Graham Holdings Co - Annual Report: 2008 (Form 10-K)

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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, 2008

Commission file number 1-6714

The Washington Post Company

(Exact name of registrant as specified in its charter)

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

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

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x  No ¨

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 (the “Act”). Yes ¨  No x

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

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definition of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Act. (Check one):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ No x

Aggregate market value of the registrant’s common equity held by non-affiliates on June 28, 2008, based on the closing price for the Company’s Class B Common Stock on the New York Stock Exchange on such date: approximately $2,600,000,000.

Shares of common stock outstanding at February 20, 2009:

Class A Common Stock – 1,291,693 shares

Class B Common Stock – 8,108,154 shares

Documents partially incorporated by reference:

Definitive Proxy Statement for the registrant’s 2009 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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PART I

Item 1. Business.

The Washington Post Company (the “Company”) is a diversified education and media company. The Company’s Kaplan subsidiary provides a wide variety of educational services, both domestically and outside the United States. The Company’s media operations consist of the ownership and operation of cable television systems, newspaper publishing (principally The Washington Post), television broadcasting (through the ownership and operation of six television broadcast stations) and magazine publishing (principally Newsweek).

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 P 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 P net of intersegment sales, which did not exceed 0.2% of consolidated operating revenues.)

The Company’s operations in geographic areas outside the United States consist primarily of Kaplan’s foreign operations and the publication of the international editions of Newsweek. During the fiscal years 2008, 2007 and 2006, these operations accounted for approximately 13%, 12% and 9%, respectively, of the Company’s consolidated revenues, and the identifiable assets attributable to foreign operations represented approximately 13%, 11% and 10% of the Company’s consolidated assets at December 28, 2008, December 30, 2007 and December  31, 2006, respectively.

Education

Kaplan, Inc., a subsidiary of the Company, provides an extensive range of educational and training services worldwide for students and professionals. The Company divides Kaplan’s various businesses into three categories for financial reporting purposes: Higher Education; Test Prep and Admissions; and Professional.

Higher Education

Kaplan Higher Education provides a wide array of diploma and degree programs—on campus and online—designed to meet the needs of students seeking to advance their education and their careers.

Higher Education U.S.

Kaplan’s U.S.-based Higher Education business currently consists of 71 schools in 20 states that provide classroom-based instruction and one institution that specializes in online education. The schools providing classroom-based instruction offer a variety of diploma, associate’s degree and bachelor’s degree programs, primarily in the fields of healthcare, business, paralegal studies, information technology, criminal justice, and fashion and design. The classroom-based schools were serving more than 38,700 students at year-end 2008 (which includes the classroom-based programs of Kaplan University), with approximately 35% of such students enrolled in accredited bachelor’s or associate’s degree programs. Each of these schools is accredited by one of several regional or national accrediting agencies recognized by the U.S. Department of Education.

Kaplan University specializes in online education, offering various master’s degree, bachelor’s degree, associate’s degree and certificate programs, principally in the fields of management, criminal justice, paralegal studies, information technology, financial planning, nursing and education. Kaplan University is accredited by the Higher Learning Commission of the North Central Association of Colleges and Schools. Most of Kaplan University’s programs are offered online, while others are offered in a traditional classroom format at eight campuses in Iowa and Nebraska. At year-end 2008, Kaplan University had approximately 43,600 students enrolled in online programs. Kaplan University includes Concord Law School, the nation’s first online law school, which offers Juris Doctor and Executive Juris Doctor degrees wholly online (the Executive Juris Doctor degree program is designed for individuals who do not intend to practice law). During 2008, the Company acquired National Paramedic Institute, Inc., a provider of online continuing education to firefighters and emergency services personnel.

Higher Education Europe

Kaplan’s higher education businesses in Europe are Kaplan International Colleges (“KIC”), Dublin Business School (“DBS”), Kaplan Open Learning (“KOL”) and Holborn College.

KIC offers academic preparation programs especially designed for international students, in collaboration with six U.K. universities. At year-end 2008, KIC served 1,900 students. DBS is an undergraduate and graduate institution located in Dublin, Ireland. DBS offers various undergraduate and graduate degree courses in business, the liberal arts and law, and

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professional courses in business. At year-end 2008, DBS was providing courses to approximately 6,000 students. KOL offers degree courses in Business Studies and Criminal Justice entirely online. KOL is an affiliate college of the University of Essex, which awards the degrees. Holborn College offers various programs, primarily in law and business, with its students receiving degrees from affiliated universities in the U.K. At year-end 2008, Holborn College was providing courses to approximately 2,100 students, most of whom come from outside the U.K. and European Union.

Kaplan Virtual Education

Kaplan Virtual Education (“KVE”), which is part of Kaplan’s Higher Education Division, is a standalone virtual public school, which offers online high school instruction and online content and curriculum development. KVE’s programs are geared toward adults wishing to earn a high school diploma, public school students seeking credit recovery or courses that may not be offered at their school, and private school and home school students who need an expanded curriculum. At year-end 2008, KVE was providing courses to approximately 3,850 students.

Test Prep and Admissions

Test Prep and Admissions divides its businesses into six categories: university test prep, professional licensing exam prep, English-language training, K12 services for schools, after-school tutoring and publishing.

Test Prep prepares students for a broad range of admissions examinations, including the SAT, ACT, LSAT, GMAT, MCAT and GRE, that are required for admission to college and graduate schools, including medical, business and law schools. During 2008, these courses were offered at 160 permanent centers located throughout the United States and in Canada, Puerto Rico, Mexico, London and Paris. In addition, Kaplan licenses material for certain of its test preparation courses to third parties and a Kaplan affiliate, which, during 2008, offered courses at 41 locations in 11 countries outside the United States. Test Prep also produces a college newsstand guide in conjunction with Newsweek. Test Prep includes The Kidum Group, which provides preparation courses for Israeli high school graduation and university admissions exams and also provides English-language courses at 44 permanent centers located throughout Israel. The professional licensing exam prep business prepares medical, nursing and law students for licensing examinations, including the USMLE, NCLEX and, under the Kaplan PMBR name, the multistate portion of state bar exams, as well as full-service bar review in select states. In 2008 the Company acquired Review Services, Inc., d/b/a The Study Group, a provider of self-study bar review with home study course offerings for full-service bar review in 30 U.S. states.

The English-language business, which operates under the name Kaplan Aspect, provides English-language training, academic preparation programs and test preparation for English proficiency exams, such as the TOEFL, principally for students wishing to study and travel in English-speaking countries in North America, Europe or Australia/New Zealand. Kaplan Aspect operates 44 English-language schools located in the U.K., Ireland, Australia, New Zealand, Canada and the United States. These include co-located schools within 13 of the U.S. Test Prep centers, as well as five schools acquired on December 31, 2008 following the acquisition of West of England Language Services Limited, an international group of English-language schools with three locations in the U.K. and one each in the United States and Australia. During 2008, the Company acquired the Pacific Language Institute, a provider of English language instruction in Canada with schools located in Vancouver and Toronto. During 2008, the Company also acquired Pro Linguis, a provider of educational services for students and professionals in Switzerland seeking language studies abroad.

Kaplan K12 Learning Services develops and provides a range of programs and services to schools and school districts, including offering reading and math programs to help students who are performing below grade level improve fundamental skills, preparing students for state assessment tests and the SAT and ACT and providing professional development and assessment services to support teaching and learning.

During 2008, these businesses provided courses to more than 411,000 students (including over 81,000 enrolled in online programs).

Kaplan’s Score Educational Centers offer individualized tutoring for children from pre-K through 10th grade. Score provides tutoring services through 78 dedicated Score centers located throughout the United States as well as online. Score served more than 28,000 students in 2008.

Kaplan Publishing publishes a variety of general trade and educational books in subject areas such as test preparation, business, law, medicine and nursing. At the end of 2008, Kaplan Publishing had nearly 500 books in print, including more than 180 new titles published in 2008.

Professional

In the United States, Kaplan Professional offers continuing education, compliance training and tracking, certification, licensing, exam preparation and professional development to corporations and to individuals. Kaplan Professional includes Kaplan Financial Education, a provider of continuing education and test preparation courses for financial services and insurance industry professionals; Kaplan Schweser (formerly known as The Schweser Study Program), a

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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 Examination; Kaplan Professional Schools, a provider of courses for real estate, financial services and home inspection licensing examinations, as well as continuing education in those areas; Kaplan Professional Publishing (formerly known as Dearborn Publishing), which provides printed and online materials that help individuals satisfy state pre-licensing and continuing education requirements and prepare for state licensing examinations in the real estate, architecture, home inspection, engineering and construction industries; and Kaplan IT, which offers online test preparation courses for technical certifications in the information technology industry, as well as training, software consultancy and related products to a broad range of industries. The courses offered by these businesses are provided in various formats (including classroom-based instruction, online programs, printed study guides, in-house training and audio CDs) and at a wide range of price points. During 2008, these businesses sold approximately 425,000 courses and separately priced course components to students in the United States (who, in some subject areas, typically purchase more than one course component offered by the Professional Division).

In January 2008, Kaplan Financial Education, headquartered in Chicago, IL, was consolidated into Kaplan Schweser, located in La Crosse, WI. The consolidation began in January 2008 and was completed in the fourth quarter of 2008. In November 2008, Kaplan Professional began to consolidate both Kaplan Professional Schools and Kaplan Professional Publishing into the La Crosse operations. The primary drivers of both consolidations were improved cost control and the ability to better serve the market through online offerings.

Kaplan Professional also includes Kaplan EduNeering, headquartered in Princeton, NJ, and Kaplan Compliance Solutions, based in Indianapolis, IN. Kaplan EduNeering is a provider of online regulatory compliance training and management systems, principally for businesses in the pharmaceutical, medical technology, healthcare, energy, telecom and defense-related industries. In May 2008, Kaplan EduNeering acquired RedHawk Communications, Inc., based in Eatontown, NJ, a provider of education and online training on corporate ethics. During 2008, Kaplan EduNeering provided services to more than 700,000 users at approximately 325 companies. Kaplan Compliance Solutions provides software solutions and services to assist broker/dealers, securities representatives, insurance carriers, agencies and individuals with licensure and/or registration, as well as with ongoing compliance with the myriad national and state- level regulatory requirements applicable to these industries. During 2008, Kaplan Compliance Solutions provided services to approximately 800 companies.

Outside of the United States, Kaplan Professional’s largest business in terms of revenue is Kaplan Financial, formerly FTC Kaplan Limited, a U.K.-based provider of training, test preparation services and degrees for accounting and financial services professionals. In 2008, Kaplan Financial provided courses to approximately 48,000 students. Headquartered in London, Kaplan Financial has 27 training centers located throughout the United Kingdom, as well as operations in Hong Kong, China and Singapore. Kaplan operates Kaplan Law School (“KLS”) in London in collaboration with Nottingham Trent University’s Nottingham Law School. KLS provides training for the Graduate Diploma in Law and the Legal Practice course for U.K. university graduates wishing to progress into the U.K. legal profession. In Hong Kong, Kaplan offers Mandarin-language training to students (principally Cantonese-speaking Chinese wishing to learn Mandarin) through Kaplan Language Training (HK) Ltd., formerly Hong Kong Putonghua Vocational School (“KLT”), and offers test preparation courses for the Chinese Proficiency Test, which is a standardized examination that assesses Mandarin-language proficiency. KLT has four centers in Hong Kong and, at the end of 2008, was serving more than 11,000 students.

In 2008, Kaplan expanded its legal and professional training businesses in the U.K. with the acquisitions of Hawksmere Limited and Altior Consulting & Training Limited. Hawksmere and Altior offer continuing professional development courses and skills training for U.K. professionals and lawyers, respectively. Together with KLS, in 2008, these businesses provided courses to more than 18,000 professionals.

Asia Pacific Management Institute (“APMI Kaplan”), which is headquartered in Singapore and has a satellite location in Hong Kong, provides students with the opportunity to earn undergraduate and graduate degrees, principally in business-related subjects, offered by affiliated educational institutions in Australia, the United Kingdom and the United States. APMI Kaplan also offers pre-university and diploma programs. APMI had more than 7,600 students enrolled at year-end 2008.

In 2008, Kaplan completed the transaction pursuant to which it increased its interest in Shanghai Kai Bo Education Investment Management Co., Ltd. (“Kaplan China”), an education company headquartered in Shanghai, China. Kaplan China provides academic preparation programs for entry to overseas universities at campuses in several cities in China. Through a collaboration with the University of Shanghai for Science and Technology and the Northern Consortium (a university consortium comprising 11 U.K. universities), Kaplan China also offers programs at the Sino-British College in Shanghai. Kaplan China had approximately 1,600 students enrolled at year-end 2008.

In Australia, Kaplan Professional delivers a broad range of financial services education and professional development courses. In 2008, Kaplan Professional provided courses to more than 21,000 students through classroom programs and

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to over 69,000 students through distance-learning programs. Additionally, three Kaplan Business School Centers are now fully accredited in Australia (Sydney, Melbourne and Adelaide), with the first intake planned for March 2009, offering foundation and master’s degree programs.

Title IV Federal Student Financial Aid Programs

Funds provided under the student financial aid programs that have been created under Title IV of the Federal Higher Education Act of 1965, as amended, historically have been responsible for a majority of the net revenues of Kaplan Higher Education. During 2008, funds received under the Title IV programs accounted for approximately $904 million, or approximately 71%, of total Kaplan Higher Education revenues, and 39% of Kaplan, Inc. revenues. The Company estimates that funds received from students borrowing under private loan programs comprised approximately an additional 5% of its higher education revenues. In late 2008, as the private loan programs deteriorated, Kaplan Higher Education began providing loans directly to Kaplan students under an institutional loan program. Direct student payments and funds received under various state and agency grant programs accounted for most of the remainder of 2008 higher education revenues. The significant role of Title IV funding in the operations of Kaplan Higher Education is expected to continue.

Title IV programs encompass various forms of student loans, with the funds being provided either by the federal government itself or by private financial institutions with a federal guaranty protecting the institutions against the risk of default. In some cases, the federal government pays part of the interest expense. Other Title IV programs offer non-repayable grants. Subsidized loans and grants are only available to students who can demonstrate financial need. During 2008, approximately 75% of the approximately $904 million of Title IV funds received by Kaplan Higher Education came from student loans, and approximately 25% of such funds came from grants.

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, facilities, recruiting practices and various other matters. Among other things, the school must be licensed or otherwise authorized to offer its educational programs by the appropriate governmental body in the state or states in which it is physically located, be accredited by an accrediting agency recognized by the U.S. Department of Education (the “Department of Education”) and be certified to participate in the Title IV programs by the Department of Education. Schools are required periodically to apply for renewal of their authorization, accreditation or certification with the applicable state governmental bodies, accrediting agencies and the Department of Education. 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 certain Title IV requirements. Including schools that are not combined with other schools for that purpose, the Higher Education Division has 34 Title IV reporting units.

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”). The Department of Education calculates a cohort default rate for each one of Kaplan’s 34 Title IV reporting units. The schools in a Title IV reporting unit whose cohort default rate exceeds 40% for any single year may lose their eligibility to participate in the Federal Family Education Loan (“FFEL”) and Direct Loan programs for at least two fiscal years, except in the event of a successful adjustment or appeal. The schools in a Title IV reporting unit whose cohort default rate equals or exceeds 25% for three consecutive years may lose their Title IV eligibility to participate in FFEL, Direct Loan and Federal Pell Grant programs for at least two fiscal years, except in the event of a successful adjustment or appeal.

