 |   
|                                                                                                     
|                                                                                                     
|                                                                                                     
|                                                                                                     
|                                                                                                     
|                                                                                                      | Consolidated Balance Sheets at December 28,
    2003 and December 29, 2002                                                                       |                                        |    | 40 |   
|                                                                                                     
|                                                                                                     
|                                                                                                     
|                                                                                                     
|                                                                                                     
|                                                                                                      | Consolidated Statements of Cash Flows for the
    Three Fiscal Years Ended December 28, 2003                                                     |                                        |    | 42 |   
|                                                                                                     
|                                                                                                     
|                                                                                                     
|                                                                                                     
|                                                                                                     
|                                                                                                      | Consolidated Statements of Changes in Common
    Shareholders Equity for the Three Fiscal Years Ended
    December 28, 2003                     |                                        |    | 43 |   
|                                                                                                     
|                                                                                                     
|                                                                                                     
|                                                                                                     
|                                                                                                     
|                                                                                                      | Notes to Consolidated Financial Statements                                                                                                       |                                        |    | 44 |   
|                                                                                                     
|                                                                                                     
|                                                                                                     
|                                                                                                     
|                                                                                                     
|                                                                                                      | Financial Statement Schedule for the Three Fiscal
    Years Ended December 28, 2003:                                                             |                                        |    |    |   
|                                                                                                     
|                                                                                                     
|                                                                                                     
|                                                                                                     
|                                                                                                     
|                                                                                                      |                                                                                                                                                  | II  Valuation and Qualifying Accounts |    |    | 59 | 
|                                                                                                     
|                                                                                                     
|                                                                                                     
|                                                                                                     
|                                                                                                     
|Ten-Year Summary of Selected Historical Financial
    Data (Unaudited)                                |                                                                                                                                                  |                                        | 60 |   



---

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.



25




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##### 



(This page intentionally left blank)




26




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##### 



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.

OVERVIEW

The Washington Post Company is a media and
education company, with education as the fastest-growing
business. 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 provides educational services for
individuals, schools and businesses. The Companys business
units are diverse and subject to different trends and risks.

The Companys education segment is expected
to become the largest operating segment of the Company from a
revenue standpoint in 2004. The Company has devoted significant
resources and attention to this division, given the
attractiveness of investment opportunities and growth prospects.
The growth of Kaplan in recent years has come from both rapid
internal growth and acquisitions. Each of Kaplans
businesses showed strong revenue and operating income growth in
2003, in particular, both the campus-based and online businesses
in its higher education division. Kaplan made
13 acquisitions in 2003, the most significant of which were
Financial Training Company, a test preparation services company
for accountants and financial services professionals, primarily
in the United Kingdom; and Dublin Business School,
Irelands largest private undergraduate institution. These
acquisitions mark the Companys most significant business
investments outside the United States in more than 10 years.
Over the past several years, Kaplans revenues have grown
rapidly while operating income (loss) has fluctuated due
largely to various business investments and stock compensation
charges.

The cable division has also been a source of
recent growth and capital investment. Cable Ones industry
has experienced significant technological change, which has
created new revenue opportunities, such as digital television
and broadband, as well as increased competition, particularly
from satellite television service providers. Through extensive
marketing efforts in 2003, the Companys cable division was
able to report a small increase in the number of basic cable
subscribers during the year (total basic subscribers of 720,800
at the end of 2003), an increase in paying digital subscribers
during the year (222,900 paying digital subscribers at the end
of December 2003) and a 69 percent increase in the number
of CableONE.net subscribers (133,800 high speed data subscribers
at the end of December 2003). As part of this marketing effort,
the cable division froze most rates for Cable One subscribers
during the year. The cable division began offering bundled
services in 2003 (basic and tier service, digital service, and
high speed data service in one package) with monthly subscriber
discounts. By the end of 2003, almost 9 percent of the
cable divisions subscribers accepted the full bundle of
services.

The Companys newspaper publishing,
broadcast television, and magazine publishing divisions derive
revenue from advertising and, to a lesser extent, circulation
and subscription. These divisions results tend to
fluctuate with the overall advertising cycle (amongst other
business factors). In 2003, advertising showed some improvement
after a prolonged slump. The Washington Post newspaper reported
an increase in print classified recruitment revenue in the
fourth quarter of 2003, the first such increase since the third
quarter of 2000. Preprint and general print advertising
categories showed double digit growth in 2003. Circulation
volume was down by about 2 percent during the year, mostly
due to a reduction in single copy sales during the year. In
order to reduce costs over the long term, the newspaper offered
early retirement programs to certain groups of employees,
including the newsroom, with a total of 153 employees
accepting such offers; costs of $34.1 million were recorded in
connection with these programs in 2003. The Companys
online publishing business, Washingtonpost.Newsweek Interactive,
showed a 30 percent revenue growth in 2003, but continued
to incur an operating loss, however, at a much reduced level.

The Companys television broadcasting
division experienced a large decline in operating income due
primarily to the absence of significant political and
Olympics-related advertising in 2003. The Company expects
significant improvement in 2004, with the elections and the
summer Olympics; however, the recent campaign finance
legislation may have an adverse impact on political revenues in
2004. Newsweek magazine showed ad growth in 2003 despite
significant reductions in travel-related advertising at its
international Pacific edition due to the SARS outbreak.
Newsweeks domestic edition fared well compared to its
primary competitors in 2003, adding market share. Newsweek had
two early retirement programs offered in 2002; this helped to
keep costs down in 2003.

The Company generates a significant amount of
cash from its businesses that is used to support its operations,
to pay down debt, and to fund capital expenditures, dividends
and acquisitions.

RESULTS OF OPERATIONS  2003
COMPARED TO 2002

Net income was $241.1 million ($25.12 per
share) for the fiscal year ended December 28, 2003,
compared with net income of $204.3 million ($21.34 per
share) for the fiscal year ended December 29, 2002. The
Companys 2003 results include a non-operating gain from
the sale of the Companys 50 percent interest in the
International Herald Tribune (after-tax impact of
$32.3 million, or $3.38 per share), an operating gain from
the sale of land at The Washington Post newspaper (after-tax
impact of $25.5 million, or $2.66 per share), early
retirement program charges at The Washington Post newspaper
(after-tax impact of $20.8 million, or $2.18 per share),
Kaplan stock compensation expense for the 10 percent
premium associated with the purchase of certain outstanding
stock options announced in the third quarter (after-tax impact
of $6.4 million, or $0.67 per share), and a charge in
connection with the establishment of the Kaplan Educational
Foundation (after-tax impact of $3.9 million, or $0.41 per
share). The Companys 2002 results included 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



27




---



##### 



(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).


Results for 2003 include $119.1 million in
stock compensation expense at the Kaplan education division,
which was significantly higher than the $34.5 million in Kaplan
stock compensation expense in 2002. In September 2003, the
Company announced an offer totaling $138 million for
approximately 55 percent of the stock options outstanding
at Kaplan. The Companys offer included a 10 percent
premium over the current valuation price. The Company paid out
$118.7 million in the fourth quarter of 2003, with the remainder
of the payouts to be made from 2004 through 2007. A small number
of key Kaplan executives will continue to hold the remaining
45 percent of outstanding Kaplan stock options, with
roughly half of the remaining options expiring in 2007 and half
expiring in 2011. The Company does not expect to issue
additional Kaplan stock options in the future.

Revenue for 2003 was $2,838.9 million, up
10 percent compared to revenue of $2,584.2 million in
2002. The increase in revenue is due mostly to significant
revenue growth at the education division, along with increases
at the Companys cable television, newspaper publishing,
and magazine publishing divisions; revenues were down at the
television broadcasting division. Advertising revenue increased
1 percent in 2003, and circulation and subscriber revenue
increased 5 percent. Education revenue increased
35 percent in 2003, and other revenue was flat. The
increase in advertising revenue is due to increases at the
newspaper publishing and magazine publishing divisions, offset
by a decline at the television broadcasting division due
primarily to significant political revenues in 2002. The
increase in circulation and subscriber revenue is due to an
8 percent increase in subscriber revenue at the cable
division from continued growth in cable modem and digital
service revenues, a 1 percent increase in circulation
revenue at The Post, and a slight increase in Newsweek
circulation revenues due to increased newsstand sales for both
the domestic and international editions of Newsweek. Revenue
growth at Kaplan, Inc. (about 43 percent of which was from
acquisitions) accounted for the increase in education revenue.

Operating costs and expenses for the year
increased 12 percent to $2,475.1 million, from
$2,206.6 million in 2002. The increase is primarily due to
a significant increase in stock-based compensation at Kaplan,
higher expenses from operating growth at Kaplan, early
retirement program charges, higher newsprint prices and a
reduced pension credit, offset by a $41.7 million pre-tax
gain on the sale of land at The Washington Post newspaper.

Operating income declined 4 percent to
$363.8 million, from $377.6 million in 2002, due
largely to the $84.6 million increase in Kaplan stock
compensation discussed above. Operating results for 2003 also
include a $41.7 million pre-tax gain on the sale of land at
The Washington Post newspaper, $34.1 million in pre-tax charges
from early retirement programs at The Washington Post newspaper,
and a $6.5 million charge for the Kaplan Educational
Foundation. Operating results for 2002 included
$19.0 million in pre-tax charges from early retirement
programs. The Companys year-to-date results were adversely
impacted by a reduction in operating income at the television
broadcasting division and a reduced net pension credit. Improved
results at the Companys newspaper publishing, magazine
publishing and cable television divisions helped to offset these
declines.

The Companys 2003 operating income includes
$55.1 million of net pension credits, compared to
$64.4 million in 2002. These amounts exclude
$34.1 million and $19.0 million in charges related to
early retirement programs in 2003 and 2002, respectively.

DIVISION RESULTS

Newspaper Publishing Division.Newspaper publishing division revenue
in 2003 increased 4 percent to $872.8 million, from
$842.0 million in 2002. Division operating income for 2003
totaled $134.2 million, an increase of 23 percent from
operating income of $109.0 million in 2002. Operating
results for 2003 include a fourth quarter $41.7 million
pre-tax gain on the sale of land at The Washington Post
newspaper and $34.1 million in pre-tax charges from early
retirement programs at The Washington Post newspaper. Operating
results for 2002 included a $2.9 million charge from an
early retirement program at The Washington Post newspaper.
Improved operating results for 2003 are due to increased
advertising revenue and cost control initiatives employed
throughout the division, offset by a 3 percent increase in
newsprint expense, incremental costs associated with the war in
Iraq, a reduced pension credit, and a small loss from a new
commuter newspaper, Express, which was launched in August 2003.
Operating margin at the newspaper publishing division was
15 percent for 2003 and 13 percent for 2002.

Print advertising revenue at The Washington Post
newspaper increased 3 percent to $572.2 million, from
$555.7 million in 2002. The rise in print advertising
revenue for 2003 was due to increases in general and preprint
advertising revenue, which more than offset declines in
classified and retail advertising revenue from volume declines.
Classified recruitment advertising revenue decreased
$6.1 million in 2003, due to a 14 percent volume
decline. Classified recruitment advertising revenue increased by
$0.8 million, or 6 percent, during the fourth quarter
of 2003, with flat volume compared to 2002. This was the first
quarter with an increase in classified recruitment advertising
revenue since the third quarter of 2000.

Circulation revenue at The Post was up
1 percent for 2003 due to an increase in home delivery
prices. Daily circulation at The Post declined 2.0 percent,
and Sunday circulation declined 1.8 percent. Single copy
sales contributed to the decline, with a 9 percent daily
decrease and a 6 percent Sunday decrease. For the year ended
December 28, 2003, average daily circulation at The Post
totaled 745,000 (unaudited), and average Sunday circulation
totaled 1,035,000 (unaudited).

During 2003, revenue generated by the
Companys online publishing activities, primarily
washingtonpost.com, increased 30 percent to $46.9 million,
from $35.9 million in 2002. Local and national



28




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##### 



online advertising revenues grew 59 percent
and revenues at the Jobs section of washingtonpost.com increased
29 percent.


As previously discussed, the Post launched a new
commuter newspaper, Express, in August 2003. The new publication
appears each morning, Monday through Friday, in tabloid form and
is distributed free-of-charge in the Washington, D.C. area.

Television Broadcasting Division.Revenue for the television
broadcasting division decreased 8 percent to
$315.1 million in 2003, from $343.6 million in 2002,
due to approximately $31.8 million in political advertising
in 2002, $5.0 million in incremental Olympics-related
advertising at the Companys NBC affiliates in the first
quarter of 2002, and several days of commercial-free coverage in
connection with the Iraq war in March 2003.

Operating income for 2003 decreased
17 percent to $139.7 million, from operating income of
$168.8 million in 2002, primarily as a result of the
revenue reductions discussed above. Operating margin at the
broadcast division was 44 percent for 2003 and
49 percent for 2002.

Competitive market position remained strong for
the Companys television stations. WDIV in Detroit and KSAT
in San Antonio were ranked number one in the November 2003
ratings period, Monday through Friday, sign-on to sign-off; WJXT
in Jacksonville ranked second; WKMG in Orlando was tied for
second; KPRC in Houston ranked third; and WPLG was third among
English-language stations in the Miami market.

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 $353.6 million for 2003, a 1 percent
increase from $349.1 million in 2002. The revenue increase
in 2003 is due to increases in ad pages at Newsweeks
domestic edition, Arthur Frommers Budget Travel magazine,
and the Companys trade magazines, offset by lower
advertising revenue at the international editions of Newsweek,
particularly travel-related advertising at the Pacific edition.

Operating income totaled $43.5 million for
2003, an increase of 69 percent from operating income of
$25.7 million in 2002. The improvement in operating results
for 2003 is primarily attributable to $16.1 million in
pre-tax charges in connection with early retirement programs at
Newsweek in 2002, offset by a reduced pension credit.

Operating margin at the magazine publishing
division was 12 percent for 2003 and 7 percent for
2002.

Cable Television Division.Cable division revenue of
$459.4 million for 2003 represents a 7 percent
increase from revenue of $428.5 in 2002. The 2003 revenue
increase is principally due to rapid growth in the
divisions cable modem and digital service revenues, offset
by lower pay and basic revenues due to fewer average basic and
pay subscribers during the year, and the lack of rate increases
due to a decision to freeze most rates for Cable One subscribers
in 2003 (the Companys price increases normally take effect
in the second quarter each year).

Cable division operating income increased
9 percent in 2003 to $88.4 million, from operating
income of $80.9 million in 2002. The increase in operating
income for 2003 is due mostly to the divisions revenue
growth, offset by higher depreciation expense and an increase in
technical, Internet, marketing and employee benefits costs.
Operating margin at the cable television division was
19 percent in 2003 and 2002.

Depreciation expense increased due to significant
capital spending in recent years that has enabled the cable
division to offer digital and broadband cable services to its
subscribers. The cable division began its rollout plan for these
services in the third quarter of 2000. Depreciation expense in
2002 included a $5.4 million charge for obsolete assets. At
December 31, 2003, the cable division had approximately
222,900 digital cable subscribers, representing a
31 percent penetration of the subscriber base. Both digital
and cable modem services are now offered in virtually all of the
cable divisions markets.

At December 31, 2003, the cable division had
720,800 basic subscribers, compared to 718,000 at the end of
December 2002, with the increase due to significant marketing
efforts in 2003 to stabilize the subscriber base. At
December 31, 2003, the cable division had 133,800
CableONE.net service subscribers, compared to 79,400 at the end
of December 2002, due to a large increase in the Companys
cable modem deployment and take-up rates. In 2003, the cable
division launched a number of marketing initiatives, including
door-to-door sales and bundled service offers with monthly
discounts, which have resulted in increased customer
subscription rates.

At December 31, 2003, Revenue Generating
Units (RGUs), as defined by the NCTA Standard Reporting
Categories, totaled 1,077,500, compared to 993,600 as of
December 31, 2002. The increase is due to an increase in
the number of digital cable and high speed data customers.

Below are details of cable division capital
expenditures for 2003 and 2002, as defined by the NCTA Standard
Reporting Categories (in millions):

|                           |       |      |      |      |      |   |      |      | 
|-------------------------- | ----- | ---- | ---- | ---- | ---- | - | ---- | ---- | 
|                           |       | 2003 |      |      | 2002 |  
|                          
|                          
|Customer premise equipment |       | $    | 17.0 |      |      | $ | 27.2 |     
|                          
|                          
|                          
|                          
|Commercial                 |       |      | 0.1  |      |      |   | 0.1  |     
|                          
|                          
|                          
|                          
|Scaleable infrastructure   |       |      | 5.3  |      |      |   | 6.8  |     
|                          
|                          
|                          
|                          
|Line extensions            |       |      | 10.6 |      |      |   | 10.4 |     
|                          
|                          
|                          
|                          
|Upgrade/ rebuild           |       |      | 21.4 |      |      |   | 37.4 |     
|                          
|                          
|                          
|                          
|Support capital            |       |      | 11.5 |      |      |   | 10.6 |     
|                           |       |     
|                           | Total |      | $    | 65.9 |      |   | $    | 92.5 | 
|                           |       |     

Education Division.Education division revenue in 2003
increased 35 percent to $838.1 million, from
$621.1 million in 2002. Kaplan reported an operating loss
of $11.7 million for the year, compared to operating income
of $20.5 million in 2002. The decline is due to an
$84.6 million increase in Kaplan stock compensation expense
in 2003 and a $6.5 million contribution to the Kaplan
Educational Foundation in the fourth quarter of 2003, offset by
significant revenue growth during the year. Approximately



29




---



##### 



43 percent of the increase in Kaplan revenue
is from acquired businesses, primarily in the higher education
division and the professional training schools that are part of
supplemental education. A summary of operating results for 2003
compared to 2002 is as follows (in thousands):


|                        |                           |      |         |          |      |   |         |          |   |  |    |      |  
|----------------------- | ------------------------- | ---- | ------- | -------- | ---- | - | ------- | -------- | - |  | -- | ---- | -
|                        |                           | 2003 |         |          | 2002 |   |         | % Change |  
|                        |                           |      |         |          |      |  
|                       
|                       
|Revenue                 |                           |      |         |          |      |   |         |          |   |  |    |     
|                       
|                       
|                       
|                       
|                        | Supplemental education    |      | $       | 471,767  |      |   | $       | 371,248  |   |  |    | 27   |  
|                       
|                       
|                       
|                       
|                        | Higher education          |      |         | 366,310  |      |   |         | 249,877  |   |  |    | 47   |  
|                        |                           |     
|                       
|                        |                           | $    | 838,077 |          |      | $ | 621,125 |          |   |  | 35 |     
|                        |                           |     
|                       
|                       
|                       
|                       
|Operating income (loss) |                           |      |         |          |      |   |         |          |   |  |    |     
|                       
|                       
|                       
|                       
|                        | Supplemental education    |      | $       | 87,866   |      |   | $       | 54,103   |   |  |    | 62   |  
|                       
|                       
|                       
|                       
|                        | Higher education          |      |         | 57,606   |      |   |         | 27,569   |   |  |    | 109  |  
|                       
|                       
|                       
|                       
|                        | Kaplan corporate overhead |      |         | (36,782  | )    |   |         | (26,143  | ) |  |    | (41  | )
|                       
|                       
|                       
|                       
|                        | Other                     |      |         | (120,399 | )    |   |         | (35,017  | ) |  |    | (244 | )
|                        |                           |     
|                        |                           | $    | (11,709 | )        |      | $ | 20,512  |          |   |  |   |     
|                        |                           |     

Supplemental education includes Kaplans
test preparation, professional training and Score! businesses.
On March 31, 2003, Kaplan completed its acquisition of
Financial Training Company (FTC) for
£55.3 million ($87.4 million), financed through cash
and debt. Headquartered in London, FTC provides test preparation
services for accountants and financial services professionals,
with training centers in the United Kingdom and Asia. The
improvement in supplemental education results for 2003 is due to
increased enrollment at Kaplans traditional test
preparation business, significant increases in the professional
real estate courses, and the FTC acquisition. Score! also
contributed to the improved results, with increased enrollments
at existing centers and the addition of 10 new centers compared
to last year.

Higher education includes all of Kaplans
post-secondary education businesses, including fixed-facility
colleges, 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s corporate office, including a
$6.5 million charge in the fourth quarter of 2003 for the
Kaplan Educational Foundation, and expenses associated with the
design and development of educational software that, if
successfully completed, will benefit all of Kaplans
business units.

Other expense comprises 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. The Company recorded expense of
$119.1 million and $34.5 million for 2003 and 2002,
respectively, related to this plan. The increase for 2003
reflects a significant increase in the value of Kaplan due to
its rapid earnings growth and the general rise in valuations of
education companies. See additional discussion above regarding
the Companys announcement in September 2003 of its offer
to purchase 55 percent of the outstanding Kaplan stock
options.

In February 2004, Kaplan announced that its
higher education division acquired Texas School of Business, a
career-oriented post-secondary school providing training in the
fields of allied health and business.

