Quarterly report pursuant to Section 13 or 15(d)

Stock-Based Compensation

v2.3.0.15
Stock-Based Compensation
 9 Months Ended
Sep. 30, 2011
Share-based Compensation [Abstract]  
Stock-Based Compensation
Stock-Based Compensation
Liberty Interactive has previously granted, and Liberty will grant, to certain of its directors, employees and employees of its subsidiaries options and stock appreciation rights ("SARs") to purchase shares of its common stock (collectively, "Awards"). The Company measures the cost of employee services received in exchange for an Award of equity instruments (such as stock options and restricted stock) based on the grant-date fair value of the Award, and recognizes that cost over the period during which the employee is required to provide service (usually the vesting period of the Award). The Company measures the cost of employee services received in exchange for an Award of liability instruments (such as stock appreciation rights that will be settled in cash) based on the current fair value of the Award, and remeasures the fair value of the Award at each reporting date.
In connection with the Split-Off, awards with respect to Liberty Interactive's Series A and Series B Liberty Starz and Liberty Capital common stock were converted to awards with respect to Liberty's Series A and Series B Liberty Starz and Liberty Capital common stock pursuant to Liberty's Transitional Stock Adjustment Plan. Therefore, the activity associated with such Awards of Liberty Interactive's Starz and Capital common stock, prior to the Split-Off, have been reflected as Awards of Liberty in the condensed consolidated financial statements.
Included in selling, general and administrative expenses in the accompanying condensed consolidated statements of operations are the following amounts of stock-based compensation (amounts in millions):
 
 
Three months ended:
 
September 30, 2011
$
3

September 30, 2010
$
13

Nine months ended:
 
September 30, 2011
$
24

September 30, 2010
$
36


In the nine months ended September 30, 2011, the Company granted, primarily to Starz employees, 496,000 options to purchase shares of Series A Liberty Starz common stock. Such options had a weighted average grant-date fair value of $21.36 per share. These options vest quarterly over the 4 year vesting period.
Liberty Interactive previously calculated, and Liberty calculates, the grant-date fair value for all of its equity classified awards and the subsequent remeasurement of its liability classified awards using the Black-Scholes Model. Liberty estimates the expected term of the Awards based on historical exercise and forfeiture data. The volatility used in the calculation for Awards is based on the historical volatility of Liberty Capital and Liberty Starz common stocks and the implied volatility of publicly traded Liberty Capital and Liberty Starz options. Liberty uses a zero dividend rate and the risk-free rate for Treasury Bonds with a term similar to that of the subject Awards.
Liberty—Outstanding Awards
The following table presents the number and weighted average exercise price ("WAEP") of Awards to purchase Liberty common stock granted to certain officers, employees and directors of the Company.
 
Series A
 
Liberty
Capital
 
WAEP
 
Liberty
Starz
 
WAEP
 
numbers of Awards in thousands
Outstanding at January 1, 2011
4,996

 
$
19.38

 
3,217

 
$
46.15

Granted
—

 
$
—

 
496

 
$
72.92

Exercised
(565
)
 
$
9.86

 
(150
)
 
$
31.30

Forfeited/Cancelled/Exchanged
(2
)
 
$
25.17

 
(33
)
 
$
64.77

Outstanding at September 30, 2011
4,429

 
$
20.58

 
3,530

 
$
50.35

Exercisable at September 30, 2011
1,382

 
$
10.62

 
707

 
$
35.08


The following table provides additional information about outstanding Awards to purchase Liberty Capital and Liberty Starz common stock at September 30, 2011.

 
No. of
outstanding
Awards
(000's)
 
WAEP of
outstanding
Awards
 
Weighted
average
remaining
life
 
Aggregate
intrinsic
value
(000's)
 
No. of
exercisable
Awards
(000's)
 
WAEP of
exercisable
Awards
 
Aggregate
intrinsic
value
(000's)
Series A Capital
4,429

 
$
20.58

 
5.6 years
 
$
201,729

 
1,382

 
$
10.62

 
$
76,711

Series A Starz
3,530

 
$
50.35

 
5.8 years
 
$
56,403

 
707

 
$
35.08

 
$
20,684

Series B Starz
36

 
$
26.71

 
3.7 years
 
$
1,566

 
36

 
$
26.71

 
$
1,566


As of September 30, 2011, the total unrecognized compensation cost related to unvested Liberty Awards was approximately $69 million. Such amount will be recognized in the Company's condensed consolidated statements of operations over a weighted average period of approximately 3.0 years.
As of September 30, 2011, Liberty reserved for issuance upon exercise of outstanding stock Awards the following:
 
Series A
 
Series B
 
amounts in millions
Liberty Capital common stock
4.4

 
—

Liberty Starz common stock
3.5

 
0.1