The enactment in August 2008 of the Higher Education Opportunity Act (which reauthorized the Federal Higher Education Act) changed the cohort default rate calculation for future years. Under the revised law, the period of time for which student defaults are tracked and included in the cohort default rate calculation is extended by a year, which is expected to increase the cohort default rates for most institutions. That change will be effective with the calculation of institutions’ cohort default rates for the federal fiscal year ending September 30, 2009; those rates are expected to be calculated and issued by the Department of Education in 2012. The Department of Education will not impose sanctions based on rates calculated under this new methodology until three consecutive years of rates have been calculated, which is expected to occur in 2014. Until that time, the Department of Education will continue to calculate rates under the old method, as well and impose sanctions based on those rates. The revised law also increases the threshold for ending an institution’s participation in the Title IV programs from 25% to 30%, effective in fiscal year 2012.

Prior to the enactment of the Higher Education Opportunity Act, any for-profit post-secondary institution (a category that includes all of the schools in Kaplan’s Higher Education Division) would lose its Title IV eligibility for at least one year if more than 90% of the institution’s receipts for any fiscal year were derived from Title IV programs, as calculated on a cash basis in accordance with the Federal Higher Education Act and applicable Department of Education regulations. Under

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amendments to the Federal Higher Education Act, a for-profit institution loses its eligibility to participate in the Title IV programs for a period of at least two fiscal years if the institution derives more than 90% of its receipts from Title IV programs for two consecutive fiscal years, commencing with the institution’s first fiscal year that ends after August 14, 2008. An institution with revenues exceeding 90% for a single fiscal year ending after August 14, 2008 will be placed on provisional certification and may be subject to other enforcement measures. The aforementioned calculations are performed on a Title IV reporting unit basis.

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, require a school to repay Title IV program funds, limit or terminate a school’s eligibility to participate in the Title IV programs or take other enforcement measures if it finds that the school has failed to comply with Title IV requirements or improperly disbursed or retained Title IV program funds. In addition, there may be other legal theories under which a school could be sued 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. 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. All of the Higher Education Division’s 34 Title IV reporting units are fully certified.

The largest Title IV reporting unit in the Higher Education Division in terms of revenue is Kaplan University, which accounted for approximately 49% of the Title IV funds received by the Division in 2008. For the most recent year for which final data are available from the Department of Education, the cohort default rate for Kaplan University was 9.30%, and the cohort default rates for the other Title IV reporting units in Kaplan’s Higher Education Division averaged 14.88%; no reporting unit had a cohort default rate of 25% or more. In 2008, Kaplan University derived fewer than 85% of its receipts from the Title IV programs, and other reporting units derived an average of fewer than 82% of their receipts from Title IV programs, with no unit deriving more than 88% of its receipts from such programs.

In September 2008, the Department of Education began a Program Review at Kaplan Higher Education Division’s CHI-Broomall campus. The program review is ongoing. The reviewers have completed their field work; however, they are reviewing additional documentation provided by the school prior to issuing the program review report. CHI-Broomall and Kaplan have responded to all requests for information and are cooperating fully in the review.

The Department of Education has also conducted Program Reviews at Kaplan Higher Education Division’s Pittsburgh and Baltimore locations, which began in October 2007 and May 2008, respectively. Kaplan has responded to all requests for information and is cooperating fully in these reviews. The Department of Education has not issued final reports on these reviews.

The Company is presently not aware of any proceeding by the Department of Education 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. As noted previously, to remain eligible to participate in Title IV programs, a school must maintain its accreditation by an accrediting agency recognized by the Department of Education. In 2008, no Kaplan school received notice from its accreditors indicating that the school’s accreditation was being withdrawn or that the school was being issued a show cause order.

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.

All of the Title IV financial aid programs are subject to periodic legislative review and reauthorization. In addition, while Congress historically has not limited the amount of funding available for the various Title IV student loan programs, the availability of funding for the Title IV programs that provide for the payment of grants is primarily 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 Higher Education 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 those schools would have a significant negative impact on Kaplan’s operating results. In addition, any development that has the effect of making the terms on which Title IV financial assistance is made available materially less attractive could also adversely affect Kaplan’s operating results.

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Cable Television Operations

At the end of 2008, the Company (through its Cable ONE subsidiary) provided cable service to approximately 699,500 basic video subscribers (representing about 50% of the 1,391,000 homes passed by the systems) and had in force approximately 225,000 subscriptions to digital video service and 372,900 subscriptions to cable modem service. Digital video and cable modem services are both available in markets serving virtually all of Cable ONE’s subscriber base. The digital video services offered by Cable ONE include certain premium, cable network and local over-the-air channels in HDTV. Cable ONE also completed introduction of its voice over Internet protocol (“VoIP”), or digital telephone, service in 2008. At year-end, Cable ONE provided VoIP service to 93,500 customers, and the service is currently available to 95% of the homes passed.

In January 2008, Cable ONE purchased some cable systems in the Mississippi area, near our Cleveland, MS system, which passed 14,000 homes and served 6,650 basic customers.

The Company’s cable systems are located in 19 midwestern, southern and western states and typically serve smaller communities. Thus, 5 of the Company’s current systems pass fewer than 10,000 dwelling units, 36 pass 10,000–50,000 dwelling units and 5 pass more than 50,000 dwelling units. The two largest clusters of systems (each of which currently serves more than 80,000 basic video subscribers) are located on the Gulf Coast of Mississippi and in the Boise, ID, area.

In December 2006, Cable ONE purchased in the FCC’s Advanced Wireless Service auction approximately 20 MHz of spectrum in the 1.7 GHz and 2.1 GHz frequency bands in areas that cover more than 85% of the homes passed by Cable ONE’s systems. This spectrum can be used to provide a variety of advanced wireless services, including fixed and mobile high-speed Internet access using WiMAX and other digital transmission systems. Licenses for this spectrum have an initial 15-year term and 10-year renewal terms. Licensees will be required to show that they have provided substantial service by the end of the initial license term to be eligible to renew, but there are no interim construction or service requirements. Cable ONE is evaluating how best to utilize its spectrum, but has no plans to offer any wireless services in the immediate future.

Regulation of Cable Television and Related Matters

The Company’s cable, Internet and voice operations are subject to various requirements imposed by local, state and federal governmental authorities. The regulation of certain cable television rates pursuant to procedures established by Congress has negatively affected the revenues of the Company’s cable systems. Certain of the other legislative and regulatory matters discussed in this section also have the potential to adversely affect the Company’s cable television, Internet and voice businesses.

Cable Television

The Cable Television Consumer Protection and Competition Act of 1992 (the “1992 Cable Act”) requires or authorizes the imposition of a wide range of regulations on cable television operations. 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.

Franchising.    As a condition to their ability to operate, the Company’s cable systems have been required to obtain franchises granted by state or local governmental authorities. Those franchises typically are nonexclusive and limited in time, contain various conditions and limitations and provide for the payment of fees to the local authority, determined generally as a percentage of revenues.

Additionally, those franchises often regulate the conditions of service and technical performance and contain various types of restrictions on transferability. Failure to comply with all of the terms and conditions of a franchise may give rise to rights of termination by the franchising authority. As discussed below, the Federal Communications Commission (“FCC”) has adopted rules designed to expedite the process of awarding competitive franchises and relieving applicants for competing franchises of some locally-imposed franchise obligations. The FCC also has extended certain of these “reforms” to incumbent cable operators.

Rate Regulation.    In 1993, the FCC adopted regulations that permitted local franchising authorities or the FCC to regulate the rates that cable systems that are not subject to “effective competition” charge for certain levels of cable service, equipment and service calls. Among other things, the Telecommunications Act of 1996 expanded the definition of “effective competition” (a condition that precludes any regulation of the rates charged by a cable system) and sunset (effective April 1, 1999) the FCC’s authority to regulate the rates charged for optional tiers of service. The FCC has confirmed that some of the cable systems owned by the Company fall within the effective-competition exemption, and the Company believes, based on an analysis of competitive conditions within its systems, that other of its systems may also

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qualify for that exemption. Monthly subscription rates charged for the basic tier of cable service, as well as rates charged for equipment rentals and service calls, for many of our cable systems remain subject to regulation by local franchise authorities in accordance with FCC rules. 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, for digital video, cable modem services and digital telephone—and for advertising are all currently exempt from regulation.

“Must-Carry” and Retransmission Consent.    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 non-commercial public station may insist on carriage of its signal on cable systems located either within the station’s predicted Grade B signal contour or within 50 miles of a reference point in a station’s community designated by the FCC. As a result of these obligations, 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.

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 by cable systems without their prior consent. The next three-year election cycle begins October 1, 2011, with the elections effective January 1, 2012 through December 31, 2014. Congress has barred broadcasters from entering into exclusive retransmission consent agreements through the end of 2010. In some cases, the Company has been required to provide consideration to broadcasters to obtain retransmission consent, such as commitments to carry other program services offered by a station or an affiliated company, to purchase advertising on a station or to provide advertising availabilities on cable to a station. A Notice of Proposed Rulemaking issued by the FCC in 2007 that raises, among other things, the issue of whether a broadcaster should be allowed to require carriage of affiliated programming as a condition of obtaining retransmission consent remains pending.

Communications Act provisions that require cable operators and broadcasters to engage in “good faith” negotiations over retransmission consent and bar exclusive retransmission consent agreements are scheduled to expire at the end of 2009 unless Congress acts to extend them or make them permanent.

Digital Television (“DTV”).    The FCC has determined that until the completion of the transition of broadcast television from analog transmissions to digital transmissions (scheduled to occur on June 12, 2009), only television stations broadcasting in a DTV-only mode can require local cable systems to carry their DTV signals, and that if a DTV signal contains multiple video streams, only the “primary” stream of video, as designated by the station, is required to be carried. In December 2007, the FCC issued an order generally requiring cable operators to ensure that following the digital transition deadline, all local must-carry broadcast stations are “viewable” by all subscribers, either by providing customers with both a digital and down-converted analog version of such stations (and in some instances also providing a standard-definition digital signal) or by deploying an “all-digital” system platform prior to the transition deadline. Moreover, where a must-carry broadcast station’s signal is transmitted in high-definition television (“HDTV”) format, cable operators generally will be required to carry the signal in HDTV format . In September 2008, the FCC modified these requirements somewhat, clarifying that mixed analog/digital cable systems did not have to carry a standard-definition digital signal in addition to a down-converted analog signal and that smaller systems (i.e., systems with 552 MHz capacity or less and systems with under 2,500 subscribers not affiliated with the top two cable companies) were exempt from providing an HD signal in addition to a down-converted analog signal. While these exemptions provide some relief, satisfaction of the generally applicable obligation to carry the analog and the standard-definition and/or the HDTV format signal of local broadcast signals could result in the Company’s cable systems being required to delete some existing programming to make room for all of the video streams included in broadcasters’ DTV signals. Satisfaction of these requirements by converting to all-digital platforms in our systems would require substantial capital expenditures, including provisioning households using analog television receivers with set-top boxes capable of down-converting the digital broadcast signals. In addition, the FCC is considering expanded must-carry requirements for Class A low-power television stations after the digital transition deadline that could have similar adverse effects on Cable ONE’s operations.

In anticipation of the broadcast television analog-to-digital transition scheduled to occur on June 12, 2009, the FCC has implemented rules requiring cable operators to provide monthly consumer education notices to their subscribers about the transition. The FCC’s Enforcement Bureau reportedly has been investigating cable operator compliance with these rules and is recommending the imposition of fines on some operators for deficiencies in their compliance. To date, the Company has not received any inquiries from the FCC regarding its compliance with these rules.

The FCC also has begun inquiries into the practices of certain cable operators that offer “switched digital video” service or have “migrated” cable networks formerly available in analog format to digital format, potentially requiring subscribers to obtain additional equipment in order to receive services previously available without such equipment. The Company has not received any inquiries on such matters. In addition, both the FCC and the courts have been asked to address

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whether a cable operator may offer public, educational and governmental (“PEG”) access channels as part of a “digital basic” service that costs no more than analog basic service, but that may require some subscribers to obtain additional equipment to receive the PEG channels.

Pole Attachments.    Pursuant to the Pole Attachment Act, the FCC exercises authority to disapprove unreasonable rates charged to cable operators by most telephone and power utilities for utilizing space on utility poles or in underground conduits. The FCC has adopted two separate formulas under the Pole Attachment Act: one for attachments by cable operators generally and a higher rate for attachments used to provide “telecommunications services.” However the Pole Attachment Act does not apply to poles and conduits owned by municipalities or cooperatives. Also, states can reclaim exclusive jurisdiction over the rates, terms and conditions of pole attachments by certifying to the FCC that they regulate such matters, and several 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 and digital voice. In 2002, the U.S. Supreme Court held, based on a prior FCC ruling that Internet access service provided by cable operators is not a “telecommunications service,” that the lower pole attachment rates apply not only to attachments used to provide traditional cable services, but also to attachments used to provide Internet access. The FCC has not yet finally determined whether digital voice provided by cable operators is a “telecommunications service” that would trigger the higher pole attachment rates. In November 2007, the FCC issued a Notice of Proposed Rulemaking exploring whether to effectively eliminate cable’s lower pole attachment fees by imposing a higher unified rate for entities providing broadband Internet service, which could moot the foregoing precedent. While the outcome of this proceeding can not be predicted, changes to Cable ONE’s pole attachment rate structure could significantly increase its annual pole attachment costs.

Federal Copyright Issues.    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 require all cable systems that retransmit broadcast signals to pay semi-annual royalty fees, generally based on the systems’ gross revenues from basic service and, in certain instances, the number of “distant” broadcast signals carried. The compulsory license fees have been increased on several occasions since this act went into effect. Since 1989, a separate compulsory copyright license for distant signal retransmissions has applied to direct broadcast satellite (“DBS”), and in 1999, Congress provided DBS with a royalty-free compulsory copyright license for distribution of the signals of local television stations to satellite subscribers in the markets served by such stations. The cable compulsory license for local and distant signals and the DBS local signal compulsory license are permanent, while the DBS distant signal compulsory license is scheduled to sunset at the end of 2009. In addition, the cable and DBS compulsory licenses employ different methodologies for calculating royalties, with cable using a percentage of revenues approach and DBS using a flat, per subscriber, per signal payment approach.

In 2008, the Copyright Office terminated a proceeding in which it had been requested to adopt rules that would allow cable operators to calculate their compulsory license fees on a community-by-community basis, rather than on a system-wide basis, that could result in the payment of royalties for “phantom signals” that are only carried in a portion of the system. The Copyright Office also is considering requests for clarification of the application of the cable compulsory license to the retransmission of distant digital television broadcast signals and for clarification and revisions of certain cable compulsory copyright license reporting requirements. Moreover, in June 2008, the Copyright Office recommended to Congress that, as part of its consideration of whether to extend the expiring DBS compulsory license in 2009, it adopt a “phase out” of both the cable and DBS distant signal compulsory licenses or, in the alternative, “harmonize” the two licensing schemes by replacing the gross-revenues-based formula applicable to cable with the “flat fee” approach applicable to DBS. We cannot predict the outcome of any such inquiries, rulemaking proceedings or legislative initiatives; however, it is possible that changes in the rules or copyright compulsory license fee computations or compliance procedures could have an adverse effect on our business by increasing our copyright compulsory license fee costs or by causing us to reduce or discontinue carriage of certain broadcast signals that we currently carry on a discretionary basis.

