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DEF 14A
GRAHAM HOLDINGS CO filed this Form DEF 14A on 03/23/2017
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cash flow is defined as operating income, plus depreciation and amortization, less capital expenditures. Valuations of performance units, based on this measure are as follows:

 

Performance

  

Unit Value

 

110%

   $         200  

105%

   $ 175  

100% Target

   $ 150  

90%

   $ 15  

Less than 90%

   $ 0  

As a result of the Cable ONE spin-off, awards under the Cable ONE 2013–2016 cycle were valued in June 2015, based on 2013-2015 performance. For Cable ONE’s 2013–2016 cycle, the Committee determined a payout value of $200 per unit with respect to the portion of performance attributable to Cable ONE.

The performance measure used for GMG for both the 2013–2016 and the 2015–2018 cycles is GMG’s cumulative cash flow margin ranking over the applicable four-year period compared to the cash flow margins of selected peer companies at the end of the award cycle. Cash flow margin is computed based on operating income plus depreciation and amortization, as a percentage of revenue. As soon as practical after the award cycle, the Committee determines GMG’s cash flow margin rank among the cash flow margins of the peer companies and determines the payout value of each performance unit. The value of each performance unit is determined as set forth in the following table:

 

GMG Cash Flow Margin Rank

  

Unit Value

 

#1

   $         150  

#2

   $ 125  

#3

   $ 50  

Below #3

   $ 0  

The GMG formula for both the 2013–2016 and the 2015–2018 cycles provides that the payout value will be increased by $12.50 for each of the four years during the award cycle in which GMG’s actual cash flow margin is not only number one among peer companies, but is also 2% higher than that of the nearest competitor among the peer companies. The formula also provides that the payout value will be reduced by 50% if GMG does not produce operating income in one of the four years during the award cycle. If GMG does not produce operating income for at least two years in the cycle, then there will be no payout with respect to the portion of performance attributable to GMG.

For the 2013–2016 cycle, GMG’s cash flow ranked number one overall for the four-year period; in addition, in each of the four years during the cycle, GMG’s cash flow was 2% higher than that of the nearest competitor among the peer companies, resulting in a payout of $200 per unit with respect to the portion of the performance attributable to GMG.

For the 2013–2016 cycle, the Kaplan performance measure is based on Kaplan’s cumulative operating income for 2013–2016. For the 2015–2018 cycle, the performance measure used for Kaplan for the 2014–2017 Kaplan Long-Term Incentive Plan is Kaplan enterprise operating income growth. A baseline Kaplan enterprise operating income of $75 million was established in 2014 and increases year over year by 10%. Provided Kaplan achieves incremental operating income growth above the baseline, the aggregate amount of awards available is calculated as 12% of such growth.

For the 2013–2016 cycle, Kaplan’s cumulative operating income over the four-year period, adjusted to exclude restructuring costs, and other operating losses related to business sales and closures, was $458 million, resulting in a payout of $70 per unit with respect to the portion of performance attributable to Kaplan.

Performance Units for 2013–2016 cycle were valued at $200 per unit based on achievement of the established performance measures. Performance Unit payouts for the named executive officers for the 2013–2016 cycle are included in the Summary Compensation Table.

For the 2015–2018 cycle, the performance measure during the four-year period for SocialCode, Slate, Graham Healthcare Group (formerly Celtic Healthcare and Residential Healthcare Group), Forney Corporation, Joyce/Dayton Corporation and Dekko is based on cumulative operating income.

Because the performance measures that compose the valuation formula for performance units in the 2015–2018 cycle are cumulative for the measures applicable to Kaplan, GMG and the other applicable business units, it is not possible to

 

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