Qurate Retail, Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Stock-Based Awards (Note)

Stock-Based Awards (Note)

6 Months Ended

Jun. 30, 2017

STOCK-BASED AWARDS

Stock-based compensation expense is included in the following line items in the accompanying consolidated statements of operations (in thousands):



	Three Months Ended June 30,						Six Months Ended June 30,
	2017			2016			2017			2016
Selling and marketing	$	1,576		$	1,702		$	3,164		$	3,510
General and administrative (a)	(2,672		)	3,382			443			6,950
Stock-based compensation expense before income taxes	(1,096		)	5,084			3,607			10,460
Income tax benefit (expense)	95			(1,765		)	(1,145		)	(3,641		)
Stock-based compensation expense after income taxes	$	(1,001	)	$	3,319		$	2,462		$	6,819
(a) The second quarter of 2017 includes a reversal of approximately $4.5 million of expense related to the forfeiture of unvested awards as a result of HSNi's former Chief Executive Officer's resignation.

As of June 30, 2017, there was approximately $27.1 million of unrecognized compensation cost, net of estimated forfeitures, related to all equity-based awards which is currently expected to be recognized on a straight-line basis over a weighted average period of approximately 2.2 years.

The shareholders of HSNi approved the HSN, Inc. 2017 Omnibus Incentive Plan (the "Plan") effective May 24, 2017. The purpose of this Plan is to give HSNi a competitive advantage in attracting, retaining and motivating officers, employees, directors and/or consultants and to provide HSNi with a stock and incentive plan. The Plan authorizes the issuance of 10.1 million newly authorized shares. As of June 30, 2017, there were approximately 9.3 million shares of common stock available for grants under the Plan. The Plan also authorized approximately 5.5 million unissued shares subject to outstanding awards granted prior to December 31, 2016 under the Second Amended and Restated 2008 Stock and Annual Incentive Plan which may become available for issuance under the 2017 Plan if such awards terminate by expiration, cancellation or otherwise.

A summary of the stock-based awards granted during the six months ended June 30, 2017 is as follows:



	Six Months Ended June 30, 2017
	Number of Awards Granted	Weighted Average per Share Fair Value
Maximum value stock appreciation rights (a)	1,144,049	$6.36
Restricted stock units	349,144	$37.45
Performance share units (b)	96,439	$57.36
Employee stock purchase plan options	31,729	$8.63
Dividend equivalents due to quarterly dividend	15,119	-
(a) Maximum value SARs are similar to traditional SARs, except these instruments contain a predetermined cap of 200% on the maximum earnings potential a recipient can expect to receive upon exercise.
(b) Performance share units ("PSUs") have vesting percentages that between 0% and 200% of the target award based on HSNi's Total Shareholder Return relative to a peer group at the end of the three-year performance period. The compensation expense for these PSUs is based on the fair value of the awards measured at the grant date and is expensed ratably over the vesting term. PSUs are reflected at the target number of awards granted.

The fair values of the options granted under the HSN, Inc. 2010 Employee Stock Purchase Plan are estimated on the grant date using the Black-Scholes option pricing model. The fair values of the maximum value stock appreciation rights and PSUs are estimated on the grant date using a Monte-Carlo simulation pricing model which estimates the potential outcome of reaching the market condition based on simulated future stock prices. The weighted average assumptions used in the valuation of each for the six months ended June 30, 2017 are as follows:



	Six Months Ended June 30, 2017
	Maximum Value Stock Appreciation Rights		Employee Stock Purchase Plan Options		Performance Share Units
Volatility factor	27.4	%	38.7	%	30.0	%
Risk-free interest rate	1.79	%	0.65	%	1.40	%
Expected term	4.7		0.5		2.9
Dividend yield	3.6	%	4.1	%	0.0	%