Stock-Based Awards (Note) | 9 Months Ended |
Sep. 30, 2013 |
Share-based Compensation [Abstract] | ' |
Stock-Based Awards | ' |
STOCK-BASED AWARDS |
Stock-based compensation expense is included in the following line items in the accompanying consolidated statements of operations (in thousands): |
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| Three Months Ended September 30, | | Nine Months Ended September 30, |
2013 | | 2012 | 2013 | | 2012 |
Selling and marketing | $ | 818 | | | $ | 932 | | | $ | 2,674 | | | $ | 2,744 | |
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General and administrative | 2,206 | | | 3,696 | | | 7,605 | | | 12,534 | |
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Stock-based compensation expense before income taxes | 3,024 | | | 4,628 | | | 10,279 | | | 15,278 | |
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Income tax benefit | (1,108 | ) | | (1,574 | ) | | (3,697 | ) | | (5,220 | ) |
Stock-based compensation expense after income taxes | $ | 1,916 | | | $ | 3,054 | | | $ | 6,582 | | | $ | 10,058 | |
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As of September 30, 2013, there was approximately $25.7 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 2.6 years. |
The Second Amended and Restated 2008 Stock and Annual Incentive Plan, as amended (the “Plan”), authorizes the issuance of 8.0 million shares of HSNi common stock for new awards granted by HSNi. The purpose of the Plan is to assist HSNi in attracting, retaining and motivating officers, employees, directors and |
consultants, and to provide HSNi with the ability to provide incentives more directly linked to the profitability of HSNi’s business and increases in shareholder value. As of September 30, 2013, there were approximately 2.7 million shares of common stock available for grants under the Plan. |
HSNi can grant restricted stock units ("RSUs"), market stock units ("MSUs"), stock options, stock appreciation rights (“SARs”), dividend equivalents and other stock-based awards under the Plan. Stock-based awards have a maximum term of 10 years. The exercise price of options and SARs granted under the Plan is required to be at, or above, the fair market value of HSNi’s stock on the date of grant. RSUs have rights to receive dividend equivalents that vest at the same time as the underlying RSUs once the requisite service has been rendered. HSNi elects to issue shares of its common stock for RSU vestings and SAR exercises net of the employees’ minimum tax withholding obligation. The payments made by HSNi to the taxing authorities for these taxes for the nine months ended September 30, 2013 and 2012 were $13.9 million and $15.5 million, respectively. |
A summary of the stock-based awards granted during the nine months ended September 30, 2013 is as follows: |
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| Nine Months Ended September 30, 2013 | | | | | | | | | | | |
| Number of Awards Granted | | Weighted Average per Share Fair Value | | | | | | | | | | | |
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Stock appreciation rights | 346,301 | | | $22.57 | | | | | | | | | | | |
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Restricted stock units | 200,940 | | | $58.31 | | | | | | | | | | | |
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Market stock units | 100,723 | | | $82.67 | | | | | | | | | | | |
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Employee stock purchase plan options | 43,521 | | | $11.75 | | | | | | | | | | | |
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The fair values of the options granted under the HSN, Inc. 2010 Employee Stock Purchase Plan and the SARs are estimated on the grant date using the Black-Scholes option pricing model. The fair values of the MSUs were measured on the grant date by applying a Monte Carlo simulation pricing model. The weighted average assumptions used in each valuation model for the nine months ended September 30, 2013 are as follows: |
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| | Nine Months Ended September 30, 2013 | | | | | | |
| | Monte Carlo | | Black-Scholes | | | | | | |
| | Market Stock Units | | Stock Appreciation Rights | | Employee Stock Purchase Plan Options | | | | | | |
Volatility factor | | 39.7 | % | | 49.1 | % | | 23.4 | % | | | | | | |
Risk-free interest rate | | 1 | % | | 0.85 | % | | 0.1 | % | | | | | | |
Expected term | | 4 | | | 4.8 | | | 0.5 | | | | | | | |
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Dividend yield | | 1.1 | % | | 1.2 | % | | 1.3 | % | | | | | | |
Performance-Based Awards |
During the first quarter of 2010, HSNi implemented a performance-based equity compensation program for certain key members of Cornerstone’s management. The amount payable was based on the extent to which certain pre-established performance goals for Cornerstone were achieved during the three-year period ended December 31, 2012. These equity awards were accounted for as liabilities which were remeasured each reporting period based on the probability of achievement of the performance conditions. The amount earned pursuant to the award at the end of the December 31, 2012 service period was $16.8 million which was settled in shares of HSNi common stock in the first quarter of 2013. |
During the third quarter of 2013, HSNi granted MSUs to its Chief Executive Officer based upon the total shareholder return of HSNi's common stock over a three years and five years period. Payout percentages range between 0% and 200% of the target award depending on the awards' market condition, the future price of HSNi's stock. The fair values of the MSUs were $8.3 million and were measured on the grant date by applying a Monte Carlo simulation pricing model which estimates the potential outcome of reaching the market condition based on simulated future stock prices and is recognized over the performance period. |