Graham Holdings Co - Quarter Report: 2012 June (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

x Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Quarterly Period Ended June 30, 2012

 Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File Number 1-6714

THE WASHINGTON POST COMPANY

(Exact name of registrant as specified in its charter)


Delaware	53-0182885
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

1150 15th Street, N.W. Washington, D.C.	20071
(Address of principal executive offices)	(Zip Code)

(202) 334-6000

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 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 whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x. No ¨.

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 definition of “large accelerated filer,” accelerated filer” and “small reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller Reporting Company

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

Shares outstanding at August 3, 2012:

Class A Common Stock – 1,219,383 Shares

Class B Common Stock – 6,225,472 Shares

THE WASHINGTON POST COMPANY

Index to Form 10-Q


PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements

	a. Condensed Consolidated Statements of Operations (Unaudited) for the Three and Six Months Ended June 30, 2012 and July 3, 2011	1

	b. Condensed Consolidated Statements of Comprehensive Income (Unaudited) for the Three and Six Months Ended June 30, 2012 and July 3, 2011	2

	c. Condensed Consolidated Balance Sheets at June 30, 2012 (Unaudited) and December 31, 2011	3

	d. Condensed Consolidated Statements of Cash Flows (Unaudited) for the Six Months Ended June 30, 2012 and July 3, 2011	4

	e. Notes to Condensed Consolidated Financial Statements (Unaudited)	5

Item 2.	Management’s Discussion and Analysis of Results of Operations and Financial Condition	15

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	22

Item 4.	Controls and Procedures	22

PART II. OTHER INFORMATION

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	23

Item 6.	Exhibits	24

Signatures		25

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

THE WASHINGTON POST COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

		Three Months Ended				Six Months Ended
		June 30,		July 3,		June 30,		July 3,
(In thousands, except per share amounts)		2012		2011		2012		2011
Operating Revenues
	Education	$	558,404	$	616,962	$	1,111,805	$	1,235,891
	Advertising		190,086		193,352		360,836		370,737
	Circulation and Subscriber		219,286		216,606		434,516		431,129
	Other		39,143		34,338		72,238		65,413
			1,006,919		1,061,258		1,979,395		2,103,170
Operating Costs and Expenses
	Operating		470,648		500,766		941,847		976,847
	Selling, general and administrative		408,497		409,173		825,867		850,539
	Depreciation of property, plant and equipment		62,978		62,882		125,479		125,078
	Amortization of intangible assets		4,443		6,338		8,380		12,054
			946,566		979,159		1,901,573		1,964,518
Income from Operations			60,353		82,099		77,822		138,652
	Equity in earnings of affiliates, net		3,314		3,138		7,202		6,875
	Interest income		775		997		1,844		1,979
	Interest expense		(8,979)		(7,960)		(18,142)		(15,921)
	Other (expense) income, net		(1,160)		(2,591)		7,428		(26,623)
Income from Continuing Operations Before Income Taxes			54,303		75,683		76,154		104,962
Provision for Income Taxes			20,100		27,900		30,600		38,800
Income from Continuing Operations			34,203		47,783		45,554		66,162
Income (Loss) from Discontinued Operations, Net of Tax			17,844		(2,020)		38,061		(4,770)
Net Income			52,047		45,763		83,615		61,392
Net (Income) Loss Attributable to Noncontrolling Interests			(11)		40		(81)		26
Net Income Attributable to The Washington Post Company			52,036		45,803		83,534		61,418
Redeemable Preferred Stock Dividends			(222)		(230)		(673)		(691)
Net Income Attributable to The Washington Post Company
	Common Stockholders	$	51,814	$	45,573	$	82,861	$	60,727
Amounts Attributable to The Washington Post Company
	Common Stockholders
Income from continuing operations		$	33,970	$	47,593	$	44,800	$	65,497
Income (loss) from discontinued operations, net of tax			17,844		(2,020)		38,061		(4,770)
Net income attributable to The Washington Post Company
	common stockholders	$	51,814	$	45,573	$	82,861	$	60,727
Per Share Information Attributable to The Washington
	Post Company Common Stockholders
Basic income per common share from continuing operations		$	4.48	$	6.00	$	5.85	$	8.16
Basic income (loss) per common share from discontinued
	operations		2.36		(0.26)		5.02		(0.59)
Basic net income per common share		$	6.84	$	5.74	$	10.87	$	7.57
Basic average number of common shares outstanding			7,431		7,852		7,473		7,949
Diluted income per common share from continuing operations		$	4.48	$	6.00	$	5.85	$	8.16
Diluted income (loss) per common share from discontinued
	operations		2.36		(0.26)		5.02		(0.59)
Diluted net income per common share		$	6.84	$	5.74	$	10.87	$	7.57
Diluted average number of common shares outstanding			7,545		7,933		7,580		8,026

See accompanying Notes to Condensed Consolidated Financial Statements.

THE WASHINGTON POST COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

Three Months Ended

Six Months Ended

June 30,

July 3,

June 30,

July 3,

(In thousands)

2012

2011

2012

2011

Net Income

52,047

45,763

83,615

61,392

Other Comprehensive Income (Loss), Before Tax

Foreign currency translation adjustments:

Translation adjustments arising during the period

(8,911)

5,088

(1,088)

13,058

Adjustment for sales of businesses with foreign operations

―

521

―

(8,903)

5,088

(567)

13,058

Unrealized gains (losses) on available-for-sale securities:

Unrealized gains (losses) for the period

6,590

(22,315)

38,905

(15,105)

Reclassification adjustment for gain or write-down on available-for-sale

securities included in net income

(772)

―

(772)

30,696

5,818

(22,315)

38,133

15,591

Pension and other postretirement plans:

Amortization of net prior service credit included in net income

(470)

(465)

(921)

(932)

Amortization of net actuarial loss (gain) included in net income

2,590

(128)

4,247

(255)

Foreign affiliate pension adjustments

―

(4,613)

2,120

(593)

3,326

(5,800)

Cash flow hedge, net change

(1,342)

―

(1,377)

―

Other Comprehensive (Loss) Income, Before Tax

(2,307)

(17,820)

39,515

22,849

Income tax (expense) benefit related to items of other comprehensive income

(2,638)

9,100

(16,031)

(6,269)

Other Comprehensive (Loss) Income, Net of Tax

(4,945)

(8,720)

23,484

16,580

Comprehensive Income

47,102

37,043

107,099

77,972

Comprehensive income attributable to noncontrolling interests

(17)

(3)

(107)

(38)

Total Comprehensive Income Attributable to The Washington

Post Company

47,085

37,040

106,992

77,934

See accompanying Notes to Consolidated Financial Statements.

THE WASHINGTON POST COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS

				June 30,		December 31,
(In thousands)				2012		2011
				(Unaudited)
Assets
Current Assets
	Cash and cash equivalents			$	264,119	$	381,099
	Restricted cash				19,997		25,287
	Investments in marketable equity securities and other investments				423,945		338,674
	Accounts receivable, net				355,753		392,725
	Income taxes receivable				12,343		16,990
	Deferred income taxes				3,212		13,343
	Inventories				6,673		6,571
	Other current assets				78,716		70,936
		Total Current Assets			1,164,758		1,245,625
Property, Plant and Equipment, Net					1,117,421		1,152,390
Investments in Affiliates					21,721		17,101
Goodwill, Net					1,398,503		1,414,997
Indefinite-Lived Intangible Assets, Net					530,502		530,641
Amortized Intangible Assets, Net					50,787		54,622
Prepaid Pension Cost					537,467		537,262
Deferred Charges and Other Assets					56,443		64,348
		Total Assets		$	4,877,602	$	5,016,986

Liabilities and Equity
Current Liabilities
	Accounts payable and accrued liabilities			$	492,244	$	495,041
	Deferred revenue				360,492		387,532
	Dividends declared				18,461		―
	Short-term borrowings				3,173		112,983
		Total Current Liabilities			874,370		995,556
Postretirement Benefits Other Than Pensions					69,440		67,864
Accrued Compensation and Related Benefits					224,086		228,304
Other Liabilities					112,108		107,741
Deferred Income Taxes					542,241		545,361
Long-Term Debt					452,569		452,229
		Total Liabilities			2,274,814		2,397,055
Redeemable Noncontrolling Interest					6,821		6,740
Redeemable Preferred Stock					11,096		11,295
Preferred Stock					―		―
Common Stockholders’ Equity
	Common stock				20,000		20,000
	Capital in excess of par value				245,393		252,767
	Retained earnings				4,589,287		4,561,989
	Accumulated other comprehensive income, net of tax
		Cumulative foreign currency translation adjustment			20,771		21,338
		Unrealized gain on available-for-sale securities			103,238		80,358
		Unrealized gain on pensions and other postretirement plans			65,621		63,625
		Cash flow hedge			(817)		8
	Cost of Class B common stock held in treasury				(2,458,622)		(2,398,189)
		Total Equity			2,584,871		2,601,896
			Total Liabilities and Equity	$	4,877,602	$	5,016,986

See accompanying Notes to Condensed Consolidated Financial Statements.