Corporate Office.The corporate office operating
expenses increased to $30.3 million in 2003, from
$27.4 million in 2002. The increase in expenses for 2003 is
associated with several companywide technology projects.

Equity in Losses of Affiliates.The Companys equity in losses of
affiliates for 2003 was $9.8 million, compared to losses of
$19.3 million for 2002. The Companys affiliate
investments at the end of 2003 consisted of a 49 percent
interest in BrassRing LLC and a 49 percent interest in
Bowater Mersey Paper Company Limited. BrassRing results improved
in 2003, despite a second quarter charge arising from the
shutdown of one of the BrassRing businesses, which increased the
Companys equity in losses of BrassRing by
$2.2 million. The Companys equity in losses of
BrassRing totaled $7.7 million for 2003, compared to
$13.9 million for 2002.

On January 1, 2003, the Company sold its
50 percent interest in the International Herald Tribune for
$65 million and recorded an after-tax non-operating gain of
$32.3 million in the first quarter of 2003.

Non-Operating Items.The Company recorded other
non-operating income, net, of $55.4 million in 2003,
compared to $28.9 million in 2002. The 2003 non-operating
income, net, mostly comprises a $49.8 million pre-tax gain
from the sale of the Companys 50 percent interest in
the International Herald Tribune. The 2002 non-operating income,
net, 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, offset by write-downs
recorded on certain investments.

A summary of non-operating income
(expense) for the years ended December 28, 2003 and
December 29, 2002, follows (in millions):

|                                                                |       |      |      |      |      |   |       |      | 
|--------------------------------------------------------------- | ----- | ---- | ---- | ---- | ---- | - | ----- | ---- | 
|                                                                |       | 2003 |      |      | 2002 |  
|                                                               
|                                                               
|Gain on sale of interest in IHT                                 |       | $    | 49.8 |      |      | $ |      |     
|                                                               
|                                                               
|                                                               
|                                                               
|Foreign currency gains, net                                     |       |      | 4.2  |      |      |   |      |     
|                                                               
|                                                               
|                                                               
|                                                               
|Impairment write-downs on cost method and other
    investments |       |      | (1.3 | )    |      |   | (21.2 | )   
|                                                               
|                                                               
|                                                               
|                                                               
|Gain on exchange of cable system business                       |       |      |     |      |      |   | 27.8  |     
|                                                               
|                                                               
|                                                               
|                                                               
|Gain on sale of marketable securities                           |       |      |     |      |      |   | 13.2  |     
|                                                               
|                                                               
|                                                               
|                                                               
|Other gains                                                     |       |      | 2.7  |      |      |   | 9.1   |     
|                                                                |       |     
|                                                                | Total |      | $    | 55.4 |      |   | $     | 28.9 | 
|                                                                |       |     

The Company incurred net interest expense of
$26.9 million in 2003, compared to $33.5 million in
2002, due to lower average borrowings during 2003 compared to
2002. At December 28,



30




---



##### 



2003, the Company had $631.1 million in borrowings outstanding at an average interest rate of 4.1 percent;
at December 29, 2002, the Company had $664.8 million
in borrowings outstanding.


Income Taxes.The
effective tax rate was 37.0 percent for 2003, compared to
38.8 percent for 2002. The 2003 effective tax rate
benefited from the 35.1 percent effective tax rate applicable to
the one-time gain arising from the sale of the Companys
interest in the International Herald Tribune. The Companys
effective tax rate also declined due to a decrease in the
overall state tax rate. The Company expects an effective tax
rate in 2004 of approximately 38.5 percent.

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.



31




---



##### 



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 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 the events of
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.

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.

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



32




---



##### 



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 comprises primarily 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 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.

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.

A summary of non-operating income
(expense) for the years ended December 29, 2002 and
December 30, 2001, follows (in millions):

|                                                                |       |      |       |      |      |   |       |       | 
|--------------------------------------------------------------- | ----- | ---- | ----- | ---- | ---- | - | ----- | ----- | 
|                                                                |       | 2002 |       |      | 2001 |  
|                                                                |       |      |       |     
|                                                               
|                                                               
|Gain on sale or exchange of cable system
    businesses         |       | $    | 27.8  |      |      | $ | 321.1 |      
|                                                               
|                                                               
|                                                               
|                                                               
|Gain (loss) on sales of marketable securities                   |       |      | 13.2  |      |      |   | (0.3  | )    
|                                                               
|                                                               
|                                                               
|                                                               
|Impairment write-downs on cost method and other
    investments |       |      | (21.2 | )    |      |   | (32.4 | )    
|                                                               
|                                                               
|                                                               
|                                                               
|Impairment write-down of non-operating asset                    |       |      |      |      |      |   | (4.3  | )    
|                                                               
|                                                               
|                                                               
|                                                               
|Other                                                           |       |      | 9.1   |      |      |   | (0.4  | )    
|                                                                |       |     
|                                                                | Total |      | $     | 28.9 |      |   | $     | 283.7 | 
|                                                                |       |     

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.



33




---



##### 



FINANCIAL CONDITION: CAPITAL RESOURCES AND
LIQUIDITY

Acquisitions, Exchanges and Dispositions.During 2003, Kaplan acquired 13
businesses in its higher education and professional divisions
for a total of $166.8 million, financed through cash and
debt, with $36.7 million remaining to be paid. The largest
of these was the March 2003 acquisition of the stock of
Financial Training Company (FTC), for £55.3 million
($87.4 million). Headquartered in London, FTC provides test
preparation services for accountants and financial services
professionals, with 28 training centers in the United Kingdom as
well as operations in Asia. This acquisition was financed
through cash and debt, and $29.7 million remains to be
paid, primarily to employees of the business. In November 2003,
Kaplan acquired Dublin Business School, Irelands largest
private undergraduate institution, serving approximately 5,000
students. Most of the purchase price for the 2003 Kaplan
acquisitions was allocated to goodwill and other intangibles and
property, plant and equipment.

In addition, the cable division acquired three
additional systems in 2003 for $2.8 million. Most of the
purchase price for these acquisitions was allocated to franchise
agreements, an indefinite-lived intangible asset.

On January 1, 2003, the Company sold its
50 percent interest in the International Herald Tribune for
$65 million and the Company recorded an after-tax
non-operating gain of $32.3 million ($3.38 per share) in
the first quarter of 2003.

During 2002, Kaplan acquired several businesses
in its higher education and test preparation divisions for
approximately $42.2 million. 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 completed acquisitions
and exchanges totaling $422.8 million (including estimated
fair value of cable systems surrendered). These principally
included the purchase of Southern Maryland Newspapers, a
division of Chesapeake Publishing Corporation, and 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.

Capital Expenditures.During 2003, the Companys
capital expenditures totaled $125.6 million. The
Companys capital expenditures for 2003, 2002 and 2001 are
disclosed in Note N to the Consolidated Financial Statements.
The Company estimates that its capital expenditures will be in
the range of $200 million to $225 million in 2004.

Kaplan Stock Compensation Plan.As discussed above, in connection with
the Companys September 2003 offer totaling
$138 million for approximately 55 percent of the stock
options outstanding at Kaplan, the Company paid out $118.7
million in the fourth quarter of 2003.

Investments in Marketable Equity Securities.At December 28, 2003, the fair
value of the Companys investments in marketable equity
securities was $248.0 million, which includes
$245.3 million in Berkshire Hathaway Inc. Class A and
B common stock and $2.7 million of various common stocks of
publicly traded companies with e-commerce business
concentrations.

At December 28, 2003, the gross unrealized
gain related to the Companys Berkshire Hathaway Inc. stock
investment totaled $60.4 million; the gross unrealized gain
on this investment was $29.9 million at December 29,
2002. The Company presently intends to hold the Berkshire
Hathaway stock long term.

Cost Method Investments.At December 28, 2003 and
December 29, 2002, 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 2003 and 2002,
the Company invested $0.8 million and $0.3 million,
respectively, in various cost method investees. At December 28,
2003 and December 29, 2002, the carrying value of the
Companys cost method investments totaled $9.6 million
and $9.5 million, respectively.

Common Stock Repurchases and Dividend Rate.During 2003, 2002 and 2001, the
Company repurchased 910 shares, 1,229 shares and 714 shares,
respectively, of its Class B common stock at a cost of
$0.7 million, $0.8 million and $0.4 million. At
December 28, 2003, the Company had authorization from the
Board of Directors to purchase up to 542,800 shares of
Class B common stock. The annual dividend rate for 2004 was
increased to $7.00 per share, from $5.80 per share in 2003, and
from $5.60 per share in 2002.



34







---



##### 



Liquidity.At
December 28, 2003, the Company had $87.4 million in
cash and cash equivalents, compared to $28.8 million at
December 29, 2002.

At December 28, 2003, the Company had
$188.3 million in commercial paper borrowings outstanding
at an average interest rate of 1.1 percent with various
maturities through the first quarter of 2004. In addition, the
Company had outstanding $398.7 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
$44.1 million in other debt.

During 2003, the Companys borrowings, net
of repayments, decreased by $33.7 million, with the decrease
primarily due to cash flow from operations. While the Company
paid down $71.0 million in commercial paper borrowings
during 2003, the Company also partially financed
$36.7 million in acquisitions during this period.

During the third quarter of 2003, the Company
replaced its $350 million 364-day revolving credit facility
with a new $250 million revolving credit facility, which
expires in August 2004. The Companys five-year
$350 million revolving credit facility, which expires in
August 2007, remains in effect. These revolving credit facility
agreements support the issuance of the Companys short-term
commercial paper and provide for general corporate purposes.

During 2003 and 2002, the Company had average
borrowings outstanding of approximately $605.7 million and
$793.7 million, respectively, at average annual interest
rates of approximately 4.2 percent and 3.7 percent,
respectively. The Company incurred net interest expense on
borrowings of $26.9 million and $33.5 million during 2003
and 2002, respectively.

At December 28, 2003 and December 29,
2002, the Company had a working capital deficit of
$216.0 million and $353.2 million, respectively. The
Company maintains working capital levels consistent with its
underlying business requirements and consistently generates cash
from operations in excess of required interest or principal
payments. The Company has classified all of its commercial paper
borrowing obligations as a current liability at
December 28, 2003 and December 29, 2002, as the
Company intends to pay down commercial paper borrowings from
operating cash flow. However, the Company continues to maintain
the ability to refinance such obligations on a long-term basis
through new debt issuance and/or its revolving credit facility
agreements.

The Companys net cash provided by operating
activities, as reported in the Companys Consolidated
Statements of Cash Flows, was $337.7 million in 2003 as
compared to $497.5 million in 2002. The decline is
primarily due to significant payments for Kaplan stock options
in 2003, and a large increase in the companys income tax
payments in 2003.

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 2004.

The following reflects a summary of the
Companys contractual obligations and commercial
commitments as of December 28, 2003:

Contractual Obligations

(in thousands)


|                                     |  |      |         |      |  |      |         |      |  |      |         |            |  |       |         |  |  |   |         |  |  |   |         |  |  |   |           | 
|------------------------------------ |  | ---- | ------- | ---- |  | ---- | ------- | ---- |  | ---- | ------- | ---------- |  | ----- | ------- |  |  | - | ------- |  |  | - | ------- |  |  | - | --------- | 
|                                     |  | 2004 |         | 2005 |  | 2006 |         | 2007 |  | 2008 |         | Thereafter |  | Total
|                                     |  |     
|                                     |  |     
|Commercial paper                     |  | $    | 188,316 |      |  | $    |        |      |  | $    |        |            |  | $     |        |  |  | $ |        |  |  | $ |        |  |  | $ | 188,316   | 
|Long-term debt                       |  |      | 20,304  |      |  |      | 4,114   |      |  |      | 18,846  |            |  |       | 839     |  |  |   | 8       |  |  |   | 398,663 |  |  |   | 442,774   | 
|Programming purchase commitments (1) |  |      | 119,874 |      |  |      | 84,308  |      |  |      | 64,822  |            |  |       | 50,026  |  |  |   | 28,460  |  |  |   | 15,707  |  |  |   | 363,197   | 
|Operating leases                     |  |      | 69,104  |      |  |      | 63,905  |      |  |      | 57,945  |            |  |       | 54,095  |  |  |   | 45,603  |  |  |   | 135,826 |  |  |   | 426,478   | 
|Other purchase obligations (2)       |  |      | 310,401 |      |  |      | 74,386  |      |  |      | 52,166  |            |  |       | 44,015  |  |  |   | 35,585  |  |  |   | 133,760 |  |  |   | 650,313   | 
|Long-term liabilities (3)            |  |      | 6,500   |      |  |      | 7,100   |      |  |      | 7,600   |            |  |       | 8,150   |  |  |   | 8,700   |  |  |   | 115,342 |  |  |   | 153,392   | 
|                                     |  |     
|Total                                |  | $    | 714,499 |      |  | $    | 233,813 |      |  | $    | 201,379 |            |  | $     | 157,125 |  |  | $ | 118,356 |  |  | $ | 799,298 |  |  | $ | 2,224,470 | 
|                                     |  |     



---



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Includes commitments for the Companys
    television broadcasting and cable television businesses that are
    reflected in the Companys consolidated balance sheet and
    commitments to purchase programming to be produced in future
    years.                                                                                                                                                                                                                                                      
|   
|(2) | Includes purchase obligations related to
    newsprint contracts, printing contracts, employment agreements,
    circulation distribution agreements, capital projects and other
    legally binding commitments. Other purchase orders made in the
    ordinary course of business are excluded from the table above.
    Any amounts for which the Company is liable under purchase
    orders are reflected in the Companys consolidated balance
    sheet as accounts payable and accrued liabilities.
|   
|(3) | Primarily made up of postretirement benefit
    obligations other than pensions. The Company has other long-term
    liabilities excluded from the table above, including obligations
    for deferred compensation, long-term incentive plans and
    long-term deferred revenue.                                                                                                                                                                                                                         

Other Commercial Commitments

(in thousands)


|                      |      |          |         |         | 
|--------------------- | ---- | -------- | ------- | ------- | 
|                      |      | Lines of
|Fiscal
          Year |      | Credit  
|                     
|                     
|                      | 2004 |          | $       | 250,000 | 
|                     
|                     
|                     
|                     
|                      | 2005 |          |         |        | 
|                     
|                     
|                     
|                     
|                      | 2006 |          |         |        | 
|                     
|                     
|                     
|                     
|                      | 2007 |          |         | 350,000 | 
|                     
|                     
|                     
|                     
|                      | 2008 |          |         |        | 
|                     
|                     
|                     
|                     
|Thereafter            |      |          |        |        
|                      |      |          |         |        
|                     
|Total                 |      | $        | 600,000 |        
|                      |      |          |         |        

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 arms-length basis.



35







---



##### 



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.The Companys revenue
recognition policies are described in Note A to the
consolidated financial statements. 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 generally 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, along with
estimates for the anticipated level of student drops and refunds
from test performance guarantees, 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, and contracts
with school districts as part of its K12 business, 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 an estimate of advertising rate
adjustments and discounts, based on estimates of advertising
volumes for contract customers who 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 $55.1 million, $64.4 million and
$76.9 million for 2003, 2002 and 2001, 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 the 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, lower than expected investment
returns in 2002, and an amendment to the pension retirement
program for certain employees at the Post effective June 1,
2003, the pension credit for 2003 declined by $9.3 million
compared to 2002. At December 28, 2003, the Company reduced
its discount rate assumption to 6.25 percent. Due to the
reduction in the discount rate, the plan amendment from June
2003, and a reduction in the estimated actuarial gain
amortization, offset by higher than expected investment returns
in 2003, the pension credit for 2004 is expected to be down by
about $14 million compared to 2003. 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 16.7 percent in 2003,
(2.3) percent in 2002, and 10.9 percent in 2001, 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.

Kaplan Stock Option Plan.The Kaplan stock option plan was
adopted in 1997 and initially reserved 15 percent, or
150,000 shares of Kaplans common stock, for options to be
granted under the plan to certain members of Kaplan 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, and 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 amount of compensation expense varies directly
with the estimated fair value of Kaplans common stock and
the number of options outstanding. The estimated fair value of
Kaplans common stock is based upon a comparison of
operating results and public market values of other education
companies and is determined by the Companys compensation
committee of the Board of Directors, with input from management
and an independent outside valuation firm. Over the past several
years, the value of education companies has fluctuated
significantly, and consequently, there has been significant
volatility in the amounts recorded as expense each year as well
as on a quarterly basis.

In September 2003, the committee set the fair
value price of Kaplan common stock at $1,625 per share, which is
determined after deducting intercompany debt from Kaplans
enterprise value. Also in September 2003, the Company announced
an offer totaling $138 million for approximately
55 percent of the stock options outstanding at Kaplan. The
Companys offer included a 10 percent premium over the
current valuation price of Kaplan common stock of $1,625 per
share; by the end of October 2003, 100 percent of the
eligible stock options were tendered. The Company paid out
$118.7 million in the fourth quarter of 2003; the remainder
of the payouts, related to 14,463 tendered stock options, will
be made at the time of their scheduled vesting, from 2004 to
2007, if the option holder is still employed at Kaplan.
Additionally, stock com-



36




---



##### 



pensation expense will be recorded on these
remaining exercised stock options over the remaining vesting
periods of 2004 to 2007. A small number of key Kaplan executives
will continue to hold the remaining 68,000 outstanding Kaplan
stock options (representing about 4.8 percent of
Kaplans common stock), with roughly half of these options
expiring in 2007 and half expiring in 2011. The Company does not
expect to issue additional Kaplan stock options in the future.


For 2003, 2002 and 2001, the Company recorded
expense of $119.1 million, $34.5 million and
$25.3 million, respectively, related to this plan. In 2003
and 2002, payouts from option exercises totaled
$119.6 million and $0.2 million, respectively. At
December 28, 2003, the Companys stock-based
compensation accrual balance totaled $73.9 million. If
Kaplans profits increase and the value of education
companies remains relatively high in 2004, there will be
significant Kaplan stock-based compensation expense again in
2004, although at an otherwise much reduced level due to the
buyout offer made in September 2003. Note G to the Consolidated
Financial Statements provides additional details surrounding the
Kaplan Stock Option Plan.

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 considered). 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 28,
2003, the Company has $1,457.6 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
$1.1 million, $19.2 million and $29.4 million in
2003, 2002 and 2001, respectively. Note C to the Consolidated
Financial Statements provides additional details surrounding
cost method investments.

OTHER

New Accounting Pronouncements.In January 2003, the Financial
Accounting Standards Board (the FASB) released Interpretation
No. 46, Consolidation of Variable Interest Entities
(FIN 46). FIN 46 requires primary beneficiaries of
Variable Interest Entities (VIEs) to consolidate those entities.
In December 2003, the FASB published a revision to FIN 46
(FIN 46R) to clarify some of the provisions of FIN 46
and to defer the effective date of implementation for certain
entities. Under the guidance of FIN 46R, entities that do
not have interests in structures that are commonly referred to
as SPEs are required to apply the provisions of the
interpretation in financial statements for periods ending after
March 14, 2004. The Company does not have any interests in
VIEs, including SPEs, and therefore, FIN 46 and
FIN 46R did not have any impact on the Company in 2003 and
are not expected to have any impact on the Company in 2004.



37




---



##### 



REPORT OF INDEPENDENT AUDITORS

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 25 present fairly, in all
material respects, the financial position of The Washington Post
Company and its subsidiaries at December 28, 2003 and
December 29, 2002, and the results of their operations and
their cash flows for each of the three fiscal years in the
period ended December 28, 2003, 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.