Telephone Company Competition.    The Telecommunications Act of 1996 permits telephone companies to offer video programming services in areas where they provide local telephone service. Over the past decade, telephone companies have pursued multiple strategies to enter the market for the delivery of multichannel video programming services. Initially, some telephone companies partnered with DBS operators to resell a DBS service to their telephone customers. Some telephone companies still do this, but other telephone companies have entered into traditional franchise agreements with local franchising authorities and have constructed their own video programming delivery systems. Still other telephone companies have developed other methods to deliver video programming that, depending on the technology employed, may be regulated in a manner similar to the Company’s cable systems. Some telephone companies have taken the

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position that the specific technology employed in delivering video programming dictates whether a local franchise is required. The theory is that because the provider is not delivering a “cable service,” as that term is defined in federal law, but rather is delivering an “information service,” which by law is not subject to regulation by state and local governments, no local franchise is required. Neither the FCC nor the courts have addressed this issue definitively, but in the meantime, most major telephone companies are entering into franchise agreements to provide their video programming distribution services to consumers. In 2006, the FCC adopted rules intended to accelerate the local franchising process by requiring local franchising authorities to act on franchise applications within 90 days and prohibiting those authorities from imposing special fees and payments on providers of such service. Local franchising authorities sought judicial review of these rules, but the rules were upheld on appeal. Separately, a number of states (including Iowa, Kansas, Missouri, Tennessee and Texas—all states in which the Company operates cable systems) have enacted laws to permit telephone companies and others to provide video program distribution service through a statewide franchise, thereby relieving these providers of the need to seek multiple authorizations within a state from various local franchising authorities. All of these developments are expected to continue to accelerate the competition Cable ONE is experiencing in the marketplace for video service.

Wireless Services.    At various times over the past decade, the FCC has taken steps to facilitate the use of certain frequencies, notably the 2.5 GHz and 3.1 GHz bands, to deliver over-the-air multichannel video programming services to subscribers in competition with cable television systems. However, those services generally were not deployed commercially in any significant way. Beginning in 2004, the FCC adopted rule changes that allowed the 2.5 GHz band to be used for non-video services and permitted transmitters to be deployed in cellular patterns. As a result of these rule changes, the 2.5 GHz and other frequency bands (including the 1.7 GHz and 2.1 GHz bands in which the FCC auctioned spectrum in 2006) now are being adopted for the delivery of two-way broadband digital data and high-speed Internet access services capable of covering large areas. Initially, these services were going to be provided on a fixed basis, delivering access to houses and businesses, but they now are expected to accommodate mobile devices, such as laptop computers with a wireless adapter card. These wireless networks are expected to use a variety of advanced transmission standards, including an increasingly popular standard known as WiMAX, and may result in the increased availability of mobile video services. Also in 2006, a number of cellular telephone providers introduced or expanded subscription services that deliver full-length television programs or video clips directly to cellular telephones, although at present, these services are capable of supporting only a limited number of available video streams. In 2008, the FCC auctioned additional spectrum in the 700 MHz band, which historically has been used for analog television broadcasting, and it is expected that this additional spectrum will be used to accommodate broadband, video and other services to mobile devices. Although it is not yet clear what effect, if any, the increased availability of mobile video services will have on the cable television industry, these developments likely will increase the number of competitive alternatives to Cable ONE’s services.

Horizontal and Vertical Ownership Limits.    In December 2007, the FCC reinstated its horizontal cable ownership rule, which governs the number of subscribers an owner of cable systems may reach on a national basis, providing that a single company could not serve more than 30% of potential cable subscribers (or “homes passed” by cable) nationwide. Judicial challenges have been brought with respect to the revised rule that is virtually identical to the prior restriction that was invalidated on constitutional and procedural grounds by the U.S. Court of Appeals for the DC Circuit in 2001. The FCC also has proposed reinstating vertical ownership restrictions that would cap the percentage of a cable system’s channel capacity that could be used to carry channels in which the operator has an ownership interest.

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 2002, the U.S. Court of Appeals for the DC Circuit struck down the rule, holding that the FCC’s decision to retain the rule was arbitrary and capricious. Thus, there currently is no restriction on the ownership of both a television broadcast station and a cable television system in the same market.

Set-Top Boxes.    Pursuant to a Congressional directive to promote competition in the retail market for set-top converter boxes, the FCC adopted rules barring cable operators from deploying set-top boxes with “integrated” security and navigation functions and requiring cable operators to support boxes and other devices designed to accept plug-in cards (known as “CableCARDs”) that provide the descrambling and other security features that traditionally have been included in the integrated set-top converter boxes leased by cable operators to their customers. Those rules took effect on July 1, 2007 after the FCC rejected requests that it generally delay their implementation until 2009. However, the FCC has granted some individual requests for waiver and has pending before it additional requests, including one such request filed by Cable ONE to allow it to offer low-cost, HD-capable integrated set-top boxes to subscribers of its Dyersburg, TN,

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system. The general prohibition on integrated set-top boxes has the potential to increase the capital costs of cable operators (because of the need to provide CableCARDs to customers and because the new type of converter box is typically more expensive than the traditional integrated box) and, to the extent subscribers decide to buy their own boxes, to reduce the revenues cable operators receive from leasing converter boxes (although in the case of the Company’s Cable ONE subsidiary, that revenue is not material).

Other Requirements.    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, a variety of consumer protection measures and various regulations intended to facilitate the development of competing video delivery services. For example, the FCC’s program carriage rules govern disputes between cable operators and programming services over the terms of carriage. Cable operators may not require a programming service to grant it a financial interest or exclusive carriage rights as a condition of its carriage on a cable system, and a cable system may not discriminate against a programming service in the terms and conditions of carriage on the basis of its affiliation or nonaffiliation with such cable system. The FCC is considering proposals to make it easier for independent programmers to bring such complaints and to expand the coverage of the rules to apply to cable systems that carry programming owned by another cable operator.

In November 2007, the FCC issued rules voiding existing and prohibiting future exclusive service contracts for cable video services to multiple dwelling units or other residential developments. In March 2008, the FCC extended the prohibition to phone services, as well. 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 a cable system’s gross revenues from the provision of cable service (which, for this purpose, includes digital video service, but does not include cable modem service or digital voice service).

In November 2007, the FCC Chairman announced that the FCC would collect information from cable operators to determine whether cable systems with 36 or more activated channels are available to 70% of households in the United States and whether 70% of those households subscribe to cable. Upon such a finding, the Cable Communications Policy Act of 1984 (“1984 Cable Act”) authorizes the FCC to promulgate “any additional rules necessary to promote diversity of information sources.” It is unclear whether this provision applies solely to the FCC’s leased access rules or more broadly. Although Cable ONE does not believe that this measure has been satisfied, and although the FCC has not yet requested any additional information relevant to this issue, it cannot predict whether the FCC will reach the same conclusion. Any additional regulations on Cable ONE’s business could have a negative impact.

In February 2008, the FCC issued revised commercial leased access rules that could substantially reduce the rates for parties desiring to lease from 10% to 15% of the capacity on cable systems. The regulations also impose a variety of leased access customer service, information and reporting standards. Implementation of these new rules has been stayed by the courts, and certain of the rules also were rejected by the Office of Management and Budget (“OMB”) as inconsistent with the federal Paperwork Reduction Act. Certain parties have requested that the FCC override the OMB ruling, but no action has been taken on that request. If the new rules take effect, they will likely increase Cable ONE’s costs and could cause additional leased access activity on Cable ONE’s cable systems. As a result, Cable ONE may find it necessary to either discontinue other channels of programming or opt not to carry new channels of programming or other services that may be more desirable to its customers.

In 2008, the FCC initiated a proceeding to consider changes in the rules applicable to cable operators and cable programmers with respect to the disclosure of sponsorship identification and product placement advertising. This proceeding remains pending.

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. Longstanding FCC rules require cable systems to black out from certain distant broadcast stations they carry syndicated programs for which local stations have purchased exclusive rights and requested exclusivity and 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.

Internet Access Services

In 2005, the U.S. Supreme Court upheld the FCC’s classification of cable modem service as an “information service.” As a result, cable modem service is not subject to the full panoply of regulations that applies to “cable services” or

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“telecommunications services” under the Communications Act, nor is it subject to state or local government regulation. In the wake of the Supreme Court’s decision, the FCC ruled that a telephone company’s offering of digital subscriber line (“DSL”) Internet access service is also an “information service.”

Cable ONE currently offers broadband Internet access service on virtually all of its cable systems and is the sole Internet service provider on those systems. Cable ONE does not restrict the websites that its broadband Internet access subscribers may view; but regulations that distinguish between interference with subscriber access and reasonable network management are evolving and over time could begin to interfere with Cable ONE’s ability to manage its network or provide services to its subscribers. Congress, from time to time, has considered whether to impose various “net neutrality” requirements on providers of broadband Internet access service that would limit the ability of such providers to prioritize the delivery of particular types of content, applications or services over their networks. As a result of allegations that cable operators may be interfering with transmission and receipt of data on so-called “peer-to-peer” networks, several entities asked the FCC to ban such practices and to rule that reasonable network management practices do not include conduct that would block, degrade or unreasonably discriminate against lawful Internet applications, content or technologies. The FCC has ruled against at least one cable operator thus far in response to this request, but the cable operator has sought judicial review of the ruling, and the appeal is pending. We cannot predict the outcome of this appeal or the impact it may have on net neutrality considerations in the future.

Providers of broadband Internet access services are subject to many of the same federal and state privacy laws that apply to other providers of electronic communications, such as cable companies and telephone companies, including the Electronic Communications Privacy Act, which addresses interceptions of electronic communications that are in transit; the Stored Communications Act, which addresses acquisitions of electronic data in storage; and the Communications Assistance for Law Enforcement Act (“CALEA”), which requires providers to make their services and facilities accessible to law enforcement for purposes of surveillance. Various federal and state laws also apply to Cable ONE and to others whose services are accessible through Cable ONE’s broadband Internet access service. These laws include copyright laws, prohibitions on obscenity and requirements governing unsolicited commercial e-mail.

Voice Services

Voice Over Internet Protocol.    Cable companies (including the Company’s Cable ONE subsidiary) and others offer telephone service using a technology known as voice over Internet protocol (“VoIP”), which permits users to make telephone calls over broadband communications networks, including the Internet. Depending on their equipment and service provider, VoIP subscribers can use a regular telephone (connected to an adaptor) to make and receive calls to or from anyone on the public network. The Telecommunications Act of 1996 preempts state and local regulatory barriers to the offering of telephone service by cable companies and others, and the FCC has used that federal provision to preempt specific state laws that seek to regulate VoIP. Other provisions of the 1996 Act enable a competitor such as a cable company to exchange voice and data traffic with the incumbent telephone company and to purchase certain features at reduced costs, and these provisions have enabled some cable companies to offer a competing telephone service.

The FCC has held that VoIP services generally are interstate in nature and thus subject exclusively to the FCC’s federal jurisdiction. This decision was upheld on appeal, although the FCC has an ongoing proceeding to consider whether VoIP services provided by cable companies and others are properly classified as an “information service,” “telecommunications service” or some other new category of service. This determination, once made, could have numerous regulatory implications for cable companies that provide VoIP services, including Cable ONE. In the absence of a definitive FCC decision, several states (including those in the Company’s Cable ONE’s service territory) have attempted to regulate VoIP services like traditional telephony service and impose certain fees and taxes on the provision of VoIP services. These state actions could have an adverse effect on our business by increasing the Company’s costs to provide VoIP services. Legislation, also from time to time, has been introduced in Congress to address the classification and regulatory obligations of VoIP providers. The prospects for passage of any such legislation are uncertain.

Emergency 911 Services.    The FCC has ruled that an interconnected VoIP provider that enables its customers to make calls to and from persons who use the public switched telephone network must provide its customers with the same “enhanced 911” or “E911” features that traditional telephone and wireless companies are obligated to provide. This requirement was upheld on appeal. The FCC is currently assessing whether additional rules related to the provision of E911 services by interconnected VoIP service providers should be adopted.

CALEA.    FCC regulations require providers of VoIP service to comply with the requirements of the Communications Assistance for Law Enforcement Act, which requires covered carriers and their equipment suppliers to deploy equipment that law enforcement officials can access readily for lawful wiretap purposes.

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Universal Service.    The FCC has determined that interconnected VoIP services, such as those provided by Cable ONE, must contribute to the universal service fund. The amount of a company’s universal service fund contribution is based on a percentage of revenues earned from end-user interstate and international services. The FCC has developed three alternative methodologies through which an interconnected VoIP service provider may elect to calculate its universal service fund contribution: (i) an interim safe harbor that assumes that 64.9% of the provider’s total end-user revenues are derived from interstate or international service; (ii) a traffic study to determine an allocation for interstate and international end-user revenues; or (iii) actual interstate and international end-user revenues. If an interconnected VoIP service provider calculates its universal service fund contributions based on its actual percentage of interstate calls, the interstate classification of the service might no longer apply, in which case the VoIP service provider could be subject to regulation by each state in which it operates, as well as federal regulation. The FCC’s decision to apply universal service obligations to VoIP providers was upheld by a federal court.

Intercarrier Compensation.    The FCC is considering various proposals designed to reform the manner in which providers of telecommunications and VoIP services compensate one another for transporting and terminating various forms of network traffic. FCC determinations regarding the rates, terms and conditions for transporting and terminating such traffic can have a profound and material effect on the profitability of providing voice and data services. It is not possible to predict what actions the FCC might take in this area or the effect that they will have on Cable ONE.

CPNI.    In 2007, the FCC adopted rules expanding the protection of customer proprietary network information (“CPNI”) and extending CPNI protection requirements to providers of interconnected VoIP. CPNI is information about the quantity, technical configuration, type, location and amount of a phone customer’s use. These requirements generally have increased the cost of providing VoIP service, as providers now must implement various safeguards to protect CPNI from unauthorized disclosure.

Access for Persons with Disabilities.    FCC regulations require providers of interconnected VoIP service to comply with all disability access requirements that apply to telecommunications carriers, including provision of telecommunications relay services for persons with speech or hearing impairments. These requirements generally have had the effect of increasing the cost of providing VoIP service.

Regulatory Fees.    An August 2007 FCC order established that interconnected VoIP service providers must begin contributing to shared costs of FCC regulation through an annual regulatory fee assessment. Fee payments started in 2008. These rules have had the effect of increasing the cost of providing VoIP service.

Local Number Portability.    In 2007, the FCC required providers of interconnected VoIP service and their “numbering partners” to ensure that their subscribers have the ability to port their telephone numbers when changing service providers. The order also clarified that local exchange carriers and commercial mobile radio service providers have an obligation to port numbers to an interconnected VoIP service provider upon a valid port request. Providers of interconnected VoIP service are required to begin to contribute to federal funds to meet the shared costs of local number portability and the costs of North American Numbering Plan Administration. The new rules were effective in March 2008. The FCC is currently considering whether additional numbering requirements (such as allowing consumers access to abbreviated dialing codes like 211 and 311) should be applied to interconnected VoIP service providers. These rules have had the effect of increasing the cost of providing VoIP service.

Subscribership and Deployment Reports.    In a June 2008 order, the FCC required interconnected VoIP service providers to report certain data on a semi-annual basis (March and September) to the FCC. These data include the number of residential and commercial voice lines by state and the ZIP codes in which voice service is offered. The new reporting requirement is currently pending approval by the Office of Management and Budget. It is expected that the requirement will be approved and applied to interconnected VoIP service providers before the March reporting cycle.