THE WASHINGTON POST COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

			Six Months Ended
			June 30,		July 3,
(In thousands)			2012		2011
Cash Flows from Operating Activities:
Net Income			$	83,615	$	61,392
Adjustments to reconcile net income to net cash provided by operating activities:
	Depreciation of property, plant and equipment			126,276		128,973
	Amortization of intangible assets			8,738		14,215
	Net pension expense (benefit)			4,634		(1,747)
	Early retirement program expense			1,022		430
	Foreign exchange gain			(68)		(3,031)
	Net gain on sales of businesses			(26,459)		―
	Net (gain) loss on sale or write-down of marketable equity securities			(505)		30,696
	Equity in earnings of affiliates, net of distributions			(7,202)		(6,875)
	(Benefit) provision for deferred income taxes			(11,698)		4,798
	Net (gain) loss on sale or write-down of property, plant and equipment and other assets			(8,398)		5,638
	Change in assets and liabilities:
		Decrease in accounts receivable, net		32,736		43,375
		Increase in inventories		(102)		(3,158)
		Decrease in accounts payable and accrued liabilities		(24,145)		(44,623)
		Decrease in deferred revenue		(15,702)		(28,216)
		Decrease in income taxes receivable		3,823		6,655
		Decrease (increase) in other assets and other liabilities, net		2,292		(29,105)
	Other			850		597
		Net Cash Provided by Operating Activities		169,707		180,014

Cash Flows from Investing Activities:
	Purchases of property, plant and equipment			(97,830)		(92,842)
	Net proceeds from sales of businesses, property, plant and equipment and other assets			73,959		7,913
	Purchase of marketable equity securities and other investments			(46,133)		(4,928)
	Investments in certain businesses, net of cash acquired			(8,971)		(79,065)
	Other			1,623		(36)
		Net Cash Used in Investing Activities		(77,352)		(168,958)

Cash Flows from Financing Activities:
	Repayment of commercial paper, net			(109,671)		―
	Common shares repurchased			(74,472)		(131,520)
	Dividends paid			(37,775)		(38,262)
	Other			11,438		16,298
		Net Cash Used in Financing Activities		(210,480)		(153,484)
Effect of Currency Exchange Rate Change				1,145		4,050
Net Decrease in Cash and Cash Equivalents				(116,980)		(138,378)
Beginning Cash and Cash Equivalents				381,099		437,740
Ending Cash and Cash Equivalents			$	264,119	$	299,362

See accompanying Notes to Condensed Consolidated Financial Statements.

THE WASHINGTON POST COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1. ORGANIZATION, BASIS OF PRESENTATION AND RECENT ACCOUNTING PRONOUNCEMENTS

The Washington Post Company, Inc. (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), and television broadcasting (through the ownership and operation of six television broadcast stations).

Financial Periods – In the fourth quarter of 2011, the Company changed its fiscal quarter from a thirteen week quarter ending on the Sunday nearest the calendar quarter-end to a quarterly month end. The fiscal quarters for 2012 and 2011 ended on June 30, 2012, March 31, 2012, July 3, 2011, and April 3, 2011, respectively. Subsidiaries of the Company report on a calendar-quarter basis, with the exception of most of the newspaper publishing operations, which report on a thirteen week quarter ending on the Sunday nearest the calendar quarter-end.

Basis of Presentation – The accompanying condensed consolidated financial statements have been prepared in accordance with: (i) generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information; (ii) the instructions to Form 10-Q; and (iii) the guidance of Rule 10-01 of Regulation S-X under the Securities and Exchange Act of 1934, as amended, for financial statements required to be filed with the Securities and Exchange Commission (“SEC”). They include the assets, liabilities, results of operations and cash flows of the Company, including its domestic and foreign subsidiaries that are more than 50% owned or otherwise controlled by the Company. As permitted under such rules, certain notes and other financial information normally required by GAAP have been condensed or omitted. Management believes the accompanying condensed consolidated financial statements reflect all normal and recurring adjustments necessary for a fair presentation of the Company’s financial position, results of operations, and cash flows as of and for the periods presented herein. The Company’s results of operations for the three and six months ended June 30, 2012 and July 3, 2011 may not be indicative of the Company’s future results. These condensed consolidated financial statements are unaudited and should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2011.

The year-end condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP.

Certain amounts in previously issued financial statements have been reclassified to conform to the current year presentation, which includes the reclassification of the results of operations of certain Kaplan businesses as discontinued operations for all periods presented.

Use of Estimates in the Preparation of the Condensed Consolidated Financial Statements – The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and judgments that affect the amounts reported herein. Management bases its estimates and assumptions on historical experience and on various other factors that are believed to be reasonable under the circumstances. Due to the inherent uncertainty involved in making estimates, actual results reported in future periods may be affected by changes in those estimates.

Recently Adopted and Issued Accounting Pronouncements – In June 2011, the Financial Accounting Standards Board (“FASB”) issued an amended standard to increase the prominence of items reported in other comprehensive income. The amendment eliminates the option to present components of other comprehensive income as part of the statement of changes in stockholders' equity and requires that all changes in stockholders' equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In addition, the amendment requires companies to present on the face of the financial statements reclassification adjustments for items that are reclassified from other comprehensive income to net income in the statement(s) where the components of net income and the components of other comprehensive income are presented. The amendment does not affect how earnings per share is calculated or presented. This amendment is effective for interim and fiscal years beginning after December 15, 2011 and must be applied retrospectively. In December 2011, the FASB deferred the requirements related to the presentation of reclassification adjustments until further deliberations have taken place. Entities should continue to report reclassifications out of accumulated other comprehensive income consistent with the presentation requirements in effect prior to the issuance of the June 2011 amended standard. The adoption of the amendment not deferred by the FASB in the first quarter of 2012 is reflected in the Company’s Condensed Consolidated Statements of Comprehensive Income.

In July 2012, the FASB issued new guidance that amends the current indefinite-lived intangible assets impairment testing process. The new guidance permits an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of its indefinite-lived intangible assets is less than its carrying amount as a basis for determining whether it is necessary to perform the quantitative impairment test. Previous guidance required an entity to test indefinite-lived intangible assets for impairment, on at least an annual basis, by comparing the fair value of an indefinite-lived intangible asset with its carrying amount. The new guidance is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. Early adoption is permitted if an entity’s financial statements for the most recent period have not yet been issued. The Company plans to early adopt this guidance at the beginning of the fourth quarter of 2012 and the guidance will not have an effect on the Company’s Condensed Consolidated Financial Statements.

2. DISCONTINUED OPERATIONS

In April 2012, the Company completed the sale of Kaplan EduNeering. Under the terms of the agreement, the purchaser acquired the stock of EduNeering and received substantially all the assets and liabilities. In the second quarter of 2012, the Company recorded an after-tax gain of $18.5 million related to this sale, subject to final net working capital adjustments, which is included in Income (Loss) from Discontinued Operations, Net of Tax in the Company’s Condensed Consolidated Statement of Operations for the three and six months ended June 30, 2012. In February 2012, Kaplan completed the stock sale of Kaplan Learning Technologies (KLT) and recorded an after-tax loss on the sale of $1.9 million, which is included in Income (Loss) from Discontinued Operations, Net of Tax in the Company’s Condensed Consolidated Statement of Operations for the six months ended June 30, 2012.

The Company recorded $23.2 million of income tax benefits in the first quarter of 2012 in connection with the sale of its stock in EduNeering and KLT related to the excess of the outside stock tax basis over the net book value of the net assets disposed.

In October 2011, Kaplan completed the sale of Kaplan Compliance Solutions (KCS) and in July 2011, Kaplan completed the sale of Kaplan Virtual Education (KVE). The results of operations of EduNeering, KLT, KCS and KVE, for the second quarter and first six months of 2012 and 2011, where applicable, are included in the Company’s Condensed Consolidated Statements of Operations as Income (Loss) from Discontinued Operations, Net of Tax. All corresponding prior period operating results presented in the Company’s condensed consolidated financial statements and the accompanying notes have been reclassified to reflect the discontinued operations presented. The Company did not reclassify its Condensed Consolidated Statements of Cash Flows or prior year Condensed Consolidated Balance Sheet to reflect the discontinued operations.

The summarized Income (Loss) from Discontinued Operations, Net of Tax, for the three and six months ended June 30, 2012 and July 3, 2011 is presented below:

Three Months Ended

Six Months Ended

June 30,

July 3,

June 30,

July 3,

(in thousands)

2012

2011

2012

2011

Operating revenues

518

24,618

7,309

46,318

Operating costs and expenses

(1,485)

(27,838)

(8,620)

(54,088)

Loss from discontinued operations

(967)

(3,220)

(1,311)

(7,770)

Benefit from income taxes

(270)

(1,200)

(459)

(3,000)

Net Loss from Discontinued Operations

(697)

(2,020)

(852)

(4,770)

Gain on sale of discontinued operations

29,541

―

26,459

―

Provision for (benefit from) income taxes on sale of discontinued operations

11,000

―

(12,454)

―

Income (Loss) from Discontinued Operations, Net of Tax

17,844

(2,020)

38,061

(4,770)

3. INVESTMENTS

Investments in marketable equity securities at June 30, 2012 and December 31, 2011 comprised the following:

	June 30,		December 31,
(in thousands)	2012		2011
Total cost	$	213,831	$	169,271
Net unrealized gains		172,064		133,930
Total Fair Value	$	385,895	$	303,201

The Company invested $45.0 million in marketable equity securities during the first six months of 2012. There were no new investments in marketable equity securities during the first six months of 2011. During the first six months of 2012, proceeds from sales of marketable equity securities were $2.0 million, and net realized gains on such sales were $0.5 million. There were no sales of marketable equity securities in the first six months of 2011.

At the end of the first quarter of 2011, the Company’s investment in Corinthian Colleges, Inc. had been in an unrealized loss position for over six months. The Company evaluated this investment for other-than-temporary impairment based on various factors, including the duration and severity of the unrealized loss, the reason for the decline in value and the potential recovery period, and the Company’s ability and intent to hold the investment. In the first quarter of 2011, the Company concluded the loss was other-than-temporary and recorded a $30.7 million write-down on the investment. The investment continued to decline and in the third quarter of 2011, the Company recorded another $23.1 million write-down on the investment. The Company’s investment in Corinthian Colleges, Inc. accounted for $21.5 million of the total fair value of the Company’s investments in marketable equity securities at June 30, 2012.

