Results of Operations - 1999 Compared to 1998

Net income in 1999 was $225.8 million, compared with net income of $417.3 million for 1998. Basic and diluted earnings per share totaled $22.35 and $22.30 in 1999, respectively, compared to $41.27 and $41.10 in 1998. The Company's 1998 net income includes $194.4 million from the disposition of the Company's 28 percent interest in Cowles Media Company, the sale of 14 small cable systems and the disposition of the Company's investment in Junglee, a facilitator of Internet commerce. Excluding the effect of these one time items from 1998 net income, the Company's 1999 net income of $225.8 million increased 1 percent, from net income of $222.9 million in 1998. On the same basis of presentation, diluted earnings per share for 1999 of $22.30 increased 2 percent compared to $21.90 in 1998, with fewer average shares outstanding.

Revenues for 1999 totaled $2,215.6 million, an increase of 5 percent from $2,110.4 million in 1998. Advertising revenues increased 3 percent in 1999, and circulation and subscriber revenues increased 6 percent. Education revenues increased 40 percent in 1999, and other revenues decreased 31 percent. The newspaper and magazine divisions generated most of the increase in advertising revenues. The increase in circulation and subscriber revenues is primarily due to a 13 percent increase in subscriber revenues at the cable division. Revenue growth at Kaplan, Inc. (about two-thirds of which was from acquisitions) accounted for the increase in education revenues. The decline in other revenues is principally due to the disposition of MLJ (July 1998) and Legi-Slate (June 1999).

Operating costs and expenses for the year increased 6 percent to $1,827.1 million, from $1,731.5 million in 1998. The cost and expense increase is primarily due to companies acquired in 1999 and 1998, greater spending for Internet-related businesses (approximately $34 million increase), higher depreciation and amortization expense and increased spending for new business initiatives at the education and career services division. These expense increases were offset in part by a 19 percent decline in newsprint expense and an increase in the Company's pension credit.

Operating income increased 3 percent to $388.5 million in 1999, from $378.9 million in 1998.

The Company's 1999 operating income includes $81.7 million of net pension credits, compared to $62.0 million in 1998.

Division Results. The Company now includes the results of its electronic media publishing operations (primarily washingtonpost.com) within the newspaper publishing division. Previously, these operating results were included in the "other businesses and corporate office" segment. All prior year division results have been restated to reflect this change in reporting.

Newspaper Publishing Division. At the newspaper division, 1999 included 52 weeks, compared to 53 weeks in 1998. Newspaper division revenues increased 3 percent to $875.1 million, from $848.9 million in 1998. Advertising revenues at the newspaper division rose 5 percent over the previous year. At The Washington Post, advertising revenues increased 3 percent as a result of higher rates and volume. Classified advertising revenues at The Washington Post increased 2 percent primarily due to higher rates. Retail advertising revenues at The Post remained essentially even with the previous year. Other advertising revenues (including general and preprint) at The Post increased 7 percent due mainly to increased general advertising volume and higher rates.

Circulation revenues for the newspaper division declined by 3 percent in 1999 due primarily to the extra week in 1998 versus 1999. At The Washington Post, daily circulation for 1999 remained essentially even with 1998; Sunday circulation declined by 1 percent.

Newspaper division operating margin in 1999 increased to 18 percent, from 16 percent in 1998. The improvement in operating margin resulted mostly from an improvement in the operating results of The Washington Post, offset in part by increased electronic media spending for the continued development of washingtonpost.com. The Post's 1999 operating results benefited from the higher advertising revenues discussed above, a 19 percent reduction in newsprint expense and larger pension credits ($28.0 million in 1999 versus $19.0 million in 1998). These operating income improvements were offset in part by higher depreciation expense (arising from the recently completed expansion of The Post's printing facilities) and other general expense increases including increased promotion and marketing.

Television Broadcasting Division. Revenues at the broadcast division declined 4 percent to $341.8 million in 1999, compared to $357.6 million in 1998. The decline in 1999 revenues is due to softness in national advertising revenues and the absence of Winter Olympic advertising revenues (first quarter of 1998) and political advertising revenues (third and fourth quarter of 1998), offset in part by growth in local advertising revenues. Competitive market position remained strong for the Company's television stations. WJXT in Jacksonville and KSAT in San Antonio continued to be ranked number one in the latest ratings period, sign-on to sign-off, in their markets; WPLG in Miami achieved the top ranking among English-language stations in the Miami market; WDIV in Detroit was ranked second in the Detroit market with very little distance between it and the first place ranking; and KPRC in Houston and WKMG in Orlando ranked third in their respective markets but continued to make good progress in improving market share.

The operating margin at the broadcast division was 49 percent in 1999, compared to 48 percent in 1998. Excluding amortization of goodwill and intangibles, the operating margin was 53 percent in 1999 and 52 percent in 1998. The improvement in 1999 operating margin is attributable to 1999 expense control initiatives, the benefits of which were offset in part by the decline in national advertising revenues.

Magazine Publishing Division. Magazine division revenues were $401.1 million for 1999, up slightly over 1998 revenues of $399.5 million. Operating income for the magazine division totaled $62.1 million in 1999, an increase of 39 percent over operating income of $44.5 million in 1998. The 39 percent increase in operating income is primarily attributable to the operating results of Newsweek. At Newsweek, operating income improved as a result of an increase in the number of advertising pages at the domestic edition, higher pension credits ($48.3 million in 1999 versus $35.9 million in 1998) and a reduction in other operating expenses. Offsetting these improvements were the effects of a decline in advertising revenues at the Company's trade periodicals unit.

Operating margin of the magazine division increased to 15 percent in 1999, from 11 percent in 1998.

Cable Division. Revenues at the cable division increased 13 percent to $336.3 million in 1999, from $298.0 million in 1998. Basic, tier, pay and advertising revenue categories showed improvement over 1998. Increased subscribers in 1999, primarily from acquisitions, and higher rates accounted for most of the increase in revenues. The number of basic subscribers at the end of the year increased to 739,850 from 733,000 at the end of 1998.

Operating margin at the cable division before amortization expense was 29 percent for 1999, compared to 30 percent for 1998. The decline in operating margin is primarily attributable to a 16 percent increase in depreciation expense arising from system rebuilds and upgrades, offset in part by higher revenues. Cable operating cash flow increased 11 percent to $140.2 million, from $126.5 million in 1998. Approximately 70 percent of the 1999 improvement in operating cash flow is due to the results of cable systems acquired in 1999 and 1998.

Education and Career Services Division. The Company provides education and career services through its subsidiary Kaplan, Inc. Kaplan provides test preparation programs in the U.S. and abroad for individuals taking admissions and professional licensing exams. Kaplan also provides on-site educational programs to students and teachers at elementary, secondary and post-secondary institutions, and offers a growing number of distance learning programs. In addition, Kaplan publishes books, software and other materials.

Kaplan also owns SCORE! Learning Corporation, a provider of after-school learning opportunities for students in kindergarten through the twelfth grade. SCORE! presently operates 100 SCORE! Educational Centers (most opened within the last two years) and plans to open an additional 45 centers in 2000. In September 1999, SCORE! announced the launch of a new e-commerce site, eSCORE.com, to provide customized online educational resources and services to parents and children.

For the first nine months of 1999 and all of 1998, Kaplan, through its career services division, was the leading provider of career fairs in North America, bringing together technical, sales and diversity candidates with corporate recruiters. Kaplan, through its subsidiary HireSystems, also provided corporate clients with web-based tools to streamline the recruitment and hiring process. On September 29, 1999, Kaplan contributed its ownership of these two businesses to a newly formed company named BrassRing, Inc. (BrassRing). Partnering with Kaplan in the formation of this new business are the Tribune Company and Accel Partners, which each contributed cash and/or other assets to BrassRing. From September 30, 1999, the operating results of the career fair businesses and HireSystems have been included in BrassRing, of which the Company records its 54 percent non-controlling interest in accordance with the equity method of accounting.

Excluding the operating results of the career fair and HireSystems businesses, the 1999 revenues for the education and career services division totaled $240.1 million, a 40 percent increase from 1998 revenues of $171.4 million. Approximately two-thirds of the 1999 revenue increase is attributable to businesses acquired in 1999 and 1998. The remaining increase in revenue is due to growth in the test preparation and SCORE! businesses. Operating losses for 1999 totaled $17.4 million, compared to $6.0 million in 1998. The decline in 1999 operating results is primarily attributable to the opening of new SCORE! centers, start-up costs associated with eSCORE.com and the development of various distance learning initiatives, offset in part by operating income improvements in the traditional test preparation business.

