Annual report pursuant to Section 13 and 15(d)

Stock-Based Compensation

v2.4.0.6
Stock-Based Compensation
 12 Months Ended
Dec. 31, 2011
Share-based Compensation [Abstract]  
Stock-Based Compensation
Stock-Based Compensation

Liberty - Incentive Plans

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 the Liberty Media Corporation Transitional Stock Adjustment Plan (the "Transitional Plan"). Following the Split-Off and the Conversion, the Transitional Plan governs the terms and conditions of such stock options and SARs (collectively, "Awards"), in respect of a maximum of 7.8 million shares of Liberty Capital common stock, to purchase shares of Series A and Series B Liberty Capital common stock. No additional grants may be made pursuant to the Transitional Plan. Therefore, the activity associated with such Awards of Liberty Interactive's Series A and Series B Liberty Starz and Liberty Capital common stock, prior to the Split-Off, have been reflected as Awards of Liberty in the consolidated financial statements.

Pursuant to the Liberty Media Corporation 2011 Incentive Plan (the "2011 Plan"), the Company may grant Awards to be made in respect of a maximum of 23.8 million shares of Liberty common stock. Awards generally vest over 4-5 years and have a term of 7-10 years. Liberty issues new shares upon exercise of equity awards.

Pursuant to the Liberty Media Corporation 2011 Nonemployee Director Incentive Plan, as amended from time to time (the "2011 NDIP"), the Liberty Board of Directors has the full power and authority to grant eligible nonemployee directors stock options, SARs, stock options with tandem SARs, and restricted stock.

The 2011 Plan and the 2011 NDIP were each approved by our board of directors prior to the Split-Off. We expect the shareholders of the Company to ratify such approvals at our 2012 Annual Meeting of Shareholders.
Additionally, in November 2011, the Company exchanged each share of outstanding Liberty Starz common stock for 0.88129 shares of Liberty Capital common stock (plus cash in lieu of fractional share interests). The outstanding Liberty Starz stock options, SARs and restricted stock were also exchanged for Liberty Capital stock options, SARs and restricted stock using the same ratio, and an adjustment was made to the strike price, as applicable, using the same ratio. The exchange of stock options, SARs and restricted stock was considered a modification of the previous Award. However, the impact to compensation expense was not significant.
Liberty - Grants of Liberty Capital and Starz tracking stock options
  Awards granted in 2011, 2010 and 2009 pursuant to the Incentive Plans discussed above are summarized as follows:

 
Years ended December 31,
 
2011
 
2010
 
2009
 
Options
granted
 
Weighted
average
grant-date
fair value
 
Options
granted
 
Weighted
average
grant-date
fair value
 
Options
granted
 
Weighted
average
grant-date
fair value
Series A Liberty Capital
162,347

 
$
33.95

 
1,135,622

 
$
19.56

 
1,649,511

 
$
12.17

Series A Liberty Starz
496,000

 
$
21.36

 
887,818

 
$
21.32

 
2,083,429

 
$
14.33


During the year ended December 31, 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.
In addition, during the year ended December 31, 2011, Liberty granted 162,347 options to purchase shares of Series A Liberty Capital common stock at a weighted average grant-date fair value of $33.95 per share. These options primarily vest quarterly over a 4 year vesting period.
The Company has calculated the grant-date fair value for all of its equity classified awards and any subsequent remeasurement of its liability classified awards using the Black-Scholes Model. The Company estimates the expected term of the Awards based on historical exercise and forfeiture data. For grants made in 2011, 2010 and 2009, the range of expected terms was 4.4 to 5.7 years. The volatility used in the calculation for Awards is based on the historical volatility of Liberty's stocks and the implied volatility of publicly traded Liberty options. The Company uses a zero dividend rate and the risk-free rate for Treasury Bonds with a term similar to that of the subject options.
The following table presents the volatilities used by the Company in the Black-Scholes Model for the 2011, 2010 and 2009 grants.
 
Volatility
2011 grants
 
 
 
Liberty Capital options
43.9%
-
54.2%
Liberty Starz options
31.9%
-
31.9%
2010 grants
 
 
 
Liberty Capital options
43.9%
-
47.9%
Liberty Starz options
31.9%
-
33.6%
2009 grants
 
 
 
Liberty Capital options
29.3%
-
47.9%
Liberty Starz options
29.3%
-
33.6%

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
 
number of Awards in thousands
Outstanding at January 1, 2011
4,996

 
$
19.38

 
3,217

 
$
46.15

Granted
162

 
$
73.45

 
496

 
$
72.92

Exercised
(600
)
 
$
9.91

 
(151
)
 
$
31.34

Forfeited/Cancelled/Exchanged
(1
)
 
$
25.17

 
(34
)
 
$
64.88

   LSTZ to LMC Conversion
3,108

 
$
57.15

 
(3,528
)
 
$
50.36

Outstanding at December 31, 2011
7,665

 
$
36.57

 
—

 
$
—

Exercisable at December 31, 2011
2,163

 
$
20.55

 
—

 
$
—


There were no grants or exercises of any of the Company's Series B options during 2011, except that 36,000 options for Series B Liberty Starz common stock with an exercise price of $26.71 were exercised.
The following table provides additional information about outstanding Awards to purchase Liberty Capital common stock at December 31, 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
 
Weighted
average
remaining
life
 
Aggregate
intrinsic
value
(000's)
Series A Liberty Capital
7,665

 
$
36.57

 
6.0 years
 
$
324,142

 
2,163

 
$
20.55

 
3.0
 years
 
$
124,727


As of December 31, 2011, the total unrecognized compensation cost related to unvested Liberty Awards was approximately $68 million. Such amount will be recognized in the Company's consolidated statements of operations over a weighted average period of approximately 2.2 years.
Liberty - Exercises
The aggregate intrinsic value of all options exercised during the years ended December 31, 2011, 2010 and 2009 was $46 million, $47 million and $66 million, respectively.
Liberty - Restricted Stock
The Company had approximately 200,000 unvested restricted shares of Liberty common stock held by certain directors, officers and employees of the Company with a weighted average grant-date fair value of $45.02 per share as of December 31, 2011.
The aggregate fair value of all restricted shares of Liberty Capital common stock that vested during the years ended December 31, 2011, 2010 and 2009 was $14 million, $10 million and $11 million, respectively.
Other
 Certain of the Company's other subsidiaries have stock based compensation plans under which employees and non-employees are granted options or similar stock based awards. Awards made under these plans vest and become exercisable over various terms. The awards and compensation recorded, if any, under these plans is not significant to the Company.