4. ACQUISITIONS AND DISPOSITIONS

In the first six months of 2012, the Company acquired four small businesses in its education division and other businesses segment; the purchase price allocation mostly comprised goodwill and other intangible assets on a preliminary basis. In the first six months of 2011, the Company acquired four businesses. In the second quarter of 2011, Kaplan acquired three businesses in its Kaplan International division. These acquisitions included Kaplan’s May 2011 acquisitions of Franklyn Scholar and Carrick Education Group, leading national providers of vocational training and higher education in Australia. In June 2011, Kaplan acquired Structuralia, a provider of e-learning for the engineering and infrastructure sector in Spain. The assets and liabilities of the companies acquired have been recorded at their estimated fair values at the date of acquisition.

Kaplan completed the sales of EduNeering in April 2012 and Kaplan Learning Technologies in February 2012, which were part of the Kaplan Ventures division. In July 2011, Kaplan completed the sale of Kaplan Virtual Education, which was part of Kaplan Ventures division.

5. GOODWILL AND OTHER INTANGIBLE ASSETS

Amortization of intangible assets for the three months ended June 30, 2012 and July 3, 2011 was $4.5 million and $7.4 million, respectively. Amortization of intangible assets for the six months ended June 30, 2012 and July 3, 2011 was $8.7 and $14.2 million. Amortization of intangible assets is estimated to be approximately $9 million for the remainder of 2012, $14 million in 2013, $8 million in 2014, $6 million in 2015, $5 million in 2016, $6 million in 2017 and $3 million thereafter.

The changes in the carrying amount of goodwill, by segment, for the six months ended June 30, 2012 were as follows:

Cable

Newspaper

Television

Other

(in thousands)

Education

Television

Publishing

Broadcasting

Businesses

Total

Balance as of December 31, 2011

Goodwill

1,116,615

85,488

81,183

203,165

100,152

1,586,603

Accumulated impairment losses

(8,492)

―

(65,772)

―

(97,342)

(171,606)

1,108,123

85,488

15,411

203,165

2,810

1,414,997

Acquisitions

7,364

―

4,098

―

11,462

Dispositions

(27,373)

―

(27,373)

Foreign currency exchange rate changes and other

(583)

―

(583)

Balance as of June 30, 2012

Goodwill

1,087,531

85,488

85,281

203,165

100,152

1,561,617

Accumulated impairment losses

―

(65,772)

―

(97,342)

(163,114)

1,087,531

85,488

19,509

203,165

2,810

1,398,503

The changes in carrying amount of goodwill at the Company’s education division for the six months ended June 30, 2012 were as follows:

Higher

Test

Kaplan

(in thousands)

Education

Preparation

International

Ventures

Total

Balance as of December 31, 2011

Goodwill

409,128

152,187

515,936

39,364

1,116,615

Accumulated impairment losses

―

(8,492)

409,128

152,187

515,936

30,872

1,108,123

Acquisitions

―

7,364

―

7,364

Dispositions

―

(27,373)

Foreign currency exchange rate changes and other

(21)

―

623

(1,185)

(583)

Balance as of June 30, 2012

Goodwill

409,107

152,187

523,923

2,314

1,087,531

Accumulated impairment losses

―

409,107

152,187

523,923

2,314

1,087,531

Other intangible assets consist of the following:

As of June 30, 2012

As of December 31, 2011

Gross

Net

Gross

Net

Useful Life

Carrying

Accumulated

Carrying

Carrying

Accumulated

Carrying

(in thousands)

Range

Amount

Amortization

Amount

Amount

Amortization

Amount

Amortized Intangible Assets

Non-compete agreements

2-5 years

14,297

11,633

2,664

14,493

10,764

3,729

Student and customer relationships

2-10 years

65,851

37,727

28,124

75,734

47,888

27,846

Databases and technology

3-5 years

10,514

8,974

1,540

10,514

8,159

2,355

Trade names and trademarks

2-10 years

32,323

16,592

15,731

36,222

18,936

17,286

Other

1-25 years

9,563

6,835

2,728

9,971

6,565

3,406

132,548

81,761

50,787

146,934

92,312

54,622

Indefinite-Lived Intangible Assets

Franchise agreements

496,321

496,321

Wireless licenses

22,150

22,150

Licensure and accreditation

7,862

7,862

Other

4,169

4,308

530,502

530,641

6. DEBT

The Company’s borrowings consist of the following:

	June 30,		December 31,
(in thousands)	2012		2011
7.25% unsecured notes due February 1, 2019	$	397,272	$	397,065
Commercial paper borrowings		―		109,671
AUD 50M borrowing		51,168		51,012
Other indebtedness		7,302		7,464
Total Debt		455,742		565,212
Less: current portion		(3,173)		(112,983)
Total Long-Term Debt	$	452,569	$	452,229

The Company’s other indebtedness at June 30, 2012 and December 31, 2011 is at interest rates from 0% to 6% and matures from 2012 to 2017 and 2012 to 2016, respectively.

During the three months ended June 30, 2012 and July 3, 2011, the Company had average borrowings outstanding of approximately $455.5 million and $401.2 million, respectively, at average annual interest rates of approximately 7.0% and 7.2%. During the three months ended June 30, 2012 and July 3, 2011, the Company incurred net interest expense of $8.2 million and $7.0 million, respectively.

During the six months ended June 30, 2012 and July 3, 2011, the Company had average borrowings outstanding of approximately $472.0 million and $400.6 million, respectively, at average annual interest rates of approximately 7.0% and 7.2%. During the six months ended June 30, 2012 and July 3, 2011, the Company incurred net interest expense of $16.3 million and $13.9 million, respectively.

At June 30, 2012, the fair value of the Company’s 7.25% unsecured notes, based on quoted market prices, totaled $464.5 million, compared with the carrying amount of $397.3 million. At December 31, 2011, the fair value of the Company’s 7.25% unsecured notes, based on quoted market prices, totaled $460.5 million, compared with the carrying amount of $397.1 million. The carrying value of the Company’s other unsecured debt at June 30, 2012 approximates fair value.

7. EARNINGS PER SHARE

The Company’s earnings per share from continuing operations (basic and diluted) for the three and six months ended June 30, 2012 and July 3, 2011 are presented below:

			Three Months Ended				Six Months Ended
			June 30,		July 3,		June 30,		July 3,
(in thousands, except per share amounts)			2012		2011		2012		2011
Income from continuing operations attributable to The
	Washington Post Company common stockholders		$	33,970	$	47,593	$	44,800	$	65,497
Less: Amount attributable to participating securities				(670)		(486)		(1,079)		(647)
Basic income from continuing operations attributable to
	The Washington Post Company common stockholders		$	33,300	$	47,107	$	43,721	$	64,850

Plus: Amount attributable to participating securities				670		486		1,079		647
Diluted income from continuing operations attributable to
	The Washington Post Company common stockholders		$	33,970	$	47,593	$	44,800	$	65,497

Basic weighted average shares outstanding				7,431		7,852		7,473		7,949
Plus: Effect of dilutive shares related to stock options and restricted stock				114		81		107		77
Diluted weighted average shares outstanding				7,545		7,933		7,580		8,026

Income Per Share from Continuing Operations Attributable
	to The Washington Post Company Common Stockholders:
		Basic	$	4.48	$	6.00	$	5.85	$	8.16
		Diluted	$	4.48	$	6.00	$	5.85	$	8.16

For the three and six months ended June 30, 2012, the basic earnings per share computed under the two-class method is lower than the diluted earnings per share computed under the if-converted method for participating securities, resulting in the presentation of the lower amount in diluted earnings per share. The diluted earnings per share amounts for the three and six months ended June 30, 2012 exclude the effects of 125,044 and 113,294 stock options outstanding, respectively, as their inclusion would have been antidilutive. The diluted earnings per share amounts for the three and six months ended June 30, 2012 exclude the effects of 42,500 restricted stock awards, as their inclusion would have been antidilutive. The diluted earnings per share amounts for the three and six months ended July 3, 2011 exclude the effects of 89,850 and 79,850 stock options outstanding, respectively, as their inclusion would have been antidilutive.

In the three and six months ended June 30, 2012, the Company declared regular dividends totaling $2.45 and $7.35 per share, respectively. In the three and six months ended July 3, 2011, the Company declared regular dividends totaling $2.35 and $7.05 per share, respectively.

8. PENSION AND POSTRETIREMENT PLANS

Defined Benefit Plans. The total cost (benefit) arising from the Company’s defined benefit pension plans for the three and six months ended June 30, 2012 and July 3, 2011, consists of the following components:

Pension Plans

Three Months Ended

Six Months Ended

June 30,

July 3,

June 30,

July 3,

(in thousands)

2012

2011

2012

2011

Service cost

8,701

6,760

17,808

13,974

Interest cost

14,829

14,964

29,420

30,069

Expected return on assets

(24,510)

(24,064)

(48,522)

(47,553)

Amortization of prior service cost

919

882

1,856

1,763

Recognized actuarial loss

2,503

―

4,072

―

Net Periodic Cost (Benefit)

2,442

(1,458)

4,634

(1,747)

Early retirement programs expense

―

1,022

430

Total Cost (Benefit)

2,442

(1,458)

5,656

(1,317)

In the first quarter of 2012, the Company offered a Voluntary Retirement Incentive Program to certain employees of Post-Newsweek Media and recorded early retirement program expense of $1.0 million. In the first quarter of 2011, the Company offered a Voluntary Retirement Incentive Program to certain employees of Robinson Terminal Warehouse and recorded early retirement program expense of $0.4 million. The early retirement program expense for these programs is funded from the assets of the Company’s pension plans.

Effective August 1, 2012, the Company’s defined benefit pension plan was amended to provide most of the current participants with a new cash balance benefit. The new cash balance benefit will be funded by the assets of the Company’s pension plans. As a result of this new benefit, effective August 1, 2012, the Company’s matching contribution for its 401(k) Savings Plans has been reduced.