February 20, 2004







38




---



##### 



CONSOLIDATED STATEMENTS OF INCOME

|                                                                                                                     |                                                            |                   |           |              |   |              |           |           |   |   |           |           |  
|-------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------- | ----------------- | --------- | ------------ | - | ------------ | --------- | --------- | - | - | --------- | --------- | -
|                                                                                                                     |                                                            |                  
|                                                                                                                     |                                                            | Fiscal year ended
|                                                                                                                     |                                                            |                  
|                                                                                                                     |                                                            | December 28,      |           | December 29, |   | December 30,
|(in
          thousands, except per share amounts)                                                                   |                                                            | 2003              |           | 2002         |   | 2001        
|                                                                                                                    
|                                                                                                                    
|Operating Revenues                                                                                                   |                                                            |                   |           |              |   |              |           |           |   |   |           |          
|                                                                                                                    
|                                                                                                                    
|                                                                                                                    
|                                                                                                                    
|                                                                                                                     | Advertising                                                |                   | $         | 1,233,358    |   |              | $         | 1,226,834 |   |   | $         | 1,209,327 |  
|                                                                                                                    
|                                                                                                                    
|                                                                                                                    
|                                                                                                                    
|                                                                                                                     | Circulation and subscriber                                 |                   |           | 706,248      |   |              |           | 675,136   |   |   |           | 653,028   |  
|                                                                                                                    
|                                                                                                                    
|                                                                                                                    
|                                                                                                                    
|                                                                                                                     | Education                                                  |                   |           | 838,077      |   |              |           | 621,125   |   |   |           | 493,271   |  
|                                                                                                                    
|                                                                                                                    
|                                                                                                                    
|                                                                                                                    
|                                                                                                                     | Other                                                      |                   |           | 61,228       |   |              |           | 61,108    |   |   |           | 55,398    |  
|                                                                                                                     |                                                            |                  
|                                                                                                                    
|                                                                                                                     |                                                            |                   | 2,838,911 |              |   |              | 2,584,203 |           |   |   | 2,411,024 |          
|                                                                                                                     |                                                            |                  
|Operating Costs and Expenses                                                                                         |                                                            |                   |           |              |   |              |           |           |   |   |           |          
|                                                                                                                    
|                                                                                                                    
|                                                                                                                    
|                                                                                                                    
|                                                                                                                     | Operating                                                  |                   |           | 1,549,262    |   |              |           | 1,369,955 |   |   |           | 1,387,101 |  
|                                                                                                                    
|                                                                                                                    
|                                                                                                                    
|                                                                                                                    
|                                                                                                                     | Selling, general and administrative                        |                   |           | 792,292      |   |              |           | 664,095   |   |   |           | 586,758   |  
|                                                                                                                    
|                                                                                                                    
|                                                                                                                    
|                                                                                                                    
|                                                                                                                     | Gain on sale of land                                       |                   |           | (41,747      | ) |              |           |          |   |   |           |          |  
|                                                                                                                    
|                                                                                                                    
|                                                                                                                    
|                                                                                                                    
|                                                                                                                     | Depreciation of property, plant and equipment              |                   |           | 173,848      |   |              |           | 171,908   |   |   |           | 138,300   |  
|                                                                                                                    
|                                                                                                                    
|                                                                                                                    
|                                                                                                                    
|                                                                                                                     | Amortization of goodwill and other intangibles             |                   |           | 1,436        |   |              |           | 655       |   |   |           | 78,933    |  
|                                                                                                                     |                                                            |                  
|                                                                                                                    
|                                                                                                                     |                                                            |                   | 2,475,091 |              |   |              | 2,206,613 |           |   |   | 2,191,092 |          
|                                                                                                                     |                                                            |                  
|Income from Operations                                                                                               |                                                            |                   | 363,820   |              |   |              | 377,590   |           |   |   | 219,932   |          
|                                                                                                                    
|                                                                                                                    
|                                                                                                                    
|                                                                                                                    
|                                                                                                                     | Equity in losses of affiliates                             |                   |           | (9,766       | ) |              |           | (19,308   | ) |   |           | (68,659   | )
|                                                                                                                    
|                                                                                                                    
|                                                                                                                    
|                                                                                                                    
|                                                                                                                     | Interest income                                            |                   |           | 953          |   |              |           | 332       |   |   |           | 2,167     |  
|                                                                                                                    
|                                                                                                                    
|                                                                                                                    
|                                                                                                                    
|                                                                                                                     | Interest expense                                           |                   |           | (27,804      | ) |              |           | (33,819   | ) |   |           | (49,640   | )
|                                                                                                                    
|                                                                                                                    
|                                                                                                                    
|                                                                                                                    
|                                                                                                                     | Other income (expense), net                                |                   |           | 55,385       |   |              |           | 28,873    |   |   |           | 283,739   |  
|                                                                                                                     |                                                            |                  
|Income Before Income Taxes and Cumulative Effect of
          Change in Accounting Principle                         |                                                            |                   | 382,588   |              |   |              | 353,668   |           |   |   | 387,539   |          
|                                                                                                                    
|                                                                                                                    
|                                                                                                                    
|                                                                                                                    
|Provision for Income Taxes                                                                                           |                                                            |                   | 141,500   |              |   |              | 137,300   |           |   |   | 157,900   |          
|                                                                                                                     |                                                            |                  
|                                                                                                                    
|Income Before Cumulative Effect of Change in Accounting
          Principle                                          |                                                            |                   | 241,088   |              |   |              | 216,368   |           |   |   | 229,639   |          
|                                                                                                                    
|                                                                                                                    
|                                                                                                                    
|                                                                                                                    
|Cumulative Effect of Change in Method of Accounting
          for Goodwill and Other Intangible Assets, Net of Taxes |                                                            |                   |          |              |   |              | (12,100   | )         |   |   |          |          
|                                                                                                                     |                                                            |                  
|Net Income                                                                                                           |                                                            |                   | 241,088   |              |   |              | 204,268   |           |   |   | 229,639   |          
|                                                                                                                    
|                                                                                                                    
|                                                                                                                    
|                                                                                                                    
|Redeemable Preferred Stock Dividends                                                                                 |                                                            |                   | (1,027    | )            |   |              | (1,033    | )         |   |   | (1,052    | )        
|                                                                                                                     |                                                            |                  
|Net Income Available for Common Shares                                                                               |                                                            | $                 | 240,061   |              |   | $            | 203,235   |           |   | $ | 228,587   |          
|                                                                                                                     |                                                            |                  
|Basic Earnings per Common Share:                                                                                     |                                                            |                   |           |              |   |              |           |           |   |   |           |          
|                                                                                                                    
|                                                                                                                    
|                                                                                                                    
|                                                                                                                    
|                                                                                                                     | Before Cumulative Effect of Change in Accounting Principle |                   | $         | 25.19        |   |              | $         | 22.65     |   |   | $         | 24.10     |  
|                                                                                                                    
|                                                                                                                    
|                                                                                                                    
|                                                                                                                    
|                                                                                                                     | Cumulative Effect of Change in Accounting Principle        |                   |           |             |   |              |           | (1.27     | ) |   |           |          |  
|                                                                                                                     |                                                            |                  
|                                                                                                                     | Net Income Available for Common Shares                     |                   | $         | 25.19        |   |              | $         | 21.38     |   |   | $         | 24.10     |  
|                                                                                                                     |                                                            |                  
|Diluted Earnings per Common Share:                                                                                   |                                                            |                   |           |              |   |              |           |           |   |   |           |          
|                                                                                                                    
|                                                                                                                    
|                                                                                                                    
|                                                                                                                    
|                                                                                                                     | Before Cumulative Effect of Change in Accounting Principle |                   | $         | 25.12        |   |              | $         | 22.61     |   |   | $         | 24.06     |  
|                                                                                                                    
|                                                                                                                    
|                                                                                                                    
|                                                                                                                    
|                                                                                                                     | Cumulative Effect of Change in Accounting Principle        |                   |           |             |   |              |           | (1.27     | ) |   |           |          |  
|                                                                                                                     |                                                            |                  
|                                                                                                                     | Net Income Available for Common Shares                     |                   | $         | 25.12        |   |              | $         | 21.34     |   |   | $         | 24.06     |  
|                                                                                                                     |                                                            |                  

CONSOLIDATED STATEMENTS OF COMPREHENSIVE
INCOME

|                                                                                            |                                                                                         |                   |         |              |   |              |         |         |   |   |         |        |  
|------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------- | ----------------- | ------- | ------------ | - | ------------ | ------- | ------- | - | - | ------- | ------ | -
|                                                                                            |                                                                                         |                  
|                                                                                            |                                                                                         | Fiscal year ended
|                                                                                            |                                                                                         |                  
|                                                                                            |                                                                                         | December 28,      |         | December 29, |   | December 30,
|(in
          thousands)                                                                    |                                                                                         | 2003              |         | 2002         |   | 2001        
|                                                                                           
|                                                                                           
|Net Income                                                                                  |                                                                                         | $                 | 241,088 |              |   | $            | 204,268 |         |   | $ | 229,639 |       
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Other Comprehensive Income (Loss)                                                           |                                                                                         |                   |         |              |   |              |         |         |   |   |         |       
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Foreign currency translation adjustments                                                |                   |         | 13,416       |   |              |         | 2,167   |   |   |         | (3,104 | )
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Reclassification adjustment on sale of affiliate
    investment                         |                   |         | (1,633       | ) |              |         |        |   |   |         |       |  
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Change in net unrealized gain on
    available-for-sale securities                      |                   |         | 31,426       |   |              |         | 829     |   |   |         | 14,528 |  
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Less reclassification adjustment for realized
    losses (gains) included in net income |                   |         | 214          |   |              |         | (11,209 | ) |   |         | 3,238  |  
|                                                                                            |                                                                                         |                  
|                                                                                           
|                                                                                            |                                                                                         |                   | 43,423  |              |   |              | (8,213  | )       |   |   | 14,662  |       
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Income tax (expense) benefit related to other
    comprehensive income (loss)           |                   |         | (12,348      | ) |              |         | 4,012   |   |   |         | (6,987 | )
|                                                                                            |                                                                                         |                  
|                                                                                           
|                                                                                            |                                                                                         |                   | 31,075  |              |   |              | (4,201  | )       |   |   | 7,675   |       
|                                                                                            |                                                                                         |                  
|Comprehensive Income                                                                        |                                                                                         | $                 | 272,163 |              |   | $            | 200,067 |         |   | $ | 237,314 |       
|                                                                                            |                                                                                         |                  
|The information on pages 44 through 58 is an
    integral part of the financial statements. |                                                                                         |                   |         |              |   |              |         |        



39







---



##### 



CONSOLIDATED BALANCE SHEETS

|                                                                                            |                                             |              |           |              |   |   |           |           |  
|------------------------------------------------------------------------------------------- | ------------------------------------------- | ------------ | --------- | ------------ | - | - | --------- | --------- | -
|                                                                                            |                                             | December 28, |           | December 29,
|(in thousands)                                                                              |                                             | 2003         |           | 2002        
|                                                                                           
|                                                                                           
|Assets                                                                                      |                                             |              |           |              |   |   |           |          
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Current Assets                                                                              |                                             |              |           |              |   |   |           |          
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Cash and cash equivalents                   |              | $         | 87,437       |   |   | $         | 28,771    |  
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Investments in marketable equity securities |              |           | 2,623        |   |   |           | 1,753     |  
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Accounts receivable, net                    |              |           | 328,816      |   |   |           | 285,374   |  
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Federal and state income taxes              |              |           | 5,318        |   |   |           |          |  
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Inventories                                 |              |           | 27,709       |   |   |           | 27,629    |  
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Other current assets                        |              |           | 43,933       |   |   |           | 39,428    |  
|                                                                                            |                                             |             
|                                                                                           
|                                                                                            |                                             |              | 495,836   |              |   |   | 382,955   |          
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Property, Plant and Equipment                                                               |                                             |              |           |              |   |   |           |          
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Buildings                                   |              |           | 288,961      |   |   |           | 283,233   |  
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Machinery, equipment and fixtures           |              |           | 1,656,111    |   |   |           | 1,551,931 |  
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Leasehold improvements                      |              |           | 102,753      |   |   |           | 85,720    |  
|                                                                                            |                                             |             
|                                                                                           
|                                                                                            |                                             |              | 2,047,825 |              |   |   | 1,920,884 |          
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Less accumulated depreciation               |              |           | (1,084,790   | ) |   |           | (926,385  | )
|                                                                                            |                                             |             
|                                                                                           
|                                                                                            |                                             |              | 963,035   |              |   |   | 994,499   |          
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Land                                        |              |           | 32,234       |   |   |           | 34,530    |  
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Construction in progress                    |              |           | 56,104       |   |   |           | 65,371    |  
|                                                                                            |                                             |             
|                                                                                           
|                                                                                            |                                             |              | 1,051,373 |              |   |   | 1,094,400 |          
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Investments in Marketable Equity
    Securities                                             |                                             |              | 245,335   |              |   |   | 214,780   |          
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Investments in Affiliates                                                                   |                                             |              | 61,312    |              |   |   | 70,703    |          
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Goodwill, Net                                                                               |                                             |              | 965,694   |              |   |   | 770,861   |          
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Indefinite-Lived Intangible Assets,
    Net                                                 |                                             |              | 486,656   |              |   |   | 482,419   |          
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Amortized Intangible Assets, Net                                                            |                                             |              | 5,226     |              |   |   | 2,153     |          
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Prepaid Pension Cost                                                                        |                                             |              | 514,801   |              |   |   | 493,786   |          
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Deferred Charges and Other Assets                                                           |                                             |              | 75,325    |              |   |   | 71,837    |          
|                                                                                            |                                             |             
|                                                                                           
|                                                                                            |                                             | $            | 3,901,558 |              |   | $ | 3,583,894 |          
|                                                                                            |                                             |             
|The information on pages 44 through 58 is an
    integral part of the financial statements. |                                             |              |           |             



40




---



##### 





|                                                                                                                                                                                                                        |                                                                                       |                                                                                                                                                |           |              |        |   |           |            |        |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------- | --------- | ------------ | ------ | - | --------- | ---------- | ------ | -
|                                                                                                                                                                                                                        |                                                                                       | December 28,                                                                                                                                   |           | December 29,
|(in
          thousands, except share amounts)                                                                                                                                                                          |                                                                                       | 2003                                                                                                                                           |           | 2002        
|                                                                                                                                                                                                                       
|                                                                                                                                                                                                                       
|Liabilities and Shareholders
    Equity                                                                                                                                                                                |                                                                                       |                                                                                                                                                |           |              |        |   |           |           
|                                                                                                                                                                                                                       
|                                                                                                                                                                                                                       
|                                                                                                                                                                                                                       
|                                                                                                                                                                                                                       
|Current Liabilities                                                                                                                                                                                                     |                                                                                       |                                                                                                                                                |           |              |        |   |           |           
|                                                                                                                                                                                                                       
|                                                                                                                                                                                                                       
|                                                                                                                                                                                                                       
|                                                                                                                                                                                                                       
|                                                                                                                                                                                                                        | Accounts payable and accrued liabilities                                              |                                                                                                                                                | $         | 339,239      |        |   | $         | 336,582    |       
|                                                                                                                                                                                                                       
|                                                                                                                                                                                                                       
|                                                                                                                                                                                                                       
|                                                                                                                                                                                                                       
|                                                                                                                                                                                                                        | Deferred revenue                                                                      |                                                                                                                                                |           | 164,014      |        |   |           | 135,419    |       
|                                                                                                                                                                                                                       
|                                                                                                                                                                                                                       
|                                                                                                                                                                                                                       
|                                                                                                                                                                                                                       
|                                                                                                                                                                                                                        | Federal and state income taxes                                                        |                                                                                                                                                |           |             |        |   |           | 4,853      |       
|                                                                                                                                                                                                                       
|                                                                                                                                                                                                                       
|                                                                                                                                                                                                                       
|                                                                                                                                                                                                                       
|                                                                                                                                                                                                                        | Short-term borrowings                                                                 |                                                                                                                                                |           | 208,620      |        |   |           | 259,258    |       
|                                                                                                                                                                                                                        |                                                                                       |                                                                                                                                               
|                                                                                                                                                                                                                       
|                                                                                                                                                                                                                        |                                                                                       |                                                                                                                                                | 711,873   |              |        |   | 736,112   |           
|                                                                                                                                                                                                                       
|                                                                                                                                                                                                                       
|                                                                                                                                                                                                                       
|                                                                                                                                                                                                                       
|Postretirement Benefits Other Than
    Pensions                                                                                                                                                                         |                                                                                       |                                                                                                                                                | 140,740   |              |        |   | 136,393   |           
|                                                                                                                                                                                                                       
|                                                                                                                                                                                                                       
|                                                                                                                                                                                                                       
|                                                                                                                                                                                                                       
|Other Liabilities                                                                                                                                                                                                       |                                                                                       |                                                                                                                                                | 235,169   |              |        |   | 194,480   |           
|                                                                                                                                                                                                                       
|                                                                                                                                                                                                                       
|                                                                                                                                                                                                                       
|                                                                                                                                                                                                                       
|Deferred Income Taxes                                                                                                                                                                                                   |                                                                                       |                                                                                                                                                | 303,824   |              |        |   | 261,153   |           
|                                                                                                                                                                                                                       
|                                                                                                                                                                                                                       
|                                                                                                                                                                                                                       
|                                                                                                                                                                                                                       
|Long-Term Debt                                                                                                                                                                                                          |                                                                                       |                                                                                                                                                | 422,471   |              |        |   | 405,547   |           
|                                                                                                                                                                                                                        |                                                                                       |                                                                                                                                               
|                                                                                                                                                                                                                       
|                                                                                                                                                                                                                        |                                                                                       |                                                                                                                                                | 1,814,077 |              |        |   | 1,733,685 |           
|                                                                                                                                                                                                                        |                                                                                       |                                                                                                                                               
|                                                                                                                                                                                                                       
|                                                                                                                                                                                                                       
|                                                                                                                                                                                                                       
|                                                                                                                                                                                                                       
|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; 12,540 and 12,916 shares issued and outstanding |                                                                                       |                                                                                                                                                | 12,540    |              |        |   | 12,916    |           
|                                                                                                                                                                                                                        |                                                                                       |                                                                                                                                               
|                                                                                                                                                                                                                       
|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;
    7,819,330 and 7,788,543 shares outstanding |           |              | 18,278 |   |           |            | 18,278 |  
|                                                                                                                                                                                                                       
|                                                                                                                                                                                                                       
|                                                                                                                                                                                                                       
|                                                                                                                                                                                                                       
|                                                                                                                                                                                                                        | Capital in excess of par value                                                        |                                                                                                                                                |           | 166,951      |        |   |           | 149,090    |       
|                                                                                                                                                                                                                       
|                                                                                                                                                                                                                       
|                                                                                                                                                                                                                       
|                                                                                                                                                                                                                       
|                                                                                                                                                                                                                        | Retained earnings                                                                     |                                                                                                                                                |           | 3,364,407    |        |   |           | 3,179,607  |       
|                                                                                                                                                                                                                        | Accumulated other comprehensive income (loss),
    net of taxes                       |                                                                                                                                                |           |              |        |   |           |            |       
|                                                                                                                                                                                                                       
|                                                                                                                                                                                                                       
|                                                                                                                                                                                                                       
|                                                                                                                                                                                                                       
|                                                                                                                                                                                                                        |                                                                                       | Cumulative foreign currency translation adjustment                                                                                             |           |              | 4,272  |   |           |            | (7,511 | )
|                                                                                                                                                                                                                       
|                                                                                                                                                                                                                       
|                                                                                                                                                                                                                       
|                                                                                                                                                                                                                       
|                                                                                                                                                                                                                        |                                                                                       | Unrealized gain on available-for-sale securities                                                                                               |           |              | 37,205 |   |           |            | 17,913 |  
|                                                                                                                                                                                                                       
|                                                                                                                                                                                                                       
|                                                                                                                                                                                                                       
|                                                                                                                                                                                                                       
|                                                                                                                                                                                                                        | Cost of 10,458,420 and 10,489,207 shares of
    Class B common stock held in treasury |                                                                                                                                                |           | (1,517,894   | )      |   |           | (1,521,806 | )     
|                                                                                                                                                                                                                        |                                                                                       |                                                                                                                                               
|                                                                                                                                                                                                                       
|                                                                                                                                                                                                                        |                                                                                       |                                                                                                                                                | 2,074,941 |              |        |   | 1,837,293 |           
|                                                                                                                                                                                                                        |                                                                                       |                                                                                                                                               
|                                                                                                                                                                                                                       
|                                                                                                                                                                                                                        |                                                                                       | $                                                                                                                                              | 3,901,558 |              |        | $ | 3,583,894 |           
|                                                                                                                                                                                                                        |                                                                                       |                                                                                                                                               
|The information on pages 44 through 58 is an
    integral part of the financial statements.                                                                                                                             |                                                                                       |                                                                                                                                                |           |             



41




---



##### 



CONSOLIDATED STATEMENTS OF CASH
FLOWS

|                                                     |                                                                                             |                                                                                                       |                                                                 |              |          |         |              |          |          |         |        |          |          |         |  
|---------------------------------------------------- | ------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------- | --------------------------------------------------------------- | ------------ | -------- | ------- | ------------ | -------- | -------- | ------- | ------ | -------- | -------- | ------- | -
|                                                     |                                                                                             |                                                                                                      
|                                                     |                                                                                             | Fiscal year ended                                                                                    
|                                                     |                                                                                             |                                                                                                      
|                                                     |                                                                                             | December 28,                                                                                          |                                                                 | December 29, |          |         | December 30, |         
|(in thousands)                                       |                                                                                             | 2003                                                                                                  |                                                                 | 2002         |          | 2001   
|                                                    
|                                                    
|Cash Flows from Operating Activities:                |                                                                                             |                                                                                                       |                                                                 |              |          |         |              |          |          |         |        |         
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Net income                                                                                  |                                                                                                       | $                                                               | 241,088      |          |         | $            | 204,268  |          |         | $      | 229,639  |         
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | 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                                                         |                                                                 |              | 173,848  |         |              |          | 171,908  |         |        |          | 138,300  |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                             | Amortization of goodwill and other intangibles                                                        |                                                                 |              | 1,436    |         |              |          | 655      |         |        |          | 78,933   |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                             | Net pension benefit                                                                                   |                                                                 |              | (55,137  | )       |              |          | (64,447  | )       |        |          | (76,945  | )      
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                             | Early retirement program expense                                                                      |                                                                 |              | 34,135   |         |              |          | 19,001   |         |        |          | 3,344    |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                             | Gain from sale or exchange of businesses                                                              |                                                                 |              | (49,762  | )       |              |          | (27,844  | )       |        |          | (321,091 | )      
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                             | Gain on sale of property, plant and equipment                                                         |                                                                 |              | (41,734  | )       |              |          |         |         |        |          |         |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                             | (Gain) loss on disposition of marketable equity securities
          and cost method investments, net |                                                                 |              |         |         |              |          | (13,209  | )       |        |          | 511      |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                             | Cost method investment and other write-downs                                                          |                                                                 |              | 1,337    |         |              |          | 21,194   |         |        |          | 36,672   |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                             | Equity in losses of affiliates, net of distributions                                                  |                                                                 |              | 10,516   |         |              |          | 20,018   |         |        |          | 69,359   |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                             | Foreign exchange gain                                                                                 |                                                                 |              | (4,187   | )       |              |          |         |         |        |          |         |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                             | Provision for deferred income taxes                                                                   |                                                                 |              | 30,704   |         |              |          | 50,115   |         |        |          | 97,302   |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                             | Change in assets and liabilities:                                                                     |                                                                 |              |          |         |              |          |          |         |        |          |          |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                             |                                                                                                       | (Increase) decrease in accounts receivable, net                 |              |          | (9,936  | )            |          |          | (1,116  | )      |          |          | 28,803  |  
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                             |                                                                                                       | Decrease (increase) in inventories                              |              |          | 829     |              |          |          | (11,142 | )      |          |          | (3,390  | )
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                             |                                                                                                       | (Decrease) increase in accounts payable and accrued liabilities |              |          | (14,308 | )            |          |          | 73,653  |        |          |          | 24,756  |  
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                             |                                                                                                       | (Increase) decrease in income taxes receivable                  |              |          | (10,171 | )            |          |          | 15,106  |        |          |          | 1,591   |  
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                             |                                                                                                       | Decrease in other assets and other liabilities, net             |              |          | 34,460  |              |          |          | 21,360  |        |          |          | 38,294  |  
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                             | Other                                                                                                 |                                                                 |              | (5,404   | )       |              |          | 5,846    |         |        |          | 2,752    |        
|                                                     |                                                                                             |                                                                                                      
|                                                     |                                                                                             |                                                                                                       | Net cash provided by operating activities                       |              |          | 337,714 |              |          |          | 497,466 |        |          |          | 348,830 |  
|                                                     |                                                                                             |                                                                                                      
|                                                    
|                                                    
|                                                    
|                                                    
|Cash Flows from Investing Activities:                |                                                                                             |                                                                                                       |                                                                 |              |          |         |              |          |          |         |        |         
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Investments in certain businesses                                                           |                                                                                                       |                                                                 | (134,541     | )        |         |              | (36,016  | )        |         |        | (104,356 | )       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Net proceeds from sale of businesses                                                        |                                                                                                       |                                                                 | 65,000       |          |         |              |         |          |         |        | 61,921   |         
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Purchases of property, plant and equipment                                                  |                                                                                                       |                                                                 | (125,588     | )        |         |              | (152,992 | )        |         |        | (224,227 | )       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Proceeds from sale of property, plant and equipment                                         |                                                                                                       |                                                                 | 44,973       |          |         |              | 1,484    |          |         |        | 1,477    |         
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Purchases of cost method investments                                                        |                                                                                                       |                                                                 | (849         | )        |         |              | (250     | )        |         |        | (11,675  | )       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Investments in affiliates                                                                   |                                                                                                       |                                                                 | (5,976       | )        |         |              | (7,610   | )        |         |        | (21,112  | )       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Proceeds from sale of marketable equity securities                                          |                                                                                                       |                                                                 |             |          |         |              | 19,701   |          |         |        | 145      |         
|                                                     |                                                                                             |                                                                                                      
|                                                    
|                                                     |                                                                                             | Net cash used in investing activities                                                                 |                                                                 |              | (156,981 | )       |              |          | (175,683 | )       |        |          | (297,827 | )      
|                                                     |                                                                                             |                                                                                                      
|                                                    
|                                                    
|                                                    
|                                                    
|Cash Flows from Financing Activities:                |                                                                                             |                                                                                                       |                                                                 |              |          |         |              |          |          |         |        |         
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | (Repayment) issuance of commercial paper, net                                               |                                                                                                       |                                                                 | (70,942      | )        |         |              | (276,189 | )        |         |        | 10,072   |         
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Dividends paid                                                                              |                                                                                                       |                                                                 | (56,289      | )        |         |              | (54,256  | )        |         |        | (54,166  | )       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Common shares repurchased                                                                   |                                                                                                       |                                                                 | (687         | )        |         |              | (786     | )        |         |        | (445     | )       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Proceeds from exercise of stock options                                                     |                                                                                                       |                                                                 | 5,898        |          |         |              | 6,739    |          |         |        | 4,671    |         
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Other                                                                                       |                                                                                                       |                                                                 | (784         | )        |         |              |         |          |         |        |         |         
|                                                     |                                                                                             |                                                                                                      
|                                                     |                                                                                             | Net cash used in financing activities                                                                 |                                                                 |              | (122,804 | )       |              |          | (324,492 | )       |        |          | (39,868  | )      
|                                                     |                                                                                             |                                                                                                      
|                                                    
|                                                    
|                                                    
|                                                    
|Effect of Currency Exchange Rate Change              |                                                                                             |                                                                                                       | 737                                                             |              |          |         |             |          |          |         |       |         
|                                                     |                                                                                             |                                                                                                      
|                                                    
|Net Increase (Decrease) in Cash and Cash Equivalents |                                                                                             |                                                                                                       | 58,666                                                          |              |          |         | (2,709       | )        |          |         | 11,135 |         
|                                                    
|                                                    
|                                                    
|                                                    
|Cash and Cash Equivalents at Beginning of Year       |                                                                                             |                                                                                                       | 28,771                                                          |              |          |         | 31,480       |          |          |         | 20,345 |         
|                                                     |                                                                                             |                                                                                                      
|                                                    
|                                                    
|                                                    
|                                                    
|Cash and Cash Equivalents at End of Year             |                                                                                             | $                                                                                                     | 87,437                                                          |              |          | $       | 28,771       |          |          | $       | 31,480 |         
|                                                     |                                                                                             |                                                                                                      
|                                                    
|                                                    
|                                                    
|                                                    
|Supplemental Cash Flow Information:                  |                                                                                             |                                                                                                       |                                                                 |              |          |         |              |          |          |         |        |         
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Cash paid during the year for:                                                              |                                                                                                       |                                                                 |              |          |         |              |          |          |         |        |          |         
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                             | Income taxes                                                                                          |                                                                 | $            | 116,900  |         |              | $        | 68,900   |         |        | $        | 52,600   |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                             | Interest, net of amounts capitalized                                                                  |                                                                 | $            | 27,500   |         |              | $        | 30,600   |         |        | $        | 48,000   |        

The information on pages 44 through 58 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, 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 | )    
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                                | Net income for the year                                                                                |             |       |             |   |                |        |              |  |                |         |                |  |              |           | 241,088 |   |   |        |        |   |   |        |        |   |   |            |       |  
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                                | Dividends paid on common stock  $5.80 per share                                                       |             |       |             |   |                |        |              |  |                |         |                |  |              |           | (55,261 | ) |   |        |        |   |   |        |        |   |   |            |       |  
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                                | Dividends paid on redeemable preferred stock                                                           |             |       |             |   |                |        |              |  |                |         |                |  |              |           | (1,027  | ) |   |        |        |   |   |        |        |   |   |            |       |  
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                                | Repurchase of 910 shares of Class B common stock                                                       |             |       |             |   |                |        |              |  |                |         |                |  |              |           |         |   |   |        |        |   |   |        |        |   |   |            | (687  | )
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                                | Issuance of 31,697 shares of Class B common stock,
          net of restricted stock award forfeitures |             |       |             |   |                |        |              |  |                |         | 14,147         |  |              |           |         |   |   |        |        |   |   |        |        |   |   |            | 4,599 |  
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                                | Change in foreign currency translation adjustment (net
          of taxes)                             |             |       |             |   |                |        |              |  |                |         |                |  |              |           |         |   |   |        | 11,783 |   |   |        |        |   |   |            |       |  
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                                | Change in unrealized gain on available-for-sale securities
          (net of taxes)                    |             |       |             |   |                |        |              |  |                |         |                |  |              |           |         |   |   |        |        |   |   |        | 19,292 |   |   |            |       |  
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                                | Stock option expense                                                                                   |             |       |             |   |                |        |              |  |                |         | 606            |  |              |           |         |   |   |        |        |   |   |        |        |   |   |            |       |  
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                                | Tax benefits arising from employee stock plans                                                         |             |       |             |   |                |        |              |  |                |         | 3,108          |  |              |           |         |   |   |        |        |   |   |        |        |   |   |            |       |  
|                                                                                                |                                                                                                        |            
|                                                                                               
|Balance, December 28, 2003                                                                      |                                                                                                        | $           | 1,722 |             |   | $              | 18,278 |              |  | $              | 166,951 |                |  | $            | 3,364,407 |         |   | $ | 4,272  |        |   | $ | 37,205 |        |   | $ | (1,517,894 | )    
|                                                                                                |                                                                                                        |            
|The information
        on pages 44 through 58 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- to 53-week fiscal year ending on the
Sunday nearest December 31. The fiscal years 2003, 2002 and
2001, which ended on December 28, 2003, December 29,
2002, and December 30, 2001, 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
2003 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. If the fair value of a
marketable security declines below its cost basis, and the
decline is considered other than temporary, the Company will
record a write-down which is included in earnings.

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. The Company considers whether the fair
values of any of its equity method investments have declined
below their carrying value whenever adverse events or changes in
circumstances indicate that recorded values may not be
recoverable. If the Company considered any such decline to be
other than temporary (based on various factors, including
historical financial results, product development activities and
the overall health of the affiliates industry), a
write-down would be recorded to estimated fair value.

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. Fair value estimates are based on a review of the
investees product development activities, historical
financial results and projected discounted cash flows.

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). Prior to the adoption
of Statement of Financial Accounting Standards No. 142 (SFAS
142), Goodwill and Other Intangible Assets, the
carrying value of goodwill and other intangible assets was
assessed whenever adverse trends and changes in circumstances
indicated that previously anticipated undiscounted cash flows
warranted assessment. The carrying value of goodwill and other
intangible assets would be considered impaired if the projected
undiscounted future cash flows from a business were less than
the carrying value of the business. Impairment would be measured
based on the amounts that the carrying value of a business
exceeded the fair market value (the fair market value determined
primarily based on projected future cash flows with an
appropriate discount rate).

As a result of the adoption of SFAS 142 in 2002,
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. The Company reviews the carrying value of goodwill and
indefinite-lived intangible assets 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 considered). 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.



44




---



##### 



Long-Lived Assets.The recoverability of long-lived
assets other than goodwill and other intangibles is assessed
whenever adverse events or changes in circumstances indicate
that recorded values may not be recoverable. A long-lived asset
is considered to be not recoverable when the undiscounted
estimated future cash flows are less than its recorded value. An
impairment charge is measured based on estimated fair market
value, determined primarily using estimated future cash flows on
a discounted basis. Losses on long-lived assets to be disposed
are determined in a similar manner, but the fair market value
would be reduced for estimated costs to dispose.

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 generally recognized ratably over the period during which
educational services are delivered. 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 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. 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 2003, 2002 and 2001 (in thousands,
except per share amounts).

|                                                                       |  |      |         |  |      |   |         |      |  |   |         | 
|---------------------------------------------------------------------- |  | ---- | ------- |  | ---- | - | ------- | ---- |  | - | ------- | 
|                                                                       |  | 2003 |         |  | 2002 |   |         | 2001 | 
|                                                                      
|                                                                      
|Stock option compensation expense included in net income               |  | $    | 606     |  |      | $ | 45      |      |  | $ |        | 
|                                                                       |  |     
|Net income available for common shares, as reported                    |  | $    | 240,061 |  |      | $ | 203,235 |      |  | $ | 228,587 | 
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|Stock option compensation expense not included in net
          income |  |      | 3,159   |  |      |   | 3,617   |      |  |   | 4,309   | 
|                                                                       |  |     
|                                                                      
|Pro forma net income available for common shares                       |  | $    | 236,902 |  |      | $ | 199,618 |      |  | $ | 224,278 | 
|                                                                       |  |     
|Basic earnings per share, as reported                                  |  | $    | 25.19   |  |      | $ | 21.38   |      |  | $ | 24.10   | 
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|Pro forma basic earnings per share                                     |  | $    | 24.86   |  |      | $ | 21.00   |      |  | $ | 23.64   | 
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|Diluted earnings per share, as reported                                |  | $    | 25.12   |  |      | $ | 21.34   |      |  | $ | 24.06   | 
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|Pro forma diluted earnings per share                                   |  | $    | 24.79   |  |      | $ | 20.96   |      |  | $ | 23.61   | 



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

Accounts receivable at December 28, 2003 and
December 29, 2002 consist of the following (in thousands):

|                                                                                                                       |  |      |         |  |      |   |         | 
|---------------------------------------------------------------------------------------------------------------------- |  | ---- | ------- |  | ---- | - | ------- | 
|                                                                                                                       |  | 2003 |         |  | 2002 |  
|                                                                                                                      
|                                                                                                                      
|Trade accounts receivable,
    less estimated returns, doubtful
    accounts and allowances of
    $66,524 and $65,396 |  | $    | 311,807 |  |      | $ | 266,319 | 
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|Other accounts receivable                                                                                              |  |      | 17,009  |  |      |   | 19,055  | 
|                                                                                                                       |  |     
|                                                                                                                      
|                                                                                                                       |  | $    | 328,816 |  |      | $ | 285,374 | 
|                                                                                                                       |  |     

Accounts payable and accrued liabilities at
December 28, 2003 and December 29, 2002 consist of the
following (in thousands):

|                                          |  |      |         |  |      |   |         | 
|----------------------------------------- |  | ---- | ------- |  | ---- | - | ------- | 
|                                          |  | 2003 |         |  | 2002 |  
|                                         
|                                         
|Accounts payable and accrued expenses     |  | $    | 182,848 |  |      | $ | 175,174 | 
|                                         
|                                         
|                                         
|                                         
|Accrued compensation and related benefits |  |      | 147,985 |  |      |   | 154,666 | 
|                                         
|                                         
|                                         
|                                         
|Due to affiliates (newsprint)             |  |      | 8,406   |  |      |   | 6,742   | 
|                                          |  |     
|                                          |  | $    | 339,239 |  |      | $ | 336,582 | 
|                                          |  |     



45




---



##### 



C. INVESTMENTS

Investments in Marketable Equity Securities.Investments in marketable equity
securities at December 28, 2003 and December 29, 2002
consist of the following (in thousands):

|                     |  |      |         |  |      |   |         | 
|-------------------- |  | ---- | ------- |  | ---- | - | ------- | 
|                     |  | 2003 |         |  | 2002 |  
|                    
|                    
|Total cost           |  | $    | 186,954 |  |      | $ | 187,169 | 
|                    
|                    
|                    
|                    
|Net unrealized gains |  |      | 61,004  |  |      |   | 29,364  | 
|                     |  |     
|Total fair value     |  | $    | 247,958 |  |      | $ | 216,533 | 
|                     |  |     

At December 28, 2003 and December 29,
2002, 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 $245.3 million or 99 percent and
$214.8 million or 99 percent, respectively, of the
total fair value of the Companys investments in marketable
equity securities.

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 28,
2003 and December 29, 2002, the unrealized gain related to
the Companys Berkshire stock investment totaled
$60.4 million and $29.9 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.

During 2003, 2002 and 2001, proceeds from sales
of marketable equity securities were $0, $19.7 million and
$0.1 million, respectively, and gross realized gains
(losses) on such sales were $0, $13.2 million, and
($0.3 million), respectively. During 2003, 2002 and 2001, the
Company recorded write-downs on marketable equity securities of
$0.2 million, $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 28, 2003 and December 29, 2002
include the following (in thousands):

|                                               |  |      |        |  |      |   |        | 
|---------------------------------------------- |  | ---- | ------ |  | ---- | - | ------ | 
|                                               |  | 2003 |        |  | 2002 |  
|                                              
|                                              
|BrassRing                                      |  | $    | 11,892 |  |      | $ | 13,658 | 
|                                              
|                                              
|                                              
|                                              
|Bowater Mersey Paper Company                   |  |      | 48,559 |  |      |   | 42,519 | 
|                                              
|                                              
|                                              
|                                              
|International Herald Tribune                   |  |      |       |  |      |   | 13,776 | 
|                                              
|                                              
|                                              
|                                              
|Los Angeles TimesWashington Post News Service |  |      | 861    |  |      |   | 750    | 
|                                               |  |     
|                                               |  | $    | 61,312 |  |      | $ | 70,703 | 
|                                               |  |     

At the end of 2003, the Companys
investments in affiliates consisted of a 49.3 percent interest
in BrassRing LLC, an Internet-based hiring management company; a
49 percent interest in the common stock of Bowater Mersey
Paper Company Limited, which owns and operates a newsprint mill
in Nova Scotia; 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):

|                       |                               |      |   |         |      |  |   |         |   |  |   |          |  
|---------------------- | ----------------------------- | ---- | - | ------- | ---- |  | - | ------- | - |  | - | -------- | -
|                       |                               | 2003 |   |         | 2002 |  |   | 2001    |  
|                      
|                      
|Financial Position:    |                               |      |   |         |      |  |   |         |   |  |   |         
|                      
|                      
|                      
|                      
|                       | Working capital               |      | $ | 11,108  |      |  | $ | 10,366  |   |  | $ | (8,767   | )
|                      
|                      
|                      
|                      
|                       | Property, plant and equipment |      |   | 140,917 |      |  |   | 135,013 |   |  |   | 126,682  |  
|                      
|                      
|                      
|                      
|                       | Total assets                  |      |   | 214,658 |      |  |   | 235,208 |   |  |   | 246,321  |  
|                      
|                      
|                      
|                      
|                       | Long-term debt                |      |   |        |      |  |   |        |   |  |   |         |  
|                      
|                      
|                      
|                      
|                       | Net equity                    |      |   | 149,584 |      |  |   | 138,723 |   |  |   | 125,211  |  
|                      
|                      
|                      
|                      
|Results of Operations: |                               |      |   |         |      |  |   |        
|                      
|                      
|                      
|                      
|                       | Operating revenues            |      | $ | 174,505 |      |  | $ | 263,709 |   |  | $ | 317,389  |  
|                      
|                      
|                      
|                      
|                       | Operating loss                |      |   | (18,753 | )    |  |   | (21,725 | ) |  |   | (14,793  | )
|                      
|                      
|                      
|                      
|                       | Net loss                      |      |   | (20,164 | )    |  |   | (36,326 | ) |  |   | (157,409 | )

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

|                                     |  |      |         |   |      |   |         |  
|------------------------------------ |  | ---- | ------- | - | ---- | - | ------- | -
|                                     |  | 2003 |         |   | 2002 |  
|                                    
|                                    
|Beginning investment                 |  | $    | 70,703  |   |      | $ | 80,936  |  
|                                    
|                                    
|                                    
|                                    
|Additional investment                |  |      | 5,976   |   |      |   | 7,610   |  
|                                    
|                                    
|                                    
|                                    
|Equity in losses                     |  |      | (9,766  | ) |      |   | (19,308 | )
|                                    
|                                    
|                                    
|                                    
|Dividends and distributions received |  |      | (750    | ) |      |   | (710    | )
|                                    
|                                    
|                                    
|                                    
|Foreign currency translation         |  |      | 9,205   |   |      |   | 2,175   |  
|                                    
|                                    
|                                    
|                                    
|Sale of interest                     |  |      | (14,056 | ) |      |   |        |  
|                                     |  |     
|Ending investment                    |  | $    | 61,312  |   |      | $ | 70,703  |  
|                                     |  |     

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 $7.7 million of the
2003 equity in losses of affiliates, compared to
$13.9 million in 2002 and $75.1 million in 2001. In
2001, BrassRing recorded a significant non-cash goodwill and
other intangibles impairment charge 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 in 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 reported a
$49.8 million pre-tax gain that is included in






46




---



##### 



Other income (expense), net in the
Consolidated Statements of Income.


Cost Method Investments.Most of the companies represented by
the Companys cost method investments have concentrations
in Internet-related business activities. At December 28,
2003 and December 29, 2002, the carrying value of the
Companys cost method investments was $9.6 million and
$9.5 million, respectively. Cost method investments are
included in Deferred Charges and Other Assets in the
Consolidated Balance Sheets.