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Newspaper Publishing

The Company’s newspaper publishing operations include results for its flagship newspaper, The Washington Post, and Washingtonpost.Newsweek Interactive (“WPNI”), which develops news and information products for electronic distribution. The Washington Post and washingtonpost.com together comprise Washington Post Media. In addition, the Company produces a number of other newspapers and websites targeted to specific geographic and demographic audiences.

The Washington Post

WP Company LLC (“WP Company”), a subsidiary of the Company, publishes The Washington Post, which is a morning daily and Sunday newspaper primarily distributed by home delivery in the Washington, DC, metropolitan area, including large portions of Maryland and northern Virginia. The following table shows the average paid daily (including Saturday) and Sunday circulation of The Post for 52-week periods ended October 1, 2006 and September 30, 2007, as reported by the Audit Bureau of Circulations (“ABC”) and as estimated by The Post for the 52-week period ended September 28, 2008 (for which period ABC had not completed its audit as of the date of this report) from the semi-annual publisher’s statements submitted to ABC for the 26-week periods ended March 30, 2008 and September 28, 2008:

In The Post’s primary circulation territory, which accounts for more than 90% of its daily and Sunday circulation and consists of Washington, DC and communities generally within a 50-mile radius from the city (but excluding Baltimore City and its northern and eastern suburbs), the newsstand price for the daily newspaper was increased from $0.50, which had been the price since December 31, 2007, to $0.75 effective December 15, 2008. The newsstand price for the Sunday newspaper has been $1.50 since 1992. The rate charged for each four-week period for home-delivered copies of the daily and Sunday newspaper, which had been $14.40 since 2004, was raised to $15.84 effective July 6, 2008. The rate charged for Sunday-only home delivery has been $6.00 since 1991. The same rates prevailed outside The Post’s primary circulation territory until the third quarter of 2006, when The Post raised its newsstand prices and home-delivery rates for such sales. At that time, newsstand prices for sales outside the primary circulation territory were increased to $0.50 for the daily newspaper and $2.00 for the Sunday newspaper, while home-delivery rates for each four-week period increased to $20.00 for the daily and Sunday newspaper and $8.00 for the Sunday newspaper only. On August 4, 2008, daily newsstand and home-delivery prices for sales outside the primary circulation territory increased to $0.75. Home-delivery rates for each four-week period are $26.00 for the daily and Sunday newspaper and remain $8.00 for the Sunday newspaper only.

General advertising rates were increased by an average of approximately 2.5% on January 1, 2008 and by additional amounts on January 1, 2009 that WP Company estimates will average approximately 2.5%. Rates for most categories of classified and retail advertising were increased by an average of approximately 2.4% on February 1, 2008, and by additional amounts on February 1, 2009, that WP Company estimates will average approximately 2.4%.*

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

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 Edition has a basic subscription price of $78.00 per year and is delivered by second-class mail to approximately 24,500 subscribers.

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The Post has about 502 full-time editors, reporters and photographers on its staff; draws upon the news reporting facilities of the major wire services; and maintains a network of correspondents and contract writers in national and international news centers. The Post also maintains reporters in nine local news bureaus.

Membership in The Post’s subscriber loyalty program, PostPoints, increased in 2008. The program allows readers to earn points that can be exchanged for rewards by subscribing to The Washington Post, shopping at participating major retailers, interacting on washingtonpost.com and other similar activities. The program has approximately 157,000 members.

The Post plans to close its printing plant located in College Park, MD, in 2009. Two printing presses will not be relocated as previously announced.

Washingtonpost.Newsweek Interactive

WPNI develops news and information products for electronic distribution. Since 1996, this subsidiary of the Company has produced washingtonpost.com, an Internet site that currently features the full editorial text of The Washington Post and most of The Post’s classified advertising, as well as original content created by WPNI’s staff, blogs written by Post reporters and others, interactive discussions hosted by Post reporters and outside subject experts, user-posted comments and content obtained from other sources. As measured by WPNI, this site averaged more than 232 million page views per month during 2008. The washingtonpost.com site also features extensive information about activities, groups and businesses in the Washington, DC, area, including an arts and entertainment section and news sections focusing on politics and on technology businesses and related policy issues. This site has developed a substantial audience of users who are outside the Washington, DC, area, and WPNI believes that approximately 85% of the unique users who access the site each month are in that category. WPNI requires most users accessing the washingtonpost.com site to register and provide their year of birth, gender, ZIP code, job title and the type of industry in which they work. The resulting information helps WPNI provide online advertisers with opportunities to target specific geographic areas and demographic groups. 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. In January 2009, WPNI began doing business as Washington Post Digital for all transactions, business arrangements and other ventures relating to washingtonpost.com. Since September 2006, WPNI has provided content from washingtonpost.com and the Slate and Newsweek websites specially formatted to be downloaded and displayed on Web-enabled cell phones and other personal digital devices.

In addition, in 2008, WPNI also produced the Newsweek website, which contains editorial content from the print edition of Newsweek, as well as daily news updates and analysis, photo galleries, Web guides and other features. Furthermore, in 2008, WPNI produced Budget Travel magazine’s website, which is found at BudgetTravel.com. This site contains editorial content from Arthur Frommer’s Budget Travel magazine and other sources. On January 1 of 2009, WPNI transferred responsibility for producing BudgetTravel.com and Newsweek.com to Newsweek.

The Slate Group, a division of WPNI, produces Slate, an online magazine, and several additional websites. Slate features articles analyzing news, politics and contemporary culture and adds new material on a daily basis. Content is supplied by the magazine’s own editorial staff, as well as by independent contributors. In January of 2008, The Slate Group launched The Root, an online magazine focused on issues of importance to African Americans and others interested in black culture. The Root offers daily news and provocative commentary on politics and culture. Additionally, it offers a geneology tool designed to help users trace their family history.

In September 2008, The Slate Group launched The Big Money, an online magazine featuring articles on business news, commentary and new material added on a daily basis. Content is supplied by the magazine’s own editorial staff, as well as by independent contributors.

In October 2008, WPNI acquired Foreign Policy, a magazine founded and managed by The Carnegie Endowment For International Peace. Foreign Policy is a bi-monthly print magazine and website that features articles analyzing current events, business and policy news from around the world. The website is updated with content from the magazine’s own editorial staff and independent contributors on a daily basis. In addition, Foreign Policy hosts a small number of foreign policy conferences every year. Foreign Policy is also part of The Slate Group.

WPNI holds a 16.5% equity interest in Classified Ventures LLC (“Classified Ventures”), a company formed in 1997 to compete in the business of providing online classified advertising databases for cars, apartment rentals and residential real estate. The other owners are Tribune Company, The McClatchy Company, Gannett Co., Inc. and A.H. Belo Corporation. Listings for these databases come from print and online-only sales of classified ads by the newspaper and online sales staffs of the various owners, as well as from sales made by Classified Ventures’ own sales staff. The washingtonpost.com site provides links to the Classified Ventures’ national car and apartment rental websites (www.cars.com and www.apartments.com).

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WPNI uses software from Classified Ventures to host washingtonpost.com’s online listing of residential real estate for sale in the greater Washington, DC, area, and Classified Ventures consolidates the local listings of its various owners into a national residential real estate website (www.homescape.com).

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 Newsweek website is 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 with access to certain MSNBC.com multimedia content. On July 1, 2007, the parties entered into a new relationship for cross-promotional marketing opportunities. The new agreement will extend through June 2009.

Express Publications

Express Publications Company, LLC (“Express Publications”), another subsidiary of the Company, publishes 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, DC, and nearby suburbs with heavy daytime sidewalk traffic. A typical edition of Express is 45 to 60 pages and contains short news, entertainment and sports stories, as well as both classified and display advertising. Current daily circulation is approximately 184,000 copies. Express relies primarily on wire service and syndicated content and is edited by a full-time newsroom staff of 24. Advertising sales, production and certain other services for Express are provided by WP Company. The Express newsroom also produces a website, ExpressNightOut.com, which features entertainment and lifestyle coverage of local interest.

Post–Newsweek Media

The Company’s Post–Newsweek Media, Inc. subsidiary publishes 2 weekly paid-circulation, 3 twice-weekly paid-circulation and 25 controlled-circulation weekly community newspapers. This subsidiary’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 County, MD; and Southern Maryland Newspapers, which circulate in southern Prince George’s County and in Charles, St. Mary’s and Calvert Counties, MD. During 2008, these newspapers had a combined average circulation of approximately 660,000 copies. This division also produces military newspapers (most of which are weekly) under agreements where editorial material is supplied by local military bases, with the exception of one independent newspaper. In 2008, the 12 military newspapers produced by this division had a combined average circulation of more than 125,000 copies.

The Gazette Newspapers have a companion website (www.Gazette.net) that includes editorial material and classified advertising from the print newspapers. The military newspapers produced by this division are supported by a website (www.DCmilitary.com) that includes base guides and other features, as well as articles from the print newspapers. The Southern Maryland Newspapers’ website (www.SoMdNews.com) also includes editorial and classified advertising from the print newspapers. Each website also contains display advertising that is sold specifically for the site.

The Gazette Newspapers and Southern Maryland Newspapers together employ approximately 159 editors, reporters and photographers.

This division also operates a commercial printing business in suburban Maryland.

The Herald

The Company owns The Daily Herald Company, publisher of The Herald in Everett, WA, about 30 miles north of Seattle. The Herald is published mornings seven days a week and is primarily distributed by home delivery in Snohomish County and online at www.Heraldnet.com. The Daily Herald Company also provides commercial printing services and publishes four controlled-circulation weekly community newspapers (collectively known as The Enterprise Newspapers) that are distributed by home delivery in south Snohomish and north King Counties. The Daily Herald Company also publishes La Raza del Noroeste, a weekly Spanish-language newspaper that is distributed free of charge in more than 700 retail locations in Snohomish, King, Skagit and northern Pierce Counties, as well as the Snohomish County Business Journal, a monthly publication focused on business news in Snohomish County, and Seattle’s Child, a monthly parenting magazine.

The Herald’s average paid circulation as reported to ABC for the 12 months ended September 30, 2008 was 48,961 daily (Monday through Friday); 48,709 (Monday through Saturday) and 53,086 Sunday. The aggregate average weekly circulation of The Enterprise Newspapers during the 12-month period ending March 31, 2008 was 73,704 copies as reported by Verified Audit Circulation. The circulation of La Raza del Noroeste during the 3-month period ended September 30, 2008 was 19,499 copies, as reported by Verified Audit Circulation. The monthly circulation of the Snohomish County Business Journal is approximately 14,000 copies. The monthly circulation of Seattle’s Child is approximately 66,000 copies.

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The Herald, The Enterprise Newspapers, the Snohomish County Business Journal, La Raza and Seattle’s Child together employ approximately 84 editors, reporters and photographers.

Greater Washington Publishing

The Company’s Greater Washington Publishing, Inc. subsidiary publishes several free-circulation advertising periodicals that have little or no editorial content and are distributed in the greater Washington, DC, metropolitan area using sidewalk distribution boxes. Greater Washington Publishing’s periodicals of that kind are Apartment Showcase, which is published monthly and has an average circulation of about 52,000 copies; New Homes Guide, which is published six times a year and has an average circulation of about 84,000 copies; and Guide to Retirement Living Sourcebook, which is published nine times a year and has an average circulation of about 55,000 copies. Greater Washington Publishing also produces Washington Spaces, a luxury home and design magazine featuring photographic layouts of visually appealing homes in the greater Washington, DC, area, resource information and editorial content. Washington Spaces, which is distributed by mail (principally on a controlled-circulation basis) and through newsstand sales, is published six times a year and has an average circulation of approximately 75,000 copies.

El Tiempo Latino

El Tiempo Latino LLC, publishes El Tiempo Latino, a weekly Spanish-language newspaper that is distributed free of charge in northern Virginia, suburban Maryland and Washington, DC, using sidewalk news boxes and retail locations that provide space for distribution. El Tiempo Latino provides a mix of local, national and international news together with sports and community-events coverage and has a current circulation of approximately 50,000 copies. Employees of the newspaper handle advertising sales as well as pre-press production, and content is provided by a combination of wire service copy, contributions from freelance writers and photographers and stories produced by the newspaper’s own editorial staff.

Television Broadcasting

Through subsidiaries, the Company owns six VHF television stations located in Houston, TX; Detroit, MI; Miami, FL; Orlando, FL; San Antonio, TX; and Jacksonville, FL; which are, respectively, the 10th, 11th, 16th, 19th, 37th and 47th 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 2002.

The Company’s 2008 net operating revenues from national and local television advertising and network compensation were as follows:

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

The Company’s Detroit, Houston and Miami stations each began digital television (“DTV”) broadcast operations in 1999, while the Company’s Orlando station began such operations in 2001. The Company’s two other stations (San Antonio and Jacksonville) began DTV broadcast operations in 2002.

All of the Company’s television stations either are or in 2009 will be engaged in some form of DTV multicasting. In 2009, all of the Company’s television stations except WDIV will multicast LATV, an entertainment and lifestyle network targeting bilingual Latino youth; and KPRC and WDIV will multicast ThisTV, a general entertainment network.

Regulation of Broadcasting and Related Matters

The Company’s television broadcasting operations are subject to the jurisdiction of the FCC under the Communications Act of 1934, as amended. 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 various 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 that is renewable upon application for an eight-year period.

Digital Television (“DTV”).    The FCC formally approved DTV technical standards in 1996. DTV is a flexible system that permits broadcasters to utilize a single digital signal in various ways, including providing at least one channel of high-definition television (“HDTV”) programming with greatly enhanced image and sound quality and one or more channels of standard-definition television programming (“multicasting”), and that also is capable of accommodating subscription video and data services known as “ancillary and supplementary” services. Broadcasters may offer a combination of services as long as they transmit at least one stream of free video programming on the DTV channel. Broadcasters that offer ancillary and supplementary services must pay a fee to the FCC of 5% of the gross revenues generated from such services. No Company station currently offers ancillary and supplementary services.

While most full-power television stations (including each station owned by the Company) are currently using two broadcast channels to operate both analog and DTV services, Congress previously required broadcasters to terminate analog service by February 17, 2009. Congress recently acted to extend the deadline for the conversion to June 12, 2009. The FCC has issued a public notice outlining procedures applicable to stations that desire to terminate analog service prior to the new deadline.

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To determine the channel on which their stations would operate after they completed their transitions to digital television, broadcasters were generally permitted to choose between each station’s analog channel and DTV channel, provided that those channels were between channels 2 and 51.

All of the Company’s TV stations except WKMG had two channels that are within this range, and they accordingly elected to operate on either their analog or digital channel. Because WKMG’s current DTV channel is not within the permitted range for post-transition channels and technical issues prevent post-transition use of the station’s analog channel, in August 2007 the FCC approved WKMG’s request to use channel 26 as its post-transition DTV channel. All of the Company’s stations are currently engaged in DTV broadcasting and have completed, or expect to complete within the next several months, construction of their final post-transition facilities.

Full-power digital television stations, including the Company’s stations, may experience interference from a variety of sources, such as other full-power stations and low-power television stations that have been authorized to provide digital service on either the low-power station’s existing analog channel or a different channel. In addition, in the future, broadcast stations may experience interference from electronic devices that the FCC may allow to be operated on an unlicensed basis. In November 2008, over objections of the broadcasting industry, the FCC granted wireless providers permission to operate such unlicensed devices. That order, called the “white spaces” order, currently is subject to an appeal. The FCC has adopted rules to limit the amount of interference that full-power digital television stations may cause to other stations. Low-power stations are required to accept interference from and avoid interference to full-power broadcasters. Certain low-power stations, known as “Class A” LPTV stations, have greater interference protection rights, and protecting such stations may limit the Company’s ability to expand its television service in the future.

