Washington Post 2012 Annual Report Download - page 96

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 10 years. At December 31,
2012, there were 351,675 shares reserved for issuance under
the stock option plan, of which 125,694 shares were subject to
options outstanding and 225,981 shares were available for
future grants.
Activity related to options outstanding for the years ended
December 31, 2012, December 31, 2011 and January 2, 2011
was as follows:
2012 2011 2010
Number
of
Shares
Average
Option
Price
Number
of
Shares
Average
Option
Price
Number
of
Shares
Average
Option
Price
Beginning
of year . . . 129,044 $494.95 87,919 $495.05 90,569 $525.44
Granted .... 7,500 378.00 51,000 499.45 22,500 395.68
Expired or
forfeited . . (10,850) 605.82 (9,875) 519.04 (25,150) 515.59
End of
Year ..... 125,694 $478.32 129,044 $494.95 87,919 $495.05
Of the shares covered by options outstanding at the end of
2012, 64,021 are now exercisable; 25,423 will become
exercisable in 2013; 19,750 will become exercisable in 2014;
14,625 will become exercisable in 2015; and 1,875 will
become exercisable in 2016. For 2012, 2011 and 2010, the
Company recorded expense of $2.9 million, $2.7 million and
$1.4 million related to this plan, respectively. Information related
to stock options outstanding and exercisable at December 31,
2012 is as follows:
Options Outstanding Options Exercisable
Range of
Exercise
Prices
Shares
Outstanding
at
12/31/2012
Weighted
Average
Remaining
Contractual
Life (yrs.)
Weighted
Average
Exercise
Price
Shares
Exercisable at
12/31/2012
Weighted
Average
Remaining
Contractual
Life (yrs.)
Weighted
Average
Exercise
Price
$343–396 . . . 41,000 7.7 $383.78 22,250 6.9 $381.54
419–439 . . . 21,694 6.5 422.67 16,271 6.5 422.67
503 . . . 50,000 8.2 502.58 12,500 8.2 502.58
652 . . . 2,000 5.4 651.91 2,000 5.4 651.91
729–763 . . . 7,000 3.9 729.67 7,000 3.9 729.67
816 . . . 1,000 0.9 816.05 1,000 0.9 816.05
954 . . . 3,000 2.0 953.50 3,000 2.0 953.50
125,694 7.2 $478.32 64,021 6.3 $495.72
At December 31, 2012, the intrinsic value for all options
outstanding, exercisable and unvested was $0.1 million, $0.1
million and $0.1 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 $365.21 at December 31, 2012. At
December 31, 2012, there were 61,673 unvested options related
to this plan with an average exercise price of $460.24 and a
weighted average remaining contractual term of 8.2 years. At
December 31, 2011, there were 83,459 unvested options with an
average exercise price of $463.53.
As of December 31, 2012, total unrecognized stock-based
compensation expense related to this plan was $5.1 million, which
is expected to be recognized on a straight-line basis over a
weighted average period of approximately 2.3 years. There were
no options exercised during 2012, 2011 and 2010.
All options granted during 2012 and 2010 were at an exercise
price equal to the fair market value of the Company’s common stock
at the date of grant. During 2011, the Company granted 50,000
options at an exercise price above the fair market value of its
common stock at the date of grant. All other options granted during
2011 were at an exercise price equal to the fair market value of
the Company’s common stock at the date of grant. The weighted
average grant-date fair value of options granted during 2012,
2011 and 2010 was $91.71, $110.67 and $106.70,
respectively. Also, in early 2013, an additional 15,000 stock
options were granted.
The fair value of options at date of grant was estimated using the
Black-Scholes method utilizing the following assumptions:
2012 2011
Expected life (years) ...... 77
Interest rate ............. 1.04%–1.27% 1.49%–2.85%
Volatility ............... 31.71%–31.80% 30.35%–31.24%
Dividend yield .......... 2.54%–2.60% 2.11%–2.74%
The Company also maintains a stock option plan at Kaplan.
Under the provisions of this plan, options were issued with an
exercise price equal to the estimated fair value of Kaplan’s
common stock, and options vested 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.
At December 31, 2012, a Kaplan senior manager holds 6,447
Kaplan restricted shares, as well as 759 Kaplan restricted shares
issued in 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
2013, the committee set the fair value price at $973 per share.
No options were awarded during 2012, 2011 or 2010; no
options were exercised during 2012 or 2010 and there are no
options outstanding at December 31, 2012. In December 2011, a
Kaplan senior manager exercised 2,000 Kaplan stock options at
an option price of $652 per option.
Kaplan recorded a stock compensation credit of $1.1 million, $1.3
million and $1.2 million in 2012, 2011 and 2010, respectively.
At December 31, 2012, the Company’s accrual balance related to
Kaplan stock-based compensation totaled $7.0 million. There were
no payouts in 2012, 2011 or 2010. The total intrinsic value of
options exercised during 2011 was $1.0 million.
84 THE WASHINGTON POST COMPANY