Stock Options and Other Share-Based Awards Stock Options and Other Share- Based Awards |
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| Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock Options and Other Share-Based Payments |
Stock Options and Other Share-Based Payments
Certain QVC employees and officers have received stock options (the "Options") and restricted shares in Series A Liberty Interactive common stock (“LINTA,” now “QVCA”) (see “2014 Reattribution” below) and Series A Liberty Ventures common stock ("LVNTA") in accordance with the Liberty Interactive Corporation 2000 Incentive Plan, as amended from time to time; the Liberty Interactive Corporation 2007 Incentive Plan, as amended from time to time; the Liberty Interactive Corporation 2010 Incentive Plan, as amended from time to time; and the Liberty Interactive Corporation 2012 Incentive Plan, as amended from time to time (collectively, the "Liberty Incentive Plan").
(a) Stock options
2014 Liberty Ventures 2 for 1 Stock Split
On February 27, 2014, Liberty's board approved a two for one stock split of Series A and Series B Liberty Ventures common stock, effected by means of a dividend. The stock split was done in order to bring Liberty into compliance with a Nasdaq listing requirement regarding the minimum number of publicly held shares of the Series B Liberty Ventures common stock. In the stock split, a dividend was paid on April 11, 2014 of one share of Series A or Series B Liberty Ventures common stock to holders of each share of Series A or Series B Liberty Ventures common stock, respectively, held by them as of 5:00 pm, New York City time, on April 4, 2014. The stock split has been recorded retroactively for all periods presented for comparability purposes.
TripAdvisor Holdings Spin-Off
In August 2014, in connection with Liberty's spin-off (the "TripAdvisor Holdings Spin-Off") of its former wholly-owned subsidiary Liberty TripAdvisor Holdings, Inc. ("TripAdvisor Holdings") the holders of Liberty Ventures common stock, all outstanding awards with respect to Liberty Ventures common stock ("Previous 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 Previous Liberty Ventures Award received:
The exercise prices and number of shares subject to the Adjusted Previous Liberty Ventures Award and the TripAdvisor Holdings Award were determined based on 1.) the exercise prices and number of shares subject to the Previous 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 Previous Liberty Ventures Award was allocated between the Adjusted Previous Liberty Ventures Award and the TripAdvisor Holdings Award.
Following the TripAdvisor Holdings Spin-Off, employees of QVC hold awards in both Liberty Ventures common stock and TripAdvisor Holdings common stock. The compensation expense relating to employees of QVC is recorded at QVC.
2014 Reattribution
On October 3, 2014, Liberty completed a transaction whereby certain of its digital commerce businesses and cash were reattributed from the QVC Group to the Ventures Group. In return, Liberty distributed Ventures Group common stock to the QVC Group stockholders in the form of a dividend. This reattribution transaction resulted in an adjustment to the outstanding QVCA options, a corresponding LVNTA option award and a LVNTA restricted stock award using a methodology similar to the one described above for the TripAdvisor Holdings Spin-Off. The adjustments to the QVCA options, LVNTA options and LVNTA restricted stock have been reflected within each respective table within this note.
CommerceHub, Inc. Spin-Off
In connection with the spin-off of CommerceHub ("CommerceHub Spin-Off") in July 2016, all outstanding awards with respect to Liberty Ventures common stock as of the record date for the CommerceHub Spin-Off (“Liberty Ventures Award”) were adjusted pursuant to the anti-dilution provisions of the incentive plans under which the equity awards were granted, such that:
The exercise prices and number of shares subject to the Adjusted Liberty Ventures Awards and the CommerceHub Awards were determined based on (1) the exercise prices and number of shares subject to the Liberty Ventures Award, (2) the distribution ratios used in the CommerceHub Spin-Off, (3) the pre-CommerceHub Spin-Off trading price of the Liberty Ventures common stock and (4) the post-CommerceHub Spin-Off trading prices of Liberty Ventures common stock and CommerceHub common stock, such that all of the pre-CommerceHub Spin-Off intrinsic value of the Liberty Ventures Award was allocated between the Adjusted Liberty Ventures Award and the CommerceHub Award, or fully to the Adjusted Liberty Ventures Award.
Following the CommerceHub Spin-Off, employees of QVC may hold Awards in both Liberty Ventures common stock and CommerceHub common stock. The compensation expense relating to employees of QVC is recorded at QVC.