Public Interest Obligations.    In November 2007, the FCC adopted new “enhanced disclosure” obligations for broadcasters. Among other changes, the FCC announced that it will require broadcasters to (i) report on the amount and type of public interest programming they offer; (ii) make their public inspection files available over the Internet if they have a website; and (iii) include an on-air notice twice daily that consumers may view the station’s public file on its website. These requirements will not become effective until they are approved by the Office of Management and Budget (“OMB”). In July 2008, the FCC submitted only the on-air station notification requirement to the OMB for approval. However, because the requirement is closely linked to the other requirements imposed in the November 2007 decision, the OMB refused to review this submission and directed the FCC to resubmit it at the same time that it submits the related provisions to the OMB. The FCC has not yet done so. Moreover, the FCC is currently considering petitions for reconsideration regarding the requirements, and it is possible that the FCC could modify the requirements in response to those petitions. The November 2007 decision also is subject to judicial review in consolidated cases pending before the U.S. Court of Appeals for the DC Circuit.

In a separate “localism” proceeding, the FCC has requested comment on additional proposals, including (i) its tentative conclusions to adopt license renewal “processing guidelines” that establish minimum amounts of locally-oriented programming to be provided by broadcast licensees and to require broadcasters to establish permanent community advisory boards and (ii) a requirement that a licensee’s main studio be located in its community of license. The localism proceeding is pending at the FCC. It is not possible to predict what, if any, effect it will have on the Company’s operations.

Children’s Programming Obligations.    Pursuant to children’s programming obligations for digital television that took effect in January 2007, stations must air three hours per week of “core” children’s programming on their primary digital video stream and additional core children’s programming if they also broadcast free multicast video streams. Stations must also complete quarterly reports concerning the core programming that they broadcast. “Core” programming includes programming that serves the educational and informational needs of children and meets guidelines specified by the FCC, which generally relate to programming length and time aired. In addition, stations must limit the amount of commercial advertising that may be broadcast during programming intended for young children.

Carriage of Local Broadcast Signals.    Pursuant to the requirements of the 1992 Cable Act, and the FCC rules, a commercial television broadcast station may, under certain circumstances, insist on carriage of either its analog or digital signal on cable systems serving the station’s market area (“must carry”). Alternatively, stations may elect, at three-year intervals that began in October 1993, to forego must-carry rights and allow their signals to be carried only 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. Each of the Company’s television stations is being carried on all of the major cable systems in the station’s respective local markets pursuant to retransmission consent agreements.

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Under the FCC’s rules, only stations that broadcast in a DTV-only mode and elect must-carry are entitled to mandatory carriage of their DTV signals. For stations that are entitled to mandatory carriage, only a single stream of video (that is, a single channel of programming), rather than a television broadcast station’s entire DTV signal, is eligible for mandatory carriage by a cable television operator. Thus, a television station currently can obtain carriage of both its analog and digital signals or of a digital multicast stream only through retransmission consent agreements.

The Satellite Home Viewer Improvement Act of 1999 gave commercial television stations the right 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). In addition, the Satellite Home Viewer Extension and Reauthorization Act of 2004 gave DBS operators the option to offer FCC-determined “significantly viewed” signals of out-of-market (or “distant”) broadcast stations to subscribers in local markets. Stations made their first DBS carriage election in July 2001, with subsequent elections occurring at three-year intervals beginning in October 2005. The analog signal of each of the Company’s television stations (and the digital signal of most 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 a pending proceeding, the FCC has sought comment on how it should apply digital signal carriage rules to DBS providers. The two major DBS operators in the United States are DirecTV and DISH Network.

On or prior to October 1, 2008, the Company elected retransmission consent status for its stations with respect to major cable operators and the two DBS operators. These elections apply to the three-year period from January 1, 2009 through December 31, 2011. Of those agreements that expired at or about December 31, 2008, nearly all (including those with the major cable system in each relevant market) have been renegotiated and provide for continued coverage of the Company’s television stations pursuant to specific terms of the new agreements.

Ownership Limits.    The FCC maintains rules to limit the number and type of media outlets in which a single person or entity may have an attributable interest. The Communications Act requires the FCC to review these ownership rules periodically and to repeal or modify any rule that it determines is no longer in the public interest. Pursuant to such a review, in June 2003, the FCC relaxed several of its local media ownership rules. The FCC’s decision to modify its ownership rules was appealed to the U.S. Court of Appeals for the Third Circuit, which stayed the effectiveness of the new rules, pending the outcome of the appeal. In June 2004, the Third Circuit held that the FCC had not adequately justified its revised rules and remanded the case to the FCC for further proceedings. The Third Circuit’s stay of the new rules remains in effect pending these further proceedings.

In July 2006, the FCC initiated a broad remand proceeding to reconsider the revised rules. In an order released in February 2008, the FCC liberalized its daily newspaper cross-ownership rule. Under the modified rule, the Commission will assess proposed newspaper/broadcast combinations on a case-by-case basis, but in limited circumstances will presumptively approve the common ownership of attributable interests in a newspaper and one television station or one radio station in the 20 largest markets, and will presumptively not approve such interests outside the 20 largest markets. The FCC stated that it would consider permitting newspaper/broadcast cross-ownership in smaller markets if it can be shown either (i) that the broadcast property is “failed” or “failing” or (ii) that the transaction will result in a new source of news in the market, that is, at least seven new hours of local news per week on a broadcast station that previously has not aired local news. Because the U.S. Court of Appeals for the Third Circuit stayed the effectiveness of any modifications to the ownership rules until it reviews the FCC’s compliance with its June 2004 order, the modified daily newspaper cross-ownership rule will not go into effect until the court has completed its review.

In its 2008 order, the FCC declined to modify its other ownership rules, including the local television multiple ownership rule, which generally permits 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 commonly-owned stations is not among the top-four -ranked television stations in that market. A number of media companies and public interest groups have challenged the FCC’s modification of the daily newspaper cross-ownership rule and its retention of the other ownership rules. These challenges are pending before the U.S. Court of Appeals for the Third Circuit. Several public interest groups also have asked the FCC to reconsider its 2008 order; this request is pending.

By law, a single person or entity may have an attributable interest in an unlimited number of television stations nationwide, as long as the aggregate audience reach of such stations does not exceed 39% of nationwide television households, and as long as the interest complies with the FCC’s other ownership restrictions.

Political Advertising.    The Bipartisan Campaign Reform Act of 2002, among other things, imposed restrictions on certain broadcast, cable television and DBS advertisements that refer to a candidate for federal office. Those restrictions may adversely affect the advertising revenues of the Company’s television stations during campaigns for federal office.

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Some commercial broadcast stations use third-party brokers to sell otherwise unused commercial inventory at below-market prices. The FCC is considering a request that it declare that such sales, when made through Internet brokers, do not affect the calculation of a broadcast station’s lowest unit charge for advertising, which stations must offer to candidates for public office during election periods. An adverse ruling could adversely affect the Company’s ability to obtain revenue from unused inventory.

Broadcast Indecency.    In 2007, the FCC amended its rules to increase the maximum monetary forfeiture for the broadcast of indecent programming from $32,500 per occurrence to $325,000 per occurrence. In June 2007, the U.S. Court of Appeals for the Second Circuit issued a decision vacating certain of the FCC’s proposed forfeitures for the broadcast of so-called “fleeting expletives,” which the FCC had found were indecent. The court concluded that the FCC had failed to articulate a reasoned basis for its decisions and remanded the relevant cases to the FCC for further consideration. The FCC appealed the Second Circuit’s decision to the U.S. Supreme Court, which has not yet issued its decision. In addition, the U.S. Court of Appeals for the Third Circuit found that the FCC acted improperly when it imposed monetary forfeitures in connection with CBS’s 2004 broadcast of a musical performance during the Super Bowl halftime show, which the FCC also had found to be indecent. The FCC has asked the U.S. Supreme Court to consider its appeal of that decision, but has asked the Court not to grant its request until it issues its decision in the “fleeting expletives” case, described above. The FCC’s request is pending. Particularly in light of the increase in forfeiture amounts, the resolution of this litigation could affect the risks associated with operation of the Company’s broadcast television stations.

It is not generally the FCC’s policy to notify licensees when it receives indecency complaints regarding their broadcasts before it issues a formal Letter of Inquiry or takes other enforcement action. As a result, the FCC may have received complaints of which the Company is not aware alleging that one or more of the Company’s stations broadcast indecent material. The Company was notified on January 25, 2008 that the FCC had proposed a monetary forfeiture against station KSAT, along with 51 other television stations, in connection with the station’s broadcast of an allegedly indecent scene in an episode of the drama “NYPD Blue.” KSAT, along with the other affected ABC affiliates, has appealed the FCC’s decision. The case is pending before the U.S. Court of Appeals for the Second Circuit.

Sponsorship Identification.    During 2006 and 2007, a media watchdog group filed a series of complaints at the FCC alleging that various broadcast stations and cable channels violated the FCC’s sponsorship identification rules by broadcasting material provided to them by a third party without disclosing the source of the material. The FCC issued Letters of Inquiry to three Company-owned stations that had been named in the complaints. Specifically, Company-owned station WJXT was named in the first complaint, along with 76 other broadcast stations, and Company-owned stations WKMG and WPLG were named in the second complaint, along with 44 other stations.

In September 2007, the FCC released two decisions proposing monetary forfeitures against a cable operator in connection with a series of news broadcasts identified in the complaints. These decisions do not directly affect the Company, but they are relevant because the FCC typically uses similar standards to evaluate alleged sponsorship identification violations by broadcast stations and cable operators. The FCC’s investigations concerning the three Company stations are pending. It is not possible to predict what further actions (if any) the FCC may take in response to the complaints.

The FCC is conducting proceedings concerning various matters in addition to those described in this section. The outcome of these FCC proceedings and other matters described in this section could adversely affect the profitability of the Company’s television broadcasting operations.

Magazine Publishing

Newsweek, Inc.

Newsweek, Inc. publishes Newsweek, a weekly global forward-looking news and ideas magazine and its digital platform, Newsweek.com. Newsweek is published domestically and internationally. The domestic edition of Newsweek includes more than 100 different geographic or demographic editions that carry substantially identical news and feature material, but enable advertisers to direct messages to specific market areas or demographic groups. Newsweek is sold through subscription mail order sales derived from a number of sources, principally direct-mail promotion, as well as online and on newsstands. Newsweek’s published advertising rates are based on its average weekly circulation rate base and are competitive with those of the other publications in its category. It currently delivers an average weekly rate base of 2,600,000 copies, which will continue through the first half of 2009. Newsweek recently announced plans to reduce its domestic rate base to 1,500,000 copies by January 2010, reflecting a shift in focus to a different demographic that is closer to its core base of loyal subscribers. This demographic consists of a group of subscribers who are more highly educated, who have demonstrated a high level of interest in news and ideas and who have higher

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incomes. This will change Newsweek’s competitive set, making it the largest premium news and ideas magazine, aligned more closely with The Economist, New York magazine, New Yorker, Wired and The Atlantic. Newsweek, Inc. will increase the subscription price of Newsweek and its national advertising rates to reflect a more valuable subscriber base.

Internationally, Newsweek is published in a Europe, Middle East and Africa edition; an Asia edition covering Japan, Korea and south Asia; and a Latin America 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 Newsweek in 2008 was approximately 460,000 copies.

Newsweek, Inc. has agreements with publishers in a number of foreign countries to produce and distribute foreign-language editions of Newsweek abroad. Currently, Newsweek is published in Japanese, Korean, Spanish, Arabic, Polish, Russian and Turkish. In addition to containing selected stories translated from Newsweek’s various U.S. and foreign editions, each of these magazines includes editorial content created by a staff of local reporters and editors. Newsweek estimates that the combined average weekly paid circulation of the various foreign-language international editions of Newsweek was approximately 678,000 copies in 2008.

The online version of Newsweek includes material from Newsweek’s print edition, as well as original content. Newsweek assumed responsibility for producing Newsweek.com from WPNI effective January 1, 2009. Newsweek.com maintains a content-sharing, co-branding and traffic relationship with MSNBC.com that has evolved from a contractual relationship that was established in 2000.

Arthur Frommer’s Budget Travel magazine, another Newsweek publication, was published 10 times during 2008 and had an average paid circulation of more than 600,000 copies. Budget Travel is headquartered in New York City and has its own editorial staff. Newsweek assumed responsibility for production of BudgetTravel.com on January 1, 2009.

Other Activities

CourseAdvisor, Inc.

CourseAdvisor, Inc., an online lead generation provider headquartered in Wakefield, MA, operates as an independent subsidiary of the Company. Through its search engine marketing expertise and proprietary technology platform, CourseAdvisor generates student leads for the post-secondary education market.

Bowater Mersey Paper Company

The Company owns 49% of the common stock of Bowater Mersey Paper Company Limited, the majority interest in which is held by a subsidiary of AbitibiBowater, Inc. Bowater Mersey owns and operates a newsprint mill near Halifax, Nova Scotia, and also owns extensive woodlands that provide part of the mill’s wood requirements. In 2008, Bowater Mersey produced about 258,875 tons* of newsprint.

Production and Raw Materials

The Washington Post, Express and El Tiempo Latino are all produced at the printing plants of WP Company in Fairfax County, VA, and Prince George’s County, MD. The Herald, The Enterprise Newspapers, the SCBJ and La Raza del Noroeste are produced at The Daily Herald Company’s plant in Everett, WA, while The Gazette Newspapers and Southern Maryland Newspapers are printed at the commercial printing facilities owned by Post–Newsweek Media, Inc. (10 military papers, 3 free weeklies and 1 paid weekly from Southern Maryland are printed at Chesapeake Publishing in Easton, MD). Greater Washington Publishing’s periodicals are produced by independent contract printers. The Post plans to close its printing plant located in College Park, MD, in 2009 and will not move two printing presses to its Springfield, VA, plant by 2010, as previously announced.

In 2008, The Washington Post, Express and El Tiempo Latino collectively consumed about 136,000 tons* of newsprint. Such newsprint was purchased from a number of suppliers, including AbitibiBowater, Inc., which supplied approximately 53% of the 2008 newsprint requirements for these newspapers. Although for many years some of the newsprint purchased by WP Company from Bowater Incorporated typically was provided by Bowater Mersey Paper Company Limited (in which, as noted previously, the Company owns an interest), since 1999 none of the newsprint delivered to WP Company has come from that source.

The price of newsprint has historically been volatile. During 2008, the RISI East Coast Newsprint Price Index, which provides monthly single-price estimates based on marketplace surveys of both buyers and sellers, for 30-lb. newsprint (the kind of newsprint used by The Washington Post and most of the newspapers published by Post–Newsweek Media, Inc.),

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ranged (on a short-ton basis) from a low of $540 per ton in January to a high of $699 per ton in November. (Because of quantity discounts and other factors, the RISI index prices do not necessarily correspond with the prices actually paid by the Company’s subsidiaries for newsprint.) The Company believes that adequate supplies of newsprint are available to The Washington Post and the other newspapers published by the Company’s subsidiaries through contracts with various suppliers. More than 90% of the newsprint consumed by WP Company’s printing plants includes recycled content. The Company owns 80% of the stock of Capitol Fiber Inc., which handles and sells to recycling industries old newspapers, paper and other recyclable materials collected in Washington, DC, Maryland and northern Virginia.

