Quarterly report pursuant to Section 13 or 15(d)

Stock-Based Awards (Note)

v3.7.0.1
Stock-Based Awards (Note)
 3 Months Ended
Mar. 31, 2017
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,
2017
 
2016
Selling and marketing
$
1,588

 
$
1,808

General and administrative
3,116

 
3,568

Stock-based compensation expense before income taxes
4,704

 
5,376

Income tax benefit
(1,240
)
 
(1,876
)
Stock-based compensation expense after income taxes
$
3,464

 
$
3,500

 
 
 
 

 
As of March 31, 2017, there was approximately $38.5 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 2.3 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 paid in February 2015) 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, 2017, there were approximately 0.5 million shares of common stock available for grants under the Plan.
During the first quarter of 2017, HSNi granted 96,439 performance share units ("PSUs") to certain executive employees. PSUs cliff vest after a three year performance period. PSUs have rights to receive dividend equivalents that vest concurrently with the underlying PSUs once the requisite service has been rendered. Vesting percentages range between 0% and 200% of the target award based on HSNi's Total Shareholder Return relative to a peer group at the end of the performance period. The compensation expense for these PSUs is based on the fair value of the awards measured at the grant date and is expensed ratably over the vesting term.
A summary of the stock-based awards granted during the three months ended March 31, 2017 is as follows:
 
Three Months Ended March 31, 2017
 
Number of Awards Granted

Weighted Average per Share Fair Value
Maximum value stock appreciation rights (a)
1,144,049

 
$6.36
Restricted stock units
291,420

 
$38.14
Performance share units (b)
192,878

 
$57.36
Employee stock purchase plan options
31,729

 
$8.63
Dividend equivalents due to quarterly dividend
8,940

 
-
(a) Maximum value SARs are similar to traditional SARs, except these instruments contain a predetermined cap of 200% on the maximum earnings potential a recipient can expect to receive upon exercise.

(b) PSUs are reflected at the maximum 200% potential value.
The fair values of the options granted under the HSN, Inc. 2010 Employee Stock Purchase Plan are estimated on the grant date using the Black-Scholes option pricing model. The fair values of the maximum value stock appreciation rights and PSUs are estimated on the grant date using a Monte-Carlo simulation pricing model which estimates the potential outcome of reaching the market condition based on simulated future stock prices. The weighted average assumptions used in the valuation of each for the three months ended March 31, 2017 are as follows: 
 
 
Three Months Ended March 31, 2017
 
 
Maximum Value Stock Appreciation Rights
 
Employee Stock Purchase Plan Options
 
Performance Share Units
Volatility factor
 
27.4
%
 
38.7
%
 
30.0
%
Risk-free interest rate
 
1.79
%
 
0.65
%
 
1.40
%
Expected term
 
4.7

 
0.5

 
2.9

Dividend yield
 
3.6
%
 
4.1
%
 
0.0
%