Washington Post 2010 Annual Report Download - page 95

Company stock awards reduced net income by $2.9 million,
$4.6 million and $3.7 million in 2010, 2009 and 2008,
respectively.
As of January 2, 2011, there was $9.1 million of total unrecog-
nized compensation expense related to this plan. That cost is
expected to be recognized on a straight-line basis over a weighted
average period of 1.6 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 four years
and have a maximum term of ten years. At January 2, 2011, there
were 362,525 shares reserved for issuance under the stock option
plan, of which 87,919 shares were subject to options outstanding
and 274,606 shares were available for future grants.
Activity related to options outstanding for the years ended
January 2, 2011, January 3, 2010 and December 28, 2008 was
as follows:
2010 2009 2008
Number
of
Shares
Average
Option
Price
Number
of
Shares
Average
Option
Price
Number
of
Shares
Average
Option
Price
Beginning
of year . . . 90,569 $525.44 87,025 $581.17 92,275 $606.89
Granted .... 22,500 395.68 24,294 421.95 17,000 402.71
Exercised . . . ——— — (17,250) 533.94
Expired or
forfeited . . . (25,150) 515.59 (20,750) 637.99 (5,000) 612.00
End of
year ..... 87,919 $495.05 90,569 $525.44 87,025 $581.17
Of the shares covered by options outstanding at the end of 2010,
40,074 are now exercisable; 15,261 will become exercisable in
2011; 15,261 will become exercisable in 2012; 11,698 will
become exercisable in 2013; and 5,625 will become exercisable
in 2014. For 2010, 2009 and 2008, the Company recorded
expense of $1.4 million, $1.3 million and $1.0 million related to
this plan, respectively. Information related to stock options
outstanding and exercisable at January 2, 2011 is as follows:
Options Outstanding Options Exercisable
Range of
Exercise
Prices
Shares
Outstanding
at
01/02/2011
Weighted
Average
Remaining
Contractual
Life (yrs.)
Weighted
Average
Exercise
Price
Shares
Exercisable
at
01/02/2011
Weighted
Average
Remaining
Contractual
Life (yrs.)
Weighted
Average
Exercise
Price
$369–396 . . 35,750 9.3 $386.59 6,375 8.0 $370.34
419–439 . . 23,294 9.0 423.25 5,824 9.0 423.25
517 . . . 9,000 1.0 517.21 9,000 1.0 517.21
652–693 . . 2,000 8.0 651.91 1,000 8.0 651.91
729–763 . . 13,375 4.4 732.79 13,375 4.4 732.79
816 . . . 1,500 3.0 816.05 1,500 3.0 816.05
954 . . . 3,000 4.0 953.50 3,000 4.0 953.50
87,919 7.3 $495.05 40,074 4.9 $599.36
At January 2, 2011, the intrinsic value for all options outstanding,
exercisable and unvested was $2.3 million, $0.5 million and $1.7
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
$439.50 at January 2, 2011. At January 2, 2011, there were
47,845 unvested options related to this plan with an average exercise
price of $407.68 and a weighted average remaining contractual
term of 9.3 years. At January 3, 2010, there were 38,794 unvested
options with an average exercise price of $429.51.
As of January 2, 2011, total unrecognized stock-based compen-
sation expense related to this plan was $4.7 million, which is
expected to be recognized on a straight-line basis over a weighted
average period of approximately 2.1 years. There were no options
exercised during 2010 and 2009. The total intrinsic value of options
exercised during 2008 was $2.4 million; a tax benefit from these
stock option exercises of $1.0 million was realized during 2008.
During 2010, 2009 and 2008, all options were granted at an
exercise price equal to the fair market value of the Company’s
common stock at the date of grant. During 2010, the Company
granted options of 22,500, with a weighted average fair value of
$106.70. During 2009, the Company granted options of 1,000,
11,944, 10,000 and 1,350, with a weighted average fair value
of $95.05, $100.27, $118.98 and $121.29, respectively.
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. Also, in early 2011, an additional 50,000 stock
options were granted.
The fair value of options at date of grant was estimated using the
Black-Scholes method utilizing the following assumptions:
2010 2009
Expected life (years) ............. 77
Interest rate .................... 2.51% 2.29%–3.08%
Volatility ...................... 30.19% 26.13%–28.62%
Dividend yield ................. 2.27% 1.96%–2.20%
The Company also maintains a stock option plan at Kaplan that
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 to certain members of Kaplan’s management. 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.
In November 2008, Kaplan’s then 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 at
an option price of $652 (representing about 0.2% of Kaplan’s
common stock), which expire in 2011. A Kaplan senior manager
also holds 1,750 Kaplan shares that remain outstanding at
December 31, 2010, and 3,454 Kaplan restricted shares issued
in 2009 and 2010 that vest over a three-year period. The fair
value of Kaplan’s common stock is determined by the Company’s
compensation committee of the Board of Directors, and in January
2011, the committee set the fair value price at $1,450 per share.
No options were awarded or exercised during 2010 or 2009.
Kaplan recorded a stock compensation credit of $1.2 million in
2010, compared to expense of $0.9 million for 2009 and a credit
of $7.8 million for 2008. At December 31, 2010, the Company’s
accrual balance related to Kaplan stock-based compensation totaled
$8.1 million. There were no payouts in 2010 and 2009. In 2008,
2010 FORM 10-K 79