Newsweek’s domestic edition is produced by two independent contract printers at four 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 Newsweek are printed in England, Singapore, the Netherlands, South Africa and Hong Kong. Since 1997, Newsweek and a subsidiary of Time Warner have used a jointly owned company based in England to provide and procure production and distribution services for the Europe, Middle East and Africa edition of Newsweek and the Europe edition of Time. In 2002, this jointly owned company began providing certain production and distribution services for the Asian editions of these magazines. Budget Travel is produced by an independent contract printer.

The domestic edition of Newsweek consumed about 20,000 tons of paper in 2008, the bulk of which was purchased from five major suppliers. The current cost of body paper (the principal paper component of the magazine) is approximately $1,060 per ton.

In 2008, the operations of The Daily Herald Company and Post–Newsweek Media, Inc. consumed approximately 5,900 and 15,993 tons* of newsprint, respectively, which were obtained in each case from various suppliers. Approximately 66% of the newsprint used by The Daily Herald Company and 66% of the newsprint used by Post-Newsweek Media, Inc. includes recycled content.

More than 90% of the aggregate domestic circulation of both Newsweek and Budget Travel is delivered by periodical (formerly second-class) mail, and most subscriptions for such publications are solicited by either first-class or standard (formerly third-class) 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. Postal rates have increased in each of the past three years. Future postal rate increases generally will be limited to increases in the Consumer Price Index. Newsweek’s 2008 postage costs increased by approximately $2.7 million. Effective May 2008, the rate increase for all classes of mail was 2.4%, which will increase Newsweek’s 2009 postal costs (January through April) by about $0.5 million. In February 2009, the Postal Service announced rate increases of 4.8% for first-class, 3.9% for standard and 4.0% for periodical mail effective May 11, 2009. It is anticipated that these increases will increase Newsweek’s 2009 postal costs (May through December) by approximately an additional $1.3 million.

Competition

Kaplan’s businesses operate in highly fragmented and competitive markets. 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. Kaplan Test Prep 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 PMBR competes with online providers of Multistate Bar Exam preparation services, as well as with various bar review providers (the largest of which is BAR/BRI, a unit of The Thomson Corporation) that prepare students for the multistate portion of the bar exam in addition to the state-specific portion of the exam. Kaplan’s Professional Division competes with other companies that provide alternative or similar professional training, test preparation and consulting services. Overseas, each of Kaplan’s businesses competes with other for-profit companies and, in certain instances, with governmentally supported schools and institutions that provide similar training and educational programs.

Cable television systems operate in a highly competitive environment. In addition to competing with over-the-air reception, cable television systems face competition from various other forms of video program delivery systems, including DBS services, telephone companies and the Internet. Certain of the Company’s cable television systems have also been partially or substantially overbuilt, using conventional cable system technology by various small to mid-sized independent telephone companies, which typically offer cable modem and telephone service, as well as basic cable service. Even without constructing their own cable plant, local telephone companies compete with cable television systems in the delivery of high-speed Internet access by providing DSL service. In addition, some telephone companies have entered into strategic partnerships with DBS operators that permit the telephone company to package the video programming services

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of the DBS operator with the telephone company’s own DSL service, thereby competing with the video programming and cable modem services being offered by existing cable television systems. Satellite-delivered broadband and high-powered WiMax services will increasingly provide competition to Cable ONE. Finally, video programming is becoming increasingly available on the Internet, where viewers can watch programming for free, as well as access pay-per-view offerings. Cable ONE distinguishes itself from its competition by consistently attaining very high levels of customer satisfaction.

The Washington Post competes in the Washington, DC, metropolitan area with The Washington Times, a newspaper that has published weekday editions since 1982 and Saturday and Sunday editions since 1991. The Post also encounters competition in varying degrees from other newspapers and specialized publications distributed in The Post’s circulation area (including newspapers published in suburban and outlying areas and nationally circulated newspapers), and from websites, television, radio, magazines and other advertising media, including direct-mail advertising. Express similarly competes with various other advertising media in its service area, including both daily and weekly free-distribution newspapers.

The websites produced by Washington Post Digital face competition from many other Internet services (particularly in the case of washingtonpost.com from 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 significant amounts of advertising, and the Company believes that such services have adversely affected the Company’s print publications and, to a lesser extent, its television broadcasting operations, all of which rely on advertising for the majority of their revenues. National online classified advertising has become a particularly crowded field, with competitors such as Amazon and eBay aggregating large volumes of content into national classified or direct-shopping databases covering a broad range of product lines. Some nationally managed sites, such as Fandango and Weather.com, also offer local information and services (in the case of those sites, movie information and tickets and local weather). In addition, major national search engines have entered local markets. For example, Google and Yahoo! have launched local services that offer directory information for local markets with enhanced functionality, such as mapping and links to reviews and other information. At the same time, other competitors are focusing on vertical niches in specific content areas. For example, AutoTrader.com and Autobytel.com aggregate national car listings; Realtor.com and move.com aggregate national real estate listings; Monster.com, Yahoo! Hotjobs (which is owned by Yahoo!) and CareerBuilder.com (which is jointly owned by Gannett, McClatchy, Tribune Co. and Microsoft) aggregate employment listings. All of these vertical-niche sites can be searched for local listings, typically by using ZIP codes. Finally, several services challenge established business models. Many of these are free classified sites, one of which is craigslist.com. In addition, the role of the free classified board as a center for community information has been expanded by “hyper local” neighborhood sites, such as dcurbanmom.com (which provides community information to mothers in the Washington, DC, metro area). Slate, The Big Money, The Root, and Foreign Policy compete for readers with many other political, lifestyle, and business publications, both online and in print, and compete for advertising revenue with those publications, as well as with a wide variety of other print publications and online services, plus other forms of advertising.

The Herald circulates principally in Snohomish County, WA; its chief competitors are the Seattle Times and 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. In January 2009, the Hearst Corporation, owner of the Seattle Post-Intelligencer, announced its intention to sell or close the paper within 60 days. The Enterprise Newspapers are distributed in south Snohomish and north King Counties, where their principal competitors are the Seattle Times and The Journal Newspapers, a group of monthly controlled-circulation newspapers. Numerous other newspapers and shoppers are distributed in The Herald’s and The Enterprise Newspapers’ principal circulation areas. La Raza del Noroeste’s principal competitors in its circulation territory are the weekly Spanish-language newspapers El Mundo and Seattle Latino, although it also competes with various other Spanish-language media. The chief competitor for the Snohomish County Business Journal is the Puget Sound Business Journal, with parenting publication Parent Map serving as the principal competitor for Seattle’s Child.

The circulation of The Gazette Newspapers is limited to Montgomery, Prince George’s and Frederick Counties and parts of Carroll County, MD. The Gazette Newspapers compete with many other advertising vehicles available in their service areas, including The Potomac and Bethesda/Chevy Chase Almanacs, The Western Montgomery Bulletin, The Bowie Blade-News, The West County News and 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); and The Frederick News-Post and Carroll County Times, daily paid-circulation community newspapers. The Southern Maryland Newspapers circulate in southern Prince George’s County and in Charles, Calvert and St. Mary’s Counties, MD, where they also

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compete with many other advertising vehicles available in their service areas, including the Calvert County Independent and St. Mary’s Today, weekly paid-circulation community newspapers; along with the County Times, a free weekly; and The Pennysaver, a shopper.

The Examiner, a free newspaper containing national and international as well as local news, is being published six days a week in northern Virginia, suburban Maryland and Washington, DC. The Examiner’s home edition is delivered to targeted ZIP codes on Thursdays and Sundays. A street edition is distributed on Mondays, Tuesdays, Wednesdays and Fridays within the Washington, DC, metropolitan area. The Examiner competes in varying degrees with The Gazette Newspapers, Express and The Washington Post.

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

El Tiempo Latino competes with other Spanish-language advertising media available in the Washington, DC, area, including several other Spanish-language newspapers.

The Company’s television stations compete for audiences and advertising revenues with television and radio stations, cable television systems and video services offered by telephone companies serving the same or nearby areas; with direct broadcast satellite services; and, to a lesser degree, with other media, such as newspapers and magazines. Cable television systems operate in substantially all of the areas served by the Company’s television stations, where they compete for television viewers by importing out-of-market television signals; by distributing pay-cable, advertiser-supported and other programming that is originated for cable systems; and by offering movies and other programming on a pay-per-view basis. In addition, DBS services provide nationwide distribution of television programming (including pay-per-view programming and programming packages unique to DBS) using digital transmission technologies. The Company’s television stations may also become subject to increased competition from low-power television stations, wireless cable services and satellite master antenna systems (which can carry pay-cable and similar program material). Major TV networks offer some of their programming on their Internet sites free of charge.

According to figures compiled by Publishers’ Information Bureau, Inc., of the 253 magazines reported on by the Bureau, Newsweek ranked 11th in total advertising revenues in 2008, when it received approximately 1.5% 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 (including Internet-based media) that compete for audience and advertising revenue.

Executive Officers

The executive officers of the Company, each of whom is elected annually by the Board of Directors, are as follows:

Donald E. Graham, age 63, 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 Post from 1979 until September 2000 and as Chairman from September 2000 to February 2008.

Veronica Dillon, age 59, became Senior Vice President in June 2008 and the Vice President, General Counsel and Secretary of the Company in January 2007. Ms. Dillon began her career with the Company in February 1991 as corporate counsel at Kaplan, Inc. She was subsequently named General Counsel at Kaplan in June 1995 and then served as Kaplan’s Chief Administrative Officer beginning in December 2003.

Boisfeuillet Jones, Jr., age 62, became Vice Chairman of the Company and Chairman of The Washington Post in February 2008. Mr. Jones joined The Washington Post in 1980 as Vice President and counsel. In 1995, he became President and General Manager and was named Associate Publisher in January 2000. In September 2000, he succeeded Donald Graham as Publisher and Chief Executive Officer of The Washington Post.

Hal S. Jones, age 56, became Senior Vice President–Finance of the Company in November 2008, and Chief Financial Officer in January 2009. He had most recently been chief executive officer of Kaplan Professional, responsible for Kaplan’s professional businesses in financial services, real estate, technology and engineering in the United States and the United Kingdom. Mr. Jones has spent 19 years at The Washington Post Company and Kaplan, serving in a variety of senior management positions with a focus on finance, auditing and accounting.

Ann L. McDaniel, age 53, became Senior Vice President–Human Resources of the Company in June 2008, and was formerly Vice President–Human Resources since September 2001. She also serves as Managing Director of Newsweek, a position she assumed in January 2008. Ms. McDaniel had previously served as Senior Director of Human Resources of the Company since January 2001 and before that held various editorial positions at Newsweek.

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John B. Morse, Jr., age 62, became Senior Vice President–Finance in June 2008, and was Chief Financial Officer and formerly Vice President–Finance from November 1989 until his retirement at the end of 2008. He joined the Company as Vice President and Controller in July 1989 and prior to that had been a partner of Price Waterhouse.

Gerald M. Rosberg, age 62, became Senior Vice President–Planning and Development of the Company in June 2008, and was formerly Vice President–Planning and Development since 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.

Wallace R. Cooney, age 46, became Vice President–Finance and Chief Accounting Officer of the Company in June 2008. Mr. Cooney joined the Company in 2001 as Controller, and prior to that had been with Gannett Co., Inc. and Price Waterhouse LLP.

Employees

The Company and its subsidiaries employ approximately 20,000 persons on a full-time basis.

Worldwide, Kaplan employs approximately 13,200 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 18,500 employees.

Cable ONE has approximately 2,372 full-time employees, none of whom is represented by a union.

WP Company has approximately 2,121 full-time employees. About 1,209 of that unit’s full-time employees and about 378 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: 982 editorial, newsroom and commercial department employees represented by the Communications Workers of America (May 7, 2009); 37 machinists represented by the International Association of Machinists (January 10, 2011); 23 photoengravers-platemakers represented by the Graphic Communications Conference of the International Brotherhood of Teamsters (February 7, 2010); 57 paper handlers and general workers represented by the Graphic Communications Conference of the International Brotherhood of Teamsters (November 16, 2011). The agreement covering 435 mailroom workers represented by the Communications Workers of America expired on May 18, 2003; efforts to negotiate a new agreement were unsuccessful, and in early 2006, WP Company declared an impasse and implemented parts of its last contract offer for employees in a particular job category. The agreement covering 25 electricians represented by the International Brotherhood of Electrical Workers expired on December 13, 2007; negotiations have yet to produce a successor agreement. Also, the agreement covering 28 engineers, carpenters and painters represented by the International Union of Operating Engineers expired on April 12, 2008; negotiations have yet to produce a successor agreement. On February 7, 2008, WP Company announced that a Voluntary Retirement Incentive Program would be offered to some employees of The Washington Post newspaper. The program was accepted by 231 employees across the newspaper.

Washingtonpost.Newsweek Interactive has approximately 368 full-time and 17 part-time employees, none of whom is represented by a union.

Of the approximately 257 full-time and 76 part-time employees at The Daily Herald Company, about 60 full-time and 3 part-time employees are represented by one or another of three unions. The newspaper’s collective bargaining agreement with the Graphic Communications Conference of the International Brotherhood of Teamsters, which represents press operators, expires on March 15, 2011; its agreement with the Communications Workers of America, which represents printers and mailers, expires on October 31, 2009; and its agreement with the International Brotherhood of Teamsters, which represents bundle haulers, expires on September 22, 2010.

The Company’s broadcasting operations have approximately 950 full-time employees, of whom about 190 are union-represented. Of the eight collective bargaining agreements covering union-represented employees, four have expired and are being renegotiated. One collective bargaining agreement will expire in 2009.

Newsweek has approximately 504 full-time employees as of December 31, 2008 (including about 100 editorial employees represented by the Communications Workers of America under a collective bargaining agreement that expired on January 1, 2009 and is currently being renegotiated). On February 6, 2008, Newsweek offered a Voluntary Retirement Incentive Program that will be funded primarily through the Company’s pension plans. Approximately 152 employees were eligible to take this early retirement and 117 accepted the program. On December 11, 2008, Newsweek offered an additional 83 employees the right to participate in the Voluntary Retirement Incentive Program and 43 accepted. A somewhat reduced workforce will result from the program.

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Post–Newsweek Media, Inc. has approximately 434 full-time and 127 part-time employees. Robinson Terminal Warehouse Corporation (the Company’s newsprint warehousing and distribution subsidiary), Greater Washington Publishing, Inc., Express Publications Company, LLC and El Tiempo Latino LLC each employs 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 2008 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, including the risks and uncertainties described in Item 1A of this Annual Report on Form 10-K, that could cause actual results or events to differ materially from those anticipated in such statements. Accordingly, undue reliance should not be placed on any forward-looking statement made by or on behalf of the Company. The Company assumes no obligation to update any forward-looking statement after the date on which such statement is made, even if new information subsequently becomes available.

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. In addition, the Company’s Certificate of Incorporation, its Corporate Governance Guidelines, the Charters of the Audit and Compensation Committees of the Company’s Board of Directors and the codes of conduct adopted by the Company and referred to in Item 10 of this Annual Report on Form 10-K are each available on the Company’s website; printed copies of such documents may be obtained by any stockholder upon written request to the Secretary of the Company at 1150 15th Street, NW, Washington, DC 20071.

Item 1A. Risk Factors.

The Company faces a number of significant risks and uncertainties in connection with its operations. The most significant of these are described below. These risks and uncertainties may not be the only ones facing the Company. Additional risks and uncertainties not presently known, or currently deemed immaterial, may adversely affect the Company in the future. If any of the events or developments described below occurs, it could have a material adverse effect on the Company’s business, financial condition or results of operations.

