|9 Months Ended|
Sep. 30, 2020
(2) Stock-Based Compensation
The Company has granted to certain of its directors, employees and employees of its subsidiaries, restricted stock (“RSAs”), restricted stock units (“RSUs”) and options to purchase shares of the Company’s common stock (collectively, "Awards"). The Company measures the cost of employee services received in exchange for an equity classified Award (such as stock options and restricted stock) based on the grant-date fair value (“GDFV”) 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). The Company measures the cost of employee services received in exchange for a liability classified Award based on the current fair value of the Award, and remeasures the fair value of the Award at each reporting date.
In connection with the Special Dividend, holders of RSAs and RSUs of Series A Qurate Retail common stock (“QRTEA”) outstanding at the close of business on the record date received:
The Cash Dividend for RSA holders was paid upon distribution. The Cash Dividend for RSU holders along with the Preferred Stock RSAs and RSUs are subject to the same vesting schedules as those applicable to the corresponding original QRTEA RSAs and RSUs.
Also in connection with the Special Dividend, holders of outstanding stock options and stock appreciation rights (“SARs”) to purchase shares of QRTEA or Series B Qurate Retail common stock (“QRTEB” and together with QRTEA, “QRTEA/B”) on the record date were adjusted pursuant to the anti-dilution provisions of the incentive plans under which the stock options and SARs were granted. The adjustment to the exercise price and the number of shares subject to the original stock option or SAR award preserved:
Included in selling, general and administrative expenses in the accompanying condensed consolidated statements of operations are $19 million and $17 million of stock-based compensation during the three months ended September 30, 2020 and 2019, respectively, and $46 million and $54 million of stock-based compensation during the nine months ended September 30, 2020 and 2019, respectively.
The following table presents the number and weighted average GDFV of options granted by the Company during the nine months ended September 30, 2020:
During the nine months ended September 30, 2020, Qurate Retail granted to employees 9.8 million RSUs of QRTEA. The Series A RSUs had a GDFV of $4.66 per share and generally vest annually over four years. In connection with our Chairman’s employment agreement, during the nine months ended September 30, 2020, Qurate Retail granted 584 thousand performance-based RSUs of QRTEA to the Chairman. The Series A RSUs had a GDFV of $4.44 per share at the time they were granted and will cliff vest one year from the month of grant, subject to the satisfaction of certain performance objectives. During the nine months ended September 30, 2020, Qurate Retail also granted 725 thousand performance-based RSUs of QRTEA to its CEO. The Series A RSUs had a GDFV of $4.44 per share at the time they were granted and will cliff vest one year from the month of grant, subject to the satisfaction of certain performance objectives. Performance objectives, which are subjective, are considered in determining the timing and amount of compensation
expense recognized. When the satisfaction of the performance objectives becomes probable, the Company records compensation expense. The probability of satisfying the performance objectives is assessed at the end of each reporting period.
Also during the nine months ended September 30, 2020, Qurate Retail granted 38 thousand time-based RSUs of QRTEA to our Chairman. The RSUs had a GDFV of $7.44 per share and cliff vest on December 10, 2020. This RSU grant was issued in lieu of our Chairman receiving 50% of his remaining base salary for the last three quarters of calendar year 2020, and he has waived his right to receive the other 50%, in each case, in light of the ongoing financial impact of COVID-19.
The Company has calculated the GDFV for all of its equity classified Awards and any subsequent remeasurement of its liability classified Awards using the Black-Scholes-Merton Model. The Company estimates the expected term of the Awards based on historical exercise and forfeiture data. The volatility used in the calculation for Awards is based on the historical volatility of Qurate Retail's stock and the implied volatility of publicly traded Qurate Retail 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.
Qurate Retail—Outstanding Awards
The following tables present the number and weighted average exercise price ("WAEP") of the Awards to purchase Qurate Retail 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.
There were no options to purchase shares of QRTEB granted during the nine months ended September 30, 2020.
As of September 30, 2020, the total unrecognized compensation cost related to unvested Awards was approximately $45 million. Such amount will be recognized in the Company's consolidated statements of operations over a weighted average period of approximately 2.4 years.
As of September 30, 2020, Qurate Retail reserved for issuance upon exercise of outstanding stock options approximately 38.6 million shares of QRTEA and 3.0 million shares of QRTEB.
The entire disclosure for share-based payment arrangement.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef