Home Shopping Network 2011 Annual Report Download - page 54

HSN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2011, there was approximately $17.0 million of unrecognized compensation cost, net of
estimated forfeitures, related to all equity-based awards, which is currently expected to be recognized on a
straight-line basis over a weighted average period of approximately 1.8 years.
Second Amended and Restated 2008 Stock and Annual Incentive Plan
The Second Amended and Restated 2008 Stock and Annual Incentive Plan, as amended (the “Plan”),
authorizes the issuance of 8.0 million shares of HSNi common stock for new awards granted by HSNi. The
purpose of the Plan is to assist HSNi in attracting, retaining and motivating officers, employees, directors and
consultants, and to provide HSNi with the ability to provide incentives more directly linked to the profitability of
HSNi’s business and increases in shareholder value. As of December 31, 2011, there were approximately
3.3 million shares of common stock available for grants under the Plan.
HSNi can grant restricted stock units ("RSUs"), stock options, stock appreciation rights (“SARs”), dividend
equivalents and other stock-based awards under the Plan. Stock-based awards have a maximum term of 10 years.
The exercise price of options and SARs granted under the Plan is required to be at, or above, the fair market
value of HSNi’s stock on the date of grant. RSUs have rights to receive dividend equivalents that vest at the same
time the underlying RSUs vest once the requisite service has been rendered. HSNi elects to issue shares of its
common stock for RSU vestings and SAR exercises net of the employees’ minimum tax withholding obligation.
The payments made by HSNi to the taxing authorities for these taxes were $11.5 million, $2.7 million and $0.7
million for the years ended December 31, 2011, 2010 and 2009, respectively.
Modification of Stock-Based Compensation Awards
In conjunction with the Spin-off, IAC share-based awards granted prior to the Spin-off were converted to
equivalent share-based awards. The adjustments to the number of shares subject to each award and the stock
option exercise prices were based on the relative market capitalization of IAC and each of the Spincos following
the Spin-off. The conversion was accounted for as a modification under the share-based payments accounting
guidance, and resulted in additional fair value of $10.2 million that was recognized immediately for fully vested
awards and is being amortized over the remaining service period for unvested awards. For the years ended
December 31, 2011, 2010 and 2009, $0.4 million, $0.5 million and $0.9 million, respectively, of the additional
compensation expense was recognized in the accompanying consolidated statements of operations.
Restricted Stock Units
RSUs are awards that are denominated in a hypothetical equivalent number of shares of HSNi’s common
stock. At the time of grant, HSNi determines if the RSUs will be settled in cash, stock or both. The value to the
holder of the RSU is based upon the market value of HSNi’s stock when the RSUs vest. Compensation expense
for RSUs granted under the Plan is measured at the grant date as the fair market value of HSNi’s common stock
and expensed ratably over the vesting term. The RSUs are generally subject to service-based vesting over a three
to five year term.
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