(14)  Stock-Based Compensation

Liberty - Incentive Plans

Pursuant to the Liberty Interactive Corporation 2000 Incentive Plan, as amended from time to time (the "2000 Plan"), and  the Liberty Interactive Corporation 2007 Incentive Plan, as amended from time to time (the "2007 Plan") the Company has granted to certain of its employees stock options and SARs (collectively, "Awards") to purchase shares of Liberty common stock. The 2000 Plan and 2007 Plan provide for Awards to be issued in respect of a maximum of 1.9 million shares and 3.5 million shares, respectively, of Liberty common stock.  No additional grants may be made pursuant to these plans.  On June 24, 2010, stockholders of the Company approved the Liberty Interactive Corporation 2010 Incentive Plan, as amended from time to time (the "2010 Plan").  The 2010 Plan provides for Awards to be made in respect of a maximum of 45.6 million shares of Liberty common stock.  Additionally, pursuant to the Liberty Interactive Corporation 2012 Incentive Plan, as amended (the "2012 Plan"), the Company may grant 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. 

Pursuant to the Liberty Interactive Corporation 2011 Nonemployee Director Incentive Plan, as amended from time to time (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 TripAdvisor Holdings Spin-Off in August 2014, all outstanding Awards with respect to Liberty Ventures common stock (“Liberty Ventures Award”) were adjusted pursuant to the anti-dilution provisions of the incentive plans under which the equity awards were granted, such that a holder of a Liberty Ventures Award received:

The exercise prices and number of shares subject to the Adjusted Liberty Ventures Award and the TripAdvisor Holdings Award were determined based on 1) the exercise prices and number of shares subject to the Liberty Ventures Award, 2) the pre-distribution trading price of the Liberty Ventures common stock and 3) the post-distribution trading prices of Liberty Ventures common stock and TripAdvisor Holdings common stock, such that all of the pre-distribution intrinsic value of the Liberty Ventures Award was allocated between the Adjusted Liberty Ventures Award and the TripAdvisor Holdings 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 Liberty Interactive 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, 2014, Liberty granted, primarily to QVC employees, 1.9 million options to purchase shares of Series A Liberty Interactive common stock which had a weighted average grant-date fair value of $12.04 per share. Liberty also granted approximately 20 thousand options to purchase shares of Series A Liberty Ventures common stock which had a weighted average grant-date fair value of $16.55 per share. Such options primarily vest on a semi-annual basis over a 4 year vesting period.

In December 2014, Liberty granted 646 thousand options of Series B Liberty Interactive common stock and 1.4 million options of Series B Liberty Ventures common stock to the CEO of Liberty in connection with a new employment agreement (see note 13).  Such options had a weighted average grant-date fair value of $10.50 per share and $15.52 per share, respectively.  Of those options, one half vest on December 24, 2018 and the other half vest on December 24, 2019.

During the year ended December 31, 2013, Liberty granted, primarily to QVC employees, 4.3 million options to purchase shares of Series A Liberty Interactive common stock. Such options had a weighted average grant-date fair value of $8.26 per share.   Liberty also granted approximately 7 thousand options to purchase shares of Series A Liberty Ventures common stock.  Such options had a weighted average grant-date fair value of $57.37 per share.

During the year ended December 31, 2012, the Company granted approximately 3.4 million options to purchase shares of Series A Liberty Interactive common stock.  Such options had a weighted average grant-date fair value of $8.44.  During the year ended December 31, 2012, the Company also granted 36 thousand options to purchase shares of Series A Liberty Ventures common stock, which options had a weighted average grant-date fair value of $27.29 per share.