The total cost arising from the Company’s Supplemental Executive Retirement Plan (SERP) for the three and six months ended June 30, 2012 and July 3, 2011, consists of the following components:

	SERP
	Three Months Ended				Six Months Ended
	June 30,		July 3,		June 30,		July 3,
(in thousands)	2012		2011		2012		2011
Service cost	$	366	$	380	$	733	$	760
Interest cost		1,061		1,084		2,121		2,168
Amortization of prior service cost		13		65		27		130
Recognized actuarial loss		459		353		917		706
Total Cost	$	1,899	$	1,882	$	3,798	$	3,764

Defined Benefit Plan Assets. The Company’s defined benefit pension obligations are funded by a portfolio made up of a relatively small number of stocks and high-quality fixed-income securities that are held by a third-party trustee. As of June 30, 2012 and December 31, 2011, the assets of the Company’s pension plans were allocated as follows:

	June 30,			December 31,
	2012			2011
U.S. equities		68	%		69	%
U.S. fixed income		11	%		10	%
International equities		21	%		21	%
		100	%		100	%

Essentially all of the assets are actively managed by two investment companies. The goal of the investment managers is to produce moderate long-term growth in the value of these assets, while protecting them against large decreases in value. Both of these managers may invest in a combination of equity and fixed-income securities and cash. The managers are not permitted to invest in securities of the Company or in alternative investments. The investment managers cannot invest more than 20% of the assets at the time of purchase in the stock of Berkshire Hathaway or more than 10% of the assets in the securities of any other single issuer, except for obligations of the U.S. Government, without receiving prior approval by the Plan administrator. As of June 30, 2012, the managers can invest no more than 24% of the assets in international stocks at the time the investment is made, and no less than 10% of the assets could be invested in fixed-income securities. None of the assets is managed internally by the Company.

In determining the expected rate of return on plan assets, the Company considers the relative weighting of plan assets, the historical performance of total plan assets and individual asset classes and economic and other indicators of future performance. In addition, the Company may consult with and consider the input of financial and other professionals in developing appropriate return benchmarks.

The Company evaluated its defined benefit pension plan asset portfolio for the existence of significant concentrations (defined as greater than 10% of plan assets) of credit risk as of June 30, 2012. Types of concentrations that were evaluated include, but are not limited to, investment concentrations in a single entity, type of industry, foreign country and individual fund. Assets included $167.6 million and $154.0 million of Berkshire Hathaway common stock at June 30, 2012 and December 31, 2011, respectively. At June 30, 2012 the Company held investments in one foreign country which exceeded 10% of total plan assets. These investments were valued at $193.6 million and $241.4 million at June 30, 2012 and December 31, 2011, respectively, or approximately 10% and 13%, respectively, of total plan assets.

Other Postretirement Plans. The total benefit arising from the Company’s other postretirement plans for the three and six months ended June 30, 2012 and July 3, 2011, consists of the following components:

	Three Months Ended				Six Months Ended
	June 30,		July 3,		June 30,		July 3,
(in thousands)	2012		2011		2012		2011
Service cost	$	779	$	718	$	1,557	$	1,436
Interest cost		684		765		1,368		1,531
Amortization of prior service credit		(1,402)		(1,412)		(2,804)		(2,825)
Recognized actuarial gain		(370)		(480)		(740)		(960)
Total Periodic Benefit	$	(309)	$	(409)	$	(619)	$	(818)

9. OTHER NON-OPERATING (EXPENSE) INCOME

A summary of non-operating (expense) income for the three and six months ended June 30, 2012 and July 3, 2011, is as follows:

		Three Months Ended				Six Months Ended
		June 30,		July 3,		June 30,		July 3,
(in thousands)		2012		2011		2012		2011
Gain on sales of cost method investments		$	1,441	$	199	$	7,258	$	4,031
Gain on sales of marketable equity securities			505		―		505		―
Impairment write-down on a cost method investment			(335)		(3,148)		(386)		(3,148)
Foreign currency (losses) gains, net			(2,592)		331		68		3,031
Impairment write-down on a marketable equity security			―		―		―		(30,696)
Other, net			(179)		27		(17)		159
	Total Other Non-Operating (Expense) Income	$	(1,160)	$	(2,591)	$	7,428	$	(26,623)

10. CONTINGENCIES

Litigation and Legal Matters. The Company is involved in various legal proceedings that arise in the ordinary course of its business. Although the outcome of the legal claims and proceedings against the Company cannot be predicted with certainty, based on currently available information, management believes that there are no existing claims or proceedings that are likely to have a material effect on the Company's business, financial condition, results of operations or cash flows. Also, based on currently available information, management is of the opinion that the exposure to future material losses from existing legal proceedings is not reasonably possible, or that future material losses in excess of the amounts accrued are not reasonably possible.

DOE Program Reviews. The U.S. Department of Education (DOE) has undertaken program reviews at various Kaplan Higher Education (KHE) campus locations and at Kaplan University. Currently, there are two pending program reviews, including Kaplan University. In May 2012, the DOE issued a preliminary report on its program review at Kaplan University. Several of the preliminary findings require Kaplan University to conduct additional, detailed file reviews, with Kaplan University’s review and response due in October 2012. In addition to the two pending program reviews, the Company is awaiting the DOE’s final report on the program review at KHE’s Broomall, PA, location. The results of these open reviews and their impact on Kaplan’s operations are uncertain.

Other. In June 2012, the Accrediting Commission of Career Schools and Colleges (ACCSC), a KHE accreditor, issued a notice to three campuses (Baltimore, Dayton and Indianapolis Northwest), to “show cause” as to why their accreditation should not be withdrawn for failure to meet certain student achievement threshold requirements. These campuses represented approximately 2% of KHE’s year-to-date revenue for 2012. Each of these campuses failed to meet student placement thresholds or student graduation rate thresholds or both in some programs or aggregated over all programs. The campuses must respond by September 2012 to show improvement in these rates and/or demonstrate an adequate plan to improve these rates and come into compliance with the ACCSC standards. KHE cannot be certain that its remedial measures will satisfy all of ACCSC's concerns; in the event that ACCSC determines that some or all of these campuses may lose accreditation, a loss of accreditation would mean that the school would no longer be eligible to participate in Title IV programs and may also lose programmatic accreditation necessary for students to obtain licensure and/or employment in specific professions.

In December 2011, the United Kingdom Border Agency (UKBA) conducted a compliance review at Kaplan UK’ s Borough High Street Center in London, England. The review focused on Kaplan UK’s compliance with regulations regarding Tier 4 students, who are adult students seeking to study in the United Kingdom (UK). Kaplan does not expect the compliance review to have a significant impact on Kaplan UK’s operations.

Also, all of the significant Kaplan UK schools have now gained Highly Trusted Sponsor status (HTS). Without HTS, schools could not issue a Confirmation of Acceptance for Studies (CAS) to potential incoming international students.

Additionally, UKBA issued revised immigration rules that became operational on April 21, 2011. Students from outside the European Economic Area (EEA) and Switzerland who were issued a CAS after July 4, 2011 will be given permission to work part-time during their studies only if they attend an institution which qualifies as a Higher Education Institution (HEI). Many of the Kaplan UK international students currently work part-time. Kaplan UK is not in receipt of public funding for the courses upon which international students study and, therefore, does not qualify as an HEI. These new rules have adversely impacted the number of international students studying at certain Kaplan UK programs.

11. FAIR VALUE MEASUREMENTS

Fair value measurements are determined based on the assumptions that a market participant would use in pricing an asset or liability based on a three-tiered hierarchy that draws a distinction between market participant assumptions based on (i) observable inputs, such as quoted prices in active markets (Level 1); (ii) inputs other than quoted prices in active markets that are observable either directly or indirectly (Level 2); and (iii) unobservable inputs that require the Company to use present value and other valuation techniques in the determination of fair value (Level 3). Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measure. The Company’s assessment of the significance of a particular input to the fair value measurements requires judgment and may affect the valuation of the assets and liabilities being measured and their placement within the fair value hierarchy.

The Company’s financial assets and liabilities measured at fair value on a recurring basis were as follows:

(in thousands)			Level 1		Level 2		Total
At June 30, 2012
Assets
	Money market investments⁽¹⁾		$	―	$	142,025	$	142,025
	Marketable equity securities⁽³⁾			385,895		―		385,895
	Other current investments⁽⁴⁾			15,851		22,200		38,051
		Total Financial Assets	$	401,746	$	164,225	$	565,971

Liabilities
	Deferred compensation plan liabilities⁽⁶⁾		$	―	$	60,511	$	60,511
	7.25% unsecured notes⁽⁷⁾			―		464,472		464,472
	AUD 50M borrowing⁽⁷⁾			―		51,168		51,168
	Interest rate swap⁽⁸⁾			―		1,362		1,362
		Total Financial Liabilities	$	―	$	577,513	$	577,513

At December 31, 2011
Assets
	Money market investments⁽²⁾		$	―	$	180,136	$	180,136
	Marketable equity securities⁽³⁾			303,201		―		303,201
	Other current investments⁽⁴⁾			15,223		20,250		35,473
	Interest rate swap⁽⁵⁾			―		14		14
		Total Financial Assets	$	318,424	$	200,400	$	518,824

Liabilities
	Deferred compensation plan liabilities⁽⁶⁾		$	―	$	63,403	$	63,403
	7.25% unsecured notes⁽⁷⁾			―		460,500		460,500
	AUD 50M borrowing⁽⁷⁾			―		51,012		51,012
		Total Financial Liabilities	$	―	$	574,915	$	574,915

____________

(1) The Company’s money market investments at June 30, 2012 are included in cash and cash equivalents.

(2) The Company’s money market investments at December 31, 2011 are included in cash, cash equivalents and restricted cash.

(3) The Company’s investments in marketable equity securities are classified as available-for-sale.

(4) Includes U.S. Government Securities, corporate bonds, mutual funds and time deposits (with original maturities greater than 90 days, but less than one year).

(5) Included in Deferred charges and other assets. The fair value utilized a market approach model using the notional amount of the interest rate swap multiplied by the observable inputs of time to maturity and market interest rates.

(6) Includes The Washington Post Company Deferred Compensation Plan and supplemental savings plan benefits under The Washington Post Company Supplemental Executive Retirement Plan, which are included in accrued compensation and related benefits.

(7) See Note 6 for carrying amount of these notes and borrowing.

(8) Included in Other liabilities. The fair value utilized a market approach model using the notional amount of the interest rate swap multiplied by the observable inputs of time to maturity and market interest rates.

For assets that are measured using quoted prices in active markets, the total fair value is the published market price per unit multiplied by the number of units held without consideration of transaction costs. Assets and liabilities that are measured using significant other observable inputs are primarily valued by reference to quoted prices of similar assets or liabilities in active markets, adjusted for any terms specific to that asset or liability.

12. BUSINESS SEGMENTS

The Company has eight reportable segments: Kaplan Higher Education, Kaplan Test Preparation, Kaplan International, Kaplan Ventures, cable television, newspaper publishing, television broadcasting and other businesses.

Education. Kaplan sold EduNeering in April 2012, KLT in February 2012, KCS in October 2011 and KVE in July 2011; therefore, the education division’s operating results exclude these businesses. Also, Kaplan’s Colloquy and U.S. Pathways businesses moved from Kaplan Ventures to Kaplan International. Segment operating results of the education division have been restated to reflect these changes.

In the second quarter of 2012, Kaplan International results benefited from a favorable net $1.9 million adjustment. This included a $2.0 million adjustment to increase liabilities assumed in a 2011 acquisition and a favorable $3.9 million out of period expense adjustment related to certain items recorded in 2011 and 2010. With respect to the $3.9 million out of period expense adjustment, the Company has concluded that it was not material to the Company’s financial position or results of operations for 2012, 2011 and 2010 and the related interim periods, based on its consideration of quantitative and qualitative factors.

The following table summarizes financial information related to each of the Company’s business segments:


		Three Months Ended				Six Months Ended
		June 30,		July 3,		June 30,		July 3,
(in thousands)		2012		2011		2012		2011
Operating Revenues
	Education	$	558,404	$	616,962	$	1,111,805	$	1,235,891
	Cable television		195,579		191,231		385,789		381,511
	Newspaper publishing		151,814		162,772		294,135		317,769
	Television broadcasting		95,591		84,940		177,088		157,123
	Other businesses		6,680		6,095		12,695		12,757
	Corporate office		―		―		―		―
	Intersegment elimination		(1,149)		(742)		(2,117)		(1,881)
		$	1,006,919	$	1,061,258	$	1,979,395	$	2,103,170
Income (Loss) from Operations
	Education	$	3,351	$	21,468	$	(9,837)	$	41,517
	Cable television		38,446		40,425		71,223		78,132
	Newspaper publishing		(15,876)		(2,918)		(38,436)		(15,745)
	Television broadcasting		43,728		32,571		74,727		52,162
	Other businesses		(5,804)		(5,014)		(11,055)		(10,053)
	Corporate office		(3,492)		(4,433)		(8,800)		(7,361)
		$	60,353	$	82,099	$	77,822	$	138,652
Equity in Earnings of Affiliates, Net			3,314		3,138		7,202		6,875
Interest Expense, Net			(8,204)		(6,963)		(16,298)		(13,942)
Other (Expense) Income, Net			(1,160)		(2,591)		7,428		(26,623)
Income from Continuing Operations Before Income Taxes		$	54,303	$	75,683	$	76,154	$	104,962
Depreciation of Property, Plant and Equipment
	Education	$	21,159	$	21,491	$	42,021	$	41,666
	Cable television		32,234		31,533		64,431		63,319
	Newspaper publishing		6,282		6,540		12,518		13,440
	Television broadcasting		3,222		3,134		6,347		6,244
	Other businesses		81		84		162		165
	Corporate office		―		100		―		244
		$	62,978	$	62,882	$	125,479	$	125,078
Amortization of Intangible Assets
	Education	$	3,810	$	5,049	$	7,053	$	9,469
	Cable television		53		66		107		139
	Newspaper publishing		172		289		355		579
	Television broadcasting		―		―		―		―
	Other businesses		408		934		865		1,867
	Corporate office		―		―		―		―
		$	4,443	$	6,338	$	8,380	$	12,054
Net Pension Expense (Credit)
	Education	$	1,969	$	1,652	$	4,361	$	3,204
	Cable television		514		497		1,044		1,015
	Newspaper publishing		7,781		5,288		16,392		11,993
	Television broadcasting		1,055		335		2,015		981
	Other businesses		19		17		38		34
	Corporate office		(8,896)		(9,247)		(18,194)		(18,544)
		$	2,442	$	(1,458)	$	5,656	$	(1,317)

Identifiable assets for the Company’s business segments consist of the following:

		As of
		June 30,		December 31,
(in thousands)		2012		2011
Identifiable Assets
	Education	$	1,829,263	$	2,176,240
	Cable television		1,146,806		1,145,596
	Newspaper publishing		72,701		118,253
	Television broadcasting		419,592		421,764
	Other businesses		9,737		11,190
	Corporate office		991,887		823,641
		$	4,469,986	$	4,696,684
Investments in Marketable Equity Securities			385,895		303,201
Investments in Affiliates			21,721		17,101
Total Assets		$	4,877,602	$	5,016,986

The Company’s education division comprises the following operating segments:

		Three Months Ended				Six Months Ended
		June 30,				June 30,
(in thousands)		2012		2011		2012		2011
Operating Revenues
	Higher education	$	290,861	$	358,312	$	599,245	$	745,195
	Test preparation		79,786		83,197		142,615		156,562
	Kaplan international		181,656		169,016		358,041		321,151
	Kaplan ventures		6,203		6,591		12,324		13,806
	Kaplan corporate and other		1,003		1,065		2,160		2,182
	Intersegment elimination		(1,105)		(1,219)		(2,580)		(3,005)
		$	558,404	$	616,962	$	1,111,805	$	1,235,891
Income (Loss) from Operations
	Higher education	$	5,858	$	45,157	$	14,812	$	95,807
	Test preparation		2,706		(11,597)		(7,513)		(24,273)
	Kaplan international		9,294		8,642		12,717		7,960
	Kaplan ventures		(369)		(2,079)		(1,630)		(3,053)
	Kaplan corporate and other		(14,299)		(18,673)		(28,578)		(34,711)
	Intersegment elimination		161		18		355		(213)
		$	3,351	$	21,468	$	(9,837)	$	41,517
Depreciation of Property, Plant and Equipment
	Higher education	$	11,673	$	11,897	$	23,430	$	23,138
	Test preparation		4,449		3,796		8,764		8,245
	Kaplan international		4,472		4,752		8,672		8,220
	Kaplan ventures		148		181		293		367
	Kaplan corporate and other		417		865		862		1,696
		$	21,159	$	21,491	$	42,021	$	41,666

Identifiable assets for the Company’s education division consist of the following:

		As of
		June 30,		December 31,
(in thousands)		2012		2011
Identifiable assets
	Higher education	$	645,779	$	908,268
	Test preparation		322,898		330,956
	Kaplan international		824,105		809,702
	Kaplan ventures		25,857		30,568
	Kaplan corporate and other		10,624		96,746
		$	1,829,263	$	2,176,240

Item 2. Management’s Discussion and Analysis of Results of Operations and Financial Condition

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

Results of Operations

The Company reported net income attributable to common shares of $51.8 million ($6.84 per share) for the second quarter ended June 30, 2012, compared to $45.6 million ($5.74 per share) for the second quarter of last year. Net income includes $17.8 million in income from discontinued operations ($2.36 per share) and $2.0 million ($0.26 per share) in losses from discontinued operations for the second quarter of 2012 and 2011, respectively. Income from continuing operations attributable to common shares was $34.0 million ($4.48 per share) for the second quarter of 2012, compared to $47.6 million ($6.00 per share) for the second quarter of 2011.

Items included in the Company’s income from continuing operations for the second quarter of 2012:

§ $8.4 million in severance, early retirement and restructuring charges at Kaplan and the newspaper publishing division (after-tax impact of $5.2 million, or $0.69 per share); and

§ $2.6 million in non-operating unrealized foreign currency losses (after-tax impact of $1.6 million, or $0.21 per share).

Items included in the Company’s income from continuing operations for the second quarter of 2011:

§ $11.7 million in severance and restructuring charges at Kaplan (after-tax impact of $7.3 million, or $0.91 per share); and

§ $0.3 million in non-operating unrealized foreign currency gains (after-tax impact of $0.2 million, or $0.03 per share).

Revenue for the second quarter of 2012 was $1,006.9 million, down 5% from $1,061.3 million in the second quarter of 2011. The Company reported operating income of $60.4 million in the second quarter of 2012, compared to operating income of $82.1 million in the second quarter of 2011. Revenues were down at the education and newspaper publishing divisions, offset by increases at the television broadcasting and cable television divisions. Operating results were down at all of the Company’s divisions, except for the television broadcasting division.

For the first six months of 2012, the Company reported net income attributable to common shares of $82.9 million ($10.87 per share), compared to $60.7 million ($7.57 per share) for the same period of 2011. Net income includes $38.1 million ($5.02 per share) in income from discontinued operations and $4.8 million ($0.59 per share) in losses from discontinued operations for the first six months of 2012 and 2011, respectively. Income from continuing operations attributable to common shares was $44.8 million ($5.85 per share) for the first six months of 2012, compared to $65.5 million ($8.16 per share) for the first six months of 2011. As a result of the Company’s share repurchases, there were 6% fewer diluted average shares outstanding in the first six months of 2012.

Items included in the Company’s income from continuing operations for the first six months of 2012:

§ $10.2 million in severance, early retirement and restructuring charges at Kaplan and the newspaper publishing division (after-tax impact of $6.4 million, or $0.84 per share); and

§ a $5.8 million gain on sales of cost method investments (after-tax impact of $3.7 million, or $0.48 per share).

Items included in the Company’s income from continuing operations for the first six months of 2011:

§ $14.0 million in severance and restructuring charges at Kaplan (after-tax impact of $8.7 million, or $1.09 per share);

§ a $30.7 million write-down of a marketable equity security (after-tax impact of $19.8 million, or $2.44 per share); and

§ $3.0 million in non-operating unrealized foreign currency gains (after-tax impact of $1.9 million, or $0.24 per share).

Revenue for the first six months of 2012 was $1,979.4 million, down 6% from $2,103.2 million in the first six months of 2011. Revenues were down at the education and newspaper publishing divisions, while revenues were up at the television broadcasting and cable television divisions. The Company reported operating income of $77.8 million for the first six months of 2012, compared to $138.7 million for the first six months of 2011. Operating results were down at all of the Company’s divisions, except for the television broadcasting division.

Division Results

Education

Education division revenue totaled $558.4 million for the second quarter of 2012, a 9% decline from revenue of $617.0 million for the second quarter of 2011. Excluding revenue from acquired businesses, education division revenue declined 11% in the second quarter of 2012. Kaplan reported second quarter 2012 operating income of $3.4 million, down from $21.5 million in the second quarter of 2011.

For the first six months of 2012, education division revenue totaled $1,111.8 million, a 10% decline from revenue of $1,235.9 million for the same period of 2011. Excluding revenue from acquired businesses, education division revenue declined 12% for the first six months of 2012. Kaplan reported an operating loss of $9.8 million for the first six months of 2012, compared to operating income of $41.5 million for the first six months of 2011.

In light of recent revenue declines and other business challenges, Kaplan has formulated and implemented restructuring plans at its various businesses that have resulted in significant costs in 2012 and 2011, with the objective of establishing lower costs levels in future periods. Across all businesses, severance and restructuring costs totaled $5.0 million in the second quarter and first half of 2012, compared to $11.7 million and $14.0 million in the second quarter and first six months of 2011, respectively. Kaplan will likely incur additional restructuring costs in the second half of 2012.

A summary of Kaplan’s operating results for the second quarter and the first six months of 2012 compared to 2011 is as follows:

		Three Months Ended					Six Months Ended
		June 30,		July 3,			June 30,		July 3,
(in thousands)		2012		2011		% Change	2012		2011		% Change
Revenue
	Higher education	$	290,861	$	358,312	(19)	$	599,245	$	745,195	(20)
	Test preparation		79,786		83,197	(4)		142,615		156,562	(9)
	Kaplan international		181,656		169,016	7		358,041		321,151	11
	Kaplan ventures		6,203		6,591	(6)		12,324		13,806	(11)
	Kaplan corporate		1,003		1,065	(6)		2,160		2,182	(1)
	Intersegment elimination		(1,105)		(1,219)	―		(2,580)		(3,005)	―
		$	558,404	$	616,962	(9)	$	1,111,805	$	1,235,891	(10)
Operating Income (Loss)
	Higher education	$	5,858	$	45,157	(87)	$	14,812	$	95,807	(85)
	Test preparation		2,706		(11,597)	―		(7,513)		(24,273)	69
	Kaplan international		9,294		8,642	8		12,717		7,960	60
	Kaplan ventures		(369)		(2,079)	82		(1,630)		(3,053)	47
	Kaplan corporate		(10,489)		(13,624)	23		(21,525)		(25,242)	15
	Amortization of intangible assets		(3,810)		(5,049)	25		(7,053)		(9,469)	26
	Intersegment elimination		161		18	―		355		(213)	―
		$	3,351	$	21,468	(84)	$	(9,837)	$	41,517	―

Kaplan sold Kaplan Learning Technologies in February 2012 and EduNeering in April 2012. Consequently, the education division’s operating results exclude these businesses. Also, Kaplan’s Colloquy and U.S. Pathways business moved from Kaplan Ventures to Kaplan International. The comparative division results presented above reflect this change.

Kaplan Higher Education (KHE) includes Kaplan’s domestic postsecondary education businesses, made up of fixed-facility colleges and online postsecondary and career programs. KHE also includes the domestic professional training and other continuing education businesses. In the second quarter and first six months of 2012, higher education revenue declined 19% and 20%, respectively, due largely to declines in average enrollments, reflecting weaker market demand over the past year. Operating income decreased 87% and 85% for the second quarter and first six months of 2012, respectively. These declines were due primarily to lower revenue, offset by expense reductions associated with lower enrollments and recent restructuring efforts. In the second quarter of 2012, KHE incurred $3.8 million in severance costs, compared to $5.5 million in the second quarter of 2011. KHE will likely incur additional restructuring costs in the second half of 2012.

Although revenues were down substantially compared to the first half of 2011, new student enrollments at Kaplan University and KHE Campuses increased 3% in the first half of 2012. For the second quarter of 2012, new student enrollments declined 1%. Total enrollments at June 30, 2012, were down 14% compared to June 30, 2011, and 11% compared to March 31, 2012.

	Student Enrollments As of
	June 30,	March 31,	June 30,
	2012	2012	2011
Kaplan University	44,756	49,481	53,309
KHE Campuses	22,849	26,503	25,225
	67,605	75,984	78,534

Kaplan University enrollments included 5,681, 5,979 and 5,837 campus-based students as of June 30, 2012, March 31, 2012, and June 30, 2011, respectively.

Kaplan University and KHE Campuses enrollments at June 30, 2012, and June 30, 2011, by degree and certificate programs, are as follows:

	As of June 30,
	2012		2011
Certificate	24.8	%	22.8	%
Associate’s	28.7	%	31.7	%
Bachelor’s	33.7	%	35.2	%
Master’s	12.8	%	10.3	%
	100.0	%	100.0	%

KHE has implemented a number of marketing and admissions changes to increase student selectivity and help KHE comply with recent regulations. KHE also implemented the Kaplan Commitment program, which provides first-time students with a risk-free trial period. Under the program, KHE also monitors academic progress and conducts academic assessments to help determine whether students are likely to be successful in their chosen course of study. Students who withdraw or are subject to academic dismissal during the risk-free trial period do not incur any significant financial obligation. For those first-time students enrolled to date under the Kaplan Commitment, the attrition rate during the risk-free period has been approximately 28%. Management believes the Kaplan Commitment program is unique and reflects Kaplan’s commitment to student success.

Refer to KHE Regulatory Matters below for additional information.

Kaplan Test preparation (KTP) includes Kaplan’s standardized test preparation and tutoring offerings and other businesses. KTP revenue declined 4% and 9% in the second quarter and first six months of 2012, respectively. Enrollment increased 4% and 8% for the second quarter and first six months of 2012, respectively, driven by strength in medical and bar review programs. Enrollment increases were offset by competitive pricing pressure and a continued shift in demand to lower priced online test preparation offerings. Revenues also declined from the prior year as changes in certain programs and the mix of courses resulted in an increase in average course length and related revenue recognition periods. Total sales bookings at KTP during the first half of 2012 were down 3% compared to the first half of 2011. The improvement in KTP operating results in the first half of 2012 is largely from lower operating expenses due to recent restructuring activities. Also, $6.2 million and $8.5 million in restructuring costs were recorded in the second quarter and first six months of 2011, respectively.

Kaplan International includes professional training and postsecondary education businesses outside the United States and English-language programs. In May 2011, Kaplan Australia acquired Franklyn Scholar and Carrick Education Group, national providers of vocational training and higher education in Australia. In June 2011, Kaplan acquired Structuralia, a provider of e-learning for the engineering and infrastructure sector in Spain. Kaplan International revenue increased 7% and 11% in the second quarter and first six months of 2012, respectively. Excluding revenue from acquired businesses, Kaplan International revenue increased slightly in the second quarter of 2012 and increased 3% in the first six months of 2012 due to enrollment growth in the English-language and Singapore higher education programs. Kaplan International operating income increased in the first half of 2012 due largely to strong results in Singapore, offset by combined losses from businesses acquired in 2011. In the second quarter of 2012, Kaplan International results also benefited from a favorable net $1.9 million adjustment. This resulted from a favorable expense adjustment to reduce certain items recorded in prior years, offset by an adjustment to increase liabilities assumed in a 2011 acquisition.

Most of the businesses previously included in Kaplan Ventures have been sold or moved to other Kaplan divisions. Kaplan Ventures is exploring other alternatives with respect to its remaining businesses, including possible sales.

Corporate represents unallocated expenses of Kaplan, Inc.’s corporate office and other minor shared activities.

Cable Television

Cable television division revenue increased 2% in the second quarter of 2012 to $195.6 million, from $191.2 million for the second quarter of 2011; for the first six months of 2012, revenue increased 1% to $385.8 million, from $381.5 million in the same period of 2011. The revenue increase for the first six months of 2012 is due to continued growth of the division’s Internet and telephone service revenues, offset by an increase in promotional discounts and a decline in basic video subscribers.

Cable television division operating income decreased 5% to $38.4 million, from $40.4 million in the second quarter of 2011; cable division operating income for the first six months of 2012 decreased 9% to $71.2 million, from $78.1 million for the first six months of 2011. The division’s operating income declined primarily due to increased programming costs.

At June 30, 2012, Primary Service Units (PSUs) were up 1% from the prior year due to growth in high-speed data and telephony subscribers, offset by a decrease in basic subscribers. PSUs include about 6,300 subscribers who receive free basic cable service, primarily local governments, schools and other organizations as required by various franchise agreements. A summary of PSUs is as follows:

	As of June 30,
	2012	2011
Basic video	612,729	637,068
High-speed data	462,426	444,357
Telephony	187,095	173,977
	1,262,250	1,255,402

Below are details of Cable division capital expenditures for the first six months of 2012 and 2011, as defined by the NCTA Standard Reporting Categories:

(in thousands)		2012		2011
Customer Premise Equipment	$	25,336	$	19,279
Commercial		2,148		1,670
Scaleable Infrastructure		10,667		20,937
Line Extensions		2,415		2,832
Upgrade/Rebuild		7,581		3,698
Support Capital		17,064		10,645
	$	65,211	$	59,061

Newspaper Publishing

Newspaper publishing division revenue totaled $151.8 million for the second quarter of 2012, down 7% from revenue of $162.8 million for the second quarter of 2011; division revenue declined 7% to $294.1 million for the first six months of 2012, from $317.8 million for the first six months of 2011. Print advertising revenue at The Washington Post in the second quarter of 2012 declined 15% to $56.7 million, from $66.6 million in the second quarter of 2011, and declined 16% to $109.3 million for the first six months of 2012, from $129.8 million for the first six months of 2011. The decline is largely due to reductions in general advertising. Revenue generated by the Company’s newspaper online publishing activities, primarily washingtonpost.com and Slate, increased 8% to $26.3 million for the second quarter of 2012, versus $24.3 million for the second quarter of 2011; newspaper online revenues increased slightly to $50.6 million for the first six months of 2012, versus $50.5 million for the first six months of 2011. Display online advertising revenue increased 14% and 1% for the second quarter and first six months of 2012, respectively. Online classified advertising revenue decreased 2% for both the second quarter and the first six months of 2012.

For the first six months of 2012, Post daily and Sunday circulation declined 9.3% and 6.1%, respectively, compared to the same periods of the prior year. For the six months ended June 30, 2012, average daily circulation at The Washington Post totaled 482,100 and average Sunday circulation totaled 699,900.

The newspaper publishing division reported an operating loss of $15.9 million in the second quarter of 2012, compared to an operating loss of $2.9 million in the second quarter of 2011. For the first six months of 2012, the newspaper publishing division reported an operating loss of $38.4 million, compared to an operating loss of $15.7 million for the first six months of 2011. These operating losses include noncash pension expense of $7.8 million and $5.3 million for the second quarter of 2012 and 2011, respectively, and $16.4 million and $12.0 million for the first six months of 2012 and 2011, respectively.

The decline in operating results for the second quarter of 2012 is primarily due to the revenue reductions discussed above and $3.4 million in severance expense, offset partially by a decline in other operating expenses. The decline in operating results for the first half of 2012 is primarily due to the revenue reductions discussed above and $5.3 million in severance and early retirement expenses, offset partially by a decline in other operating expenses. Newsprint expense was down 10% and 11% for the second quarter and first six months of 2012, respectively, due to a decline in newsprint consumption.

Television Broadcasting

Revenue for the television broadcasting division increased 13% in the second quarter of 2012 to $95.6 million, from $84.9 million in the same period of 2011; operating income for the second quarter of 2012 increased 34% to $43.7 million, from $32.6 million in the same period of 2011. For the first six months of 2012, revenue increased 13% to $177.1 million, from $157.1 million in the same period of 2011; operating income for the first six months of 2012 increased 43% to $74.7 million, from $52.2 million in the same period of 2011.

The increase in revenue and operating income for the second quarter and first six months of 2012 reflects improved advertising demand across many product categories, including a $4.4 million and $6.6 million increase in political advertising revenue in the second quarter and first six months of 2012, respectively. Expense reductions from various cost control initiatives also contributed to the improvement in operating results.

Other Businesses

Other businesses includes the operating results of Avenue100 Media Solutions and WaPo Labs, a digital team focused on emerging technologies and new product development.

In July 2012, the Company determined that Avenue100 Media Solutions, Inc. had no value and disposed of the business. As a result, the Company estimates that it will incur a pre-tax loss of approximately $5 million, and record a tax benefit of approximately $42 million. The estimated tax benefit is due to the Company’s tax basis in the stock of Avenue100 exceeding its net book value, as a result of goodwill and other intangible asset impairment charges recorded in 2008, 2010 and 2011 for which no tax benefit was previously recorded.

Corporate Office

Corporate office includes the expenses of the Company’s corporate office as well as a net pension credit.

Equity in Earnings (Losses) of Affiliates

The Company holds a 49% interest in Bowater Mersey Paper Company, a 16.5% interest in Classified Ventures, LLC and interests in several other affiliates.

The Company’s equity in earnings of affiliates, net, for the second quarter of 2012 was $3.3 million, compared to $3.1 million for the second quarter of 2011. For the first six months of 2012, the Company’s equity in earnings of affiliates, net, totaled $7.2 million, compared to $6.9 million for the same period of 2011.

Other Non-Operating Income (Expense)

The Company recorded other non-operating expense, net, of $1.2 million for the second quarter of 2012, compared to other non-operating expense, net, of $2.6 million for the second quarter of 2011. The second quarter 2012 non-operating expense, net, included $2.6 million in unrealized foreign currency losses, offset by other items. The second quarter 2011 non-operating expense, net, included $3.1 million for an impairment write-down on a cost method investment, offset by $0.3 million in unrealized foreign currency gains and other items.

The Company recorded non-operating income, net, of $7.4 million for the first six months of 2012, compared to other non-operating expense, net, of $26.6 million for the same period of the prior year. The 2012 non-operating income, net, included a $7.3 million gain on sales of cost method investments, $0.1 million in unrealized foreign currency gains and other items. The 2011 non-operating expense, net, included a $30.7 million write-down of a marketable equity security (Corinthian Colleges, Inc.), offset by $3.0 million in unrealized foreign currency gains and other items.

A summary of non-operating income (expense) for the six months ended June 30, 2012 and July 3, 2011, is as follows:


(in thousands)		2012		2011
Gain on sales of cost method investments		$	7,258	$	4,031
Gain on sales of marketable equity securities			505		―
Impairment write-down on a cost method investment			(386)		(3,148)
Foreign currency gains, net			68		3,031
Impairment write-down on a marketable equity security			―		(30,696)
Other, net			(17)		159
	Total Other Non-Operating Income (Expense)	$	7,428	$	(26,623)

Net Interest Expense

The Company incurred net interest expense of $8.2 million and $16.3 million for the second quarter and first six months of 2012, respectively, compared to $7.0 million and $13.9 million for the same periods of 2011. At June 30, 2012, the Company had $455.7 million in borrowings outstanding, at an average interest rate of 7.0%.

Provision for Income Taxes

The effective tax rate for income from continuing operations for the first six months of 2012 was 40.2%, compared to 37.0% for the first six months of 2011. The higher effective tax rate in 2012 results primarily from losses in Australia for which no tax benefit is recorded.

Discontinued Operations

Kaplan sold EduNeering in April 2012, Kaplan Learning Technologies in February 2012, Kaplan Compliance Solutions in October 2011 and Kaplan Virtual Education in July 2011. Consequently, the Company’s income from continuing operations excludes these businesses, which have been reclassified to discontinued operations, net of tax.

The sale of Kaplan Learning Technologies resulted in a pre-tax loss of $3.1 million that was recorded in the first quarter of 2012. The sale of EduNeering resulted in a pre-tax gain of $29.5 million that was recorded in the second quarter of 2012.

In connection with each of the sales of the Company’s stock in EduNeering and Kaplan Learning Technologies, in the first quarter of 2012, the Company recorded $23.2 million of income tax benefits related to the excess of the outside stock tax basis over the net book value of the net assets disposed.

Earnings (Loss) Per Share

The calculation of diluted earnings per share for the second quarter and first six months of 2012 was based on 7,545,150 and 7,579,888 weighted average shares outstanding, respectively, compared to 7,933,459 and 8,026,424, respectively, for the second quarter and first six months of 2011. In the first six months of 2012, the Company repurchased 218,282 shares of its Class B common stock at a cost of $74.5 million. At June 30, 2012, there were 7,444,630 shares outstanding and the Company had remaining authorization from the Board of Directors to purchase up to 275,192 shares of Class B common stock.

KHE Regulatory Matters

Gainful employment. In June 2011, the DOE issued final regulations that tie an education program’s Title IV eligibility to whether the program leads to gainful employment. The regulations define an education program that leads to gainful employment as one that complies with the following gainful employment metrics as calculated under the complex formulas prescribed in the regulations: (1) the average annual loan payment for program graduates is 12% or less of annual earnings; (2) the average annual loan payment for program graduates is 30% or less of discretionary income, generally defined as annual earnings above 150% of the U.S. Federal poverty level; and (3) the U.S. Federal loan repayment rate must be at least 35% for loans owed by students for attendance in the program regardless of whether they graduated.

If a program fails all three of the gainful employment metrics in a single U.S. Federal fiscal year, the Department requires the institution, among other things, to disclose to current and prospective students the amount by which the program under-performed the metrics and the institution’s plan for program improvement, and to establish a three-day waiting period before students can enroll. Should a program fail to achieve the metrics twice within three years, the Department requires the institution, among other things, to disclose to current and prospective students that they should expect to have difficulty repaying their student loans; that the program is at risk of losing eligibility to receive U.S. Federal financial

aid; and that transfer options exist, including providing resources to students to research other education options and compare program costs. Should a program fail three times within a four-year period, the DOE would terminate the program’s eligibility for U.S. Federal student aid, and the institution would not be able to reestablish the program’s eligibility for at least three years, though the program could continue to operate without student aid. The final rule was scheduled to go into effect on July 1, 2012. However, the first final debt measures would not be released until 2013, and a program could not lose eligibility until 2015.

