Washington Post 2009 Annual Report Download - page 85

The fair value of options at date of grant was estimated using the
Black-Scholes method utilizing the following assumptions:
2009 2008
Expected life (years) ....... 77
Interest rate ............. 2.29%–3.08% 1.91%–3.31%
Volatility ............... 26.13%–28.62% 20.41%–25.39%
Dividend yield ........... 1.96%–2.20% 1.32%–2.33%
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 2010, the committee set the fair value price at $1,975 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. A Kaplan senior manager continues to
hold the remaining 2,000 outstanding Kaplan stock options, which
expire in 2011.
Activity related to Kaplan stock options outstanding for the years
ended January 3, 2010, December 28, 2008 and December 30,
2007 was as follows:
2009 2008 2007
Number
of
Shares
Average
Option
Price
Number
of
Shares
Average
Option
Price
Number
of
Shares
Average
Option
Price
Beginning of
year ...... 2,000 $652.00 69,662 $1,611.89 73,352 $1,480.11
Granted ..... ——21,325 2,700.00 3,262 2,115.00
Exercised ..... ——(67,461) 1,701.38 (6,952) 457.55
Forfeited ..... ——(21,526) 2,498.56 — —
End of year . . . 2,000 $652.00 2,000 $ 652.00 69,662 $1,611.89
The compensation committee awarded a Kaplan senior manager
Kaplan shares equal in value to $4.8 million for the 2007 fiscal
year, and the expense of this award was recorded in the
Company’s results of operations for the 2007 fiscal year. As a
result, in the first quarter of 2008, 1,778 Kaplan shares were
issued related to the 2007 Kaplan share awards. In the fourth
quarter of 2007, a Kaplan senior manager exercised Kaplan stock
options and received 1,750 Kaplan shares. In February 2010 and
2009, a Kaplan senior manager was granted 2,278 and 1,176
shares, respectively, of Kaplan restricted stock that vest over a three-
year period.
Kaplan recorded stock compensation expense of $0.9 million for
2009, compared to a credit of $7.8 million for 2008 and expense
of $41.3 million for 2007. There were no payouts in 2009. In
2008 and 2007, total net payouts were $85.1 million and $8.1
million, respectively. At December 31, 2009, the Company’s
accrual balance related to Kaplan stock-based compensation
totaled $9.2 million. At December 31, 2009, 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.
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.
The Company’s earnings per share (basic and diluted) for 2009,
2008 and 2007 are presented below:
Fiscal Year Ended
(in thousands, except per
share amounts) January 3, 2010 December 28, 2008 December 30, 2007
Net income available for
common shares ..... $91,846 $64,776 $287,655
Weighted average
shares outstanding —
basic ............. 9,332 9,408 9,492
Effect of dilutive shares:
Stock options and
restricted stock ...... 60 22 36
Weighted average
shares outstanding —
diluted ............ 9,392 9,430 9,528
Basic earnings per
common share ...... $ 9.78 $ 6.89 $ 30.31
Diluted earnings per
common share ...... $ 9.78 $ 6.87 $ 30.19
The 2009, 2008 and 2007 diluted earnings per share amounts
exclude the effects of 74,569, 29,875 and 7,500 stock options
outstanding, respectively, as their inclusion would be antidilutive.
In 2009, the Company adopted new guidance which provides that
unvested share-based payment awards that contain nonforfeitable
rights to dividends are treated as participating securities and are
2009 FORM 10-K 71