Washington Post 2000 Annual Report Download - page 18

The Washington Post Company 43
Stock Options. The Company’s employee stock option plan, which was
adopted in 1971 and amended in 1993, reserves 1,900,000 shares of
the Company’s Class B common stock for options to be granted under
the plan. The purchase price of the shares covered by an option
cannot be less than the fair value on the granting date. At December
31, 2000, there were 503,575 shares reserved for issuance under the
stock option plan, of which 166,450 shares were subject to options
outstanding and 337,125 shares were available for future grants.
Changes in options outstanding for the years ended December
31, 2000, January 2, 2000, and January 3, 1999 were as follows:
2000 1999 1998
Number Average Number Average Number Average
of Option of Option of Option
Shares Price Shares Price Shares Price
Beginning of year .... 156,497 $ 470.64 246,072 $ 404.48 251,225 $371.35
Granted................... 89,500 544.90 3,750 516.36 25,500 519.32
Exercised ................ (20,425) 345.46 (87,825) 288.43 (30,653) 228.53
Forfeited.................. (59,122) 643.71 (5,500) 450.86 — —
End of year.............. 166,450 $ 465.55 156,497 $ 470.64 246,072 $404.48
Of the shares covered by options outstanding at the end of 2000,
75,463 are now exercisable, 31,612 will become exercisable in 2001,
25,375 will become exercisable in 2002, 20,250 will become exercis-
able in 2003, and 13,750 will become exercisable in 2004.
Information related to stock options outstanding at December 31,
2000 is as follows:
Weighted
Average Weighted Weighted
Number Remaining Average Number Average
Range of Outstanding Contractual Exercise Exercisable Exercise
exercise prices at 12/31/00 Life (yrs.) Price at 12/31/00 Price
$ 173 2,500 1.0 $ 173.00 2,500 $ 173.00
222-299 23,750 3.3 247.91 23,750 247.91
344 13,750 6.0 343.94 13,750 343.94
472-484 31,450 7.6 473.89 18,713 472.00
500-586 95,000 9.3 542.81 16,750 526.03
All options were granted at an exercise price equal to or greater
than the fair market value of the Company’s common stock at the date
of grant. The weighted-average fair value for options granted during
2000, 1999, and 1998 was $161.15, $157.77, and $126.57, respec-
tively. The fair value of options at date of grant was estimated using
the Black-Scholes method utilizing the following assumptions:
2000 1999 1998
Expected life (years) ............................. 7 7 7
Interest rate .......................................... 5.98% 6.19% 4.68%
Volatility................................................ 17.9% 16.0% 14.6%
Dividend yield....................................... 1.0% 1.1% 1.2%
Had the fair values of options granted after 1995 been recog-
nized as compensation expense, net income would have been
reduced by $3.8 million ($0.40 per share, basic and diluted), $1.9
million ($0.19 per share, basic and diluted), and $2.0 million ($0.19
per share, basic and diluted) in 2000, 1999, and 1998, respectively.
The Company also maintains a stock option plan at its Kaplan
subsidiary that provides for the issuance of stock options representing
15 percent of Kaplan, Inc. common stock to certain members of
Kaplan’s management. Under the provisions of this plan, options are
issued with an exercise price equal to the estimated fair value of
Kaplan’s common stock. Options vest ratably over five years from
issuance, and upon exercise, an option holder has the right to require
the Company to repurchase the Kaplan stock at the stock’s then fair
value. The fair value of Kaplan’s common stock is determined by
the Company’s compensation committee. At December 31, 2000,
options representing 12.5 percent of Kaplan’s common stock were
issued and outstanding. For 2000, 1999, and 1998, the Company
recorded expense of $6,000,000, $7,200,000, and $6,000,000,
respectively, related to this plan. No options have been exercised
to date under this plan.
Average Number of Shares Outstanding. Basic earnings per share are
based on the weighted average number of shares of common stock
outstanding during each year. Diluted earnings per common share are
based upon the weighted average number of shares of common stock
outstanding each year, adjusted for the dilutive effect of shares issuable
under outstanding stock options. Basic and diluted weighted average
share information for 2000, 1999, and 1998 is as follows:
Basic Dilutive Diluted
Weighted Effect of Weighted
Average Stock Average
Shares Options Shares
2000 ..................................... 9,445,466 14,362 9,459,828
1999 ..................................... 10,060,578 21,206 10,081,784
1998 ..................................... 10,086,786 42,170 10,128,956
IH IPENSIONS AND OTHER POSTRETIREMENT PLANS
The Company maintains various pension and incentive savings plans
and contributes to several multi-employer plans on behalf of certain
union represented employee groups. Substantially all of the
Company’s employees are covered by these plans.
The Company also provides healthcare and life insurance benefits
to certain retired employees. These employees become eligible for
benefits after meeting age and service requirements.