Washington Post 2007 Annual Report Download - page 84

expected to be recognized on a straight-line basis over a
weighted average period of 1.9 years.
Stock Options. The Company’s employee stock option plan
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. Options generally
vest over 4 years and have a maximum term of 10 years. At
December 30, 2007, there were 379,775 shares reserved for
issuance under the stock option plan, of which 92,275 shares
were subject to options outstanding and 287,500 shares were
available for future grants.
Changes in options outstanding for the years ended
December 30, 2007, December 31, 2006 and January 1,
2006, were as follows:
Number
of
Shares
Average
Option
Price
Number
of
Shares
Average
Option
Price
Number
of
Shares
Average
Option
Price
2007 2006 2005
Beginning of
year. . . . . 109,175 $593.82 113,325 $572.36 122,250 $561.05
Granted . . ——9,000 729.67 4,500 762.50
Exercised. . (16,275) 519.12 (12,275) 481.05 (12,800) 533.24
Forfeited . . (625) 609.62 (875) 803.61 (625) 530.87
End of year . . 92,275 $606.89 109,175 $593.82 113,325 $572.36
Of the shares covered by options outstanding at the end of 2007,
82,337 are now exercisable, 4,344 will become exercisable in
2008, 3,344 will become exercisable in 2009 and 2,250 will
become exercisable in 2010. For 2007, 2006 and 2005, the
Company recorded expense of $1.2 million, $1.3 million and
$1.1 million, respectively, related to this plan. Information related
to stock options outstanding and exercisable at December 30,
2007 is as follows:
Range of
Exercise Prices
Shares
Outstanding
at
12/30/2007
Weighted
Average
Remaining
Contractual
Life (yrs.)
Weighted
Average
Exercise
Price
Shares
Exercisable
at
12/30/2007
Weighted
Average
Remaining
Contractual
Life (yrs.)
Weighted
Average
Exercise
Price
Options Outstanding Options Exercisable
$ 480 750 3.0 $480.00 750 3.0 $480.00
503–586 61,650 2.8 527.57 61,650 2.8 527.57
693 500 6.0 692.51 500 6.0 692.51
729–763 21,875 7.2 735.98 12,937 6.2 734.78
816 3,500 6.0 816.05 3,500 6.0 816.05
954 4,000 7.0 953.50 3,000 7.0 953.50
92,275 4.3 $606.89 82,337 3.7 $588.48
At December 30, 2007, the intrinsic value for all options
outstanding, exercisable, and nonvested was $18.6 million,
$18.0 million and $0.6 million, respectively. The intrinsic
value of a stock option is the amount by which the market
value of the underlying stock exceeds the exercise price of the
option. The market value of the Company’s stock was $801.50 at
December 30, 2007. At December 30, 2007, there were
9,938 nonvested options related to this plan with an average
exercise price of $759.42 and a weighted average remaining
contractual term of 8.6 years. At December 31, 2006, there
were 15,437 nonvested options with an average exercise price
of $770.79.
As of December 30, 2007, total unrecognized stock-based
compensation expense related to this plan was $2.1 million,
which is expected to be recognized on a straight-line
basis over a weighted average period of approximately
1.75 years. The total intrinsic value of options exercised
during 2007, 2006 and 2005 was $4.7 million,
$3.7 million and $3.8 million, respectively.
There were no options granted during 2007. During 2006 and
2005, 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 2006 and 2005 was $211.76 and $218.62,
respectively. The fair value of options at date of grant was
estimated using the Black-Scholes method utilizing the following
assumptions:
2006 2005
Expected life (years) . . ................ 77
Interest rate . . ..................... 4.45% 4.49%
Volatility. ......................... 20.35% 19.08%
Dividend yield. ..................... 1.07% 0.97%
The Company also maintains a stock option plan at its Kaplan
subsidiary that provides for the issuance of Kaplan stock options
to certain members of Kaplan’s management. The Kaplan stock
option plan was adopted in 1997 and initially reserved 15%, or
150,000 shares, of Kaplan’s common stock for awards to be
granted under the plan. Under the provisions of this plan, options
areissuedwithanexercisepriceequaltotheestimatedfairvalue
of Kaplan’s common stock, and options vest ratably over the
number of years specified (generally four to five years) at the
time of the grant. Upon exercise, an option holder may receive
Kaplan shares or cash equal to the difference between the
exercise price and the then fair value. The fair value of
Kaplan’s common stock is determined by the Company’s
compensation committee of the Board of Directors. In January
2008, the committee set the fair value price at $2,700 per share.
Option holders have a 30-day window in which they may
exercise at this price, after which time the compensation
committee has the right to determine a new price in the event
of an exercise. Also in the first two months of 2008, 26,656
Kaplan stock options were exercised, and 21,325 Kaplan stock
options were awarded at an option price of $2,700 per share.
68 THE WASHINGTON POST COMPANY