Note 7: Common Stock and Stock Options

Holders of the Class A common stock are entitled to elect 30% of the Board of Directors and, with the holders of Class B common stock, also are entitled to vote on the reservation of shares for stock awards and on certain specified types of major corporate reorganizations or acquisitions. Class B common stock can be converted into Class A common stock on a share-for-share basis at the option of the holder. Both classes of common stock receive the same dividends per share.

Each non-employee member of the Board of Directors of the Company participates in the Directors’ Deferred Compensation Plan. The plan provides that each non-employee Director shall receive half of his or her annual compensation for services to the Board in the form of Deferred Stock Units (DSU); each Director additionally may elect to receive the balance of his or her compensation in cash or DSU. Other than dividend credits, deferred stock units do not entitle Directors to any rights due to a holder of common stock. DSU account balances may be settled as of the Director’s retirement date by a cash lump-sum payment, a single distribution of common stock, or annual installments of either cash or common stock over a period of up to ten years. Expense recognized in 1999, 1998 and 1997 under the plan was $456,000, $550,000 and $550,000.

Stock-based awards are granted to key employees in the form of nonqualified stock options and restricted stock under the 1995 Long-Term Incentive Plan (LTIP). The plan is administered by the Compensation Committee of the Board of Directors. Grant prices of stock options are determined by the Committee and shall not be less than the fair market value on the date of grant. Options are exercisable during the continued employment of the optionee but not for a period greater than ten years and not for a period greater than one year after termination of employment, and they become exercisable at the rate of one-third each year from the date of grant. Restricted stock is awarded in the name of each of the participants; these shares have all the rights of other Class A shares, subject to certain restriction and forfeiture provisions. In 1999, 72,200 shares were granted under terms of the plan. Restrictions on the shares expire no more than ten years after the date of award, or earlier if pre-established performance targets are met. The pre-established performance targets were met for the 1997 award and the 89,000 shares outstanding under that award will have the restrictions lifted in the first quarter of 2000. The plan will continue until terminated by the Company.

Options to purchase Class A common stock were granted to key employees under the 1976 and 1987 nonqualified stock option plans prior to the 1995 LTIP. The Company will not make any future awards under these plans and past awards are not affected. Options outstanding under the plans are exercisable during the continued employment of the optionee, but not for a period greater than ten years after the date of grant for options granted subsequent to the 1991 amendment to the 1987 plan and for a period of not greater than three years after termination of employment.

Restricted shares of the Company’s Class A common stock were granted to certain key employees under the 1991 restricted stock plan. The Company will not make any future awards under the plan and past awards are not affected. At December 26, 1999, 25,644 shares granted in 1995 remain restricted under the terms of the plan. Shares were awarded in the name of each of the participants; these shares have all the rights of other Class A shares, subject to certain restrictions and forfeiture provisions. Restrictions on the shares expire no more than ten years after the date of the award, or earlier if certain performance targets are met.

Unearned compensation was recorded at the date of the restricted stock awards based on the market value of the shares. Unearned compensation, which is shown as a separate component of stockholders’ equity, is being amortized to expense over a vesting period (not exceeding ten years) based upon expectations of meeting certain performance targets. The amount amortized to expense in 1999, 1998 and 1997 was $1.5 million, $1.0 million and $1.8 million, respectively.

The Company entered into a stock redemption agreement in 1985, which was amended in 1988 and 1994, with the late D. Tennant Bryan, former Chairman Emeritus of the Company. In June 1999, the estate of D. Tennant Bryan exercised its option under the 1994 stock redemption agreement to sell to the Company 15% of Mr. Bryan’s ownership in Media General Class A Stock at the time of his death. This exercise resulted in the Company’s purchase of 326,897 shares from the estate, at a 10% discount from average stock price, for $13.6 million. Additionally, in December 1999, the Board of Directors authorized a program to repurchase up to $250 million of the Company’s Class A common stock. As of December 26, 1999, 253,200 shares had been repurchased at a cost of $12.8 million; the program will continue in 2000.

The following information is provided solely in connection with the disclosure requirements of SFAS No. 123, Accounting for Stock-Based Compensation. If the Company had elected to recognize compensation cost related to its stock options granted in 1999, 1998 and 1997 in accordance with the provisions of SFAS No. 123, earnings per share would have declined $0.05 ($0.07 assuming dilution), $0.05 ($0.04 assuming dilution) and $0.03 in 1999, 1998 and 1997, and pro forma net income (loss) and earnings (loss) per share would have been $880,052,000, $69,730,000 and ($11,452,000); and $33.20 ($32.73 assuming dilution), $2.62 ($2.59 assuming dilution) and ($0.43), respectively (per share amounts assuming dilution are identical unless otherwise indicated). The fair value for these options was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted-average assumptions for 1999, 1998 and 1997, respectively: risk-free interest rates of 4.72%, 5.61% and 6.54%; dividend yields of 1.31%, 1.45% and 1.57%; volatility factors of .293, .287 and .287; and an expected life of 8 years.

A summary of the Company’s stock option activity, and related information for the years ended December 26, 1999, December 27, 1998 and December 28, 1997 follows:

The following table summarizes information about stock options outstanding at December 26, 1999:

(*) Exercisable during lifetime of optionee
(**) Exercisable during the continued employment of the optionee and for a three-year period thereafter
(***) Exercisable during the continued employment of the optionee and for a three-year period thereafter with the exception of 122,000 options which were issued on 1/28/98 for $46.38 with a remaining contractual life of eight years and 136,000 options which were issued on 1/28/99 for $47.91 with a remaining contractual life of nine years

Return to Notes Index