(14)Stock-Based Compensation

 

Liberty - Incentive Plans

 

Pursuant to the Liberty Media Corporation 2013 Incentive Plan (amended and restated as of March 31, 2015) (the "2013 Plan"), the Company may grant Awards to purchase shares of Series A, Series B and Series C Liberty Media Corporation common stock. The 2013 Plan provides for Awards to be made in respect of a maximum of 98.7 million shares of Liberty Media Corporation 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. 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 (“GDFV”) 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).

 

Pursuant to the Liberty Media Corporation 2013 Nonemployee Director Incentive Plan (Amended and Restated as of December 17, 2015) (the "2013 NDIP"), the Liberty board of directors has the full power and authority to grant eligible nonemployee directors stock options, stock appreciation rights (“SARs”), stock options with tandem SARs, and restricted stock.

In connection with the Recapitalization, all outstanding Awards with respect to Liberty Media Corporation common stock (“Liberty Awards”) were adjusted pursuant to the anti-dilution provisions of the incentive plans under which the equity awards were granted, such that a holder of a Liberty Award received new corresponding equity awards relating to shares of one or more series of Liberty SiriusXM common stock, Liberty Braves common stock and Liberty Formula One common stock (collectively, the “Adjusted Liberty Awards”).

The exercise prices and number of shares subject to the Adjusted Liberty Awards were determined based on 1) the exercise prices and number of shares subject to the Liberty Award, 2) the distribution ratios, 3) the pre-Recapitalization trading price of Liberty Media Corporation common stock and 4) the post-Recapitalization trading prices of Liberty SiriusXM common stock, Liberty Braves common stock and Liberty Formula One common stock, such that all of the pre-Recapitalization value of the Liberty Awards was allocated among the Adjusted Liberty Awards.

 

On July 23, 2014 a dividend of Series C Liberty Media Corporation common stock was distributed and adjustments to the Awards outstanding were required to reflect the changes to the capital structure of the Company. For every Series A Award held, two Series C Awards were issued with an exercise price equal to one third the exercise price of the outstanding Award. Additionally, the exercise price of the outstanding Series A Awards was adjusted to one third the exercise price associated with such Award. The change to outstanding Awards did not change the aggregate intrinsic value associated with the Awards outstanding just prior to the distribution and immediately following the distribution.

 

In connection with the Broadband Spin-Off during 2014, the holder of an outstanding Award to purchase shares of Series A, Series B, and Series C Liberty Media Corporation common stock (an “LMC Award”) received an Award to purchase shares of the corresponding series of Liberty Broadband common stock and an adjustment to the exercise price and number of shares subject to the original LMC Award.  Following the Broadband Spin-Off, employees of Liberty hold Awards in both Liberty common stock and Liberty Broadband common stock.  The compensation expense relating to employees of Liberty is recorded at Liberty and included in the Company’s consolidated financial statements.

 

Liberty - Grants of stock options

 

Awards granted in 2016,  2015 and 2014 pursuant to the 2013 Plan and the 2013 NDIP discussed above are summarized as follows:

 

 

 

During the year ended December 31, 2016, in connection with our CEO’s employment agreement, Liberty granted approximately 775 thousand options of Series C Liberty Media Corporation common stock and 39 thousand performance-based restricted stock units of Series C Liberty Media Corporation common stock. Such options and restricted stock units had a weighted average GDFV of $8.91 per share and $37.76 per share, respectively, at the time they were granted. The majority of these options vested on December 31, 2016, and the performance-based restricted stock units cliff vest in one year, subject to satisfaction of certain performance objectives. Performance objectives, which are subjective, are considered in determining the timing and amount of the compensation expense recognized. As the satisfaction of the performance objectives becomes probable, the Company records compensation expense. The value of the grant is remeasured at each reporting period.

 

Also during the year ended December 31, 2016, Liberty granted 10 thousand, 101 thousand, 415 thousand and 41 thousand options to purchase shares of Series C Liberty Media Corporation common stock, Liberty Formula One common stock, Liberty SiriusXM common stock and Liberty Braves common stock, respectively. Such options had a weighted average GDFV of $8.33,  $4.89,  $7.50 and $3.79 per share, respectively, and mainly vest 50% each on December 31, 2019 and 2020. 

 

During the year ended December 31, 2015, the Company granted a total of approximately 2.5 million options to purchase shares of Series C Liberty Media Corporation common stock. A portion of the options granted was comprised of 676 thousand options with a weighted average GDFV of $10.86 per share that vest annually over 3 years and 1.3 million options with a weighted average GDFV of $15.52 per share that vest 50% each on December 31, 2019 and 2020. 

