To highlight specific long-term financial goals, the 2012 ICP provides for the grant of performance-based compensation, which the Company
grants pursuant to its Performance Unit Plans. The named executive officers participate in these plans, in which performance-based goals are determined at the beginning of each four-year award cycle. The goals consider operating income, peer company
performance, cash flow, earnings per share, measures of economic value added, and/or quantitative revenue growth or profitability measurements of the Company as a whole or of individual business units. Management and the Committee believe that they
have designed the performance-based goals to be challenging, but achievable. In the past four award cycles, the Company achieved or exceeded its goals and paid out at or above target. Each Performance Unit has a nominal value of $100 and a maximum
potential payout of $200. The payment of a total award to any individual at the end of an award cycle may not exceed $5 million.
cycle under a Performance Unit Plan, the Committee establishes a valuation formula within 90 days of the beginning of the cycle and no later than prior to the completion of the first quarter of the cycle. At the end of the cycle, the unit value is
calculated, based on application of the formula, and payments are made to named executive officers in the year following the end of the cycle. The formula used to calculate the payouts is determined by (i) a weighted combination of factors that
relate to individual business unit performance of the Companys operating divisions and (ii) the discretion of the Committee. A new four-year cycle commences every two years, with the result that there are always two overlapping cycles in
In connection with the sale of Washington Post Media (WPM) to Nash Holdings LLC (Nash), completed in
October 2013 (the WPM Transaction), the Committee, in January 2014, revised the valuation formulas with respect to the 20132016 cycle.
Awards under the 20132016 cycle were initially based on a two-pronged formula. The 20132016 cycle formula consisted of an average
of the value of the performance units allocable to (1) the 20132016 performance of Cable ONE and Graham Media Group (GMG) (65%); plus (2) an amount based on Kaplans achievement of cumulative operating income goals
during the four-year period, excluding Kaplan stock compensation expense and restructuring charges (35%). In light of the Cable ONE spin-off, the Committee in January 2015 revised the valuation formula of the 20132016 cycle to take effect on
the closing date of the transaction, which was July 1, 2015. Specifically, the Committee determined that if Cable ONE were no longer held by the Company for the final year and one-half of the performance period, then the weighting of
performance units attributable to an average of Cable ONE and GMG should be reduced, and the weighting of performance units attributable solely to GMG should make up for the reduction. Accordingly, as of July 1, 2015, awards under the
20132016 cycle are based on a three-pronged formula consisting of the average of the value of the performance units allocable to (1) the performance of Cable ONE through June 30, 2015 and the 20132016 performance of GMG (49%);
plus (2) the value of the performance units allocable to the 20132016 performance of GMG (16%); plus (3) an amount based on Kaplans achievement of cumulative operating income goals during the four-year period, excluding Kaplan
stock compensation expense and restructuring charges (35%).
Awards under the 20152018 cycle are based on a three-pronged formula
consisting of the average of (1) the value (up to $200) of a Kaplan Performance Unit paid to Kaplan in accordance with the final unit valuation of the 20142017 Kaplan Long-Term Incentive Plan (35%); plus (2) the value of a
Performance Unit under the GMG valuation (35%); plus (3) an amount based on cumulative operating income goals during the four-year period for SocialCode, Slate, Graham Healthcare Group (formerly Celtic Healthcare and Residential Healthcare
Group), Forney Corporation and Joyce/Dayton Corporation (30%). In December 2016, the Committee approved an amendment to the 20152018 Corporate Performance Unit Plan to include cumulative operating income goals for Group Dekko (acquired by the
Company in the fourth quarter of 2015) in category (3) above.
The Committee selected these targets because they reflected the key
priorities for the Company on the grant date (or the amendment date, as applicable) for the applicable time periods. The values of performance units in the 20132016 and 20152018 cycles are determined at the conclusion of those cycles,
based on the performance criteria described below.
The performance measure used in the formula for the 20132016 cycle prior to the
Cable ONE spin-off is cumulative free cash flow of Cable ONE over the applicable three-year period and the cash flow margin of GMG described below. Free