Quarterly report pursuant to Section 13 or 15(d)

Stock-Based Awards (Note)

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Stock-Based Awards (Note)
 3 Months Ended
Mar. 31, 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):

 
 
Three Months Ended March 31,
2013
 
2012
Selling and marketing
 
$
962

 
$
1,182

General and administrative
 
2,747

 
4,818

Stock-based compensation expense before income taxes
 
3,709

 
6,000

Income tax provision (benefit)
 
(1,306
)
 
(2,126
)
Stock-based compensation expense after income taxes
 
$
2,403

 
$
3,874

 
 
 
 
 

 
As of March 31, 2013, there was approximately $25.8 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 2.4 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 March 31, 2013, there were approximately 2.8 million shares of common stock available for grants under the Plan.
HSNi can grant restricted stock units ("RSUs"), 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 the underlying RSUs vest 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 three months ended March 31, 2013 and 2012 were $11.1 million and $11.6 million, respectively.
A summary of the stock-based awards granted during the three months ended March 31, 2013 is as follows:
 
 
Three Months Ended March 31, 2013
 
 
Number of Awards Granted
 
Weighted Average per Share Fair Value
Stock appreciation rights
 
335,999

 
$22.62
Restricted stock units
 
158,977

 
$59.27
Employee stock purchase plan options
 
22,232

 
$11.32

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 weighted average assumptions used in the Black-Scholes option pricing model for the three months ended March 31, 2013 are as follows: 
 
 
Three Months Ended March 31, 2013
 
 
Stock Appreciation Rights
 
Employee Stock Purchase Plan Options
Volatility factor
 
49.1
%
 
19.4
%
Risk-free interest rate
 
0.85
%
 
0.12
%
Expected term
 
4.8

 
0.5

Dividend yield
 
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.