During the Company’s 2008 fiscal year, funds provided under the student financial aid programs created under Title IV of the Federal Higher Education Act accounted for approximately $904 million of the net revenues of the schools in Kaplan’s Higher Education Schools. Any legislative, regulatory or other development that has the effect of materially reducing the amount of Title IV financial assistance or other funds available to the students of those schools would have a significant adverse effect on Kaplan’s operating results. In addition, any development that has the effect of making the terms on which Title IV financial assistance or other funds are available to students of those schools materially less attractive could have an adverse effect on Kaplan’s operating results.

Students obtain financing from a number of sources. In addition to funds available under the Federal Title IV programs in the form of federal loans and grants, students often obtain loans from private lenders. In response to a general tightening in the credit markets, lenders have announced that they will apply more stringent lending standards for loans to students. In late 2008, Kaplan Higher Education experienced a significant reduction in the ability of its students to obtain loans from private lenders, which could lead to reduced enrollment in Kaplan schools. Kaplan Higher Education estimates that approximately 5% of its revenue comes from students who obtain loans from private lenders. To counter the loss of loans from private lenders, Kaplan Higher Education commenced an institutional loan program directly lending to its students to fund their education.

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Each of Kaplan Higher Education’s ground campuses and online university are institutionally accredited by one or another of a number of national and regional accreditors recognized by the U.S. Department of Education. Accreditation by an accrediting agency recognized by the U.S. Department of Education is required for an institution to become and remain eligible to participate in Title IV programs. The loss of accreditation would, among other things, render Kaplan schools and programs ineligible to participate in Title IV programs and would have a material adverse effect on its business.

Kaplan Higher Education ground campuses and online university are authorized to operate and to grant degrees, certificates or diplomas by the applicable state agency of each state where such authorization is required. Such state authorization is required for each campus located in the state or, in the case of states that require it, for Kaplan University online to offer post-secondary education. In either case, state authorization is required for students at Higher Education campuses or enrolled in online programs to be eligible to participate in Title IV programs. The loss of such authorization would preclude the campuses or online university from offering post-secondary education and render students ineligible to participate in Title IV programs. Loss of authorization at those state campus locations or, in states that require it for Kaplan University online, could have a material adverse effect on Kaplan Higher Education’s business.

A substantial portion of Kaplan’s operating income is generated by its Test Prep and Admissions operations. The source of this income is fees charged for courses that prepare students for a broad range of admissions examinations that are required for admission to colleges and graduate schools. Historically, colleges and graduate schools have required standardized tests as part of the admissions process. There has been some movement away from this historical reliance on standardized admissions tests among a small number of colleges that have adopted “test-optional” admissions policies. Any significant reduction in the use of standardized tests in the college or graduate school admissions process could have an adverse effect on Kaplan’s operating results.

A substantial portion of Kaplan Professional’s revenue comes from preparing individuals for licensing or technical proficiency examinations in various fields. Any significant relaxation or elimination of licensing or technical proficiency requirements in those fields served by Kaplan’s Professional Division could negatively impact Kaplan’s operating results.

The Company’s Kaplan subsidiary has historically been an active acquirer of businesses that provide educational services. Consistent with this historical trend, during 2008 Kaplan completed a total of nine acquisitions. Acquisitions involve various inherent risks and uncertainties, including difficulties in efficiently integrating the service offerings, accounting and other administrative systems of an acquired business; the challenges of assimilating and retaining key personnel; the consequences of diverting the attention of senior management from existing operations; the possibility that an acquired business does not meet or exceed the financial projections that supported the purchase price; and the possible failure of the due diligence process to identify significant business risks or undisclosed liabilities associated with the acquired business. A failure to effectively manage growth and integrate acquired businesses could have a material adverse effect on Kaplan’s operating results.

Kaplan has operations and investments in a growing number of foreign countries, including Canada, Mexico, the United Kingdom, Ireland, France, Israel, Australia, New Zealand, Singapore, India and China. Operating in foreign countries presents a number of inherent risks, including the difficulties of complying with unfamiliar laws and regulations, effectively managing and staffing foreign operations, successfully navigating local customs and practices, preparing for potential political and economic instability and adapting to currency exchange rate fluctuations. The failure to manage these risks could have a material adverse effect on Kaplan’s operating results.

A significant portion of the Company’s revenues in its publishing and broadcasting businesses comes from advertising. The demand for advertising is sensitive to the overall level of economic activity, both nationally and locally. The financial

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market crisis and economic downturn has reduced advertising expenditures of many of our advertisers, which has had a negative impact on the operating results of the Company’s newspaper and magazine publishing and television broadcasting businesses. A continued decline in general economic conditions in the United States may have a material adverse effect on the operating results of the Company’s businesses.

The rates that the Company’s publishing and television broadcasting businesses can charge for advertising are directly related to the number of readers and viewers of its publications and broadcasts. There is tremendous competition for readers and viewers from other media. The Company’s publishing and television broadcasting businesses will be adversely affected to the extent that individuals decide to obtain news, entertainment, classified listings and local shopping information from Internet-based or other media to the exclusion of the Company’s publications and broadcasts.

Historically, newspaper and magazine publishing and television broadcasting have been viewed as cost-effective methods of delivering various forms of advertising. There can be no guarantee that this historical perception will guide future decisions on the part of advertisers. To the extent that advertisers shift advertising expenditures to other media outlets, the profitability of the Company’s publishing and television broadcasting businesses will suffer.

The development of direct broadcast satellite systems has significantly increased the competition faced by the Company’s cable television systems. In addition, the continuing growth and technological expansion of Internet-based services has increased competitive pressure on the Company’s media businesses. The development and deployment of new technologies has the potential to negatively and dramatically affect the Company’s businesses in ways that cannot now be reliably predicted.

The Company’s television broadcasting and cable television businesses operate in highly regulated environments. The Company’s VoIP services business also is subject to a growing degree of regulation. Complying with applicable regulations has significantly increased, and may continue to increase, the costs and reduced the revenues of these businesses. Changes in regulations have the potential to further negatively impact those businesses, not only by increasing compliance costs and (through restrictions on certain types of advertising, limitations on pricing flexibility or other means) reducing revenues, but also by possibly creating more favorable regulatory environments for the providers of competing services. More generally, all of the Company’s businesses could have their profitability or their competitive positions adversely affected by significant changes in applicable regulations.

Providers of services similar to those offered by the Company’s Cable ONE subsidiary have been the target of patent infringement claims from time to time relating to such matters as cable system architecture, electronic program guides, cable modem technology and VoIP services. Although we cannot predict the impact at this juncture, if any such claims are successful, the outcome would likely affect Cable ONE, as well as all other cable operators in the United States.

The Company’s newspaper publishing businesses collectively spend significant amounts each year on newsprint. Material increases in the cost of newsprint or significant disruptions in the supply of newsprint could have a material adverse effect on the operating results of the Company’s newspaper publishing businesses.

Item 1B. Unresolved Staff Comments.

Not applicable.

Item 2. Properties.

Directly or through subsidiaries, Kaplan owns a total of 11 properties: a 30,000-square-foot six-story building located at 131 West 56th Street in New York City, which serves as an educational center primarily for international students; a 39,000- square-foot four-story brick building and a 19,000 square-foot two-story brick building in Lincoln, NE, each of which is used by Kaplan University; a 4,000-square-foot office condominium in Chapel Hill, NC, which it utilizes for its

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Test Prep business; a 15,000-square-foot three-story building in Berkeley, CA, used for its Test Prep and English-language training businesses; a 25,000-square-foot one-story building in Omaha, NE, which is currently vacant; a 131,000-square-foot five-story brick building in Manchester, NH, used by Hesser College; a 25,000-square-foot building in Hammond, IN, used by Kaplan Career College (formerly Sawyer College); a 45,000-square-foot three-story brick building in Houston, TX, used by the Texas School of Business; and a 34,000-square-foot building in London, U.K., and a 2,200-square-foot building in Oxfordshire, U.K., each of which is used by Holborn College. Kaplan University’s corporate offices, together with a data center, call center and employee-training facilities, are located in two 97,000-square-foot leased buildings located on adjacent lots in Ft. Lauderdale, FL. Both of those leases will expire in 2017. In December 2008, Kaplan University entered into an agreement to lease a two-story, 124,500-square-foot building in Orlando, FL, to house additional call center and employee-training facilities, and a data center. One floor at the Orlando facility will be sublet to a third party through July of 2009. Kaplan’s distribution facilities for most of its domestic publications are located in a 291,000-square-foot warehouse in Aurora, IL, under a lease expiring in 2017. Kaplan’s headquarters offices are located at 888 7th Avenue in New York City, where Kaplan rents space on three floors under a lease that will expire in 2017. Overseas, DBS’s facilities in Dublin, Ireland, are located in nine buildings aggregating approximately 79,000 square feet of space that have been rented under leases expiring between 2009 and 2029. Kaplan Publishing has an office and distribution warehouse in Wokingham, Berkshire, of 25,000 square feet, under a lease expiring in 2016. Kaplan Financial’s largest leaseholds are office and instructional space in London of 33,000 square feet (which lease will expire in 2033), 21,000 square feet (which lease will expire in 2015), and 28,000 square feet (comprising six separate leases, which leases will expire in 2015); office and instructional space in Birmingham of 23,500 square feet (comprising two separate leases, which leases will expire in 2017); office and instructional space in Manchester of 26,000 square feet (comprising five separate leases, which leases will expire in 2027); and office and instructional space in Wales of 34,000 square feet (on an open-ended lease with termination on 12 months’ notice). Kidum has 44 locations throughout Israel, all of which are occupied under leases expiring between 2009 and 2012. All other Kaplan facilities in the United States and overseas (including administrative offices and instructional locations) also occupy leased premises.

WP Company owns the principal offices of The Washington Post in downtown Washington, DC, 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. WP Company also owns and occupies a small office building on L Street which is connected to The Post’s office building. Additionally, WP Company owns land on the corner of 15th and L Streets, NW, in Washington, DC, 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 one floor in this building, which it has subleased to a third party.

WP Company owns a printing plant in Fairfax County, VA, 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 College Park, MD, which was built in 1998 on a 17-acre tract of land owned by WP Company. As noted previously, WP Company plans to close this facility in 2009.

The Daily Herald Company owns its plant and office building in Everett, WA; it also owns two warehouses and a small rental building adjacent to its plant, as well as a small office building in Lynnwood, WA.

Early in 2007, Post–Newsweek Media, Inc. completed the construction of a two-story combination office building and printing plant on a 7-acre plot in Laurel, MD. In July 2006, The Gazette sold the two-story brick building in Gaithersburg, MD, that served as its headquarters, although certain editorial and administrative personnel occupied the building until early 2008. At this time, the staff moved into the renovated two-story brick building, also in Gaithersburg, that had formerly held the Montgomery County printing operations for Post–Newsweek Media. The Company closed a printing facility in Waldorf, MD, in 2008 that served as the headquarters for the Southern Maryland Newspapers. In May 2007, the Company finished construction of a one-story brick building in St. Mary’s County and moved that county’s editorial and sales staff to this property. In addition to this owned property, Post–Newsweek Media leases editorial and sales office space in Alexandria, VA, and in Frederick, Carroll, Calvert and Prince George’s Counties, MD.

The headquarters offices of the Company’s broadcasting operations are located in Detroit, MI, 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). In January 2007, the Company’s Post–Newsweek Stations subsidiary purchased a 5.8-acre site north of Miami on which it is constructing a new building to house the operations of WPLG and sold WPLG’s existing facility in Miami. WPLG will continue to occupy this facility pursuant to a lease with the new owner until the new building in completed.

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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 term on this space will expire on April 30, 2009. Newsweek has executed a 15-year lease at 395 Hudson Street, also in New York City, for approximately 18% less space than currently occupied with occupancy commencing at the termination of the current lease. Remodeling of the new space has commenced. The lease on this new space, subject to renewal rights, will expire on April 30, 2024. Budget Travel’s offices are also located in New York City, where they occupy premises under a lease that was renewed through 2015. Newsweek also leases a portion of a building in Mountain Lakes, NJ, to house its accounting, production and distribution departments. The lease on this space will expire on July 31, 2012, but is renewable for one 5-year period at Newsweek’s option.

The headquarters offices of the Cable Television Division are located in a three-story office building in Phoenix, AZ, that was purchased by Cable ONE in 1998. Cable ONE purchased an adjoining two-story office building in 2005; that building is currently leased to third-party tenants. The majority of the offices and head-end facilities of the Division’s individual cable systems are located in buildings owned by Cable ONE. Most of the tower sites used by the Division are leased. In addition, the Division houses call-center operations in 60,000 square feet of rented space in Phoenix under a lease that will expire in 2013.

Robinson Terminal Warehouse Corporation owns two wharves and several warehouses in Alexandria, VA. These facilities are adjacent to the business district and occupy approximately 7 acres of land. Robinson also owns two partially developed tracts of land in Fairfax County, VA, aggregating about 20 acres. These tracts are near The Washington Post’s Virginia printing plant and include several warehouses. Robinson also owns 23 acres of undeveloped land on the Potomac River in Charles County, MD.

WPNI occupies 85,000 square feet of office space in Arlington, VA, under a lease that will expire in 2015. Express Publications Company subleases part of this space. In addition, WPNI leases space in Washington, DC, and Los Angeles and subleases space from Newsweek in New York City for Slate’s offices in those cities. WPNI also leases office space for WPNI sales representatives in New York City, Chicago, San Francisco and Los Angeles. In January of 2008, WPNI entered into a two-year sublease for office space in Washington, DC, to house Foreign Policy magazine.

Greater Washington Publishing’s offices are located in leased space in Vienna, VA, while El Tiempo Latino’s offices are located in leased space in Arlington, VA.

Item 3. Legal Proceedings.

Kaplan, Inc., a subsidiary of the Company, is a party to a previously disclosed class action antitrust lawsuit filed on April 29, 2005, by purchasers of BAR/BRI bar review courses in the U.S. District Court for the Central District of California. On February 2, 2007, the parties filed a settlement agreement with the court together with documents setting forth a procedure for class notice. The court approved the terms of the settlement on July 9, 2007. However, certain class members filed an appeal to the case to the U.S. Court of Appeals for the Ninth Circuit, and that appeal remains pending. Effectiveness of the settlement is subject to court approval. On February 6, 2008, Kaplan was served with a purported class action lawsuit alleging substantially similar claims as the previously settled lawsuit. The putative class included all persons who purchased a bar review course from BAR/BRI in the United States since 2006 and all potential future purchasers of bar review courses. On April 15, 2008, the court granted defendants’ motion to dismiss. An appeal was filed by the plaintiffs on May 20, 2008. The appeal is pending in the U.S. Court of Appeals for the Ninth Circuit. Kaplan intends to vigorously defend this lawsuit.

On June 17, 2008, the Kaplan Aspect teachers filed a complaint in California Superior Court in San Francisco against Kaplan, Inc. and Aspect Education, Inc. alleging wage and hour violations on behalf of a putative class of California teachers. The Company is defending the complaint.

In 2007, the Company became aware of several state attorneys general who have opened inquiries or investigations into arrangements between lenders and institutions of higher education. Subsidiaries of the Company received requests for information from the Attorneys General of the states of Arizona, Iowa and Maryland regarding relationships with student loan providers. The Company also became aware of similar requests from members of the U.S. Congress to at least one lender with regard to its relationship with the Company and its subsidiaries, as well as other institutions of higher education. The Company believes that these governmental authorities are conducting wide-ranging inquiries of student lending practices generally, which, among other things, led to new legislation and other regulatory proposals and changes in 2008. The Company believes that it was not the sole recipient of this type of information request. The Company’s subsidiaries responded to these information requests and cooperated fully with these inquiries. The Company’s subsidiaries received no further requests for such information during 2008.