 

In connection with our CEO’s employment agreement, Liberty also granted 420 thousand performance-based options of Series C Liberty Media Corporation common stock and 34 thousand performance-based restricted stock units of Series C Liberty Media Corporation common stock during 2015. Such options and restricted stock units had a weighted average GDFV of $12.15 per share and $38.20 per share, respectively. The performance-based options and performance-based restricted stock units cliff vested in March 2016, upon satisfaction of certain performance objectives.

 

During the year ended December 31, 2014, Liberty granted 3.3 million options to purchase shares of Series C Liberty Media Corporation common stock to the CEO of Liberty in connection with his employment agreement (see note 13); of those options, one half vest on December 24, 2018 and the other half vest on December 24, 2019. The remainder of the options granted typically vest quarterly over a 4 year vesting period.

 

The Company has calculated the GDFV for all of its equity 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 2016,  2015 and 2014, the range of expected terms was 4.6 to 6.7 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 2016,  2015 and 2014 grants.

 

 

 

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, as well as the weighted average remaining life and aggregate intrinsic value of the Awards.

 

Liberty Media Corporation

 

 

 

 

 

Liberty SiriusXM

 

 

Liberty Braves

 

 

Liberty Formula One

 

There were no outstanding Series B options to purchase shares of Series B Liberty SiriusXM common stock, Liberty Braves common stock or Liberty Formula One common stock during 2016.

 

As of December 31, 2016, the total unrecognized compensation cost related to unvested Liberty Awards was approximately $42 million. Such amount will be recognized in the Company's consolidated statements of operations over a weighted average period of approximately 2.1 years.

 

As of December 31, 2016, 3.1 million, 13.0 million and 1.3 million shares of Series A and Series C Liberty Formula One, Liberty SiriusXM and Liberty Braves common stock, respectively, were reserved for issuance under exercise privileges of outstanding stock Awards.

 

Liberty - Exercises

 

The aggregate intrinsic value of all options exercised during the years ended December 31, 2016,  2015 and 2014 was $24 million, $40 million and $17 million, respectively.

 

Liberty - Restricted Stock

 

The Company had approximately 87 thousand, 282 thousand and 29 thousand unvested restricted shares of Liberty Formula One, Liberty SiriusXM and Liberty Braves common stock, respectively, held by certain directors, officers and employees of the Company as of December 31, 2016.  These Series A and Series C unvested restricted shares of Liberty Formula One common stock, Liberty SiriusXM common stock and Liberty Braves common stock had a weighted average GDFV of $19.04,  $21.83 and $16.17 per share, respectively.

 

The aggregate fair value of all restricted shares of Liberty common stock that vested during the years ended December 31, 2016,  2015 and 2014 was $7 million, $2 million and $1 million, respectively.

 

SIRIUS XM - Stock-based Compensation

 

During the year ended December 31, 2016, SIRIUS XM granted stock options and restricted stock units (“RSUs”) to its employees and members of its board of directors. During the year ended December 31, 2016, SIRIUS XM also granted performance-based restricted stock units (“PRSUs”) to certain employees, the vesting of which is subject to the employee's continuing employment and SIRIUS XM’s achievement of certain performance goals.  The PRSUs awards cliff vest on the three-year anniversary of the grant date. SIRIUS XM also calculates 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 weighted average volatility applied to the fair value determination of SIRIUS XM’s option grants during 2016,  2015 and 2014 was 22%,  29% and 33%, respectively. During the year ended December 31, 2016, SIRIUS XM granted approximately 55.2 million stock options with a weighted-average exercise price of $4.14 per share and a grant date fair value of $0.81 per share. As of December 31, 2016, SIRIUS XM has approximately 332.6 million options outstanding of which approximately 126.6 million are exercisable, each with a weighted-average exercise price per share of $3.5 and $2.82, respectively. The aggregate intrinsic value of these outstanding and exercisable options was $316 million and $210 million, respectively. During the year ended December 31, 2016, SIRIUS XM granted approximately 18.5 million RSUs and PRSUs with a grant date fair value of $4.21 per share. The stock-based compensation related to SIRIUS XM stock options and restricted stock awards was $109 million, $157 million and $148 million for the years ended December 31, 2016,  2015, and 2014, respectively. As of December 31, 2016, the total unrecognized compensation cost related to unvested SIRIUS XM stock options was $266 million. The SIRIUS XM unrecognized compensation cost will be recognized in the Company's consolidated statements of operations over a weighted average period of approximately 2.5 years.

 

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.