XM Radio 2015 Annual Report Download - page 117

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shares of the Series B Preferred Stock into 1,293,509 shares of our common stock. There were no
shares of preferred stock issued or outstanding as of December 31, 2015 and 2014.
Warrants
As of December 31, 2015, there were no warrants outstanding. We have issued warrants to
purchase shares of our common stock in connection with distribution and programming agreements.
As of December 31, 2014, 16,667 warrants were outstanding and fully vested. During the year
ended December 31, 2015, these warrants with an exercise price of $2.50 per share were
exercised on a net settlement basis, resulting in the issuance of 6,010 shares of our common stock.
Except for an insignificant amount of warrant expense associated with the extension of the warrants
during the three months ended March 31, 2015, we did not incur warrant related expenses during
the years ended December 31, 2015, 2014 and 2013. Warrants were included in our calculation of
diluted net income per common share as the effect was dilutive for the years ended December 31,
2014 and 2013.
(15) Benefit Plans
We recognized share-based payment expense of $84,310, $78,212 and $68,876 for the years
ended December 31, 2015, 2014 and 2013, respectively.
We account for equity instruments granted to employees in accordance with ASC 718,
Compensation—Stock Compensation. ASC 718 requires all share-based compensation payments to
be recognized in the financial statements based on fair value. ASC 718 requires forfeitures to be
estimated at the time of grant and revised in subsequent periods if actual forfeitures differ from
initial estimates. We use the Black-Scholes-Merton option-pricing model to value stock option
awards and have elected to treat awards with graded vesting as a single award. Share-based
compensation expense is recognized ratably over the requisite service period, which is generally the
vesting period, net of forfeitures. We measure restricted stock awards and units using the fair
market value of the restricted shares of common stock on the day the award is granted.
Fair value as determined using the Black-Scholes-Merton model varies based on assumptions
used for the expected life, expected stock price volatility and risk-free interest rates. For the years
ended December 31, 2015, 2014 and 2013, we estimated the fair value of awards granted using
the hybrid approach for volatility, which weights observable historical volatility and implied volatility
of qualifying actively traded options on our common stock. The expected life assumption represents
the weighted-average period stock-based awards are expected to remain outstanding. These
expected life assumptions are established through a review of historical exercise behavior of stock-
based award grants with similar vesting periods. Where historical patterns do not exist, contractual
terms are used. The risk-free interest rate represents the daily treasury yield curve rate at the grant
date based on the closing market bid yields on actively traded U.S. treasury securities in the over-
the-counter market for the expected term. Our assumptions may change in future periods.
Stock-based awards granted to employees, non-employees and members of our board of
directors include warrants, stock options, stock awards and restricted stock units.
2015 Long-Term Stock Incentive Plan
In May 2015, our stockholders approved the Sirius XM Holdings Inc. 2015 Long-Term Stock
Incentive Plan (the “2015 Plan”). Employees, consultants and members of our board of directors are
eligible to receive awards under the 2015 Plan. The 2015 Plan provides for the grant of stock
options, restricted stock awards, restricted stock units and other stock-based awards that the
compensation committee of our board of directors deem appropriate. Vesting and other terms of
stock-based awards are set forth in the agreements with the individuals receiving the awards.
F-26
SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Dollars and shares in thousands, except per share amounts)