During 2003, 2002 and 2001, the Company invested
$0.8 million, $0.3 million and $11.7 million,
respectively, in companies constituting cost method investments
and recorded charges of $1.1 million, $19.2 million
and $29.4 million, respectively, to write-down cost method
investments to estimated fair value. The Companys 2002 and
2001 write-downs relate to several investments. In 2002, three
of the investments were written down by an aggregate of $15.6
million, primarily as a result of significant recurring losses
in each of the underlying businesses, with the write-downs
recorded based on the Companys best estimate of the fair
value of each these investments. Another of the Companys
investments was written down in 2002 by $2.8 million, based
on proceeds received by the Company arising from the
investees merger. In 2001, two investments were written
down by an aggregate of $19.5 million, as a result of
recurring losses in the underlying businesses, with the
write-downs recorded based on the Companys best estimate
of the fair value of each of the investments. Another of the
Companys investments was written down by $2.4 million
to its net realizable value as the company was liquidated.
Charges recorded to write-down 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  |  
|    
|    
|2003 |                 |         |         |        |          |   |        |        |   |   |         |        
|    
|    
|    
|    
|     | U.S. Federal    |         | $       | 93,329 |          |   | $      | 27,189 |   |   | $       | 120,518 | 
|    
|    
|    
|    
|     | Foreign         |         |         | 4,129  |          |   |        | (159   | ) |   |         | 3,970   | 
|    
|    
|    
|    
|     | State and local |         |         | 13,338 |          |   |        | 3,674  |   |   |         | 17,012  | 
|     |                 |        
|     |                 | $       | 110,796 |        |          | $ | 30,704 |        |   | $ | 141,500 |        
|     |                 |        
|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 |        
|     |                 |        

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):

|                                                                          |  |      |         |   |      |   |         |      |  |   |         | 
|------------------------------------------------------------------------- |  | ---- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | 
|                                                                          |  | 2003 |         |   | 2002 |   |         | 2001 | 
|                                                                         
|                                                                         
|U.S. Federal statutory taxes                                              |  | $    | 133,906 |   |      | $ | 123,784 |      |  | $ | 135,639 | 
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|State and local taxes, net of U.S. Federal income tax
          benefit   |  |      | 11,058  |   |      |   | 14,025  |      |  |   | 13,832  | 
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|Amortization of goodwill not deductible for income tax
          purposes |  |      |        |   |      |   |        |      |  |   | 6,988   | 
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|Sale of affiliate with higher tax basis                                   |  |      | (2,188  | ) |      |   |        |      |  |   |        | 
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|Other, net                                                                |  |      | (1,276  | ) |      |   | (509    | )    |  |   | 1,441   | 
|                                                                          |  |     
|Provision for income taxes                                                |  | $    | 141,500 |   |      | $ | 137,300 |      |  | $ | 157,900 | 
|                                                                          |  |     

Deferred income taxes at December 28, 2003
and December 29, 2002 consist of the following (in
thousands):

|                                                 |  |      |         |  |      |   |         | 
|------------------------------------------------ |  | ---- | ------- |  | ---- | - | ------- | 
|                                                 |  | 2003 |         |  | 2002 |  
|                                                
|                                                
|Accrued postretirement benefits                  |  | $    | 60,536  |  |      | $ | 58,874  | 
|                                                
|                                                
|                                                
|                                                
|Other benefit obligations                        |  |      | 102,791 |  |      |   | 94,280  | 
|                                                
|                                                
|                                                
|                                                
|Accounts receivable                              |  |      | 17,650  |  |      |   | 16,252  | 
|                                                
|                                                
|                                                
|                                                
|State income tax loss carryforwards              |  |      | 12,068  |  |      |   | 13,693  | 
|                                                
|                                                
|                                                
|                                                
|Affiliate operations                             |  |      | 4,334   |  |      |   |        | 
|                                                
|                                                
|                                                
|                                                
|Other                                            |  |      | 25,480  |  |      |   | 22,140  | 
|                                                 |  |     
|Deferred tax asset                               |  |      | 222,859 |  |      |   | 205,239 | 
|                                                 |  |     
|Property, plant and equipment                    |  |      | 153,615 |  |      |   | 135,520 | 
|                                                
|                                                
|                                                
|                                                
|Prepaid pension cost                             |  |      | 207,312 |  |      |   | 200,315 | 
|                                                
|                                                
|                                                
|                                                
|Affiliate operations                             |  |      |        |  |      |   | 180     | 
|                                                
|                                                
|                                                
|                                                
|Unrealized gain on available-for-sale securities |  |      | 23,811  |  |      |   | 11,463  | 
|                                                
|                                                
|                                                
|                                                
|Goodwill and other intangibles                   |  |      | 141,945 |  |      |   | 118,914 | 
|                                                 |  |     
|Deferred tax liability                           |  |      | 526,683 |  |      |   | 466,392 | 
|                                                 |  |     
|Deferred income taxes                            |  | $    | 303,824 |  |      | $ | 261,153 | 
|                                                 |  |     

The Company has approximately $240 million
in state income tax loss carryforwards. If unutilized, state
income tax loss carryforwards will start to expire in 2008.
Approximately $15 million, $2 million and
$8 million of state income tax loss carryforwards will
expire in 2008, 2009 and 2010, respectively, and
$215 million of state income tax loss carryforwards will
expire between 2011 and 2023.



47




---



##### 



E. DEBT

Long-term debt consists of the following (in
millions):

|                                                            |  |              |        |      |              |   |        |  
|----------------------------------------------------------- |  | ------------ | ------ | ---- | ------------ | - | ------ | -
|                                                            |  | December 28, |        |      | December 29, |  
|                                                            |  | 2003         |        | 2002
|                                                           
|                                                           
|Commercial paper borrowings                                 |  | $            | 188.3  |      |              | $ | 259.3  |  
|                                                           
|                                                           
|                                                           
|                                                           
|5.5 percent unsecured notes due February 15,
          2009 |  |              | 398.7  |      |              |   | 398.4  |  
|                                                           
|                                                           
|                                                           
|                                                           
|4.0 percent notes due 2004
          2006 (£16.7 million)  |  |              | 29.7   |      |              |   |       |  
|                                                           
|                                                           
|                                                           
|                                                           
|Other indebtedness                                          |  |              | 14.4   |      |              |   | 7.1    |  
|                                                            |  |             
|Total                                                       |  |              | 631.1  |      |              |   | 664.8  |  
|                                                           
|                                                           
|                                                           
|                                                           
|Less current portion                                        |  |              | (208.6 | )    |              |   | (259.3 | )
|                                                            |  |             
|Total long-term debt                                        |  | $            | 422.5  |      |              | $ | 405.5  |  
|                                                            |  |             

The notes of £16.7 million were issued
to current FTC employees who were former FTC shareholders in
connection with the acquisition. The noteholders, at their
discretion, may elect to receive 25 percent of their
outstanding balance in January 2004. In August 2004,
50 percent of the original outstanding balance (less any
amounts paid in January 2004) is due for payment. The remaining
balance outstanding is due for payment in August 2006.

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

At December 28, 2003 and December 29,
2002, the average interest rate on the Companys
outstanding commercial paper borrowings was 1.1 percent and
1.6 percent, respectively. During the third quarter of 2003, the
Company replaced its $350 million 364-day revolving credit
facility with a new $250 million revolving credit facility,
which expires in August 2004. In 2002, the Company replaced its
revolving credit facility agreements with a new five-year $350
million revolving credit facility, which expires in August 2007.
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 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 $250 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 $250 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 2003 and 2002, the Company had average
borrowings outstanding of approximately $605.7 million and
$793.7 million, respectively, at average annual interest
rates of approximately 4.2 percent and 3.7 percent,
respectively. The Company incurred net interest costs on its
borrowings of $26.9 million and $33.5 million during
2003 and 2002, respectively. No interest expense was capitalized
in 2003 or 2002.

At December 28, 2003 and December 29,
2002, the fair value of the Companys 5.5 percent unsecured
notes, based on quoted market prices, totaled
$434.6 million and $426.6 million, respectively,
compared with the carrying amount of $398.7 million and
$398.4 million, respectively.

The carrying value of the Companys
commercial paper borrowings and other unsecured debt at
December 28, 2003 and December 29, 2002 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 2003, 682 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 2003, 2002 and 2001, the Company purchased
a total of 910 shares, 1,229 shares and 714 shares,
respectively, of its Class B common stock at a cost of
approximately $0.7 million, $0.8 million and
$0.4 million. At December 28, 2003, the Company has
authorization from the Board of Directors to purchase up to
542,800 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



48




---



##### 



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 28, 2003, there were 54,520 shares reserved for
issuance under the incentive compensation plan. Of this number,
29,845 shares were subject to awards outstanding, and 24,675
shares were available for future awards. Activity related to
stock awards under the long-term incentive compensation plan for
the years ended December 28, 2003, December 29, 2002
and December 30, 2001, was as follows:


|                  |           |        |        |         |   |        |         |         |  |        |        |         |   |  |         |        |  |  |        |         |   |  |         |        | 
|----------------- | --------- | ------ | ------ | ------- | - | ------ | ------- | ------- |  | ------ | ------ | ------- | - |  | ------- | ------ |  |  | ------ | ------- | - |  | ------- | ------ | 
|                  |           |        |        |         |   |       
|                  |           | 2003   |        | 2002    |   | 2001  
|                  |           |        |        |         |   |       
|                  |           | Number |        | Average |   | Number |         | Average |  | Number |        | Average
|                  |           | of     |        | Award   |   | of     |         | Award   |  | of     |        | Award  
|                  |           | Shares |        | Price   |   | Shares |         | Price   |  | Shares |        | Price  
|                 
|                 
|Beginning of year |           |        | 27,625 |         |   |        | $536.74 |         |  |        | 29,895 |         |   |  | $539.25 |        |  |  | 30,165 |         |   |  | $413.28 |       
|                 
|                 
|                 
|                 
|                  | Awarded   |        |        | 15,990  |   |        |         | 734.01  |  |        |        | 215     |   |  |         | 563.36 |  |  |        | 16,865  |   |  |         | 608.96 | 
|                 
|                 
|                 
|                 
|                  | Vested    |        |        | (12,752 | ) |        |         | 523.60  |  |        |        | (601    | ) |  |         | 540.61 |  |  |        | (15,200 | ) |  |         | 364.13 | 
|                 
|                 
|                 
|                 
|                  | Forfeited |        |        | (1,018  | ) |        |         | 658.44  |  |        |        | (1,884  | ) |  |         | 578.37 |  |  |        | (1,935  | ) |  |         | 555.02 | 
|                  |           |       
|End of year       |           |        | 29,845 |         |   |        | $643.89 |         |  |        | 27,625 |         |   |  | $536.74 |        |  |  | 29,895 |         |   |  | $539.25 |       
|                  |           |       

In addition to stock awards granted under the
long-term incentive compensation plan, the Company also made
stock awards of 1,050 shares in 2003, 2,150 shares in 2002 and
3,300 shares in 2001.

For the share awards outstanding at
December 28, 2003, the aforementioned restriction will
lapse in 2004 for 2,732 shares, in 2005 for 16,929 shares, in
2006 for 1,588 shares, and in 2007 for 16,460 shares.
Stock-based compensation costs resulting from stock awards
reduced net income by $3.9 million ($0.41 per share, basic
and diluted), $3.5 million ($0.37 per share, basic and
diluted), and $2.6 million ($0.27 per share, basic and
diluted) in 2003, 2002 and 2001, respectively.

Stock Options.The
Companys employee stock option plan reserves 1,900,000
shares of the Companys Class B common stock for
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 28, 2003, there were
454,350 shares reserved for issuance under the stock option
plan, of which 152,475 shares were subject to options
outstanding, and 301,875 shares were available for future grants.

Changes in options outstanding for the years
ended December 28, 2003, December 29, 2002 and
December 30, 2001, were as follows:

|                  |           |        |         |         |         |        |         |        |         |        |         |         |         |  |         |        |  |  |         |         |   |  |         |        | 
|----------------- | --------- | ------ | ------- | ------- | ------- | ------ | ------- | ------ | ------- | ------ | ------- | ------- | ------- |  | ------- | ------ |  |  | ------- | ------- | - |  | ------- | ------ | 
|                  |           |        |         |         |         |       
|                  |           | 2003   |         | 2002    |         | 2001  
|                  |           |        |         |         |         |       
|                  |           | Number |         |         | Average |        | Number  |        | Average |        | Number  |         | Average
|                  |           | of     |         | Option  |         | of     |         | Option |         | of     |         | Option 
|                  |           | Shares |         | Price   |         | Shares |         | Price  |         | Shares |         | Price  
|                 
|                 
|Beginning of year |           |        | 163,900 |         |         |        | $515.74 |        |         |        | 170,575 |         |         |  | $490.86 |        |  |  | 166,450 |         |   |  | $465.55 |       
|                 
|                 
|                 
|                 
|                  | Granted   |        |         | 5,000   |         |        |         | 803.70 |         |        |         | 11,500  |         |  |         | 729.00 |  |  |         | 24,000  |   |  |         | 522.75 | 
|                 
|                 
|                 
|                 
|                  | Exercised |        |         | (15,675 | )       |        |         | 450.87 |         |        |         | (16,675 | )       |  |         | 404.14 |  |  |         | (16,875 | ) |  |         | 276.79 | 
|                 
|                 
|                 
|                 
|                  | Forfeited |        |         | (750    | )       |        |         | 729.00 |         |        |         | (1,500  | )       |  |         | 561.77 |  |  |         | (3,000  | ) |  |         | 546.04 | 
|                  |           |       
|                 
|End of year       |           |        | 152,475 |         |         |        | $530.81 |        |         |        | 163,900 |         |         |  | $515.74 |        |  |  | 170,575 |         |   |  | $490.86 |       
|                  |           |       

Of the shares covered by options outstanding at
the end of 2003, 111,100 are now exercisable, 26,688 will become
exercisable in 2004, 9,562 will become exercisable in 2005,
3,875 will become exercisable in 2006, and 1,250 will become
exercisable in 2007. Information related to stock options
outstanding at December 28, 2003 is as follows:

|                |          |             |  |             |         |          |  |             |      |          |  |   |        |  |  |  |        |  |  |   |        | 
|--------------- | -------- | ----------- |  | ----------- | ------- | -------- |  | ----------- | ---- | -------- |  | - | ------ |  |  |  | ------ |  |  | - | ------ | 
|                |          |             |  | Weighted    |         |          |  |             |      |         
|                |          |             |  | Average     |         | Weighted |  |             |      | Weighted
|                |          | Number      |  | Remaining   |         | Average  |  | Number      |      | Average 
|Range of        |          | Outstanding |  | Contractual |         | Exercise |  | Exercisable |      | Exercise
|Exercise Prices |          | at 12/28/03 |  | Life (yrs.) |         | Price    |  | at 12/28/03 |      | Price   
|               
|               
|                | $222299 |             |  |             | 6,500   |          |  |             | 1.4  |          |  | $ | 263.83 |  |  |  | 6,500  |  |  | $ | 263.83 | 
|               
|               
|               
|               
|                | 344      |             |  |             | 7,600   |          |  |             | 3.0  |          |  |   | 343.94 |  |  |  | 7,600  |  |  |   | 343.94 | 
|               
|               
|               
|               
|                | 472484  |             |  |             | 20,000  |          |  |             | 4.8  |          |  |   | 474.47 |  |  |  | 18,594 |  |  |   | 473.99 | 
|               
|               
|               
|               
|                | 500596  |             |  |             | 102,875 |          |  |             | 6.9  |          |  |   | 538.94 |  |  |  | 75,781 |  |  |   | 535.11 | 
|               
|               
|               
|               
|                | 693      |             |  |             | 500     |          |  |             | 9.5  |          |  |   | 692.51 |  |  |  |       |  |  |   |       | 
|               
|               
|               
|               
|                | 729      |             |  |             | 10,500  |          |  |             | 9.0  |          |  |   | 729.00 |  |  |  | 2,625  |  |  |   | 729.00 | 
|               
|               
|               
|               
|                | 816      |             |  |             | 4,500   |          |  |             | 10.0 |          |  |   | 816.05 |  |  |  |       |  |  |   |       | 

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 2003, 2002 and
2001 was $229.81, $197.89 and $107.78, respectively. The fair
value of options at date of grant was estimated using the
Black-Scholes method utilizing the following assumptions:

|                      |  |      |       |   |      |  |       |      |  |  |       |  
|--------------------- |  | ---- | ----- | - | ---- |  | ----- | ---- |  |  | ----- | -
|                      |  | 2003 |       |   | 2002 |  |       | 2001 | 
|                     
|                     
|Expected life (years) |  |      | 7     |   |      |  | 7     |      |  |  | 7     |  
|                     
|                     
|                     
|                     
|Interest rate         |  |      | 4.38  | % |      |  | 3.69  | %    |  |  | 2.30  | %
|                     
|                     
|                     
|                     
|Volatility            |  |      | 20.43 | % |      |  | 21.74 | %    |  |  | 19.46 | %
|                     
|                     
|                     
|                     
|Dividend yield        |  |      | 0.71  | % |      |  | 0.77  | %    |  |  | 1.1   | %

Refer to Note A for additional disclosures
surrounding stock option accounting.

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 1997 and initially
reserved 15 percent, or 150,000 shares, of Kaplans
common stock for options to be granted under the plan. Under the
provisions of this plan, options are issued with an exercise
price equal to the estimated fair value of Kaplans common
stock, and 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 September 2003, the committee set the fair value price of
Kaplan common stock at $1,625 per share, which is determined
after deducting intercompany debt from Kaplans enterprise
value. Also in September 2003, the Company announced an offer
totaling $138 million for approximately 55 percent of
the stock options outstanding at Kaplan. The Companys
offer included a 10 percent premium over the current
valuation price of Kaplan common stock of $1,625 per share; by
the end of October 2003, 100 percent of the eligible stock
options were tendered. The Company paid out $118.7 million
in the fourth quarter of 2003 and the remainder of the payouts,
related to 14,463 tendered stock options, will be made at the
time of their scheduled vesting from 2004 to 2007 if the option
holder is still employed at Kaplan. Additionally, stock
compensation expense will



49




---



##### 



be recorded on these remaining exercised stock
options over the remaining vesting periods of 2004 to 2007. A
small number of key Kaplan executives will continue to hold the
remaining 68,000 outstanding Kaplan stock options, with roughly
half of these options expiring in 2007 and half expiring in
2011. The remaining 68,000 of outstanding Kaplan stock options
represent 4.8 percent of Kaplans common stock at
December 28, 2003. The Company does not expect to issue
additional Kaplan stock options in the future.


For 2003, 2002 and 2001, the Company recorded
expense of $119.1 million, $34.5 million and
$25.3 million, respectively, related to this plan. In 2003
and 2002, payouts from option exercises totaled
$119.6 million and $0.2 million, respectively. At
December 28, 2003, the Companys stock-based
compensation accrual balance totaled $73.9 million.

