Washington Post 2008 Annual Report Download - page 84

As of December 28, 2008, total unrecognized stock-based
compensation expense related to this plan was $2.6 million, which
is expected to be recognized on a straight-line basis over a
weighted average period of approximately 2.0 years. The total
intrinsic value of options exercised during 2008, 2007 and 2006
was $2.4 million, $4.7 million and $3.7 million, respectively; a
tax benefit from these stock option exercises of $1.0 million, $1.9
million and $1.4 million was realized during 2008, 2007 and
2006, respectively.
During 2008 and 2006, 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. There were no
options granted during 2007. During 2008, the Company granted
options of 2,000 and 15,000, with a weighted average fair value
of $159.93 and $79.24, respectively. The weighted average fair
value for options granted during 2006 was $211.76.
The fair value of options at date of grant was estimated using the
Black-Scholes method utilizing the following assumptions:
2008 2006
Expected life (years) .............. 77
Interest rate .................... 1.91%–3.31% 4.45%
Volatility ...................... 20.41%–25.39% 20.35%
Dividend yield .................. 1.32%–2.33% 1.07%
The Company also maintains a stock option plan at Kaplan 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 are issued with an
exercise price equal to the estimated fair value 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 2009, the committee set the fair value price at $2,550 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.
In November 2008, Kaplan’s chief executive officer resigned. The
executive exercised 40,805 Kaplan stock options, sold 6,572
Kaplan shares and forfeited 21,526 unvested Kaplan stock options
at the time of his resignation.
Activity related to Kaplan stock 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 ..... 69,662 $1,611.89 73,352 $1,480.11 62,229 $ 944.63
Granted .......... 21,325 2,700.00 3,262 2,115.00 29,785 1,833.00
Exercised ......... (67,461) 1,701.38 (6,952) 457.55 (18,662) 257.73
Forfeited .......... (21,526) 2,498.56 ————
End of year .......... 2,000 $ 652.00 69,662 $1,611.89 73,352 $1,480.11
The compensation committee awarded a Kaplan senior manager
Kaplan shares equal in value to $4.8 million and $4.6 million for
the 2007 and 2006 fiscal year, respectively, and the expense of
these awards was recorded in the Company’s results of operations
for each relevant fiscal year. As a result, in the first quarter of 2008
and 2007, 1,778 and 2,175 of Kaplan shares were issued
related to the 2007 and 2006 Kaplan share awards, respectively.
In the fourth quarter of 2007, a Kaplan senior manager exercised
Kaplan stock options and received 1,750 Kaplan shares.
Kaplan recorded a stock compensation credit of $7.8 million for
2008, compared to stock compensation expense of $41.3 million
for 2007 and $27.7 million for 2006, excluding Kaplan stock
compensation expense in 2006 of $8.2 million as a result of the
change in accounting under SFAS 123R. In 2008, 2007 and
2006, total net payouts of Kaplan options and Kaplan shares were
$85.1 million, $8.1 million and $31.1 million, respectively. At
December 31, 2008, the Company’s accrual balance related to
Kaplan stock-based compensation totaled $8.3 million; this liability
relates to 2,000 Kaplan stock options and 1,750 Kaplan shares
outstanding.
In February 2009, a Kaplan senior manager was granted 1,176
shares of Kaplan restricted stock that will vest over a 3 year period.
At December 28, 2008, there was no unrecognized stock-based
compensation expense related to stock options. The total intrinsic
value of options exercised during 2008 was $67.4 million; a tax
benefit from these stock option exercises of $26.3 million was
realized during 2008.
Information related to stock options outstanding and exercisable at
December 28, 2008 is as follows:
Options Outstanding Options Exercisable
Exercise Price
Shares
Outstanding at
12/28/2008
Remaining
Contractual
Life (yrs.)
Shares
Exercisable at
12/28/2008
Remaining
Contractual
Life (yrs.)
$ 652 2,000 3.0 2,000 3.0
At December 28, 2008, the intrinsic value for all options
outstanding and exercisable was $3.8 million; there were no
unvested options. At December 30, 2007, there were 33,591
unvested options with an average exercise price of $1,883.
The fair value of Kaplan stock options at December 28, 2008 and
December 30, 2007 was estimated using the Black-Scholes
method utilizing the following assumptions:
December 28,
2008 December 30, 2007
Expected life (years) ......... 20–4
Interest rate ............... 0.82% 3.05%–3.34%
Volatility .................. 50.5% 34.24%–45.39%
Dividend yield ............. 0% 0%
Earnings Per Share. Basic earnings per share is based on the
weighted average number of shares of common stock outstanding
during each year. Diluted earnings per common share is based on
the weighted average number of shares of common stock
outstanding each year, adjusted for the dilutive effect of shares
issuable under outstanding stock options and restricted stock.
72 THE WASHINGTON POST COMPANY