Including the results of the career fair businesses and HireSystems, the education and career services division's 1999 revenues totaled $257.5 million, a 32 percent increase over the same period in the prior year. Approximately two-thirds of the increase is due to business acquisitions completed in 1999 and 1998. The remaining increase in 1999 revenue is due to growth in the test preparation business and SCORE! businesses. Division operating losses of $38.0 million represent a $30.5 million increase in operating losses from 1998. The decline in 1999 operating results is primarily attributable to start-up costs associated with opening new SCORE! centers and the launch of the eSCORE.com web site, as well as increased spending for HireSystems and the development of various distance learning initiatives, offset in part by operating income improvements in the traditional test preparation business.

Other Businesses and Corporate Office. For 1999, other businesses and corporate office includes the expenses associated with the Company's corporate office and the operating results of Legi-Slate through June 30, 1999, the date of its sale. For 1998, other businesses and corporate office includes the Company's corporate office, the operating results of Legi-Slate, and the results of MLJ through July 1998, the date of its sale.

Revenue for other businesses totaled $3.8 million and $11.5 million in 1999 and 1998, respectively. Operating losses for other businesses and corporate office were $27.1 million for 1999 and $33.4 million for 1998. The decrease in operating losses in 1999 is due to the absence of full-year operating losses of MLJ (sold in July 1998) and Legi-Slate (sold in June 1999).

Equity in Losses of Affiliates. The Company's equity in losses of affiliates in 1999 was $8.8 million, compared to losses of $5.1 million in 1998. The Company's affiliate investments consists primarily of a 54 percent non-controlling interest in BrassRing (formed in late September 1999), a 50 percent interest in the International Herald Tribune, and a 49 percent interest in Bowater Mersey Paper Company Limited. The decline in 1999 affiliate results is primarily attributable to BrassRing, Inc., which is in the development and marketing phase of its operations.

Non-Operating Items. In 1999, the Company incurred net interest expense of $25.7 million, compared to $10.4 million of net interest expense in 1998. The 1999 increase in net interest expense is attributable to borrowings executed by the Company to fund capital improvements, acquisition activities and share repurchases.

The Company recorded other non-operating income of $21.4 million in 1999, compared to $304.7 million in 1998. The Company's 1999 other non-operating income consists principally of gains on the sale of marketable equity securities (mostly various Internet-related securities). The Company's 1998 other non-operating income consisted mostly of the non-recurring gains resulting from the Company's disposition of its 28 percent interest in Cowles Media Company, sale of 14 small cable systems and disposition of its investment interest in Junglee.

Income Taxes. The effective tax rate in 1999 was 39.9 percent, as compared to 37.5 percent in 1998. The increase in the effective tax rate is principally due to the 1998 disposition of Cowles Media Company being subject to state income tax in jurisdictions with lower tax rates.

Results of Operations - 1998 Compared to 1997

Net income in 1998 was $417.3 million, an increase of 48 percent over net income of $281.6 million in 1997. Basic and diluted earnings per share both rose 57 percent to $41.27 and $41.10, respectively, in 1998. The Company's 1998 net income includes $194.4 million from the disposition of the Company's 28 percent interest in Cowles Media Company, the sale of 14 small cable systems and the disposition of the Company's investment interest in Junglee, a facilitator of Internet commerce. The Company's 1997 net income includes $44.5 million from the sale of the Company's investment in Bear Island Paper Company, L.P., and Bear Island Timberlands Company, L.P., and the sale of the assets of its PASS regional cable sports network. Excluding these non-recurring gains, net income decreased 6 percent in 1998 and basic and diluted earnings per share remained essentially unchanged with fewer average shares outstanding.

Revenues for 1998 totaled $2,110.4 million, an increase of 8 percent from $1,956.3 million in 1997. Advertising revenues increased 5 percent in 1998, and circulation and subscriber revenues increased 5 percent. Education revenues increased 46 percent in 1998 and other revenues increased 14 percent. The newspaper and broadcast divisions generated most of the increase in advertising revenues. The increase in circulation and subscriber revenues is primarily due to a 15 percent increase in subscriber revenues at the cable division (arising mostly from cable system acquisitions in 1998 and 1997). Revenue growth at Kaplan, Inc. (about two-thirds of which was from acquisitions) accounted for the increase in education revenues.

Operating costs and expenses for the year increased 10 percent to $1,731.5 million, from $1,574.9 million in 1997. The cost and expense increase is primarily due to companies acquired in 1998 and 1997, increased spending for new media activities, a 10 percent increase in newsprint expense, and expenses arising from the expansion of the printing facilities of The Washington Post. These expense increases were partially offset by an increase in the Company's pension credit.