Changes in Kaplan stock options outstanding for
the years ended December 28, 2003, December 29, 2002
and December 30, 2001 were as follows:

|                  |           |        |         |         |   |        |         |          |  |        |         |         |   |  |         |        |  |  |         |         |   |  |         |        | 
|----------------- | --------- | ------ | ------- | ------- | - | ------ | ------- | -------- |  | ------ | ------- | ------- | - |  | ------- | ------ |  |  | ------- | ------- | - |  | ------- | ------ | 
|                  |           |        |         |         |   |       
|                  |           | 2003   |         | 2002    |   | 2001  
|                  |           |        |         |         |   |       
|                  |           | Number |         | Average |   | Number |         | Average  |  | Number |         | Average
|                  |           | of     |         | Option  |   | of     |         | Option   |  | of     |         | Option 
|                  |           | Shares |         | Price   |   | Shares |         | Price    |  | Shares |         | Price  
|                 
|                 
|Beginning of year |           |        | 147,463 |         |   |        | $311.24 |          |  |        | 142,578 |         |   |  | $296.69 |        |  |  | 131,880 |         |   |  | $246.14 |       
|                 
|                 
|                 
|                 
|                  | Granted   |        |         | 16,037  |   |        |         | 1,546.23 |  |        |         | 6,475   |   |  |         | 652.00 |  |  |         | 27,962  |   |  |         | 526.00 | 
|                 
|                 
|                 
|                 
|                  | Exercised |        |         | (94,652 | ) |        |         | 303.66   |  |        |         | (540    | ) |  |         | 375.00 |  |  |         | (7,247  | ) |  |         | 227.20 | 
|                 
|                 
|                 
|                 
|                  | Forfeited |        |         | (848    | ) |        |         | 382.12   |  |        |         | (1,050  | ) |  |         | 403.76 |  |  |         | (10,017 | ) |  |         | 321.67 | 
|                  |           |       
|End of year       |           |        | 68,000  |         |   |        | $596.17 |          |  |        | 147,463 |         |   |  | $311.24 |        |  |  | 142,578 |         |   |  | $296.69 |       
|                  |           |       

Of the shares covered by options outstanding at
the end of 2003, 39,910 are now exercisable, 7,332 will become
exercisable in 2004, 7,332 will become exercisable in 2005,
7,232 will become exercisable in 2006, 3,397 will become
exercisable in 2007, and 2,797 will become exercisable in 2008.
Information related to stock options outstanding at
December 28, 2003 is as follows:

|               |       |             |  |             |        |             |  |  |     |  |  |  |        | 
|-------------- | ----- | ----------- |  | ----------- | ------ | ----------- |  |  | --- |  |  |  | ------ | 
|               |       |             |  | Weighted    |        |            
|               |       |             |  | Average     |        |            
|               |       | Number      |  | Remaining   |        | Number     
|               |       | Outstanding |  | Contractual |        | Exercisable
|Exercise Price |       | at 12/28/03 |  | Life (yrs.) |        | at 12/28/03
|               |       |             |  |             |        |            
|              
|              
|               | $190  |             |  |             | 31,341 |             |  |  | 4.0 |  |  |  | 31,341 | 
|               | 375   |             |  |             | 500    |             |  |  | 5.6 |  |  |  | 300    | 
|               | 526   |             |  |             | 19,172 |             |  |  | 7.0 |  |  |  | 7,669  | 
|               | 652   |             |  |             | 3,000  |             |  |  | 7.0 |  |  |  | 600    | 
|               | 861   |             |  |             | 487    |             |  |  | 7.0 |  |  |  | 0      | 
|               | 1,625 |             |  |             | 13,500 |             |  |  | 8.0 |  |  |  | 0      | 

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 2003, 2002 and
2001 is as follows:

|     |  |          |           |           |  |          |        |  |  |  |           | 
|---- |  | -------- | --------- | --------- |  | -------- | ------ |  |  |  | --------- | 
|     |  | Basic    |           | Dilutive  |  | Diluted 
|     |  | Weighted |           | Effect of |  | Weighted
|     |  | Average  |           | Stock     |  | Average 
|     |  | Shares   |           | Options   |  | Shares  
|    
|    
|2003 |  |          | 9,530,209 |           |  |          | 24,454 |  |  |  | 9,554,663 | 
|    
|    
|    
|    
|2002 |  |          | 9,503,983 |           |  |          | 18,671 |  |  |  | 9,522,654 | 
|    
|    
|    
|    
|2001 |  |          | 9,486,386 |           |  |          | 13,173 |  |  |  | 9,499,559 | 

The 2003, 2002 and 2001 diluted earnings per
share amounts exclude the effects of 16,750, 11,500 and 31,000
stock options outstanding, respectively, as their inclusion
would be antidilutive.



|   |                                            
|-- | -------------------------------------------
|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 Company uses a measurement date of
December 31 for its pension and other postretirement
benefit plans.

In 2001, 2002 and 2003, the Company offered
several early retirement programs to certain groups of employees
at The Washington Post newspaper, Newsweek and the corporate
office, the effects of which are included below. Effective
June 1, 2003, the retirement pension program for certain
employees at The Washington Post newspaper and the corporate
office was amended and provides for increased annuity payments
for vested employees retiring after this date. This plan
amendment resulted in a reduction in the pension credit of
approximately $2.6 million for the year ended
December 28, 2003.

The following table sets forth obligation, asset
and funding information for the Companys defined benefit
pension and postretirement



50




---



##### 



plans at December 28, 2003 and
December 29, 2002 (in thousands):


|                                          |  |               |           |                      |      |   |           |      |  |   |          |   |  |   |          |   |  |  |  |  |  |  |  | 
|----------------------------------------- |  | ------------- | --------- | -------------------- | ---- | - | --------- | ---- |  | - | -------- | - |  | - | -------- | - |  |  |  |  |  |  |  | 
|                                          |  |               |           |                     
|                                          |  | Pension Plans |           | Postretirement Plans
|                                          |  |               |           |                     
|                                          |  | 2003          |           |                      | 2002 |   |           | 2003 |  |   | 2002     |  
|                                         
|                                         
|Change in Benefit Obligation              |  |               |           |                      |      |   |           |      |  |   |          |   |  |   |          |  
|                                         
|                                         
|                                         
|                                         
|Benefit obligation at beginning of year   |  | $             | 498,952   |                      |      | $ | 431,017   |      |  | $ | 112,174  |   |  | $ | 105,392  |  
|                                         
|                                         
|                                         
|                                         
|Service cost                              |  |               | 19,965    |                      |      |   | 17,489    |      |  |   | 5,164    |   |  |   | 5,418    |  
|                                         
|                                         
|                                         
|                                         
|Interest cost                             |  |               | 33,696    |                      |      |   | 30,820    |      |  |   | 7,395    |   |  |   | 7,997    |  
|                                         
|                                         
|                                         
|                                         
|Amendments                                |  |               | 60,697    |                      |      |   | 28,817    |      |  |   | (5,479   | ) |  |   | (3,130   | )
|                                         
|                                         
|                                         
|                                         
|Actuarial loss                            |  |               | 37,339    |                      |      |   | 22,851    |      |  |   | 6,733    |   |  |   | 1,487    |  
|                                         
|                                         
|                                         
|                                         
|Benefits paid                             |  |               | (24,875   | )                    |      |   | (32,042   | )    |  |   | (5,543   | ) |  |   | (4,990   | )
|                                          |  |              
|                                         
|Benefit obligation at end of year         |  | $             | 625,774   |                      |      | $ | 498,952   |      |  | $ | 120,444  |   |  | $ | 112,174  |  
|                                          |  |              
|                                         
|                                         
|                                         
|                                         
|Change in Plan Assets                     |  |               |           |                      |      |   |           |      |  |   |          |   |  |   |          |  
|                                         
|                                         
|                                         
|                                         
|Fair value of assets at beginning of year |  | $             | 1,362,084 |                      |      | $ | 1,427,554 |      |  | $ |         |   |  | $ |         |  
|                                         
|                                         
|                                         
|                                         
|Actual return on plan assets              |  |               | 227,757   |                      |      |   | (33,428   | )    |  |   |         |   |  |   |         |  
|                                         
|                                         
|                                         
|                                         
|Employer contributions                    |  |               |          |                      |      |   |          |      |  |   | 5,543    |   |  |   | 4,990    |  
|                                         
|                                         
|                                         
|                                         
|Benefits paid                             |  |               | (24,875   | )                    |      |   | (32,042   | )    |  |   | (5,543   | ) |  |   | (4,990   | )
|                                          |  |              
|                                         
|Fair value of assets at end of year       |  | $             | 1,564,966 |                      |      | $ | 1,362,084 |      |  | $ |         |   |  | $ |         |  
|                                          |  |              
|                                         
|Funded status                             |  | $             | 939,192   |                      |      | $ | 863,132   |      |  | $ | (120,444 | ) |  | $ | (112,174 | )
|                                         
|                                         
|                                         
|                                         
|Unrecognized transition asset             |  |               | (1,442    | )                    |      |   | (3,631    | )    |  |   |         |   |  |   |         |  
|                                         
|                                         
|                                         
|                                         
|Unrecognized prior service cost           |  |               | 46,941    |                      |      |   | 24,553    |      |  |   | (8,589   | ) |  |   | (3,469   | )
|                                         
|                                         
|                                         
|                                         
|Unrecognized actuarial gain               |  |               | (469,890  | )                    |      |   | (390,268  | )    |  |   | (11,707  | ) |  |   | (20,750  | )
|                                          |  |              
|                                         
|Net prepaid (accrued) cost                |  | $             | 514,801   |                      |      | $ | 493,786   |      |  | $ | (140,740 | ) |  | $ | (136,393 | )
|                                          |  |              

The accumulated benefit obligation for the
Companys defined benefit pension plans at
December 28, 2003 and December 29, 2002 was
$548.4 million and $432.9 million, respectively.

Key assumptions utilized for determining the
benefit obligation at December 28, 2003 and
December 29, 2002 are as follows:

|                              |  |               |       |                |      |  |       |      |  |  |       |  |  |  |       | 
|----------------------------- |  | ------------- | ----- | -------------- | ---- |  | ----- | ---- |  |  | ----- |  |  |  | ----- | 
|                              |  |               |       |                |      | 
|                              |  |               |       | Postretirement
|                              |  | Pension Plans |       | Plans         
|                              |  |               |       |               
|                              |  | 2003          |       |                | 2002 |  |       | 2003 |  |  | 2002  | 
|                             
|                             
|Discount rate                 |  |               | 6.25% |                |      |  | 6.75% |      |  |  | 6.25% |  |  |  | 6.75% | 
|                             
|                             
|                             
|                             
|Rate of compensation increase |  |               | 4.0%  |                |      |  | 4.0%  |      |  |  |      |  |  |  |      | 

The assumed health care cost trend rate used in
measuring the postretirement benefit obligation at
December 28, 2003 was 9.5 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 |  | $        | 18,104 |          |    | $ | (16,918 | )
|                                 
|                                 
|                                 
|                                 
|Service cost plus interest cost   |  | $        | 1,990  |          |    | $ | (1,929  | )

The Company made no contributions to its defined
benefit pension plans in 2003 and 2002, and the Company does not
expect to make any contributions in 2004 or in the foreseeable
future. The Company made contributions to its postretirement
benefit plans of $5.5 million and $5.0 million for the
years ended December 28, 2003 and December 29, 2002,
respectively, as the plans are unfunded and the Company covers
benefit payments. The Company expects to make contributions for
its postretirement plans by funding benefit payments consistent
with the assumed heath care cost trend rates discussed above.

The Companys defined benefit pension
obligations are funded by a relatively small but diversified mix
of stocks and high-quality fixed-income securities that are held
in trust. Essentially all of the assets are managed by two
investment companies. None of the assets are managed internally
by the Company or are invested in securities of the Company. The
goal of the investment managers is to produce moderate long-term
growth in the value of those assets while protecting them
against decreases in value. The investment managers cannot
invest more than 20 percent of the assets at the time of
purchase in the stock of Berkshire Hathaway or more than
10 percent of the assets in the securities of any other
single issuer, except for obligations of the
U.S. Government, without receiving prior approval by the
Plan administrator. Over the past five years, the managers
together have invested between 65 percent and
85 percent of the assets in equities. At the end of 2003,
82 percent of the assets were invested in equities;
25 percent of the assets were invested in Berkshire
Hathaway common stock. The Companys retirement plan trust
held shares of Berkshire Class A and Class B common
stock with a total market value of $398.2 million and
$343.8 million at December 28, 2003 and
December 29, 2002, respectively.

The total (income) cost arising from the
Companys defined benefit pension and postretirement plans
for the years ended December 28, 2003, December 29,
2002 and December 30, 2001, consists of the following
components (in thousands):

|                                         |  |               |         |                      |      |   |         |      |  |   |         |   |  |      |        |   |      |   |        |   |  |   |        |  
|---------------------------------------- |  | ------------- | ------- | -------------------- | ---- | - | ------- | ---- |  | - | ------- | - |  | ---- | ------ | - | ---- | - | ------ | - |  | - | ------ | -
|                                         |  |               |         |                     
|                                         |  | Pension Plans |         | Postretirement Plans
|                                         |  |               |         |                     
|                                         |  | 2003          |         |                      | 2002 |   |         | 2001 |  |   | 2003    |   |  | 2002 |        |   | 2001 |  
|                                        
|                                        
|Service cost                             |  | $             | 19,965  |                      |      | $ | 17,489  |      |  | $ | 15,393  |   |  | $    | 5,164  |   |      | $ | 5,418  |   |  | $ | 3,707  |  
|                                        
|                                        
|                                        
|                                        
|Interest cost                            |  |               | 33,696  |                      |      |   | 30,820  |      |  |   | 27,526  |   |  |      | 7,395  |   |      |   | 7,997  |   |  |   | 6,811  |  
|                                        
|                                        
|                                        
|                                        
|Expected return on assets                |  |               | (96,116 | )                    |      |   | (92,192 | )    |  |   | (97,567 | ) |  |      |       |   |      |   |       |   |  |   |       |  
|                                        
|                                        
|                                        
|                                        
|Amortization of transition asset         |  |               | (2,189  | )                    |      |   | (5,221  | )    |  |   | (6,502  | ) |  |      |       |   |      |   |       |   |  |   |       |  
|                                        
|                                        
|                                        
|                                        
|Amortization of prior service cost       |  |               | 4,172   |                      |      |   | 2,185   |      |  |   | 2,122   |   |  |      | (360   | ) |      |   | (421   | ) |  |   | (162   | )
|                                        
|                                        
|                                        
|                                        
|Recognized actuarial gain                |  |               | (14,665 | )                    |      |   | (17,528 | )    |  |   | (17,917 | ) |  |      | (1,675 | ) |      |   | (2,435 | ) |  |   | (3,408 | )
|                                         |  |              
|Net periodic (benefit) cost for the year |  |               | (55,137 | )                    |      |   | (64,447 | )    |  |   | (76,945 | ) |  |      | 10,524 |   |      |   | 10,559 |   |  |   | 6,948  |  
|                                        
|                                        
|                                        
|                                        
|Early retirement programs expense        |  |               | 34,135  |                      |      |   | 19,001  |      |  |   | 3,344   |   |  |      |       |   |      |   |       |   |  |   |       |  
|                                        
|                                        
|                                        
|                                        
|Curtailment gain                         |  |               |        |                      |      |   |        |      |  |   |        |   |  |      | (634   | ) |      |   |       |   |  |   |       |  
|                                         |  |              
|                                        
|Total (benefit) cost for the year        |  | $             | (21,002 | )                    |      | $ | (45,446 | )    |  | $ | (73,601 | ) |  | $    | 9,890  |   |      | $ | 10,559 |   |  | $ | 6,948  |  
|                                         |  |              

The costs for the Companys defined benefit
pension and postretirement plans are actuarially determined.
Below are the key assumptions utilized to determine periodic
cost for the years ended December 28, 2003,
December 29, 2002 and December 30, 2001:

|                               |  |               |       |                      |      |  |      |      |  |  |      |  |  |      |       |  |      |  |      |  |  |  |      | 
|------------------------------ |  | ------------- | ----- | -------------------- | ---- |  | ---- | ---- |  |  | ---- |  |  | ---- | ----- |  | ---- |  | ---- |  |  |  | ---- | 
|                               |  |               |       |                     
|                               |  | Pension Plans |       | Postretirement Plans
|                               |  |               |       |                     
|                               |  | 2003          |       |                      | 2002 |  |      | 2001 |  |  | 2003 |  |  | 2002 |       |  | 2001 | 
|                              
|                              
|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% |  |  |      |      |  |      |  |     |  |  |  |     | 

In determining the expected rate of return on
plan assets, the Company considers the relative weighting of
plan assets, the historical performance of total plan assets and
individual asset classes and economic and other indicators of
future performance. In



51







---



##### 



addition, the Company may consult with and
consider the input of financial and other professionals in
developing appropriate return benchmarks.


In December of 2003, the Medicare Prescription
Drug, Improvement, and Modernization Act of 2003 (the Act) was
enacted. The Act introduced a prescription drug benefit under
Medicare, as well as a federal subsidy to sponsors of retiree
health benefit plans that provide a benefit that meets certain
criteria. The Companys other postretirement plans covering
retirees currently provide certain prescription benefits to
eligible participants. In accordance with FASB Staff Position
No. 106-1, Accounting and Disclosure Requirements
Related to the Medicare Prescription Drug, Improvement, and
Modernization Act of 2003, the effects of the Act on the
Companys medical plans have not been included in the
measurement of the Companys accumulated postretirement
benefit obligation or net periodic postretirement benefit cost
for 2003.

Contributions to multi-employer pension plans,
which are generally based on hours worked, amounted to
$2.0 million in 2003, $2.0 million in 2002 and
$1.8 million in 2001.

The Company recorded expense associated with
retirement benefits provided under incentive savings plans
(primarily 401(k) plans) of approximately $15.5 million in
2003, $15.4 million in 2002 and $14.5 million in 2001.

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 28, 2003, future minimum rental
payments under noncancelable operating leases approximate the
following (in thousands):

|           |  |   |         | 
|---------- |  | - | ------- | 
|          
|          
|          
|          
|2004       |  | $ | 69,104  | 
|          
|          
|          
|          
|2005       |  |   | 63,905  | 
|          
|          
|          
|          
|2006       |  |   | 57,945  | 
|          
|          
|          
|          
|2007       |  |   | 54,095  | 
|          
|          
|          
|          
|2008       |  |   | 45,603  | 
|          
|          
|          
|          
|Thereafter |  |   | 135,826 | 
|           |  |   |         | 
|           |  | $ | 426,478 | 
|           |  |   |         | 

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 was approximately $76.8 million,
$60.7 million and $58.3 million in 2003, 2002 and
2001, respectively. Sublease income was approximately
$0.6 million, $0.6 million and $1.5 million in 2003,
2002 and 2001, 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 28,
2003, such commitments amounted to approximately
$55.3 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 $169.5 million in 2003,
$90.5 million in 2002 and $422.8 million in 2001
(including estimated fair value of cable systems surrendered,
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 2003, Kaplan acquired 13 businesses in its
higher education and professional divisions for a total of
$166.8 million, financed through cash and debt, with
$36.7 million remaining to be paid. The largest of these
was the March 2003 acquisition of the stock of Financial
Training Company (FTC), for £55.3 million
($87.4 million). Headquartered in London, FTC provides test
preparation services for accountants and financial services
professionals, with 28 training centers in the United Kingdom as
well as operations in Asia. This acquisition was financed
through cash and debt with $29.7 million remaining to be
paid, primarily to employees of the business. In November 2003,
Kaplan acquired Dublin Business School, Irelands largest
private undergraduate institution, serving approximately 5,000
students. Most of the purchase price for the 2003 Kaplan
acquisitions was allocated to goodwill and other intangibles and
property, plant and equipment.

In addition, the cable division acquired three
additional systems in 2003 for $2.8 million. Most of the
purchase price for these acquisitions was allocated to franchise
agreements, an indefinite-lived intangible asset.

On January 1, 2003, the Company sold its
50 percent interest in the International Herald Tribune for
$65 million and the Company recorded an after-tax
non-operating gain of $32.3 million ($3.38 per share) in
the first quarter of 2003.

During 2002, Kaplan acquired several businesses
in its higher education and test preparation divisions for
approximately $42.2 million. 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, as determined based on an appraisal
completed by an independent third-party firm. 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
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



52






---



##### 



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, as determined based on an appraisal
completed by an independent third-party firm. 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.

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 2003, 2002 and 2001, assuming the
acquisitions and exchanges occurred at the beginning of 2001,
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, the Company completed
its transitional impairment review of indefinite-lived
intangible assets and goodwill in 2002. 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 2002 fiscal year results as a cumulative effect
of change in accounting principle.

On a pro forma basis, the Companys 2001
operating income would have been $298.3 million, if SFAS
142 had been adopted at the beginning of fiscal 2001, compared
to $363.8 million and $377.6 million for 2003 and
2002, respectively.

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

|                                                                                                                 |                                                                             |      |         |       |      |   |         |       |   |   |         |       | 
|---------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------- | ---- | ------- | ----- | ---- | - | ------- | ----- | - | - | ------- | ----- | 
|                                                                                                                 |                                                                             | 2003 |         |       | 2002 |   |         | 2001  |  
|                                                                                                                
|                                                                                                                
|Income before cumulative effect of change in
    accounting principle,
    as reported                           |                                                                             | $    | 241,088 |       |      | $ | 216,368 |       |   | $ | 229,639 |      
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|Amortization of goodwill and other intangibles,
    net of tax                                                   |                                                                             |      |        |       |      |   |        |       |   |   | 54,989  |      
|                                                                                                                 |                                                                             |     
|Pro forma income before cumulative effect of
    change in
    accounting principle                              |                                                                             |      | 241,088 |       |      |   | 216,368 |       |   |   | 284,628 |      
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|Cumulative effect of change in method of
    accounting for goodwill
    and other intangible assets, net of tax |                                                                             |      |        |       |      |   | (12,100 | )     |   |   |        |      
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|Redeemable preferred stock dividends                                                                             |                                                                             |      | (1,027  | )     |      |   | (1,033  | )     |   |   | (1,052  | )    
|                                                                                                                 |                                                                             |     
|                                                                                                                
|Pro forma net income available for common shares                                                                 |                                                                             | $    | 240,061 |       |      | $ | 203,235 |       |   | $ | 283,576 |      
|                                                                                                                 |                                                                             |     
|Basic earnings per share:                                                                                        |                                                                             |      |         |       |      |   |         |       |   |   |         |      
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                 | Before cumulative effect of change in accounting principle, as reported     |      | $       | 25.19 |      |   | $       | 22.65 |   |   | $       | 24.10 | 
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                 | Cumulative effect of change in accounting
    principle                     |      |         |      |      |   |         | (1.27 | ) |   |         |      | 
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                 | Amortization of goodwill and other intangibles                              |      |         |      |      |   |         |      |   |   |         | 5.79  | 
|                                                                                                                 |                                                                             |     
|                                                                                                                
|                                                                                                                 | Pro forma net income available for common shares                            |      | $       | 25.19 |      |   | $       | 21.38 |   |   | $       | 29.89 | 
|                                                                                                                 |                                                                             |     
|Diluted earnings per share:                                                                                      |                                                                             |      |         |       |      |   |         |       |   |   |         |      
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                 | Before cumulative effect of change in accounting
    principle, as reported |      | $       | 25.12 |      |   | $       | 22.61 |   |   | $       | 24.06 | 
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                 | Cumulative effect of change in accounting
    principle                     |      |         |      |      |   |         | (1.27 | ) |   |         |      | 
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                 | Amortization of goodwill and other intangibles                              |      |         |      |      |   |         |      |   |   |         | 5.79  | 
|                                                                                                                 |                                                                             |     
|                                                                                                                
|                                                                                                                 | Pro forma net income available for common shares                            |      | $       | 25.12 |      |   | $       | 21.34 |   |   | $       | 29.85 | 
|                                                                                                                 |                                                                             |     

As part of the adoption of SFAS 142 in 2002, the
Company 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
principally from franchise agreements at its cable division, as
the Company expects its cable franchise agreements to provide
the Company with substantial benefit for a period that extends
beyond the foreseeable horizon, and the Companys cable
division historically has obtained renewals and extensions of
such agreements for nominal costs and without any material
modifications to the agreements. Amortized intangible assets are
primarily non-compete agreements, with amortization periods up
to five years. Amortization expense was $1.4 million in
2003, and is estimated to be approximately $2 million in
each of the next five years.



