Washington Post 2005 Annual Report Download - page 70

was estimated using the Black-Scholes method utilizing the following For 2005, 2004 and 2003, the Company recorded total Kaplan
assumptions: stock compensation expense of $3.0 million, $32.5 million and
$119.1 million, respectively. In 2005, 2004, and 2003 payouts
2005 2004 2003 from option exercises totaled $35.2 million, $10.3 million, and
$119.6 million, respectively. At December 31, 2005, the Compa-
Expected life (years)ÏÏÏÏÏÏÏÏÏÏÏ 777
ny's accrual balance related to Kaplan stock-based compensation
Interest rateÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4.49% 3.85% 4.38%
VolatilityÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 19.08% 20.24% 20.43% totaled $63.6 million.
Dividend yieldÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 0.97% 0.73% 0.71% Changes in Kaplan stock options outstanding for the years ended
Refer to Note A for additional disclosures surrounding stock option January 1, 2006, January 2, 2005, and December 28, 2003,
accounting. were as follows:
The Company also maintains a stock option plan at its Kaplan 2005 2004 2003
Number Average Number Average Number Average
subsidiary that provides for the issuance of Kaplan stock options to
of Option of Option of Option
certain members of Kaplan's management. The Kaplan stock option Shares Price Shares Price Shares Price
plan was adopted in 1997 and initially reserved 15%, or
Beginning of Year ÏÏÏÏ 68,000 $ 596.17 68,000 $596.17 147,463 $ 311.24
150,000 shares, of Kaplan's common stock for awards to be Granted ÏÏÏÏÏÏÏÏÏÏ 10,582 2,080.00 Ì Ì 16,037 1,546.23
granted under the plan. Under the provisions of this plan, options Exercised ÏÏÏÏÏÏÏÏÏ (16,153) 225.14 Ì Ì (94,652) 303.66
Forfeited ÏÏÏÏÏÏÏÏÏÏ (200) 652.00 Ì Ì (848) 382.12
are issued with an exercise price equal to the estimated fair value of
End of year ÏÏÏÏÏÏÏÏÏ 62,229 $ 944.63 68,000 $596.17 68,000 $ 596.17
Kaplan's common stock and options vest ratably over the number of
years specified (generally 4 to 5 years) at the time of the grant. Of the shares covered by options outstanding at the end of 2005,
Upon exercise, an option holder receives cash equal to the differ- 38,931 are now exercisable, 9,366 will become exercisable in
ence between the exercise price and the then fair value. The fair 2006, 5,843 will become exercisable in 2007, 5,443 will
value of Kaplan's common stock is determined by the Company's become exercisable in 2008, and 2,646 will become exercisable
compensation committee of the Board of Directors. In January in 2009. Information related to stock options outstanding at
2006, the committee set the fair value price at $1,833 per share. January 1, 2006, is as follows:
Option holders have a 30-day window in which they may exercise
at this price, after which time the compensation committee has the Number Weighted Average Number
Range of Outstanding Remaining Contractual Exercisable
right to determine a new price in the event of an exercise.
Exercise Prices at 1/1/06 Life (yrs.) at 1/1/06
In September 2003, the compensation committee set the fair value
$ 190 16,650 2.0 16,650
price of Kaplan common stock at $1,625 per share, and 375 338 4.5 338
announced an offer totaling $138 million for approximately 55% of 526 18,672 5.5 15,139
the stock options outstanding at Kaplan. The Company's offer 652 2,000 6.0 1,200
included a 10% premium over the then current valuation price of 861 487 6.0 204
Kaplan common stock of $1,625 per share. As a result of this offer, 1,625 13,500 6.0 5,400
100% of the eligible stock options were tendered. The Company 2,080 10,582 6.0 Ì
paid out $118.7 million in the fourth quarter of 2003, $10.3 million Average Number of Shares Outstanding. Basic earnings
in 2004, and $5.1 million in 2005, with the remainder of the per share are based on the weighted average number of shares of
payouts, related to 1,705 tendered stock options, to be made at common stock outstanding during each year. Diluted earnings per
the time of their scheduled vesting in 2006 to 2008 if the option common share are based on the weighted average number of
holder is still employed at Kaplan. Additionally, stock compensation shares of common stock outstanding each year, adjusted for the
expense will be recorded on these remaining exercised stock dilutive effect of shares issuable under outstanding stock options.
options over the remaining vesting periods of 2006 to 2008. A Basic and diluted weighted average share information for 2005,
small number of key Kaplan executives continue to hold the remain- 2004, and 2003 is as follows:
ing 62,229 of outstanding Kaplan stock options. In January 2006,
15,298 Kaplan stock options were exercised, and 12,239 Kaplan Basic Dilutive Diluted
stock options were awarded at an option price of $1,833 per Weighted Average EÅect of Weighted Average
share. Shares Stock Options Shares
In December 2005, the compensation committee awarded to a 2005 ÏÏÏÏÏÏÏÏÏ 9,593,837 22,060 9,615,897
senior manager Kaplan shares or share equivalents equal in value to 2004 ÏÏÏÏÏÏÏÏÏ 9,563,314 28,311 9,591,625
$4.8 million, with the number of shares or share equivalents deter- 2003 ÏÏÏÏÏÏÏÏÏ 9,530,209 24,454 9,554,663
mined by the January 2006 valuation. In 2006, based on the The 2005, 2004, and 2003, diluted earnings per share amounts
$1,833 per share value, 2,619 shares or share equivalents will be exclude the effects of 4,000, 4,000, and 16,750 stock options
issued. The expense of this award has been reflected in the 2005 outstanding, respectively, as their inclusion would be antidilutive.
results of operations.
54 THE WASHINGTON POST COMPANY