Operating income decreased 1 percent to $378.9 million in 1998, from $381.4 million in 1997.

The Company's 1998 operating income includes $62.0 million of net pension credits, compared to $30.2 million in 1997.

Division Results.

Newspaper Divison. At the newspaper division, 1998 included 53 weeks as compared to 52 weeks in 1997. Newspaper division revenues increased 4 percent to $848.9 million, from $814.3 million in 1997. Advertising revenues at the newspaper division rose 5 percent over the previous year. At The Washington Post, advertising revenues increased 4 percent as a result of higher rates and a slight increase in volume. Classified advertising revenues at The Washington Post increased 5 percent primarily due to higher rates and higher recruitment volume. Retail advertising revenues at The Post declined 3 percent primarily as a result of a 7.5 percent decline in inches. Other advertising revenues (including general and preprint) at The Post increased 11 percent; general advertising volume was essentially unchanged for 1998; however, preprint volume increased 6 percent.

Circulation revenues for the newspaper division remained essentially unchanged from 1997, with the extra week in 1998 offsetting the effects of a 1.3 percent decline in daily and Sunday circulation at The Washington Post.

Newspaper division operating margin in 1998 decreased to 16 percent, from 19 percent in 1997. The decrease in 1998 operating margin is primarily attributable to increased costs arising from the expansion of the printing facilities of The Washington Post, a 10 percent increase in newsprint costs, and increased electronic media spending for the continued development of washingtonpost.com. The 10 percent increase in newsprint costs is comprised of a 4 percent increase in newsprint consumed (driven primarily by expanded suburban community coverage at The Washington Post) and a 6 percent increase in newsprint prices.

Television Broadcasting Division. Revenues at the broadcast division rose 6 percent to $357.6 million in 1998, compared to $338.4 million in 1997. The increase in revenues is primarily attributable to 1998 political advertising and increased local advertising revenues.

Competitive market position remained strong for the Company's television stations. In the November 1998 Nielsen ratings book, WDIV, WJXT and KSAT continued to rank number one in audience share sign-on to sign-off, while WPLG tied for first place among English-language stations in the Miami market. KPRC, although still ranked third in the market, has narrowed the gap significantly and now challenges its closest competitors by as little as two audience share points. WKMG, which the broadcast division took over in September 1997, has remained in third place in Orlando while moving aggressively to build a strong news franchise.

The operating margin at the broadcast division was 48 percent in 1998 and 1997. Excluding amortization of goodwill and intangibles, the operating margin was 52 percent in 1998 and 1997.

Magazine Publishing Division. Magazine division revenues rose 2 percent to $399.5 million, from $389.9 million in 1997. The increase in revenue is attributable to revenue contributed by the business information trade periodicals acquired in December 1997, offset partially by a decline in revenue at Newsweek. Advertising revenues at Newsweek declined 7 percent primarily as the result of two fewer Newsweek domestic special issues in 1998 versus 1997 and softness in advertising at the international editions of Newsweek (particularly the Asian and Latin American editions). Total circulation revenue for the magazine division decreased 6 percent in 1998 due predominantly to the newsstand sales of two Newsweek domestic edition special issues in 1997, which were not recurring in 1998, as well as currency deflation at most of the international editions of Newsweek.

Operating margin at the magazine division was 11 percent in both 1998 and 1997. The 2 percent increase in 1998 revenues combined with an increase in the pension credit at Newsweek were offset by normal expense growth and the amortization expense arising from the December 1997 acquisition of the business unit trade periodicals.

Cable Division. Revenues at the cable division increased 16 percent to $298.0 million in 1998, from $257.7 million in 1997. Basic, tier, pay and advertising revenue categories showed improvement over 1997. Increased subscribers in 1998, primarily from acquisitions, and higher rates accounted for most of the 15 percent increase in subscriber revenues. The number of basic subscribers at the end of the year increased to 733,000, from 637,300 at the end of 1997. During 1998, the cable division acquired cable systems serving approximately 115,400 subscribers and sold cable systems serving approximately 29,000 subscribers.

Operating margin at the cable division was 22 percent in 1998, compared to 21 percent in 1997. Cable operating cash flow increased 21 percent to $126.5 million, from $104.7 million in 1997. Approximately 40 percent of the 1998 improvement in operating cash flow is attributable to the results of cable systems acquired in 1998 and 1997.