53




---



##### 



The Companys goodwill and other intangible
assets as of December 28, 2003 and December 29, 2002
were as follows (in thousands):

|      |                                    |       |           |             |              |   |         |         |  |   |           |           | 
|----- | ---------------------------------- | ----- | --------- | ----------- | ------------ | - | ------- | ------- |  | - | --------- | --------- | 
|      |                                    |       |           | Accumulated |              |   |        
|      |                                    | Gross |           |             | Amortization |   | Net     |        
|     
|     
|2003: |                                    |       |           |             |              |   |         |         |  |   |           |          
|     
|     
|     
|     
|      | Goodwill                           |       | $         | 1,264,096   |              |   | $       | 298,402 |  |   | $         | 965,694   | 
|     
|     
|     
|     
|      | Indefinite-lived intangible assets |       |           | 650,462     |              |   |         | 163,806 |  |   |           | 486,656   | 
|     
|     
|     
|     
|      | Amortized intangible assets        |       |           | 8,034       |              |   |         | 2,808   |  |   |           | 5,226     | 
|      |                                    |      
|      |                                    | $     | 1,922,592 |             |              | $ | 465,016 |         |  | $ | 1,457,576 |          
|      |                                    |      
|     
|     
|     
|     
|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 | 
|      |                                    |      

Activity related to the Companys goodwill
and intangible assets during 2003 was as follows (in thousands):

|                                        |                                |            |   |              |   |            |   |            |  |           |   |        |  |  |   |         |   |  |   |         |   |  |   |         |  
|--------------------------------------- | ------------------------------ | ---------- | - | ------------ | - | ---------- | - | ---------- |  | --------- | - | ------ |  |  | - | ------- | - |  | - | ------- | - |  | - | ------- | -
|                                        |                                | Newspaper  |   | Television   |   | Magazine   |   | Cable      |  |           |   |       
|                                        |                                | Publishing |   | Broadcasting |   | Publishing |   | Television |  | Education |   | Total 
|                                       
|                                       
|Goodwill, Net                           |                                |            |   |              |   |            |   |            |  |           |   |        |  |  |   |         |   |  |   |         |   |  |   |        
|                                       
|                                       
|                                       
|                                       
|                                        | Beginning of year              |            | $ | 72,738       |   |            | $ | 203,165    |  |           | $ | 69,556 |  |  | $ | 85,666  |   |  | $ | 339,736 |   |  | $ | 770,861 |  
|                                       
|                                       
|                                       
|                                       
|                                        | Acquisitions                   |            |   |              |   |            |   |            |  |           |   |        |  |  |   |         |   |  |   | 184,075 |   |  |   | 184,075 |  
|                                       
|                                       
|                                       
|                                       
|                                        | Disposition                    |            |   | (1,461       | ) |            |   |            |  |           |   |        |  |  |   |         |   |  |   |         |   |  |   | (1,461  | )
|                                       
|                                       
|                                       
|                                       
|                                        | Foreign currency exchange rate |            |   |              |   |            |   |            |  |           |   |        |  |  |   |         |   |  |   | 12,219  |   |  |   | 12,219  |  
|                                        |                                |           
|                                        | End of year                    |            | $ | 71,277       |   |            | $ | 203,165    |  |           | $ | 69,556 |  |  | $ | 85,666  |   |  | $ | 536,030 |   |  | $ | 965,694 |  
|                                        |                                |           
|                                       
|                                       
|                                       
|                                       
|Indefinite-Lived Intangible Assets, Net |                                |            |   |              |   |            |   |            |  |           |   |        |  |  |   |         |   |  |   |         |   |  |   |        
|                                       
|                                       
|                                       
|                                       
|                                        | Beginning of year              |            |   |              |   |            |   |            |  |           |   |        |  |  | $ | 482,419 |   |  |   |         |   |  | $ | 482,419 |  
|                                       
|                                       
|                                       
|                                       
|                                        | Acquisitions                   |            |   |              |   |            |   |            |  |           |   |        |  |  |   | 2,137   |   |  | $ | 2,100   |   |  |   | 4,237   |  
|                                        |                                |           
|                                        | End of year                    |            |   |              |   |            |   |            |  |           |   |        |  |  | $ | 484,556 |   |  | $ | 2,100   |   |  | $ | 486,656 |  
|                                        |                                |           
|                                       
|                                       
|                                       
|                                       
|Amortized Intangible Assets, Net        |                                |            |   |              |   |            |   |            |  |           |   |        |  |  |   |         |   |  |   |         |   |  |   |        
|                                       
|                                       
|                                       
|                                       
|                                        | Beginning of year              |            | $ | 45           |   |            |   |            |  |           |   |        |  |  | $ | 1,232   |   |  | $ | 876     |   |  | $ | 2,153   |  
|                                       
|                                       
|                                       
|                                       
|                                        | Acquisitions                   |            |   |              |   |            |   |            |  |           |   |        |  |  |   |         |   |  |   | 4,463   |   |  |   | 4,463   |  
|                                       
|                                       
|                                       
|                                       
|                                        | Amortization                   |            |   | (15          | ) |            |   |            |  |           |   |        |  |  |   | (151    | ) |  |   | (1,270  | ) |  |   | (1,436  | )
|                                       
|                                       
|                                       
|                                       
|                                        | Foreign currency exchange rate |            |   |              |   |            |   |            |  |           |   |        |  |  |   |         |   |  |   | 46      |   |  |   | 46      |  
|                                        |                                |           
|                                        | End of year                    |            | $ | 30           |   |            |   |            |  |           |   |        |  |  | $ | 1,081   |   |  | $ | 4,115   |   |  | $ | 5,226   |  
|                                        |                                |           

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 Intangible Assets, Net |                   |            |   |              |   |            |   |            |  |           |   |         |   |  |   |         |   |  |   |         |   |  |   |        
|                                       
|                                       
|                                       
|                                       
|                                        | Beginning of year |            |   |              |   |            |   |            |  |           |   |         |   |  | $ | 450,759 |   |  |   |         |   |  | $ | 450,759 |  
|                                       
|                                       
|                                       
|                                       
|                                        | Acquisitions      |            |   |              |   |            |   |            |  |           |   |         |   |  |   | 32,160  |   |  |   |         |   |  |   | 32,160  |  
|                                       
|                                       
|                                       
|                                       
|                                        | Disposition       |            |   |              |   |            |   |            |  |           |   |         |   |  |   | (500    | ) |  |   |         |   |  |   | (500    | )
|                                        |                   |           
|                                        | End of year       |            |   |              |   |            |   |            |  |           |   |         |   |  | $ | 482,419 |   |  |   |         |   |  | $ | 482,419 |  
|                                        |                   |           
|                                       
|                                       
|                                       
|                                       
|Amortized Intangible Assets, Net        |                   |            |   |              |   |            |   |            |  |           |   |         |   |  |   |         |   |  |   |         |   |  |   |        
|                                       
|                                       
|                                       
|                                       
|                                        | Beginning of year |            | $ | 60           |   |            |   |            |  |           |   |         |   |  | $ | 1,377   |   |  | $ | 11      |   |  | $ | 1,448   |  
|                                       
|                                       
|                                       
|                                       
|                                        | Acquisitions      |            |   |              |   |            |   |            |  |           |   |         |   |  |   | 10      |   |  |   | 1,350   |   |  |   | 1,360   |  
|                                       
|                                       
|                                       
|                                       
|                                        | Amortization      |            |   | (15          | ) |            |   |            |  |           |   |         |   |  |   | (155    | ) |  |   | (485    | ) |  |   | (655    | )
|                                        |                   |           
|                                       
|                                        | End of year       |            | $ | 45           |   |            |   |            |  |           |   |         |   |  | $ | 1,232   |   |  | $ | 876     |   |  | $ | 2,153   |  
|                                        |                   |           



L. OTHER NON-OPERATING INCOME
(EXPENSE)

The Company recorded other non-operating income,
net, of $55.4 million in 2003, $28.9 million in 2002,
and $283.7 million in 2001. The 2003 non-operating income,
net, mostly comprises a $49.8 million pre-tax gain from the
sale of the Companys 50 percent interest in the
International Herald Tribune. The 2002 non-operating income,
net, 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, 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.

A summary of non-operating income (expense) for
the years ended December 28, 2003, December 29, 2002
and December 30, 2001, follows (in millions):

|                                                                |       |      |      |      |      |   |       |      |  |   |       |       | 
|--------------------------------------------------------------- | ----- | ---- | ---- | ---- | ---- | - | ----- | ---- |  | - | ----- | ----- | 
|                                                                |       | 2003 |      |      | 2002 |   |       | 2001 | 
|                                                               
|                                                               
|Gain on sale of interest in IHT                                 |       | $    | 49.8 |      |      | $ |      |      |  | $ |      |      
|                                                               
|                                                               
|                                                               
|                                                               
|Foreign currency gains, net                                     |       |      | 4.2  |      |      |   |      |      |  |   |      |      
|                                                               
|                                                               
|                                                               
|                                                               
|Impairment write-downs on cost method and other
    investments |       |      | (1.3 | )    |      |   | (21.2 | )    |  |   | (32.4 | )    
|                                                               
|                                                               
|                                                               
|                                                               
|Gain on sale or exchange of cable system
    businesses         |       |      |     |      |      |   | 27.8  |      |  |   | 321.1 |      
|                                                               
|                                                               
|                                                               
|                                                               
|Gain (loss) on sales of marketable securities                   |       |      |     |      |      |   | 13.2  |      |  |   | (0.3  | )    
|                                                               
|                                                               
|                                                               
|                                                               
|Impairment write-down of non-operating asset                    |       |      |     |      |      |   |      |      |  |   | (4.3  | )    
|                                                               
|                                                               
|                                                               
|                                                               
|Other                                                           |       |      | 2.7  |      |      |   | 9.1   |      |  |   | (0.4  | )    
|                                                                |       |     
|                                                                | Total |      | $    | 55.4 |      |   | $     | 28.9 |  |   | $     | 283.7 | 
|                                                                |       |     



M. 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 violations of applicable wage and hour laws.
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 U.S.
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 28, 2003, December 29, 2002 and
December 30, 2001, approximately $250.0 million,
$161.7 million and $101.5 million, respectively, of
the Companys education division revenues were derived from
financial aid received by students under Title IV Programs.
Management believes that the Companys education division
schools that participate in Title IV Programs are in material
compliance with standards set forth in the HEA and the
Regulations.



54       N. 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 publishing includes 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). The magazine publishing division consists of the
publication of a weekly news magazine, Newsweek, which has one
domestic and three international editions, the publication of
Arthur Frommers Budget Travel, 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. Television broadcasting operations are conducted
through six VHF television stations serving the Detroit,
Houston, Miami, San Antonio, Orlando and Jacksonville television
markets. All stations are network-affiliated (except for WJXT in
Jacksonville) 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 subscribers in 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 Kaplan Test Prep 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 multi-media learning and private tutoring
to children and educational resources to parents. Kaplans
businesses also include higher education services, which include
all of Kaplans post-secondary education businesses,
including the fixed-facility colleges that were formerly part of
Quest Education, which offer 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. The Companys foreign revenues in 2003, 2002
and 2001 totaled approximately $140 million,
$81 million and $89 million, respectively, principally
from Kaplans foreign operations and the publication of the
international editions of Newsweek. The Companys
long-lived assets in foreign countries, principally in the
United Kingdom, totaled approximately $205 million at
December 28, 2003. 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.  55
      Newspaper
      
      Television
      
      Magazine
      
      Cable
      
      
      
      Corporate(in
          thousands)
      
      Publishing
      
      Broadcasting
      
      Publishing
      
      Television
      
      Education
      
      Office
      
      Consolidated2003Operating revenues
      
      $
      872,754
      
      
      $
      315,126
      
      
      $
      353,555
      
      
      $
      459,399
      
      
      $
      838,077
      
      
      $
      
      
      
      $
      2,838,911Income (loss) from operations(1)
      
      $
      134,197
      
      
      $
      139,744
      
      
      $
      43,504
      
      
      $
      88,392
      
      
      $
      (11,709
      )
      
      $
      (30,308
      )
      
      $
      363,820Equity in losses of affiliates
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      (9,766
      )Interest expense, net
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      (26,851
      )Other income, net
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      55,385Income before income taxes
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      $
      382,588Identifiable assets
      
      $
      673,631
      
      
      $
      410,580
      
      
      $
      533,305
      
      
      $
      1,119,826
      
      
      $
      845,983
      
      
      $
      8,963
      
      
      $
      3,592,288Investments in marketable equity securities
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      247,958Investments in affiliates
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      61,312Total assets
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      $
      3,901,558Depreciation of property, plant and equipment
      
      $
      41,914
      
      
      $
      11,414
      
      
      $
      3,727
      
      
      $
      92,804
      
      
      $
      23,989
      
      
      $
      
      
      
      $
      173,848Amortization expense
      
      $
      15
      
      
      $
      
      
      
      $
      
      
      
      $
      151
      
      
      $
      1,270
      
      
      $
      
      
      
      $
      1,436Pension credit (expense)
      
      $
      (19,580
      )
      
      $
      4,165
      
      
      $
      38,493
      
      
      $
      (853
      )
      
      $
      (1,223
      )
      
      $
      
      
      
      $
      21,002Kaplan stock-based incentive compensation
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      $
      119,126
      
      
      
      
      
      
      $
      119,126Capital expenditures
      
      $
      18,642
      
      
      $
      5,434
      
      
      $
      1,027
      
      
      $
      65,948
      
      
      $
      34,537
      
      
      $
      
      
      
      $
      125,5882002Operating revenues
      
      $
      841,984
      
      
      $
      343,552
      
      
      $
      349,050
      
      
      $
      428,492
      
      
      $
      621,125
      
      
      $
      
      
      
      $
      2,584,203Income (loss) from operations
      
      $
      109,006
      
      
      $
      168,826
      
      
      $
      25,728
      
      
      $
      80,937
      
      
      $
      20,512
      
      
      $
      (27,419
      )
      
      $
      377,590Equity in losses of affiliates
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      (19,308
      )Interest expense, net
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      (33,487
      )Other income, net
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      28,873Income before income taxes
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      $
      353,668Identifiable assets
      
      $
      690,197
      
      
      $
      413,663
      
      
      $
      488,562
      
      
      $
      1,142,995
      
      
      $
      542,251
      
      
      $
      18,990
      
      
      $
      3,296,658Investments in marketable equity securities
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      216,533Investments in affiliates
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      70,703Total assets
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      $
      3,583,894Depreciation of property, plant and equipment
      
      $
      42,961
      
      
      $
      11,187
      
      
      $
      4,124
      
      
      $
      88,751
      
      
      $
      24,885
      
      
      $
      
      
      
      $
      171,908Amortization expense
      
      $
      15
      
      
      $
      
      
      
      $
      
      
      
      $
      155
      
      
      $
      485
      
      
      $
      
      
      
      $
      655Pension credit (expense)
      
      $
      18,902
      
      
      $
      4,730
      
      
      $
      23,814
      
      
      $
      (814
      )
      
      $
      (1,186
      )
      
      $
      
      
      
      $
      45,446Kaplan stock-based incentive compensation
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      $
      34,531
      
      
      
      
      
      
      $
      34,531Capital expenditures
      
      $
      27,280
      
      
      $
      8,784
      
      
      $
      1,672
      
      
      $
      92,499
      
      
      $
      22,757
      
      
      $
      
      
      
      $
      152,9922001Operating revenues
      
      $
      842,721
      
      
      $
      314,010
      
      
      $
      374,575
      
      
      $
      386,037
      
      
      $
      493,681
      
      
      $
      
      
      
      $
      2,411,024Income (loss) from operations
      
      $
      84,744
      
      
      $
      131,847
      
      
      $
      25,306
      
      
      $
      32,237
      
      
      $
      (28,337
      )
      
      $
      (25,865
      )
      
      $
      219,932Equity in losses of affiliates
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      (68,659
      )Interest expense, net
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      (47,473
      )Other income, net
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      283,739Income before income taxes
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      $
      387,539Pro forma income (loss) from operations(2)
      
      $
      88,592
      
      
      $
      145,982
      
      
      $
      31,975
      
      
      $
      70,634
      
      
      $
      (13,061
      )
      
      $
      (25,865
      )
      
      $
      298,257Identifiable assets
      
      $
      703,947
      
      
      $
      419,246
      
      
      $
      486,804
      
      
      $
      1,117,426
      
      
      $
      472,988
      
      
      $
      42,346
      
      
      $
      3,242,757Investments in marketable equity securities
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      235,405Investments in affiliates
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      80,936Total assets
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      $
      3,559,098Depreciation of property, plant and equipment
      
      $
      37,862
      
      
      $
      11,932
      
      
      $
      4,654
      
      
      $
      64,505
      
      
      $
      19,347
      
      
      $
      
      
      
      $
      138,300Amortization expense
      
      $
      3,864
      
      
      $
      14,135
      
      
      $
      6,669
      
      
      $
      38,553
      
      
      $
      15,712
      
      
      $
      
      
      
      $
      78,933Pension credit (expense)
      
      $
      25,197
      
      
      $
      6,263
      
      
      $
      44,989
      
      
      $
      (638
      )
      
      $
      (847
      )
      
      $
      (1,363
      )
      
      $
      73,601Kaplan stock-based incentive compensation
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      $
      25,302
      
      
      
      
      
      
      $
      25,302Capital expenditures
      
      $
      32,551
      
      
      $
      11,032
      
      
      $
      1,737
      
      
      $
      166,887
      
      
      $
      12,020
      
      
      $
      
      
      
      $
      224,227 (1) Newspaper publishing operating income in
2003 includes gain on sale of land at The Washington Post
newspaper of $41.7 million. (2) 2001 results, adjusted to exclude
amortization of goodwill and indefinite-lived intangible assets
no longer amortized under SFAS 142.  56       O. SUMMARY OF QUARTERLY OPERATING RESULTS
AND COMPREHENSIVE INCOME (UNAUDITED) Quarterly results of operations and comprehensive
income for the years ended December 28, 2003 and
December 29, 2002 are as follows (in thousands, except per
share amounts): First
      
      Second
      
      Third
      
      FourthQuarter
      
      Quarter
      
      Quarter(1)
      
      Quarter2003 Quarterly Operating ResultsOperating revenuesAdvertising
      
      $
      279,796
      
      
      $
      318,927
      
      
      $
      287,984
      
      
      $
      346,651Circulation and subscriber
      
      
      172,036
      
      
      
      176,348
      
      
      
      175,595
      
      
      
      182,269Education
      
      
      177,778
      
      
      
      195,560
      
      
      
      224,663
      
      
      
      240,076Other
      
      
      10,830
      
      
      
      16,105
      
      
      
      17,837
      
      
      
      16,456640,440
      
      
      
      706,940
      
      
      
      706,079
      
      
      
      785,452Operating costs and expensesOperating
      
      
      348,634
      
      
      
      368,974
      
      
      
      378,864
      
      
      
      411,043Selling, general and administrative
      
      
      169,170
      
      
      
      187,493
      
      
      
      244,299
      
      
      
      191,330Depreciation of property, plant and equipment
      
      
      43,395
      
      
      
      43,212
      
      
      
      42,420
      
      
      
      44,821Amortization of goodwill and other intangibles
      
      
      149
      
      
      
      363
      
      
      
      398
      
      
      
      526561,348
      
      
      
