Greetings from Washington, home of the SEC. With all the scrutiny stock analysts have been under recently, you may be asking yourselves why you chose a career that demands accurate forecasting. You may be wondering – why didn’t I become a meteorologist?

You’ve heard from plenty of companies about the picture for media advertising. Our results will not be too dissimilar from what others have been reporting. In a moment I’ll give you a recap of developments at Post-Newsweek Stations, The Washington Post, Newsweek, and Washingtonpost.Newsweek Interactive.

But I’d like to begin by talking about two things that have changed a little bit since our annual report letter, which summarized the financial outlook for the company.

First, thanks to a combination of efforts by the management and associates at Cable One, the outlook for basic cable subscribers is much better than a year ago – or even four months ago. This has not hugely significant – but certainly meaningful – consequences for Cable One’s economics. It also reverses a concern that we had going into the year. And it shows what good marketing – and good cable management – can achieve.

Second, Kaplan’s programs and its financial results have come along quite a bit faster than we anticipated. In the annual report we said that Kaplan has tremendous momentum and some room to grow by acquisition. Kaplan’s first quarter results were excellent, and now, with the FTC acquisition in the United Kingdom, which closed on March 31, the outlook for Kaplan is very good.

Let me flesh out these developments at Cable One and Kaplan.

We were understandably concerned when Cable One lost 5 percent of its basic subscribers during the course of last year. We knew that the reasons for the loss included a mix of poor economies in the small towns and cities where Cable One provides service, a tightening up of bad debt exposure that drove credit stops to record levels, and competition from two DBS services. We also knew that working in our favor were industry-leading take-up rates for digital services, with which our customers were particularly satisfied, and the extraordinarily fast take-up rates for cable modems typical of all cable companies.

To address the weakness in basic subs, CEO Tom Might and his team tried a variety of tactics: bundling basic, digital and modem service in a package that cost subscribers less than if they bought those services a la carte; re-instituting a door-to-door sales force, which turned out to be surprisingly effective; introducing an Hispanic tier, HDTV channels, and about 20 other digital channels for smaller, specialty markets; and a freeze on all video rates in 2003 (although we raised the charge for some cable modem customers by $5 a month, for the first time).

As a result of all these steps, the basic subscriber picture this year has improved each month. Between January 1 and June 1 of this year, basic subscribers are up by 6,000, while in the January to June period last year, they were down by 8,000. We have at least temporarily reversed last year’s trend – although that trend was so strong that, even with our better results, we are still off 20,000 subs from May of 2002.

Since some of you here today are primarily newspaper analysts, I should point out that declining basic subscribers is a bigger problem for cable companies than declining circulation is for newspapers, because essentially all cable revenue comes from subscribers.

Figuring very crudely, a gain or loss of 1 percent of basic subscribers – assuming none subscribed to digital or modem service – has a $2.1 million impact on Cable One’s operating income.

As we reported, Cable One increased operating income by 29 percent for the first quarter, driven in part by the growing strength in basic subscribers and the incredibly rapid increase in modems. With the rate freeze I mentioned, Cable One’s operating income comparison for the rest of 2003 will not be as strong. Our price increases normally take effect in the second quarter each year. This will be the first year absent these increases, which is costing the company about $1 million a month.

Although the quarterly pattern will be erratic, cable’s overall results look good. And we expect Cable One’s capital expenditures to continue on a downward trend over the next few years.

We now have more than 103,000 cable modem subscribers, up by over 25,000 from January 1 of this year and up by over 50,000, an amazing 95 percent, from a year ago.

Kaplan, meanwhile, under the extraordinary leadership of CEO Jonathan Grayer and his team, continues to grow quite rapidly in revenue and operating income.

To refresh your memory, Kaplan reports its operating results in two groups. Supplemental Education includes Kaplan Test Prep and Admissions, the business in which we help students prepare for college and graduate admissions exams; Kaplan Professional, which offers licensing and continuing education training for professionals in financial services and real estate; and Score, our after-school learning center business for younger kids. Kaplan Higher Education includes online as well as traditional colleges and offers degree and certificate programs.