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On or about January 17, 2008, an Assistant U.S. Attorney in the Civil Division of the U.S. Attorney’s Office for the Eastern District of Pennsylvania contacted Kaplan Higher Education Division’s CHI-Broomall campus and made inquiries about the Surgical Technology program, including the program’s eligibility for Title IV federal financial aid, the program’s student loan defaults, licensing and accreditation. The inquiry is presently proceeding on an “informal, voluntary basis.” Kaplan is responding to the information requests made and intends to cooperate fully with the inquiry. The U.S. Department of Education is conducting a program review at the CHI-Broomall campus. Kaplan has responded to the information requests made by the Department of Education and intends to cooperate fully with its program review. The U.S. Attorney’s Office has informed Kaplan Higher Education that it may make further information requests upon the completion of the Department of Education program review.

On March 25, 2008, the U.S. District Court for the Middle District of Florida unsealed an action against subsidiaries of the Company encaptioned, United States of America ex rel. Carlos Urquilla-Diaz, et al. v. Kaplan University et al. The complaint contains, among other things, allegations under the False Claims Act, 31 U.S.C. Sec. 3729 et seq. related to eligibility for Title IV funding. The U.S. Government declined intervention. The Company has moved to dismiss the complaint. The U.S. Magistrate has entered a Report and Recommendation that the matter be transferred to the U.S. District Court for the Southern District of Florida. Discovery has been stayed pending rulings on the motions. The Company intends to defend this action vigorously.

On April 7, 2008, the U.S. District Court for the Northern District of Illinois unsealed an action against a subsidiary of the Company encaptioned, United States of America ex rel. Jorge Torres v. Kaplan Higher Education Corp. The U.S. Government declined intervention. The Plaintiff’s complaint contains, among other things, allegations under the False Claims Act, 31 U.S.C. Sec. 3729 et seq. related to eligibility for Title IV funding. The Company has moved to dismiss the complaint and will continue to defend this action vigorously.

On September 2, 2008, the U.S. District Court for the Western District of Pennsylvania unsealed an action against subsidiaries of the Company encaptioned, United States of America ex rel. Victoria Gatsiopoulos et al. v. ICM School of Business & Medical Careers et al. The Plaintiff’s complaint contains, among other things, allegations under the False Claims Act, 31 U.S.C. Sec. 3729 et seq. related to eligibility for Title IV funding. The U.S. Government filed notice that it is not intervening as of August 18, 2008. The Company has moved to dismiss the complaint and will continue to defend this action vigorously.

The Company and its subsidiaries are also subject to administrative proceedings and are defendants in various other civil lawsuits that have arisen in the ordinary course of their businesses, including actions alleging libel, violations of applicable wage and hour laws and claims involving current and former students at the Company’s schools. While it is not possible to predict the outcome of these lawsuits, in the opinion of management their ultimate dispositions should not have a material adverse effect on the Company’s business or financial position.

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

Not applicable.

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PART II

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

Market Information and Holders

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:

At January 31, 2009, there were 28 holders of record of the Company’s Class A Common Stock and 820 holders of record of the Company’s Class B Common Stock.

Dividend Information

Both classes of the Company’s Common Stock participate equally as to dividends. Quarterly dividends were paid at the rate of $2.15 per share during 2008 and $2.05 per share during 2007.

Securities Authorized for Issuance Under Equity Compensation Plans

The following table and the footnote thereto set forth certain information as of December 28, 2008, concerning compensation plans of the Company under which equity securities of the Company are authorized to be issued.

This table does not include information relating to restricted stock grants awarded under The Washington Post Company Incentive Compensation Plan, which plan has been approved by the stockholders of the Company. At December 28, 2008, there were 9,775 shares of restricted stock outstanding under the 2005 – 2008 Award Cycle and 11,430 shares of restricted stock outstanding under the 2007 – 2010 Award Cycle that had been awarded to employees of the Company and its subsidiaries under that Plan. In addition, the Company has from time to time awarded special discretionary grants of restricted stock to employees of the Company and its subsidiaries. At December 28, 2008, there were a total of 11,580 shares of restricted stock outstanding under special discretionary grants approved by the Compensation Committee of the Board of Directors. At December 28, 2008, a total of 133,815 shares of restricted stock were available for future awards.

Performance Graph

The following graph is a comparison of the yearly percentage change in the Company’s cumulative total shareholder return with the cumulative total return of the Standard & Poor’s 500 Stock Index, the Standard & Poor’s Publishing Index, and a custom peer group index comprised of education companies. The Standard & Poor’s 500 Stock Index is comprised of 500 U.S. companies in the industrial, transportation, utilities and financial industries and is weighted by market capitalization. The Standard & Poor’s Publishing Index is comprised of Gannett Co., Inc., The McGraw-Hill

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Companies, The Meredith Corporation, The New York Times Company and The Washington Post Company and also is weighted by market capitalization. The custom peer group of education companies includes Apollo Group Inc., Capella Education Co., Career Education Corp., Corinthian Colleges, Inc., DeVry Inc., ITT Educational Services Inc. and Strayer Education Inc. The Company is using a custom peer index of education companies this year because the Company is a diversified education and media company. Its largest and fastest growing business is Kaplan Inc., a leading global provider of educational services to individuals, schools and businesses. The graph reflects the investment of $100 on December 31, 2003, in the Company’s Class B Common Stock, the Standard & Poor’s 500 Stock Index, the Standard & Poor’s Publishing Index and the custom peer group index of education companies. For purposes of this graph, it has been assumed that dividends were reinvested on the date paid in the case of the Company and on a quarterly basis in the case of the Standard & Poor’s 500 Index, the Standard & Poor’s Publishing Index and the custom peer group index of education companies.

Item 6. Selected Financial Data.

See the information for the years 2004 through 2008 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 38 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 38 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; to its borrowing and cash-management activities, which are subject to interest rate risk; and to its foreign business operations, which are subject to foreign exchange rate risk. Neither the Company nor any of its subsidiaries is a party to any derivative financial instruments.

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Equity Price Risk

The Company has common stock investments in several publicly traded companies (as discussed in Note D to the Company’s Consolidated Financial Statements) that are subject to market price volatility. The fair value of these common stock investments totaled $333,319,000 at December 28, 2008.

Interest Rate Risk

The Company has historically satisfied some of its financing requirements through the issuance of short-term commercial paper. Conversely, when cash generation exceeds its current need for cash the Company may pay down its commercial paper borrowings and invest some or all of the surplus in commercial paper issued by third parties and money market funds. As of December 28, 2008 the Company had $150.0 million of commercial paper borrowings outstanding at an average interest rate of 0.20% and $11.5 million of investments in an institutional U.S. government money market fund at a rate of 1.20%. The Company is exposed to interest rate risk with respect to such investments and borrowings since an increase in short-term interest rates would increase the Company’s interest income on any commercial paper or money market investments it held at the time and would increase the Company’s interest expense on any commercial paper it had outstanding at the time. Assuming a hypothetical 100 basis point increase in the average interest rate on the Company’s commercial paper borrowings during 2008, the Company’s interest expense would have increased by approximately $786,000.

The Company’s long-term debt consists of $400,000,000 principal amount of 5.5% unsecured notes due February 15, 2009 (the “Notes”). At December 28, 2008, the aggregate fair value of the Notes, based upon quoted market prices, was $397,800,000. An increase in the market rate of interest applicable to the Notes would not increase the Company’s interest expense with respect to the Notes since the rate of interest the Company is required to pay on the Notes is fixed, but such an increase in rates would affect the fair value of the Notes. Assuming, hypothetically, that the market interest rate applicable to the Notes was 100 basis points higher than the Notes’ stated interest rate of 5.5%, the fair value of the Notes at December 31, 2008, would have been approximately $399,440,000. Conversely, if the market interest rate applicable to the Notes was 100 basis points lower than the Notes’ stated interest rate, the fair value of the Notes at such date would then have been approximately $400,450,000. During the first quarter of 2009, the Notes were refinanced primarily with the net proceeds from the sale of $400,000,000 principal amount of 7.25% unsecured notes due February 1, 2019.

Foreign Exchange Rate Risk

The Company is exposed to foreign exchange rate risk at its Kaplan and Newsweek international operations and the primary exposure relates to the exchange rate between the U.S. dollar and both the British pound and the Australian dollar. This exposure includes British pound and Australian-dollar denominated intercompany loans on U.S. based Kaplan entities with a functional currency in U.S. dollars. Gains and losses arising from foreign currency transactions affecting the Consolidated Statements of Income have historically not been significant; however, unrealized foreign currency losses on intercompany loans of $46.3 million were recorded in 2008 arising from the significant strengthening of the U.S dollar during the year. Comparing exchange rates in effect at December 31, 2008 versus December 31, 2007, the U.S. dollar strengthened against the British pound and the Australian dollar by approximately 28% and 21%, respectively. In 2007 and 2006, the Company reported unrealized foreign currency gains of $8.8 million and $11.9 million, respectively, as a result of the weakening of the U.S. dollar against the British pound and the Australian dollar.

If the values of the British pound and the Australian dollar relative to the U.S. dollar had been 10% lower than the values that prevailed during 2008, the Company’s pre-tax income for fiscal 2008 would have been approximately $15 million lower. Conversely, if such values had been 10% greater, the Company’s reported pre-tax income for fiscal 2008 would have been approximately $15 million higher.

Item 8. Financial Statements and Supplementary Data.

See the Company’s Consolidated Financial Statements at December 28, 2008, and for the periods then ended, together with the report of PricewaterhouseCoopers LLP thereon and the information contained in Note Q to said Consolidated Financial Statements titled “Summary of Quarterly Operating Results and Comprehensive Income (Unaudited),” which are included in this Annual Report on Form 10-K and listed in the index to financial information on page 38 hereof.

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

Not applicable.

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Item 9A. Controls and Procedures.

Disclosure Controls and Procedures

An evaluation was performed by the Company’s management, with the participation of the Company’s Chief Executive Officer (the Company’s principal executive officer) and the Company’s Senior Vice President–Finance (the Company’s principal financial officer), of the effectiveness of the Company’s disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)), as of December 28, 2008. Based on that evaluation, the Company’s Chief Executive Officer and Senior Vice President–Finance have concluded that the Company’s disclosure controls and procedures, as designed and implemented, are effective in ensuring that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and is accumulated and communicated to management, including the Chief Executive Officer and Senior Vice President–Finance, in a manner that allows timely decisions regarding required disclosure.

Management’s Report on Internal Control Over Financial Reporting

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)). The Company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Our management assessed the effectiveness of our internal control over financial reporting as of December 28, 2008. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control — Integrated Framework. Our management has concluded that as of December 28, 2008, our internal control over financial reporting is effective based on these criteria. The effectiveness of our internal control over financial reporting as of December 28, 2008 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report included herein.

Changes in Internal Control Over Financial Reporting

There has been no change in the Company’s internal control over financial reporting during the quarter ended December 28, 2008 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

Item 9B. Other Information.

Not applicable.

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Item 10. Directors, Executive Officers and Corporate Governance.

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,” “Audit Committee” and “Section 16(a) Beneficial Ownership Reporting Compliance” in the definitive Proxy Statement for the Company’s 2009 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 5.05 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.

In addition to the certifications of the Company’s Chief Executive Officer and Chief Financial Officer filed as exhibits to this Annual Report on Form 10-K, on June 6, 2008, the Company’s Chief Executive Officer submitted to the New York Stock Exchange the annual certification regarding compliance with the NYSE’s corporate governance listing standards required by Section 303A.12(a) of the NYSE Listed Company Manual.

Item 11. Executive Compensation.

The information contained under the headings “Director Compensation,” “Compensation Committee Interlocks and Insider Participation,” “Executive Compensation” and “Compensation Committee Report” in the definitive Proxy Statement for the Company’s 2009 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” in the definitive Proxy Statement for the Company’s 2009 Annual Meeting of Stockholders is incorporated herein by reference thereto.

Item 13. Certain Relationships and Related Transactions, and Director Independence.

The information contained under the headings “Transactions with Related Persons, Promoters and Certain Control Persons” and “Controlled Company” in the definitive Proxy Statement for the Company’s 2009 Annual Meeting of Stockholders is incorporated herein by reference thereto.

Item 14. Principal Accounting Fees and Services.

The information contained under the heading “Audit Committee Report” in the definitive Proxy Statement for the Company’s 2009 Annual Meeting of Stockholders is incorporated herein by reference thereto.

PART IV

Item 15. Exhibits, Financial Statement Schedules.

The following documents are filed as part of this report:

As listed in the index to financial information on page 38 hereof.

As listed in the index to financial information on page 38 hereof.

As listed in the index to exhibits on page 91 hereof.

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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 February 25, 2009.

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 February 25, 2009:

An original power of attorney authorizing Donald E. Graham, Hal S. Jones and Veronica Dillon, 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.

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INDEX TO FINANCIAL INFORMATION

THE WASHINGTON POST COMPANY

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.

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

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At December 28, 2008 and December 30, 2007, the Company had working capital of $257.3 million and a working capital deficit of $18.5 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’s net cash provided by operating activities, as reported in the Company’s Consolidated Statements of Cash Flows, was $535.8 million in 2008, compared to $581.2 million in 2007.

The Company expects to fund its estimated capital needs primarily through existing cash balances and internally generated funds and, to a lesser extent, through commercial paper borrowings. In management’s opinion, the Company will have ample liquidity to meet its various cash needs in 2009.

The following reflects a summary of the Company’s contractual obligations as of December 28, 2008:

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 D to the Company’s consolidated financial statements, are in the ordinary course of business and are conducted on an arm’s-length basis.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and judgments that affect the amounts reported in the financial statements. On an ongoing basis, the Company evaluates its estimates and assumptions. The Company bases its estimates on historical experience and other assumptions believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results could differ from these estimates.

An accounting policy is considered to be critical if it is important to the Company’s financial condition and results and if it requires management’s most difficult, subjective and complex judgments in its application. For a summary of all of the Company’s significant accounting policies, see Note B to the Company’s consolidated financial statements.

Revenue Recognition, Trade Accounts Receivable, Sales Returns and Allowance for Doubtful Accounts. Education tuition revenue is recognized ratably over the period of instruction as services are delivered to students, net of any refunds, corporate discounts, scholarships and employee tuition discounts. At Kaplan’s test prep 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’s estimates have increased.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and

Shareholders of The Washington Post Company:

In our opinion, the consolidated financial statements referred to under Item 15 (1) on page 36 and listed in the index on page 38 present fairly, in all material respects, the financial position of The Washington Post Company and its subsidiaries at December 28, 2008 and December 30, 2007, and the results of their operations and their cash flows for each of the three years in the period ended December 28, 2008 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the accompanying index presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 28, 2008, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for these financial statements and financial statement schedule, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control Over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on these financial statements, on the financial statement schedule, and on the Company’s internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included 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. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

As discussed in Notes J and K to the financial statements, The Washington Post Company changed the manner in which it accounts for share-based compensation and the manner in which it accounts for defined benefit pensions and postretirement plans, respectively, both in fiscal 2006.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

PricewaterhouseCoopers LLP

McLean, Virginia

February 25, 2009

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CONSOLIDATED STATEMENTS OF INCOME