(15)  Stock-Based Compensation

Liberty - Incentive Plans

Pursuant to the Liberty Interactive Corporation 2012 Incentive Plan, as amended (the "2012 Plan"), the Company may grant stock options (“Awards”)  to purchase shares of Series A and Series B QVC Group common stock and Liberty Ventures common stock.  The 2012 Plan provides for Awards to be made in respect of a maximum of 47 million shares of Liberty common stock.  Awards generally vest over 4-5 years and have a term of 7-10 years. Liberty issues new shares upon exercise of equity awards. The Company measures the cost of employee services received in exchange for an Award of equity instruments (such as stock options and restricted stock) based on the grant-date fair value of the Award, and recognizes that cost over the period during which the employee is required to provide service (usually the vesting period of the Award).   

Pursuant to the Liberty Interactive Corporation 2011 Nonemployee Director Incentive Plan, as amended (the "2011 NDIP"), the Liberty Board of Directors has the full power and authority to grant eligible nonemployee directors stock options, SARs, stock options with tandem SARs, and restricted stock.

In connection with the zulily acquisition in October 2015 (see note 5), outstanding awards to purchase shares of zulily Class A and Class B common stock (a “zulily Award”) were exchanged for awards to purchase shares of Series A QVC Group common stock (a “QVCA Award”).  The exercise prices and number of shares subject to the QVCA Award were determined based on 1) the exercise prices and number of shares subject to the zulily Award and 2) a conversion ratio which was calculated using the acquisition exchange ratio, acquisition cash consideration, and pre-distribution trading price of the Series A QVC Group common stock, such that all of the pre-distribution intrinsic value of the zulily Award was allocated to the QVCA Award.  The exchange of such awards was considered a modification under ASC 805 – Business Combinations.  A portion of the fair value of the replacement QVCA Awards was attributed to the consideration paid in the acquisition.  The remaining portion of the fair value will be recognized in the consolidated financial statements over the remaining vesting period of each individual award.

In connection with the TripAdvisor Holdings Spin-Off during 2014, the holder of an outstanding Award to purchase shares of Liberty Ventures Series A and Series B common stock on the record date (a “Liberty Ventures Award”) received an Award to purchase shares of the corresponding series of TripAdvisor Holdings common stock and an adjustment to the exercise price and number of shares subject to the original Liberty Ventures Award (as so adjusted, an “adjusted Liberty Ventures Award”).  Following the TripAdvisor Holdings Spin-Off, employees of Liberty hold Awards in both Liberty Ventures common stock and TripAdvisor Holdings common stock.  The compensation expense relating to employees of Liberty is recorded at Liberty.

Additionally, outstanding stock options, relating to QVC Group common stock, were adjusted, using a similar methodology as described above, in connection with the stock dividend related to the reattribution of the Digital Commerce businesses from the QVC Group to the Ventures Group during October 2014.

 

 

 

 

 

Liberty – Grants

During the year ended December 31, 2015, Liberty granted:

During the year ended December 31, 2014, Liberty granted:

During the year ended December 31, 2013, Liberty granted, primarily to QVC employees, 4.3 million options to purchase shares of Series A QVC Group common stock. Such options had a weighted average grant-date fair value of $8.26 per share.

The Company has calculated the grant-date fair value for all of its equity classified awards using the Black-Scholes-Merton Model. The Company estimates the expected term of the Awards based on historical exercise and forfeiture data.  For grants made in 2015, 2014 and 2013, the range of expected terms was 5.8 to 7.9 years.  The volatility used in the calculation for Awards is based on the historical volatility of Liberty's stocks and the implied volatility of publicly traded Liberty options. The Company uses a zero dividend rate and the risk-free rate for Treasury Bonds with a term similar to that of the subject options.

The following table presents the range of volatilities used by Liberty in the Black-Scholes-Merton Model for the 2015, 2014, and 2013 QVC Group and Liberty Ventures grants.

 

 

Liberty - Outstanding Awards

The following table presents the number and weighted average exercise price ("WAEP") of the Awards to purchase QVC Group and Liberty Ventures common stock granted to certain officers, employees and directors of the Company, as well as the weighted average remaining life and aggregate intrinsic value of the Awards. 

 

 

 

 

As of December 31, 2015, the total unrecognized compensation cost related to unvested Liberty Awards was approximately $113 million. Such amount will be recognized in the Company's consolidated statements of operations over a weighted average period of approximately 2.4 years.

 

Liberty - Exercises

 

The aggregate intrinsic value of all options exercised during the years ended December 31, 2015, 2014 and 2013 was $115 million, $91 million and $76 million, respectively. 

 

Liberty - Restricted Stock

 

The Company had approximately 3 million and 149 thousand unvested restricted shares of QVC Group and Liberty Ventures common stock, respectively, held by certain directors, officers and employees of the Company as of December 31, 2015.  These Series A and Series B unvested restricted shares of QVC Group and Liberty Ventures had a weighted average grant date fair value of $24.93 and $9.08 per share, respectively.

The aggregate fair value of all restricted shares of Liberty common stock that vested during the years ended December 31, 2015, 2014 and 2013 was $16 million, $19 million and $16 million, respectively.

Other

Certain of the Company's other subsidiaries have stock-based compensation plans under which employees and non-employees are granted options or similar stock-based awards.  Awards made under these plans vest and become exercisable over various terms and are typically cash settled and recorded as liability awards.  Stock-based compensation expense related to CommerceHub more than doubled to $51 million during the year ended December 31, 2015.  The increase was primarily related to an increase in the fair value of CommerceHub (determined by a valuation based on discounted cash flows and market comparables (level 3)) and the continued vesting of outstanding awards. The awards and compensation recorded, if any, under the plans at the other subsidiaries are not significant to Liberty.