During the fourth quarter of 2012, the Company entered into a series of transactions with certain officers of Liberty and its subsidiaries, associated with certain outstanding stock options, in order to recognize tax deductions in that year versus future years (the "2012 Option Exchange").  On December 4, 2012 (the "Grant Date"), pursuant to the approval of the Compensation Committee of its Board of Directors, the Company effected the acceleration of (i) each unvested in-the-money option to acquire shares of Series A Liberty Interactive common stock and (ii) each unvested in-the-money option to acquire shares of Series A Liberty Ventures common stock, in each case, held by certain of its and its subsidiaries' officers (collectively, the “Eligible Optionholders”). Following this acceleration, also on the Grant Date, each Eligible Optionholder exercised, on a net settled basis, substantially all of his or her outstanding in-the-money vested and unvested options to acquire Series A Liberty Interactive shares and Series A Liberty Ventures shares (the “Eligible Options”), and:

In connection with the 2012 Option Exchange, Liberty granted 20.1 million and 905 thousand options to purchase shares of Series A Liberty Interactive common stock and Series A Liberty Ventures common stock, respectively.  Such options had a weighted average grant-date fair value of $7.15 and $26.58 per share, respectively.

 

The 2012 Option Exchange was considered a modification under ASC 718 - Stock Compensation and resulted in incremental compensation expense in 2012 of $17 million and $4 million for the Liberty Interactive (now QVC) and Liberty Ventures groups, respectively.  Incremental compensation expense is also being recognized over the remaining vesting periods of the new unvested options and the restricted shares and is included in unrecognized compensation.

The Company has calculated the grant-date fair value for all of its equity classified awards and any subsequent remeasurement of its liability classified awards using the Black-Scholes Model. The Company estimates the expected term of the Awards based on historical exercise and forfeiture data.  For grants made in 2014, 2013 and 2012, the range of expected terms was 1.3 to 9.0 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 Model for the 2014, 2013 and 2012 Liberty Interactive and Liberty Ventures grants.

 

 

Liberty - Outstanding Awards

The following table presents the number and weighted average exercise price ("WAEP") of the Awards to purchase Liberty Interactive 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 discussed in note 2, on February 27, 2014, Liberty’s board approved a two for one stock split of Series A and Series B Liberty Ventures common stock, to be effected by means of a dividend.  The stock split has been recorded retroactively for all periods presented for comparability purposes.

 

 

 

 

As of December 31, 2014, the total unrecognized compensation cost related to unvested awards of Liberty employees was approximately $80 million, including incremental compensation under the Option Exchange. Such amount will be recognized in the Company's consolidated statements of operations over a weighted average period of approximately 2.0 years.

 

Liberty - Exercises

 

The aggregate intrinsic value of all options exercised during the years ended December 31, 2014, 2013 and 2012 was $91 million, $76 million and $339 million, respectively.  The aggregate intrinsic value of options exercised for the year ended December 31, 2012 includes approximately $242 million related to the intrinsic value of options exercised as a result of the 2012 Option Exchange.

 

Liberty - Restricted Stock

 

Associated with the 2012 Option Exchange the Company issued unvested restricted shares of Liberty Interactive and Liberty Ventures common stock, of which 639 thousand and 177 thousand shares, respectively, remain unvested as of December 31, 2014.  These shares continue to vest over the next year, and since the 2012 Option Exchange was accounted for as a modification, the compensation expense associated with these restricted shares was treated as incremental compensation, as discussed above, and is included in the total unrecognized compensation costs under the outstanding Awards section above. The Company had approximately 1.3 million shares and 249 thousand shares of unvested restricted Liberty Interactive and Liberty Ventures common stock, respectively, held by certain directors, officers and employees of the Company as of December 31, 2014, not issued under the Option Exchange.  These Series A unvested restricted shares of Liberty Interactive and Liberty Ventures had a weighted average grant date fair value of $17.49 and $4.07 per share, respectively.

The aggregate fair value of all restricted shares of Liberty common stock that vested during the years ended December 31, 2014, 2013 and 2012 was $19 million, $16 million and $12 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.  The awards and compensation recorded, if any, under these plans is not significant to Liberty.