Test Prep now accounts for 29 percent of Kaplan’s revenue; 21 percent comes from Kaplan Professional; and Score is at 8 percent. Revenues from Kaplan Higher Education account for 42 percent of Kaplan’s total revenue.

Test Prep remains a fierce battle in every market with competitors large and small. But John Polstein and his team continue to win most of the battles.

Kaplan Professional has had another strong five months under Eric Cantor’s leadership.

The biggest news here, of course, is Kaplan’s expansion into the United Kingdom with its $87 million acquisition of FTC in March. This company is one of three offering training for accountancy tests in the U.K., Singapore, and Hong Kong. We negotiated carefully before taking Kaplan’s first major step into international waters and can report, three months later, that FTC’s business looks even better than we thought.

We’ve added a strong management team led by William Macpherson, who had built the business. The market is a large one, and FTC has plenty of room to grow.

And just last week, Kaplan announced the acquisition of Inspection Training Associates, the leader in home inspection training and education, which will become part of the Kaplan Professional schools.

Although it’s the smallest of Kaplan’s four major businesses, Score continues to show gratifying economic progress, while making us all feel great about the service it provides. This business is nudging into profitability while continuing to expand.

Kaplan’s Higher Education division is booming ahead. We now have more than 10,000 students online through Kaplan College and Concord Law School. While Concord is small compared to the total size of Kaplan, I have to take time to brag. Of the ten students in Concord’s first graduating class, six passed the California bar on the first try. This 60 percent pass rate, while it comes from a very small sample and may not be repeated, is higher than the 57 percent first-time pass rate from California-based ABA-accredited bricks-and-mortar law schools. It’s also higher than the 22 percent first-time pass rate of California state bar-accredited schools.

Again, I mention these numbers not because they foretell a trend that online students will outperform everyone else. Rather these results offer proof, on a small scale, that online higher education works. This bodes well as Kaplan rolls out additional online programs.

Meanwhile, Higher Ed’s traditional bricks and mortar campuses now have roughly 40,000 students each year in 47 schools in 15 states. Under Gary Kerber’s leadership, they have had huge increases in student counts, revenues, and operating income. People are flocking to these schools because they produce practical results in terms of jobs and promotions in a very tough labor market.

Now let’s turn to our traditional media businesses.

We’ve told shareholders that Post-Newsweek Stations would inevitably have a down year because of the unrepeatability of the Olympics and political advertising revenue, totaling $37 million net, the division had in 2002. That promise will be fulfilled. Still, PNS is having a decent year. Like the rest of the industry, we were off to a good start in January and February, fell in advertising revenue as the buildup to the war in Iraq began, although we are now recovering. But our May ratings were good, and if the economy picks up, we’re in a good position to pick up with it.

A year ago we ceased being the CBS affiliate in Jacksonville and decided to go independent with WJXT. I said in the annual report the early results were pretty good, and we were pleased WJXT continued to win all the early evening news ratings periods.

Audience and demographic results in February and May were better than in November. This encourages us about WJXT’s outlook, though its sales performance lags our other stations. In the May book, WJXT was the number one independent station in the U.S., sign-on to sign-off, and led the Jacksonville market in news at 5, 5:30 and 6 o’clock. And our 10 p.m. news pushed in front of Fox’s longer-established program.

Unlike almost every station lucky enough to have the program, we put reruns of Dr. Phil at 3 p.m. and put the first-run shows in prime time at 9 p.m., where he is pulling a surprisingly good 3 rating against first-run network competition. PNS president Alan Frank and station manager Sherry Burns continue to tinker with the programming lineup, and the results of most of the tinkering are quite positive. It will be the end of next year before I can tell you whether we made a good decision by dropping the CBS affiliation in Jacksonville.

Our Houston station was one of only three local stations to win a Peabody Award, for a series of reports that recounted how the U.S. Army, citing federal law, refused access to soldiers' DNA in criminal investigations where enlisted personnel were suspects. This series prompted Congressional action and a new federal law, which now requires the military to use its DNA files in serious criminal cases.

I would like to pause for a moment and talk about the job Newsweek did covering the Iraq war and the buildup to it.

People often look back and comment on past golden ages of various publications. It’s harder to see when a publication is going through one at the time. But Newsweek’s readers clearly feel Newsweek has been serving up a highly superior magazine week after week for the last two years.

Credit has to be widely shared. But every reader knows the byline of the remarkable Evan Thomas; the amazing contributions of the Washington team of Dan Klaidman, Howard Fineman, Mike Isikoff, and Debra Rosenberg; the heroic efforts of Rod Norland and Newsweek’s team of war correspondents, including Melinda Liu who covered the war from Baghdad; the thoughtful commentary of Newsweek columnists Fareed Zakaria, Jonathan Alter, Bob Samuelson, Jane Bryant Quinn, Anna Quindlen, and George Will; and the unmatched leadership of editors Mark Whitaker, Jon Meacham, and Dorothy Kalins – all under the leadership of Rick Smith.

Newsweek’s circulation results remain by far the best of any newsweekly. According to the ABC, Newsweek leads the newsweekly field in individually-paid, long-term readers, the highest percentage of subscriptions sold without premium incentives, and the lowest sub acquisition requirement to maintain its rate base.

And advertising has actually been good for the first five months of the year, up 7.2 percent in domestic pages, with the glaring exception of Newsweek International’s Asia edition, whose major advertisers are the travel and hotel industry.

SARS has completely eliminated that business. If the World Health Organization is correct that SARS is peaking, this area, too, should recover, though it will take some time.

The Washington Post also served up quite an extraordinary performance to readers during the Iraq war and the months before and after it. The Post also won three Pulitzer Prizes: for international reporting, commentary, and film criticism. In addition, Rick Atkinson, a 15-plus-year Post reporter and editor, won the history Pulitzer for his book “An Army at Dawn” about military operations in West Africa during World War II. I mention Rick because he received word of his Pulitzer while embedded with the 101st Airborne on temporary assignment from The Post. So The Post’s journalism has been extraordinary.

Business results have not – and for the same reason you heard before: help wanted. The rest of the Washington economy isn’t bad, but major companies simply are not hiring. Here again we thought results were recovering when the year began. But they screeched to a halt before the war. We hoped they might resume their upward march when the war was over, but that’s not been the case so far. We watch, but we have no sustained good news to report at this point.

Despite the job market, total print advertising revenue at The Post is up 1.3 percent through May, thanks to general, real estate, and automotive categories. Performance is mixed for retailer advertising.

The Post, under publisher Bo Jones and general manager Steve Hills, has done a very strong job of controlling costs, going far beyond savings from lower newsprint costs. For the company as a whole, the costs of covering the war – travel, communications, and additional newsprint – will continue to impact second quarter results. Company-wide, we estimate the cost will total roughly $3 million.

The fastest-growing division of The Washington Post Company, in terms of revenue, is Washingtonpost.Newsweek Interactive (or WPNI), though it’s from a small base. As has happened in the past with major news stories, audiences grew at washingtonpost.com with the Iraq war.

Page views increased 41 percent between January and March of this year. In fact, March 2003 represented the second-highest traffic month in washingtonpost.com history, just short of the levels reached in September 2001. According to Nielsen/NetRatings, washingtonpost.com attracted 7.1 million unique users in March, second among individual newspaper sites and fourth among all-news sites (behind MSNBC.com, CNN.com, and nytimes.com). The audience remains higher than before the war.

Chris Schroeder and his team have done a good job of capitalizing on WPNI’s revenue opportunities. Last year, local and national advertising revenues (excluding jobs, cars, and real estate) jumped 60 percent. The trend has continued into 2003, with washingtonpost.com reporting a 65 percent gain in local and national ad revenue through May.

And despite the difficult recruitment market, Jobs on washingtonpost.com posted a 20 percent revenue gain in the first five months of this year.

Looking ahead, it feels to us that major advertisers, both local and national, are becoming more committed to including online as an integral part of their marketing campaigns.

In closing, while you know we never comment on your forecasts of quarterly results, I did comment at the annual meeting that our improvement in first quarter profits was not to be repeated. That’s because the first quarter of 2002 (right behind 9/11) had very poor results. The remaining quarters of 2002 were much better. If any of you is foolish enough to try to forecast Washington Post Company operating results, I don’t care what you come up with, but I would encourage you to keep that in mind.