      600,042
      
      
      
      665,981
      
      
      
      647,720Income from operations
      
      
      79,092
      
      
      
      106,898
      
      
      
      40,098
      
      
      
      137,732Equity in losses of affiliates
      
      
      (2,642
      )
      
      
      (5,524
      )
      
      
      (1,116
      )
      
      
      (484
      )Interest income
      
      
      114
      
      
      
      458
      
      
      
      189
      
      
      
      191Interest expense
      
      
      (7,237
      )
      
      
      (6,658
      )
      
      
      (7,037
      )
      
      
      (6,872
      )Other income (expense), net
      
      
      48,135
      
      
      
      2,274
      
      
      
      1,565
      
      
      
      3,412Income before income taxes
      
      
      117,462
      
      
      
      97,448
      
      
      
      33,699
      
      
      
      133,979Provision for income taxes
      
      
      44,400
      
      
      
      36,800
      
      
      
      13,800
      
      
      
      46,500Net income
      
      
      73,062
      
      
      
      60,648
      
      
      
      19,899
      
      
      
      87,479Redeemable preferred stock dividends
      
      
      (517
      )
      
      
      (258
      )
      
      
      (252
      )
      
      
      Net income available for common shares
      
      $
      72,545
      
      
      $
      60,390
      
      
      $
      19,647
      
      
      $
      87,479Basic earnings per common share
      
      $
      7.62
      
      
      $
      6.34
      
      
      $
      2.06
      
      
      $
      9.17Diluted earnings per common share
      
      $
      7.59
      
      
      $
      6.32
      
      
      $
      2.06
      
      
      $
      9.15Basic average shares outstanding
      
      
      9,526
      
      
      
      9,527
      
      
      
      9,532
      
      
      
      9,536Diluted average shares outstanding
      
      
      9,553
      
      
      
      9,555
      
      
      
      9,556
      
      
      
      9,5632003 Quarterly comprehensive income
      
      $
      61,417
      
      
      $
      79,992
      
      
      $
      24,158
      
      
      $
      106,596 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) Results for the third quarter of 2003
include $74.6 million in pre-tax Kaplan stock compensation
expense at the education division. Quarterly impact from certain unusual items
(after-tax and diluted EPS amounts): First
    
    Second
    
    Third
    
    FourthQuarter
    
    Quarter
    
    Quarter
    
    QuarterEarly retirement program charges
    ($1.3 million and $19.5 million in the second and
    fourth quarters, respectively)
    
    
    
    
    
    $
    (0.14
    )
    
    
    
    
    
    $
    (2.04
    )Gain on sale of IHT ($32.3 million)
    
    $
    3.38Gain on sale of land ($25.5 million)
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    2.66Kaplan stock compensation expense for
    10 percent premium on Kaplan stock option offer
    ($6.4 million)
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (0.67
    )Establishment of Kaplan Educational Foundation
    ($3.9 million)
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (0.41
    )  57 
      First
      
      Second
      
      Third
      
      Fourth(in
          thousands, except per share amounts)
      
      Quarter
      
      Quarter
      
      Quarter
      
      Quarter2002 Quarterly Operating ResultsOperating revenuesAdvertising
      
      $
      273,564
      
      
      $
      316,102
      
      
      $
      292,523
      
      
      $
      344,645Circulation and subscriber
      
      
      161,298
      
      
      
      168,614
      
      
      
      171,535
      
      
      
      173,689Education
      
      
      146,929
      
      
      
      149,695
      
      
      
      160,454
      
      
      
      164,047Other
      
      
      18,531
      
      
      
      13,292
      
      
      
      15,781
      
      
      
      13,504600,322
      
      
      
      647,703
      
      
      
      640,293
      
      
      
      695,885Operating costs and expensesOperating
      
      
      333,239
      
      
      
      335,443
      
      
      
      342,411
      
      
      
      358,862Selling, general and administrative
      
      
      176,866
      
      
      
      160,387
      
      
      
      162,642
      
      
      
      164,200Depreciation of property, plant and equipment
      
      
      41,173
      
      
      
      41,286
      
      
      
      45,808
      
      
      
      43,641Amortization of goodwill and other intangibles
      
      
      152
      
      
      
      159
      
      
      
      172
      
      
      
      172551,430
      
      
      
      537,275
      
      
      
      551,033
      
      
      
      566,875Income from operations
      
      
      48,892
      
      
      
      110,428
      
      
      
      89,260
      
      
      
      129,010Equity in losses of affiliates
      
      
      (6,506
      )
      
      
      (9,183
      )
      
      
      (1,254
      )
      
      
      (2,366
      )Interest income
      
      
      133
      
      
      
      59
      
      
      
      69
      
      
      
      71Interest expense
      
      
      (8,867
      )
      
      
      (8,797
      )
      
      
      (8,717
      )
      
      
      (7,438
      )Other income (expense), net
      
      
      6,454
      
      
      
      (5,963
      )
      
      
      1,115
      
      
      
      27,268Income before income taxes and cumulative effect of change
          in accounting principle
      
      
      40,106
      
      
      
      86,544
      
      
      
      80,473
      
      
      
      146,545Provision for income taxes
      
      
      16,400
      
      
      
      35,400
      
      
      
      32,700
      
      
      
      52,800Income before cumulative effect of change in accounting
          principle
      
      
      23,706
      
      
      
      51,144
      
      
      
      47,773
      
      
      
      93,745Cumulative 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
      
      
      
      93,745Redeemable preferred stock dividends
      
      
      (525
      )
      
      
      (259
      )
      
      
      (249
      )
      
      
      Net income available for common shares
      
      $
      11,081
      
      
      $
      50,885
      
      
      $
      47,524
      
      
      $
      93,745Basic earnings per common share:Before cumulative effect of change in accounting principle
      
      $
      2.44
      
      
      $
      5.35
      
      
      $
      5.00
      
      
      $
      9.86Cumulative effect of change in accounting principle
      
      
      (1.27
      )
      
      
      
      
      
      
      
      
      
      
      Net income available for common shares
      
      $
      1.17
      
      
      $
      5.35
      
      
      $
      5.00
      
      
      $
      9.86Diluted earnings per common share:Before cumulative effect of change in accounting principle
      
      $
      2.43
      
      
      $
      5.34
      
      
      $
      4.99
      
      
      $
      9.83Cumulative effect of change in accounting principle
      
      
      (1.27
      )
      
      
      
      
      
      
      
      
      
      
      Net income available for common shares
      
      $
      1.16
      
      
      $
      5.34
      
      
      $
      4.99
      
      
      $
      9.83Basic average shares outstanding
      
      
      9,498
      
      
      
      9,503
      
      
      
      9,506
      
      
      
      9,509Diluted average shares outstanding
      
      
      9,512
      
      
      
      9,521
      
      
      
      9,523
      
      
      
      9,5372002 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 in accordance with SFAS 142. Quarterly impact from certain unusual items (after-tax
  and diluted EPS amounts):  First
      
      Second
      
      Third
      
      FourthQuarter
      
      Quarter
      
      Quarter
      
      QuarterEarly retirement program charges ($6.1 million,
          $1.6 million and $3.6 million in    the first, second and third
          quarters, respectively)
      
      $
      (0.64
      )
      
      $
      (0.17
      )
      
      $
      (0.38
      )Net investment gain/(loss) ($3.8 million, ($3.3 million),
          ($0.9 million) and ($1.9 million) in the first, second, third
          and fourth quarters, respectively)
      
      $
      0.40
      
      
      $
      (0.34
      )
      
      $
      (0.09
      )
      
      $
      (0.20
      )Gain on exchange of cable systems ($16.7 million)
      
      
      
      
      
      
      
      
      
      
      
      
      
      $
      1.75  58
       SCHEDULE II THE WASHINGTON POST COMPANY SCHEDULE II  VALUATION AND
QUALIFYING ACCOUNTS Column A
    
    Column B
    
    Column C
    
    Column D
    
    Column EAdditions Balance at
    
    Charged to
    
    
    
    Balance atBeginning
    
    Costs and
    
    
    
    End ofDescription
    
    of Period
    
    Expenses
    
    Deductions
    
    PeriodYear Ended December 30, 2001Allowance for doubtful accounts and returns
    
    $
    58,003,000
    
    
    $
    98,655,000
    
    
    $
    88,689,000
    
    
    $
    67,969,000Allowance 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
    
    
    $
    73,248,000Year Ended December 29, 2002Allowance for doubtful accounts and returns
    
    $
    67,969,000
    
    
    $
    91,091,000
    
    
    $
    98,820,000
    
    
    $
    60,240,000Allowance 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
    
    
    $
    65,396,000Year Ended December 28, 2003Allowance for doubtful accounts and returns
    
    $
    60,240,000
    
    
    $
    93,565,000
    
    
    $
    91,951,000
    
    
    $
    61,854,000Allowance for advertising rate adjustments and
    discounts
    
    
    5,156,000
    
    
    
    6,371,000
    
    
    
    6,857,000
    
    
    
    4,670,000$
    65,396,000
    
    
    $
    99,936,000
    
    
    $
    98,808,000
    
    
    $
    66,524,000  59      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 20012003.
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)
    
    2003
    
    2002
    
    2001Results of OperationsOperating revenues
    
    $
    2,838,911
    
    
    $
    2,584,203
    
    
    $
    2,411,024Income from operations
    
    $
    363,820
    
    
    $
    377,590
    
    
    $
    219,932Income before cumulative effect of change in
    accounting principle
    
    $
    241,088
    
    
    $
    216,368
    
    
    $
    229,639Cumulative effect of change in method of
    accounting for goodwill and other intangibles
    
    
    
    
    
    
    (12,100
    )
    
    
    Net income
    
    $
    241,088
    
    
    $
    204,268
    
    
    $
    229,639Per Share AmountsBasic earnings per common shareBefore cumulative effect of change in accounting
    principle
    
    $
    25.19
    
    
    $
    22.65
    
    
    $
    24.10Cumulative effect of change in accounting
    principle
    
    
    
    
    
    
    (1.27
    )
    
    
    Net income available for common shares
    
    $
    25.19
    
    
    $
    21.38
    
    
    $
    24.10Basic average shares outstanding
    
    
    9,530
    
    
    
    9,504
    
    
    
    9,486Diluted earnings per shareBefore cumulative effect of change in accounting
    principle
    
    $
    25.12
    
    
    $
    22.61
    
    
    $
    24.06Cumulative effect of change in accounting
    principle
    
    
    
    
    
    
    (1.27
    )
    
    
    Net income available for common shares
    
    $
    25.12
    
    
    $
    21.34
    
    
    $
    24.06Diluted average shares outstanding
    
    
    9,555
    
    
    
    9,523
    
    
    
    9,500Cash dividends
    
    $
    5.80
    
    
    $
    5.60
    
    
    $
    5.60Common shareholders equity
    
    $
    217.46
    
    
    $
    193.18
    
    
    $
    177.30Financial PositionCurrent assets
    
    $
    495,836
    
    
    $
    382,955
    
    
    $
    396,857Working capital (deficit)
    
    
    (216,037
    )
    
    
    (353,157
    )
    
    
    (37,233
    )Property, plant and equipment
    
    
    1,051,373
    
    
    
    1,094,400
    
    
    
    1,098,211Total assets
    
    
    3,901,558
    
    
    
    3,583,894
    
    
    
    3,559,098Long-term debt
    
    
    422,471
    
    
    
    405,547
    
    
    
    883,078Common shareholders equity
    
    
    2,074,941
    
    
    
    1,837,293
    
    
    
    1,683,485 Impact from certain unusual items (after-tax
and diluted EPS amounts): 2003 
    gain of $32.3 million ($3.38 per share)
    on the sale of the Companys 50 percent interest in
    the International Herald Tribune
    gain of $25.5 million ($2.66 per share) on sale
    of land at The Washington Post newspaper
    charge of $20.8 million ($2.18 per share) for
    early retirement programs at The Washington Post newspaper
    Kaplan stock compensation expense of
    $6.4 million ($0.67 per share) for the 10 percent
    premium associated with the purchase of outstanding Kaplan stock
    options
    charge of $3.9 million ($0.41 per share) in
    connection with the establishment of the Kaplan Educational
    Foundation 2002 
    gain of $16.7 million ($1.75 per share)
    on the exchange of certain cable systems
    charge of $11.3 million ($1.18 per
    share) for early retirement programs at Newsweek and The
    Washington Post newspaper 2001 
    gain of $196.5 million ($20.69 per
    share) on the exchange of certain cable systems
    non-cash goodwill and other intangibles
    impairment charge of $19.9 million ($2.10 per share)
    recorded in conjunction with the Companys BrassRing
    investment
    charges of $18.3 million ($1.93 per
    share) from the write-down of a non-operating parcel of land and
    certain cost-method investments to their estimated fair value  60         2000
    
    1999
    
    1998
    
    1997
    
    1996
    
    1995
    
    1994Results of OperationsOperating revenues
    
    $
    2,409,633
    
    
    $
    2,212,177
    
    
    $
    2,107,593
    
    
    $
    1,952,986
    
    
    $
    1,851,058
    
    
    $
    1,716,971
    
    
    $
    1,611,629Income from operations
    
    $
    339,882
    
    
    $
    388,453
    
    
    $
    378,897
    
    
    $
    381,351
    
    
    $
    337,169
    
    
    $
    271,018
    
    
    $
    274,875Income before cumulative effect of change in
    accounting principle
    
    $
    136,470
    
    
    $
    225,785
    
    
    $
    417,259
    
    
    $
    281,574
    
    
    $
    220,817
    
    
    $
    190,096
    
    
    $
    169,672Cumulative effect of change in method of
    accounting for goodwill and other intangibles
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income
    
    $
    136,470
    
    
    $
    225,785
    
    
    $
    417,259
    
    
    $
    281,574
    
    
    $
    220,817
    
    
    $
    190,096
    
    
    $
    169,672Per Share AmountsBasic earnings per common shareBefore cumulative effect of change in accounting
    principle
    
    $
    14.34
    
    
    $
    22.35
    
    
    $
    41.27
    
    
    $
    26.23
    
    
    $
    20.08
    
    
    $
    17.16
    
    
    $
    14.66Cumulative effect of change in accounting
    principle
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income available for common shares
    
    $
    14.34
    
    
    $
    22.35
    
    
    $
    41.27
    
    
    $
    26.23
    
    
    $
    20.08
    
    
    $
    17.16
    
    
    $
    14.66Basic average shares outstanding
    
    
    9,445
    
    
    
    10,061
    
    
    
    10,087
    
    
    
    10,700
    
    
    
    10,964
    
    
    
    11,075
    
    
    
    11,577Diluted earnings per shareBefore cumulative effect of change in accounting
    principle
    
    $
    14.32
    
    
    $
    22.30
    
    
    $
    41.10
    
    
    $
    26.15
    
    
    $
    20.05
    
    
    $
    17.15
    
    
    $
    14.65Cumulative effect of change in accounting
    principle
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income available for common shares
    
    $
    14.32
    
    
    $
    22.30
    
    
    $
    41.10
    
    
    $
    26.15
    
    
    $
    20.05
    
    
    $
    17.15
    
    
    $
    14.65Diluted average shares outstanding
    
    
    9,460
    
    
    
    10,082
    
    
    
    10,129
    
    
    
    10,733
    
    
    
    10,980
    
    
    
    11,086
    
    
    
    11,582Cash dividends
    
    $
    5.40
    
    
    $
    5.20
    
    
    $
    5.00
    
    
    $
    4.80
    
    
    $
    4.60
    
    
    $
    4.40
    
    
    $
    4.20Common shareholders equity
    
    $
    156.55
    
    
    $
    144.90
    
    
    $
    157.34
    
    
    $
    117.36
    
    
    $
    121.24
    
    
    $
    107.60
    
    
    $
    99.32Financial PositionCurrent assets
    
    $
    405,067
    
    
    $
    476,159
    
    
    $
    404,878
    
    
    $
    308,492
    
    
    $
    382,631
    
    
    $
    406,570
    
    
    $
    375,879Working capital (deficit)
    
    
    (3,730
    )
    
    
    (346,389
    )
    
    
    15,799
    
    
    
    (300,264
    )
    
    
    100,995
    
    
    
    98,393
    
    
    
    102,806Property, plant and equipment
    
    
    927,061
    
    
    
    854,906
    
    
    
    841,062
    
    
    
    653,750
    
    
    
    511,363
    
    
    
    457,359
    
    
    
    411,396Total assets
    
    
    3,200,743
    
    
    
    2,986,944
    
    
    
    2,729,661
    
    
    
    2,077,317
    
    
    
    1,870,411
    
    
    
    1,732,893
    
    
    
    1,696,868Long-term debt
    
    
    873,267
    
    
    
    397,620
    
    
    
    395,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    50,297Common shareholders equity
    
    
    1,481,007
    
    
    
    1,367,790
    
    
    
    1,588,103
    
    
    
    1,184,074
    
    
    
    1,322,803
    
    
    
    1,184,204
    
    
    
    1,126,933 2000 
    charge of $16.5 million ($1.74 per share)
    for an early retirement program at The Washington Post newspaper 1999 
    gains of $18.6 million ($1.81 per
    share) on the sales of marketable equity securities 1998 
    gain of $168.0 million ($16.59 per
    share) on the disposition of the Companys 28 percent
    interest in Cowles Media Company
    gain of $13.8 million ($1.36 per share)
    from the sale of 14 small cable systems
    gain of $12.6 million ($1.24 per share) on
    the disposition of the Companys investment in Junglee, a
    facilitator of internet commerce 1997 
    gain of $28.4 million ($2.65 per share)
    from the sale of the Companys investments in Bear Island
    Paper Company LP and Bear Island Timberlands Company LP
    gain of $16.0 million ($1.50 per share)
    from the sale of the PASS regional cable sports network 1995 
    gain of $8.4 million ($0.75 per share)
    from the sale of the Companys investment in American PCS,
    LP
    charge of $5.6 million ($0.51 per
    share) for the write-off of the Companys interest in
    Mammoth Micro Productions 1994 
    gain of $8.1 million ($0.70 per share)
    on the sale of land at one of the Companys newsprint
    affiliates  61
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  62      INDEX TO EXHIBITS ExhibitNumber
    
    Description3
    .1
    
    Restated Certificate of Incorporation of the
    Company dated November 13, 2003.3
    .2
    
    Certificate of Designation for the Companys
    Series A Preferred Stock dated September 22, 2003
    (incorporated by reference to Exhibit 3.2 to Amendment
    No. 1 to the Companys Current Report on Form 8-K
    dated September 22, 2003).3
    .3
    
    By-Laws of the Company as amended and restated
    through September 22, 2003 (incorporated by reference to
    Exhibit 3.4 to the Companys Current Report on Form
    8-K dated September 22, 2003).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
    
    First Supplemental Indenture dated as of
    September 22, 2003, among WP Company LLC, the Company and
    Bank One, NA, as successor to the First National Bank of
    Chicago, as Trustee, to the Indenture dated as of February 17,
    1999, between The Washington Post Company and The First National
    Bank of Chicago, as Trustee (incorporated by reference to
    Exhibit 4.1 to the Companys Current Report on
    Form 8-K dated September 22, 2003).4
    .4
    
    364-Day Credit Agreement dated as of
    August 13, 2003, among the Company, Citibank, N.A.,
    Wachovia Bank, N.A., SunTrust Bank, Bank One, N.A., JPMorgan
    Chase Bank, The Bank of New York and Riggs Bank
    N.A.(incorporated by reference to Exhibit 4.2 to the
    Companys Current Report on Form 8-K dated
    September 22, 2003).4
    .5
    
    5-Year Credit Agreement dated as of
    August 14, 2002, among the Company, Citibank, N.A.,
    Wachovia Bank, N.A., SunTrust Bank, Bank One, N.A., JPMorgan
    Chase Bank, The Bank of New York and Riggs Bank N.A.
    (incorporated by reference to Exhibit 4.4 to the
    Companys Quarterly Report on Form 10-Q for the
    quarter ended September 29, 2002).4
    .6
    
    Consent and Amendment No. 1 dated as of
    August 13, 2003, to the 5-Year Credit Agreement dated as of
    August 14, 2002, among the Company, Citibank, N.A. and the
    other lenders that are parties to such Credit Agreement
    (incorporated by reference to Exhibit 4.3 to the
    Companys Current Report on Form 8-K dated
    September 22, 2003).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 effective May 31, 2003 (incorporated
    by reference to Exhibit 10.1 to the Companys
    Quarterly Report on Form 10-Q for the quarter ended
    September 28, 2003).*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 4, 2004.31
    .1
    
    Rule 13a-14(a)/15d-14(a) Certification of
    the Chief Executive Officer.31
    .2
    
    Rule 13a-14(a)/15d-14(a) Certification of
    the Chief Financial Officer.32
    .1
    
    Section 1350 Certification of the Chief
    Executive Officer.32
    .2
    
    Section 1350 Certification of the Chief
    Financial Officer. 
 * 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.
  63