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HSN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
60
Outstanding at August 20, 2008
4,104,929
$ 19.25
Granted 1,799,826 19.30
Exercised
(9,354)
7.93
Forfeited (2,871) 18.31
Expired (275,017) 19.54
Outstanding at December 31, 2008 (1)
5,617,513
19.27
7.6
$ 2,123,882
Vested and expected to vest at December 31, 2008
4,831,848
19.35
7.3
1,783,935
$
Exercisable at December 31, 2008 1,307,313 17.56 3.0 359,994$
(1) Approximately 3.1 million of the stock options and stock-settled SARs outstanding as of December 31, 2008 were held by
employees of the other Spincos.
Number of
shares
Weighted
Average
Remaining
Contractual
Term (in years)
Aggregate
Intrinsic Value
Stock Options and Stock-Settled SARs
Weighted
Average
Exercise Price
The aggregate intrinsic value in the table above represents the pre-tax difference between the closing price
of HSNi’s common stock on December 31, 2008 of $7.27 and the exercise price for all “in the money” awards at
December 31, 2008. This amount changes based on the fair market value of HSNi’s common stock. The intrinsic
value of the stock options and stock-settled SARs exercised during the year ended December 31, 2008 was less than
$0.1 million.
The fair value of each stock option and stock-settled SAR award is estimated on the grant date using the
Black-Scholes option pricing model. The Black-Scholes option pricing model incorporates various assumptions,
including expected volatility and expected term. For purposes of this model, no dividends have been assumed.
Expected stock price volatilities are estimated based on the historical and implied volatilities of comparable
publicly-traded companies. The risk-free interest rates are based on U.S. Treasury yields for notes with comparable
terms as the awards, in effect at the grant date. The expected term of options granted is based on analyses of
historical employee termination rates and option exercise patterns, giving consideration to expectations of future
employee behavior. The following are the weighted average assumptions used in the Black-Scholes option pricing
model for the year ended December 31, 2008: volatility factor of 47.7%, risk-free interest rate of 2.25%, expected
term of 5.8 years, and a dividend yield of zero.
The weighted average fair value of stock options granted from the Plan during the year ended December
31, 2008 at market prices equal to HSNi’s common stock on the grant date was $2.76.
At the date of the spin-off, HSNi granted approximately 719,000 stock options to its Chief Executive
Officer at exercise prices greater than market value on the date of grant with a 10-year term and graded vesting over
four years. The weighted average exercise price and the weighted average fair value related to these grants were
$39.84 and $3.36, respectively.
Cash received from stock option exercises and the related actual tax benefit realized for the years ended
December 31, 2008 was less than $0.1 million. As of December 31, 2008, there was approximately $12.8 million of
unrecognized compensation cost, net of estimated forfeitures, related to stock options and SARs, which is currently
expected to be recognized over a weighted average period of approximately 3.1 years.
The following table summarizes the information about stock options and stock-settled SARs outstanding
and exercisable as of December 31, 2008: