GHC 10-Q Quarter ended April 4, 2010

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

For the Quarterly Period Ended April 4, 2010

or

Commission File Number 1-6714

THE WASHINGTON POST COMPANY

(Exact name of registrant as specified in its charter)

(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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes ¨ .    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):

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 May 3, 2010:

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THE WASHINGTON POST COMPANY

Index to Form 10-Q

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The Washington Post Company

(Unaudited)

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The Washington Post Company

Condensed Consolidated Statements of Comprehensive Income (Loss)

(Unaudited)

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The Washington Post Company

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The Washington Post Company

(Unaudited)

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The Washington Post Company

Notes to Condensed Consolidated Financial Statements

(Unaudited)

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), television broadcasting (through the ownership and operation of six television broadcast stations), and magazine publishing.

Financial Periods – The Company generally reports on a thirteen week fiscal quarter ending on the Sunday nearest the calendar quarter-end. The fiscal quarters for 2010 and 2009 ended on April 4, 2010 and March 29, 2009, respectively. With the exception of the newspaper publishing operations and the corporate office, subsidiaries of the Company report on a calendar-quarter basis.

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 thirteen weeks ended April 4, 2010 and March 29, 2009 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 January 3, 2010.

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 with the current year presentation.

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 October 2009, the Financial Accounting Standards Board (“FASB”) issued new guidance that modifies the fair value requirement of multiple element revenue arrangements. The new guidance allows the use of the “best estimate of selling price” in addition to vendor-specific objective evidence (“VSOE”) and third-party evidence (“TPE”) for determining the selling price of a deliverable. A vendor is now required to use its best estimate of the selling price when VSOE or TPE of the selling price cannot be determined. In addition, the residual method of allocating arrangement consideration is no longer permitted. The guidance requires expanded qualitative and quantitative disclosures and is effective for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. Early application is permitted. The Company is not planning to early adopt the guidance and will continue evaluating the impact of this new guidance on its condensed consolidated financial statements.

In January 2010, the FASB issued additional disclosure requirements for fair value measurements. The guidance requires previous fair value hierarchy disclosures to be further disaggregated by class of assets and liabilities. A class is often a subset of assets or liabilities within a line item in the statement of financial position. In addition, significant transfers between Levels 1 and 2 of the fair value hierarchy are required to be disclosed. These additional requirements became effective for interim and annual periods beginning after December 15, 2009 and did not have an impact on the condensed consolidated financial statements of the Company. In addition, the fair value disclosure amendments also require more detailed disclosures of the changes in Level 3 instruments. These changes will not become effective until interim and annual periods beginning after December 15, 2010 and are not expected to have an impact on the condensed consolidated financial statements of the Company.

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The Washington Post Company

Notes to Condensed Consolidated Financial Statements—(Continued)

(Unaudited)

Investments in marketable equity securities at April 4, 2010 and January 3, 2010 consist of the following (in thousands):

There were no new investments or sales of marketable equity securities in the first quarter of 2010. In the first quarter of 2009, the Company invested $10.8 million in the Class B common stock of Berkshire Hathaway Inc.

In the first quarter of 2010, Kaplan made one small acquisition in its Kaplan Ventures division. The Company did not make any acquisitions during the first quarter of 2009.

In April 2010, Kaplan sold Education Connection, which was part of the Kaplan Ventures division; the gain on sale was not significant.

The education division made several minor changes to its operating and reporting structure in the first quarter of 2010, changing the composition of the reporting units within Kaplan Test Preparation, Kaplan Ventures and Kaplan Higher Education (see Note 12). The changes resulted in the reassignment of the assets and liabilities to the reporting units affected. The goodwill was allocated to the reporting units affected using the relative fair value approach.

The Company amortizes the recorded values of its amortized intangible assets over their estimated useful lives. Amortization of intangible assets for the thirteen weeks ended April 4, 2010 and March 29, 2009 was $6.5 million and $6.6 million, respectively. Amortization of intangible assets is estimated to be approximately $19 million for the remainder of 2010, $21 million in 2011, $9 million in 2012, $5 million in each of 2013 and 2014 and $16 million thereafter.

The changes in the carrying amount of goodwill, by segment, for the thirteen weeks ended April 4, 2010 is as follows:

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The Washington Post Company

Notes to Condensed Consolidated Financial Statements—(Continued)

(Unaudited)

Other intangible assets consist of the following:

The Company’s borrowings consist of the following (in millions):

The Company’s other indebtedness at April 4, 2010 and January 3, 2010 is at an interest rate of 6% and matures during 2010.

During the first quarter of 2010 and 2009, the Company had average borrowings outstanding of approximately $399.3 million and $488.5 million, respectively, at average annual interest rates of approximately 7.2% and 6.4%, respectively. During the first quarter of 2010 and 2009, the Company incurred net interest expense of $7.3 million and $7.1 million, respectively.

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Notes to Condensed Consolidated Financial Statements—(Continued)

(Unaudited)

At April 4, 2010, the fair value of the Company’s 7.25% unsecured notes, based on quoted market prices, totaled $452.9 million, compared with the carrying amount of $396.3 million. At January 3, 2010, the fair value of the Company’s 7.25% unsecured notes, based on quoted market prices, totaled $443.1 million, compared with the carrying amount of $396.2 million. The carrying value of the Company’s other unsecured debt at April 4, 2010 approximates fair value.

The Company’s earnings (loss) per share (basic and diluted) for the first quarters of 2010 and 2009, are presented below:

For the first quarter of 2010, there are 9,174,845 weighted average basic and 9,240,951 diluted shares outstanding. For the first quarter of 2009, there are 9,339,065 weighted average basic and diluted shares outstanding; these amounts are the same as the Company reported a net loss for the first quarter of 2009.

The first quarter of 2010 diluted earnings per share amount excludes the effects of 52,625 stock options outstanding, as their inclusion would be antidilutive.

The Company treats unvested share-based payment awards that contain nonforfeitable rights to dividends as participating securities and includes these securities in the computation of earnings per share under the two-class method. The amount attributable to the unvested restricted stock awards of the Company for the thirteen weeks ended April 4, 2010 was $0.3 million, reducing the net income available for common shares in the basic earnings per common share computation to $45.1 million.

Defined Benefit Plans . The total (income) cost arising from the Company’s defined benefit pension plans for the first quarters ended April 4, 2010 and March 29, 2009, consists of the following components (in thousands):

Newsweek offered a Voluntary Retirement Incentive Program to certain employees in November 2008 and 44 employees accepted the offer in the first quarter of 2009; early retirement program expense of $6.6 million was recorded in the first quarter of 2009, funded mostly from the assets of the Company’s pension plans.

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Notes to Condensed Consolidated Financial Statements—(Continued)

(Unaudited)

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 March 31, 2010 and December 31, 2009, the assets of the Company’s pension plans were allocated as follows:

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 March 31, 2010, up to 13% of the assets could be invested in international stocks, and no less than 9% of the assets could be invested in fixed-income securities. None of the assets is managed internally by the Company.

In determining the 6.5% 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 March 31, 2010. 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. Included in the assets are $198.1 million and $274.3 million of Berkshire Hathaway Class A and Class B common stock at March 31, 2010 and December 31, 2009, respectively. Approximately 41% of the Berkshire Hathaway common stock held at December 31, 2009 was sold in February 2010.

Other Postretirement Plans . The total cost (benefit) arising from the Company’s postretirement plan for the first quarters ended April 4, 2010 and March 29, 2009, consists of the following components (in thousands):

The Company recorded a curtailment gain of $0.7 million in the first quarter of 2009, due to the elimination of life insurance benefits for new retirees on or after January 1, 2009.

Multiemployer Pension Plans . The Washington Post newspaper contributes to multiemployer pension plans on behalf of three union-represented employee groups: the CWA-ITU National Pension Plan on behalf of Post mailers, helpers and utility mailers; the IAM National Pension Fund on behalf of Post machinists; and the Central Pension Fund of the International Union of Operating Engineers on behalf of Post engineers, carpenters and painters. Contributions are made in accordance with the relevant collective bargaining agreements and are generally based on straight-time hours.

As previously disclosed, The Post has negotiated in collective bargaining the contractual right to withdraw from the IAM National Pension Fund and from the IUOE Central Pension Fund. The right to withdraw from the CWA-ITU National Pension Plan is the

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Notes to Condensed Consolidated Financial Statements—(Continued)

(Unaudited)

subject of contract negotiations. Of these multiemployer plans, The Post is a significant participant in only the CWA-ITU National Pension Plan. According to the most recent withdrawal liability estimate from the CWA-ITU National Pension Plan, The Post would have owed approximately $19 million in the event of a 2009 withdrawal. The Post expects to receive an updated withdrawal liability estimate from the CWA-ITU National Pension Plan by the end of the third quarter of 2010.

A summary of non-operating (expense) income for the thirteen weeks ended April 4, 2010 and March 29, 2009, is as follows (in millions):

Department of Education Rulemaking. The U.S. Department of Education is expected to issue proposed regulations in the second quarter of 2010 that could amend or add to existing Title IV regulations. The proposed regulations may include revised standards governing the payment of incentive compensation to admissions and financial aid advisors; a new definition of “gainful employment” that is based on student tuition and debt levels and other factors; and other changes to Title IV eligibility requirements for institutions, programs and students. The changes ultimately made to the Title IV regulations could adversely affect, among other things, Kaplan’s ability to retain admissions and financial aid advisors and the ability of Kaplan Higher Education division’s programs and students to qualify for Title IV financial assistance, and could otherwise have a material adverse effect on Kaplan’s operating results. The Department of Education has stated its intent to publish any new final regulations by November 1, 2010, which is the deadline for the regulations to take effect by July 1, 2011.

Department of Education Program Reviews. From 2007 through 2010, the Department of Education undertook program reviews at four of Kaplan Higher Education’s campus locations and at Kaplan University. The Department of Education has issued a final report with respect to one of the campus locations with no action taken. No final reports with respect to the other reviews have been issued. Therefore, the results of these reviews and their impact on Kaplan’s operations is uncertain.

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.

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Notes to Condensed Consolidated Financial Statements—(Continued)

(Unaudited)

The Company’s financial assets and liabilities measured at fair value on a recurring basis as of April 4, 2010 were as follows (in millions):