On June 30, 2012, the United States District Court for the District of Columbia overturned most of the final regulations on gainful employment. The DOE is reviewing the details of the Court’s decision in consultation with the Department of Justice and evaluating their plans which may include an appeal. The ultimate outcome of gainful employment regulations and their impact on Kaplan’s operations is uncertain.

The 90/10 Rule. Under regulations referred to as the 90/10 rule, a Kaplan Higher Education OPEID unit would lose its eligibility to participate in the Title IV programs for a period of at least two fiscal years if it derives more than 90% of its receipts from the Title IV programs for two consecutive fiscal years, commencing with the unit's first fiscal year that ends after August 14, 2008. Any OPEID reporting unit with receipts from the Title IV programs exceeding 90% for a single fiscal year ending after August 14, 2008, would be placed on provisional certification and may be subject to other enforcement measures. KHE is taking various measures to reduce the percentage of its receipts attributable to Title IV funds, including emphasizing direct-pay and employer-paid education programs; encouraging students to carefully evaluate the amount of their Title IV borrowing; program eliminations; cash-matching and developing and offering additional non-Title IV-eligible certificate preparation, professional development and continuing education programs. Based on currently available information, management does not believe that any of the Kaplan OPEID units will have a 90/10 ratio over 90% in 2012. However, absent the adoption of the changes mentioned above, and if current trends continue, management estimates that in 2013, at least 20 of the KHE Campuses OPEID units, representing approximately 22% of KHE’s 2011 revenues, could have a 90/10 ratio over 90%. As noted above, Kaplan is taking steps to address compliance with the 90/10 rule; however, there can be no guarantee that these measures will be adequate to prevent the 90/10 rule calculations from exceeding 90% in the future.

Financial Condition: Capital Resources and Liquidity

Acquisitions and Dispositions

Capital Expenditures

During the first six months of 2012, the Company’s capital expenditures totaled $97.8 million. The Company estimates that its capital expenditures will be in the range of $240 million to $265 million in 2012.

Liquidity

The Company’s borrowings decreased by $109.5 million, to $455.7 million at June 30, 2012, as compared to borrowings of $565.2 million at December 31, 2011. At June 30, 2012, the Company has $264.1 million in cash and cash equivalents, compared to $381.1 million at December 31, 2011. The Company had money market investments of $142.0 million and $180.1 million that are classified as cash and cash equivalents in the Company’s condensed consolidated Balance Sheets as of June 30, 2012 and December 31, 2011, respectively.

The Company’s total debt outstanding of $455.7 million at June 30, 2012 included $397.3 million of 7.25% unsecured notes due February 1, 2019, $51.2 million of AUD 50M borrowing and $7.3 million in other debt.

In June 2011, the Company entered into a credit agreement (the “Credit Agreement”) providing for a U.S. $450 million, AUD 50 million four year revolving credit facility (the “Facility”), with each of the lenders party thereto, JPMorgan Chase Bank, N.A., as Administrative Agent (“JP Morgan”), and J.P. Morgan Australia Limited, as Australian Sub-Agent. The Facility replaces the Company’s previous revolving credit agreement. The Facility will expire on June 17, 2015, unless the Company and the banks agree to extend the term.

In November 2011, Standard & Poor’s lowered the Company’s long-term corporate debt rating from “A-” to “BBB+” and changed the outlook from Negative to Stable. Standard & Poor’s kept the short-term rating unchanged at “A-2.” In November 2011, Moody’s downgraded the Company’s senior unsecured rating from “A2” to “A3” and the commercial paper rating from “Prime-1” to “Prime-2.” The outlook was changed from Rating Under Review to Negative. In May 2012, Standard & Poor’s affirmed the Company’s credit ratings, but revised the outlook from Stable to Negative. In July 2012, Moody’s changed the outlook of the Company’s long-term debt rating from Negative to Rating Under Review. The Company’s current credit ratings are as follows:

			Standard
	Moody’s		& Poor’s
Long-term		A3		BBB+
Short-term		Prime-2		A-2

During the second quarter of 2012 and 2011, the Company had average borrowings outstanding of approximately $455.5 million and $401.2 million, respectively, at average annual interest rates of approximately 7.0% and 7.2%. During the second quarter of 2012 and 2011, the Company incurred net interest expense of $8.2 million and $7.0 million, respectively.

During the first six months of 2012 and 2011, the Company had average borrowings outstanding of approximately $472.0 million and $400.6 million, respectively, at average annual interest rates of approximately 7.0% and 7.2%. During the first six months of 2012 and 2011, the Company incurred net interest expense of $16.3 million and $13.9 million, respectively.

At June 30, 2012 and December 31, 2011, the Company had working capital of $290.4 million and $250.1 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 expects to fund its estimated capital needs primarily through existing cash balances and internally generated funds and to a lesser extent commercial paper. In management’s opinion, the Company will have ample liquidity to meet its various cash needs throughout 2012.

Except for a lease commitment totaling $42.9 million from 2013 through 2019, there were no significant changes to the Company’s contractual obligations or other commercial commitments from those disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011.

Forward-Looking Statements

This report contains certain forward-looking statements that are based largely on the Company’s current expectations. Forward-looking statements are subject to certain risks and uncertainties that could cause actual results and achievements to differ materially from those expressed in the forward-looking statements. For more information about these forward-looking statements and related risks, please refer to the section titled “Forward-Looking Statements” in Part I of the Company’s Annual Report on Form 10-K.

Item 3. 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. The Company’s market risk disclosures set forth in its 2011 Annual Report filed on Form 10-K have not otherwise changed significantly.

Item 4. Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures

An evaluation was performed by the Company’s management, with the participation of the Company’s Chief Executive Officer (the Company’s principal executive officer) and the Company’s Senior Vice President-Finance (the Company’s principal financial officer), of the effectiveness of the Company’s disclosure controls and procedures (as defined in

Exchange Act Rules 13a-15(e) and 15d-15(e)), as of June 30, 2012. 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.

(b) 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 June 30, 2012 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

During the quarter ended June 30, 2012, the Company purchased shares of its Class B Common Stock as set forth in the following table:

		Average		Total Number of	Maximum Number
	Total Number	Price		Shares Purchased	of Shares That May
	of Shares	Paid per		as Part of Publicly	Yet BePurchased
Period	Purchased	Share		Announced Plan*	Under the Plan*
Apr. 1 - Apr. 30, 2012	―	$	―	―	493,074
May. 1 - May. 31, 2012	157,451		338.34	157,451	335,623
Jun. 1 - Jun. 30, 2012	60,431		348.38	60,431	275,192
	217,882	$	341.13	217,882

* On September 8, 2011, the Company’s Board of Directors authorized the Company to purchase, on the open market or otherwise, up to 750,000 shares of its Class B Common Stock. There is no expiration date for that authorization. All purchases made during the quarter ended June 30, 2012 were open market transactions.

Item 6. Exhibits.


Exhibit Number	Description

3.1	Restated Certificate of Incorporation of the Company dated November 13, 2003 (incorporated by reference to Exhibit 3.1 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 28, 2003).

3.2	Certificate of Designation for the Company’s Series A Preferred Stock dated September 22, 2003 (incorporated by reference to Exhibit 3.2 to Amendment No. 1 to the Company’s Current Report on Form 8-K dated September 22, 2003).

3.3	By-Laws of the Company as amended and restated through November 8, 2007 (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K dated November 14, 2007).

4.1	Second Supplemental Indenture dated January 30, 2009, between the Company and The Bank of New York Mellon Trust Company, N.A., as successor to The First National Bank of Chicago, as Trustee (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K dated January 30, 2009).

4.2	Four Year Credit Agreement, dated as of June 17, 2011, among the Company, JPMorgan Chase Bank, N.A., J.P. Morgan Australia Limited, Wells Fargo Bank, N.A., The Royal Bank of Scotland PLC, HSBC Bank USA, National Association, The Bank of New York Mellon, PNC Bank, National Association, Bank of America, N.A., Citibank, N.A. and The Northern Trust Company (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated June 17, 2011).

10.1	The Washington Post Company 2012 Incentive Compensation Plan, effective May 10, 2012.

31.1	Rule 13a-14(a)/15d-14(a) Certification of the Chief Executive Officer.

31.2	Rule 13a-14(a)/15d-14(a) Certification of the Chief Financial Officer.

32	Section 1350 Certification of the Chief Executive Officer and the Chief Financial Officer.

101.INS	XBRL Instance Document.*

101.SCH	XBRL Taxonomy Extension Schema Document.*

101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document.*

101.DEF	XBRL Taxonomy Extension Definition Linkbase Document.*

101.LAB	XBRL Taxonomy Extension Label Linkbase Document.*

101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document.*

* Attached as Exhibit 101 to this report are the following documents formatted in XBRL (Extensible Business Reporting Language): (i) Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2012 and July 3, 2011, (ii) Condensed Consolidated Statements of Comprehensive Income for Three and Six Months Ended June 30, 2012 and July 3, 2011, (iii) Condensed Consolidated Balance Sheets at June 30, 2012 and December 31, 2011, (iv) Condensed Consolidated Statements of Cash Flows for Six Months Ended June 30, 2012 and July 3, 2011, and (v) Notes to Condensed Consolidated Financial Statements. Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed “furnished” and not “filed” or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, are deemed “furnished” and not “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, and otherwise are not subject to liability under these sections.

.SIGNATURES

Pursuant to the requirements 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.


		THE WASHINGTON POST COMPANY
		(Registrant)

Date: August 7, 2012		/s/ Donald E. Graham
		Donald E. Graham, Chairman & Chief Executive Officer (Principal Executive Officer)

Date: August 7, 2012		/s/ Hal S. Jones
		Hal S. Jones, Senior Vice President-Finance (Principal Financial Officer)