QVC Group, Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Stock-Based Awards (Note)

Stock-Based Awards (Note)

9 Months Ended

Sep. 30, 2015

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 September 30,						Nine Months Ended September 30,
	2015			2014			2015			2014
Selling and marketing	$	1,472		$	1,135		$	4,624		$	3,424
General and administrative	2,917			2,746			9,190			8,267
Stock-based compensation expense before income taxes	4,389			3,881			13,814			11,691
Income tax benefit	(1,539		)	(1,401		)	(4,897		)	(4,224		)
Stock-based compensation expense after income taxes	$	2,850		$	2,480		$	8,917		$	7,467

As of September 30, 2015, there was approximately $27.0 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 2.0 years.

The Second Amended and Restated 2008 Stock and Annual Incentive Plan, as amended (the “Plan”), authorizes the issuance of 8.0 million shares (8.8 million shares after giving effect to the anti-dilution provisions of the Plan related to the special cash dividend) 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.

In connection with the special cash dividend of $10.00 per common share paid on February 19, 2015, and as required by the anti-dilution provisions of the Plan, adjustments were made to outstanding equity awards as of the ex-dividend date to preserve their value following the dividend, as follows: (i) the number of shares subject to outstanding restricted stock units was increased as a result of the reinvestment of the dividend; and (ii) the exercise prices of outstanding stock options and stock appreciation rights and the grant date fair value of market stock units were reduced and the number of shares subject to such awards was increased. These adjustments did not result in additional stock-based compensation expense as the fair value of the outstanding awards did not change. As further required by the Plan, the maximum number of shares issuable under the Plan was also proportionally adjusted, which resulted in approximately 0.8 million additional shares available to be issued. As of September 30, 2015, after adjustment for the special dividend, there were approximately 2.7 million shares of common stock available for grants under the Plan.

A summary of the stock-based awards granted during the nine months ended September 30, 2015 is as follows:



	Nine Months Ended September 30, 2015
	Number of Awards Granted	Weighted Average per Share Fair Value
Stock appreciation rights	508,420	$13.65
Restricted stock units	230,118	$66.22
Employee stock purchase plan options	40,239	$15.07
Stock appreciation rights and stock options due to special dividend	343,485	-
Restricted stock unit dividend equivalents due to special dividend and quarterly dividends	102,053	-
Market stock units related to special dividend	15,078	-

The fair values of the options granted under the HSN, Inc. 2010 Employee Stock Purchase Plan and the stock appreciation rights are estimated on the grant date using the Black-Scholes option pricing model. The weighted average assumptions used in the valuation of each for the nine months ended September 30, 2015 are as follows:



	Nine Months Ended September 30, 2015
	Stock Appreciation Rights		Employee Stock Purchase Plan Options
Volatility factor	29.2	%	21.8	%
Risk-free interest rate	1.49	%	0.12	%
Expected term	4.4		0.5
Dividend yield	2.2	%	1.9	%

As a result of the special cash dividend, the exercise prices of outstanding stock options and stock appreciation rights were reduced and the number of shares subject to such awards were increased as of the ex-dividend date. The following table summarizes the information about stock options and stock appreciation rights outstanding and exercisable (after giving effect to the anti-dilution provisions of the special cash dividend) as of September 30, 2015:



	Outstanding				Exercisable
	Number Outstanding at September 30, 2015	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term in Years	Number Exercisable at September 30, 2015	Weighted Average Exercise Price
$0.00 to $9.99	106,698	$	4.92	3.2	106,698	$	4.92
$10.00 to $19.99	70,701	15.56		3.2	70,701	15.56
$20.00 to $29.99	57,541	25.86		5.4	57,541	25.86
$30.00 to $39.99	609,562	36.54		3.8	609,562	36.54
$40.00 to $49.99	398,520	47.73		8.2	126,164	47.73
$50.00 to $59.99	300,174	51.57		7.3	190,246	51.57
$60.00 to $69.99	470,422	65.24		9.4	—	—
	2,013,618				1,160,912