Washington Post 2008 Annual Report Download - page 83

J. CAPITAL STOCK, STOCK AWARDS AND STOCK OPTIONS
Adoption of SFAS 123R. The Company adopted SFAS 123R in
2006 and reported a $5.1 million after-tax charge for the
cumulative effect of change in accounting for Kaplan equity awards
($8.2 million in pre-tax Kaplan stock compensation expense).
Capital Stock. Each share of Class A common stock and Class B
common stock participates equally in dividends. The Class B stock
has limited voting rights and as a class has the right to elect 30% of
the Board of Directors; the Class A stock has unlimited voting rights,
including the right to elect a majority of the Board of Directors. In
the third quarter of 2007, a majority of the Company’s Class A
shareholders voted to convert 430,557, or 25%, of the Class A
shares of the Company to an equal number of Class B shares. The
conversion had no impact on the voting rights of the Class A and
Class B common stock.
During 2008, 2007 and 2006, the Company purchased a total of
167,642, 54,506 and 77,300 shares, respectively, of its Class B
common stock at a cost of approximately $99.0 million,
$42.0 million and $56.6 million, respectively. At December 28,
2008, the Company had authorization from the Board of Directors
to purchase up to 245,956 shares of Class B common stock.
Stock Awards. In 1982, the Company adopted a long-term
incentive compensation plan, which, among other provisions,
authorizes the awarding of Class B common stock to key
employees. Stock awards made under this incentive compensation
plan are subject to the general restriction that stock awarded to a
participant will be forfeited and revert to Company ownership if the
participant’s employment terminates before the end of a specified
period of service to the Company. At December 28, 2008, there
were 166,600 shares reserved for issuance under the incentive
compensation plan. Of this number, 32,785 shares were subject to
awards outstanding and 133,815 shares were available for future
awards. Activity related to stock awards under the long-term
incentive compensation plan for the years ended December 28,
2008, December 30, 2007 and December 31, 2006, was as
follows:
2008 2007 2006
Number
of
Shares
Average
Award
Price
Number
of
Shares
Average
Award
Price
Number
of
Shares
Average
Award
Price
Beginning of year,
unvested ..... 34,355 $813.99 29,105 $815.55 29,580 $819.83
Awarded ..... 3,550 685.00 19,260 759.66 1,300 769.43
Vested ....... (1,147) 968.05 (12,838) 726.94 (159) 721.32
Forfeited ..... (3,973) 798.37 (1,172) 913.33 (1,616) 866.07
End of year,
unvested ..... 32,785 $796.52 34,355 $813.99 29,105 $815.55
For the share awards outstanding at December 28, 2008, the
aforementioned restriction will lapse in 2009 for 12,550 shares, in
2010 for 825 shares, in 2011 for 15,560 shares and in 2012 for
3,850 shares. Stock-based compensation costs resulting from
Company stock awards reduced net income by $3.7 million,
$3.7 million and $3.3 million, in 2008, 2007 and 2006,
respectively.
As of December 28, 2008, there was $9.3 million of total
unrecognized compensation expense related to this plan. That cost
is expected to be recognized on a straight-line basis over a
weighted average period of 1.7 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 28, 2008, there
were 362,525 shares reserved for issuance under the stock option
plan, of which 87,025 shares were subject to options outstanding
and 275,500 shares were available for future grants.
Activity related to in options outstanding for the years ended
December 28, 2008, December 30, 2007 and December 31,
2006 was as follows:
2008 2007 2006
Number
of
Shares
Average
Option
Price
Number
of
Shares
Average
Option
Price
Number
of
Shares
Average
Option
Price
Beginning of
year ...... 92,275 $606.89 109,175 $593.82 113,325 $572.36
Granted . . . 17,000 402.71 — — 9,000 729.67
Exercised . . (17,250) 533.94 (16,275) 519.12 (12,275) 481.05
Forfeited . . . (5,000) 612.00 (625) 609.62 (875) 803.61
End of year . . . 87,025 $581.17 92,275 $606.89 109,175 $593.82
Of the shares covered by options outstanding at the end of 2008,
64,806 are now exercisable, 7,219 will become exercisable in
2009, 6,500 will become exercisable in 2010, 4,250 will
become exercisable in 2011 and 4,250 will become exercisable
in 2012. For 2008, 2007 and 2006, the Company recorded
expense of $1.1 million, $1.2 million and $1.3 million related to
this plan, respectively. Information related to stock options
outstanding and exercisable at December 28, 2008 is as follows:
Options Outstanding Options Exercisable
Range of
Exercise
Prices
Shares
Outstanding
at
12/28/2008
Weighted
Average
Remaining
Contractual
Life (yrs.)
Weighted
Average
Exercise
Price
Shares
Exercisable
at
12/28/2008
Weighted
Average
Remaining
Contractual
Life (yrs.)
Weighted
Average
Exercise
Price
$ 369 . . . . 15,000 10.0 $369.48 — — —
503–586 . . . . 42,150 2.1 524.85 42,150 2.1 524.85
652–693 . . . . 2,500 9.0 660.03 500 5.0 692.51
729–763 . . . . 19,875 6.2 734.15 14,656 5.7 734.13
816 . . . . 3,500 5.0 816.05 3,500 5.0 816.05
954 . . . . 4,000 6.0 953.50 4,000 6.0 953.50
87,025 4.9 $581.17 64,806 3.3 $615.66
At December 28, 2008, the intrinsic value for all options out-
standing and unvested was $0.2 million. All exercisable shares at
December 28, 2008 were antidilutive. 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 $382.23 at December 28, 2008. At
December 28, 2008, there were 22,219 unvested options related
to this plan with an average exercise price of $480.57 and a
weighted average remaining contractual term of 9.5 years. At
December 30, 2007, there were 9,938 unvested options with an
average exercise price of $759.42.
2008 FORM 10-K 71