Liberty Expedia Holdings, Inc. Split-Off
In connection with the split-off of Liberty Expedia Holdings, Inc. (“Expedia Holdings”) from Liberty (the “Expedia Holdings Split-Off”) in November 2016, all outstanding Awards with respect to Liberty Ventures common stock (a “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 of and number of shares subject to the new Expedia Holdings Award and the Adjusted Liberty Ventures Award were determined based on (1) the exercise price and number of shares subject to the original Liberty Ventures Award, (2) the redemption ratios used in the Expedia Holdings Split-Off, (3) the pre-Expedia Holdings Split-Off trading price of Liberty Ventures common stock and (4) the relative post-Expedia Holdings Split-Off trading prices of Liberty Ventures common stock and Expedia Holdings common stock, such that the pre-Expedia Holdings Split-Off intrinsic value of the original Liberty Ventures Award was allocated between the new Expedia Holdings Award and the Adjusted Liberty Ventures Award.
Following the Expedia Holdings Split-Off, employees of QVC hold Awards in both Liberty Ventures common stock and Expedia Holdings common stock. The compensation expense relating to employees of QVC is recorded at QVC.
Except as described above, all other terms of an Adjusted Liberty Ventures Award, a new Expedia Holdings Award and a new CommerceHub Award (including, for example, the vesting terms thereof) are in all material respects, the same as those of the corresponding original Liberty Ventures Award.
The adjustments related to the CommerceHub Spin-Off and the Expedia Holdings Split-Off were considered modifications under ASC 718 - Stock Compensation but did not result in incremental compensation expense.
A summary of the activity of the Liberty Incentive Plan with respect to the QVCA Options granted to QVC employees and officers as of and during the year ended December 31, 2016 is presented below:
(1) During year ended December 31, 2016, employees were transferred to QVC from zulily and are now employed by QVC. The row represents employees' previous grants prior to being a QVC employee.
A summary of the activity of the Liberty Incentive Plan with respect to the LVNTA Options granted to QVC employees and officers as of and during the year ended December 31, 2016 is presented below:
Upon employee exercise of the Options, the exercise price is remitted to Liberty in exchange for the shares. The aggregate intrinsic value of all Options exercised during the years ended December 31, 2016, 2015 and 2014 was $28 million, $60 million and $54 million, respectively.
The weighted average fair value at date of grant of a QVCA Option granted during the years ended December 31, 2016, 2015 and 2014 was $7.84, $11.20 and $11.16, respectively. There were no LVNTA Options granted during the years ended December 31, 2016, 2015 and 2014.
During the years ended December 31, 2016, 2015 and 2014, the fair value of each QVCA Option was determined as of the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions:
Expected volatility is based on historical and implied volatilities of QVCA common stock over a period commensurate with the expected term of the options. The Company estimates the expected term of the options based on historical exercise and forfeiture data. The volatility used in the calculation for the Options 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 fair value of the Options is recognized as expense over the requisite service period.
During the years ended December 31, 2016, 2015 and 2014, the Company recorded $21 million, $24 million and $36 million, respectively, of stock-based compensation expense related to the Options. As of December 31, 2016, the total unrecognized compensation cost related to unvested Options was approximately $45 million. Such amount will be recognized in the Company's consolidated statement of operations over a weighted average period of approximately 3.0 years.
(b) Restricted stock plan
A summary of the activity of the Liberty Incentive Plan with respect to the QVCA restricted shares granted to QVC employees and officers as of and during the year ended December 31, 2016 is presented below:
(1) During year ended December 31, 2016, employees were transferred to QVC from zulily and are now employed by QVC. The row represents employees' previous grants prior to being a QVC employee.
A summary of the activity of the Liberty Incentive Plan with respect to the LVNTA restricted shares granted to QVC employees and officers as of and during the year ended December 31, 2016 is presented below:
During the years ended December 31, 2016, 2015 and 2014, the Company recorded $11 million, $7 million and $8 million, respectively, of stock-based compensation expense related to these shares. As of December 31, 2016, the total unrecognized compensation cost related to unvested restricted shares of common stock was approximately $15 million. Such amount will be recognized in the Company's consolidated statement of operations over a weighted average period of approximately 2.4 years.
Fair value of restricted shares is calculated based on the market price on the day of the granted shares. The weighted average grant date fair value of the QVCA restricted shares granted to QVC employees and officers during the years ended December 31, 2016, 2015 and 2014 was $25.86, $29.22, and $24.86, respectively. There have been no LVNTA restricted shares granted to QVC employees and officers during the years ended December 31, 2016, 2015 and 2014.
The aggregate fair value of all restricted shares of common stock that vested during the years ended December 31, 2016, 2015 and 2014 was $8 million, $7 million and $16 million, respectively.
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