Education and Career Services Division. The education and career services division's 1998 revenues totaled $194.9 million, a 66 percent increase over 1997 (with acquisitions accounting for approximately two-thirds of the increase). The remaining growth in revenue was primarily generated by the traditional test preparation and SCORE! businesses. Operating losses totaled $7.5 million for 1998, compared to $8.4 million in 1997. The 1998 operating results reflect improvements in operating income arising from the traditional test preparation business and acquisitions, offset by start-up costs associated with the opening of new SCORE! centers.

Other Businesses and Corporate Office. Revenues from other businesses, including Legi-Slate, MLJ (sold in July 1998) and PASS Sports (nine months of 1997) totaled $11.5 million in 1998, compared to $38.8 million in 1997. The decline in revenue is due to the sale of PASS and MLJ.

Other businesses and the corporate office recorded an operating loss in 1998 of $33.4 million, compared to a loss of $25.8 million in 1997.

Equity in Losses of Affiliates. The Company's equity in losses of affiliates in 1998 was $5.1 million, compared with income of $10.0 million in 1997. The $15.1 million decline in affiliate earnings resulted from increased spending at new media joint ventures (principally Classified Ventures and CareerPath.com) and the absence of affiliate earnings that were provided in the prior year from the Company's investment interest in the Bear Island Partnerships (sold in November 1997) and Cowles Media Company (disposed of in March 1998).

Non-Operating Items. In 1998, the Company incurred net interest expense of $10.4 million, compared to $2.2 million of net interest income in 1997. The average short-term borrowings outstanding in 1998 was $231.8 million, as compared to $10.7 million in average borrowings outstanding in 1997.

Other income, net, in 1998 was $304.7 million, compared to $69.5 million in 1997. For 1998, other income, net, includes $309.7 million arising from the disposition of the Company's 28 percent interest in Cowles Media Company, the sale of 14 small cable systems and the disposition of the Company's interest in Junglee, a facilitator of Internet commerce. For 1997, other income, net, includes $74.8 million in gains arising from the sale of the Bear Island partnerships and the sale of the assets of the Company's PASS regional cable sports network.

Income Taxes. The effective tax rate in 1998 was 37.5 percent, as compared to 39 percent in 1997. The decrease in the effective income tax rate is principally the result of the disposition of Cowles Media Company being subject to state income tax in jurisdictions with lower tax rates, and to a lesser extent, from a favorable IRS-approved income tax change in the fourth quarter of 1998.

Financial Condition: Capital Resources and Liquidity

Acquisitions. During 1999, the Company acquired various businesses for about $90.5 million, which included, among others, $18.3 million for cable systems serving approximately 10,300 subscribers and $61.8 million for various educational and training companies to expand Kaplan, Inc.'s business offerings.

During 1998, the Company acquired various businesses for about $320.6 million, which included, among others, $209.0 million for cable systems serving approximately 115,400 subscribers and $100.4 million for educational, training and career services companies. In 1997, the Company spent $118.9 million on business acquisitions. These acquisitions included, among others, $23.9 million for cable systems serving approximately 16,000 subscribers and $84.5 million for the publishing rights to two computer services industry periodicals and the rights to conduct two computer industry trade shows.

On February 10, 2000, BrassRing, Inc. announced an agreement to acquire from Central Newspapers, Inc. the Westech Group of Companies in exchange for BrassRing, Inc. stock representing a 23 percent equity ownership in BrassRing, Inc. Westech provides Internet recruitment services and high-tech career fairs. Upon the closing of this transaction, the Company's ownership in BrassRing, Inc. will decline from 54 percent to 42 percent.

Exchanges. During 1997, the Company exchanged the assets of certain cable systems with Tele-Communications, Inc., resulting in an increase of about 21,000 subscribers for the Company. The Company also completed, in 1997, a transaction with Meredith Corporation whereby the Company exchanged the assets of WFSB-TV, the CBS affiliate in Hartford, Connecticut, and $60.0 million in cash for the assets of WCPX-TV (renamed WKMG), the CBS affiliate in Orlando, Florida.

Dispositions. In March 1998, the Company received $330.5 million in cash and 730,525 shares of McClatchy Newspapers, Inc. Class A common stock as a result of the merger of Cowles and McClatchy. The market value of the McClatchy stock received was $21.6 million, based upon publicly quoted market prices. During the last three quarters of 1998, the Company sold 464,700 shares of the McClatchy stock (64 percent of the total shares received) for $15.4 million.

