Washington Post 2001 Annual Report Download - page 9

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THE WASHINGTON POST COMPANY
Kaplan Stock Option Plan. The Company maintains a stock option plan
at its Kaplan subsidiary that provides for the issuance of stock options
representing 10.6 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 compensation committee of the Company’s Board of Directors,
with input from management and an independent outside valuation
firm. The compensation committee has historically modified the fair
value of Kaplan stock on an annual basis, and management expects
this practice to continue. At December 30, 2001, options representing
10.0 percent of Kaplan’s common stock were issued and outstanding.
For 2001, 2000, and 1999, the Company recorded expense of
$25,302,000, $6,000,000, and $7,250,000, respectively, related to this
plan. In 2001, payouts from option exercises totaled $2.1 million. At
December 30, 2001, the Company’s Kaplan stock-based compensa-
tion accrual balance totaled $41,400,000. Management expects
Kaplan’s profits and related fair value to increase significantly again
in 2002, with a corresponding increase in the stock-based compen-
sation expense for 2002 as compared to 2001.
Other. The Company does not have any off-balance sheet arrange-
ments or financing activities with special-purpose entities (SPEs).
Transactions with related parties, as discussed in Note C to the
Consolidated Financial Statements, are in the ordinary course of
business and are conducted on an arms-length basis.
OTHER
New Accounting Pronouncements. In July 2001, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards
(SFAS) No. 142, “Goodwill and Other Intangible Assets.” SFAS No. 142
supersedes APB 17 and provides, among other provisions, that (1)
goodwill and indefinite lived intangible assets will no longer be amor-
tized, (2) goodwill will be tested for impairment at least annually at the
reporting unit level, (3) intangible assets deemed to have an indefinite
life will be tested for impairment at least annually, and (4) the amorti-
zation period of intangible assets with finite lives will no longer be lim-
ited to 40 years. The Company adopted SFAS No. 142 effective in fiscal
2002 and estimates that the application of its requirements will result
in the cessation of most of the periodic charges presently being
recorded from the amortization of goodwill and other intangible assets.
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.
THE WASHINGTON POST COMPANY