In July 1998, the Company completed the sale of 14 small cable systems in Texas, Missouri and Kansas serving approximately 29,000 subscribers for $41.9 million. In August 1998, the Company received 202,961 shares of Amazon.com common stock as a result of the merger of Amazon.com and Junglee Corporation. At the time of the merger transaction, the Company owned a minority investment interest in Junglee Corporation, a facilitator of Internet commerce. The market value of the Amazon.com stock received was $25.2 million.

In November 1997, the Company sold its 35 percent interest in Bear Island Paper Company, L.P., and Bear Island Timberlands Company, L.P., for approximately $92.8 million. In September 1997, the Company sold the assets of its PASS regional cable sports network for $27.4 million.

Capital Expenditures. During 1999, the Company's capital expenditures totaled $130.0 million, about half of which related to plant upgrades at the Company's cable subsidiary. The Company estimates that in 2000 it will spend approximately $145.0 million for property and equipment, primarily for various projects at the cable, broadcasting and newspaper divisions.

Investments in Marketable Equity Securities. At January 2, 2000, the fair value of the Company's investments in marketable equity securities was $203.0 million, which includes $165.8 million of Berkshire Hathaway, Inc. Class A and B common stock and $37.2 million of various publicly traded common stocks of companies with Internet business concentrations.

During 1999 the Company spent $20.0 million for 9,820 shares of Berkshire Hathaway, Inc. Class B common stock. The Company spent $165.0 million for 2,634 and 25 shares of Berkshire Hathaway, Inc. Class A and B common stock, respectively, during 1998. At February 25, 2000, the gross unrealized loss on the Company's Berkshire Hathaway, Inc. stock holdings totaled $51.5 million. The Company intends to hold the Berkshire Hathaway stock long-term and views the unrealized loss position at February 25, 2000 as temporary.

During 1999, the Company sold various of its common stock holdings (most of which were Internet-related) netting proceeds of $54.8 million.

Common Stock Repurchases and Dividend Rate. During 1999, 1998 and 1997, the Company repurchased 744,095, 41,033 and 846,290 shares, respectively, of its Class B common stock at a cost of $425.9 million, $20.5 million and $368.6 million, respectively. The annual dividend rate for 2000 was increased to $5.40 per share, from $5.20 per share in 1999, $5.00 per share in 1998 and $4.80 per share in 1997.

Liquidity. At January 2, 2000, the Company had $75.5 million in cash and cash equivalents. At January 2, 2000, the Company had $487.7 million in short-term commercial paper borrowings outstanding at an average interest rate of 6.4 percent with various maturities throughout the first quarter of 2000.

Additionally, at January 2, 2000 the Company had outstanding $400.0 million of 5.5 percent, 10 year unsecured notes, due in February 2009. The $400.0 million, 10 year notes were issued on February 15, 1999, netting approximately $395.0 million in proceeds after discount and fees. The notes require semiannual interest payments of $11.0 million payable on February 15th and August 15th. The Company used the proceeds from the issuance of the notes to repay an equal amount of short-term commercial paper borrowings then outstanding.

The Company utilizes a $500.0 million revolving credit facility to support the issuance of its short-term commercial paper and to provide for general corporate purposes.The Company expects to fund its estimated capital needs primarily through internally generated funds, and, to a lesser extent, commercial paper borrowings. In management's opinion, the Company will have ample liquidity to meet its various cash needs in 2000.

Year 2000. The Company did not experience any significant malfunctions or errors in its operating or business systems when the date changed from 1999 to 2000. Based on operations since January 1, 2000, the Company does not expect any significant impact to its ongoing business as a result of the "Year 2000 issue." However, it is possible that the full impact of the date change, which was of concern due to computer programs that use two digits instead of four digits to define years, has not been fully recognized. For example, it is possible that the Year 2000 or similar issues such as leap year-related problems may occur with billing, payroll, or financial closings at month, quarterly, or year-end. The Company believes that any such problems are likely to be minor and correctable. In addition, the Company could still be negatively affected if its customers or suppliers are adversely affected by the Year 2000 or similar issues. The Company currently is not aware of any significant Year 2000 or similar problems that have arisen for its customers and suppliers.

The Company spent about $25 million on Year 2000 readiness efforts; $15 million related to assessment, repair and testing efforts and was expensed as incurred (approximately $8 million in 1999 and $7 million in 1998) and $10 million related to the replacement of non-compliant systems which have been capitalized and will be amortized over a period ranging between five and seven years.

Forward-Looking Statements. This annual 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 1 of the Company's Annual Report on Form 10-K.