ServiceMagic 2014 Annual Report Download - page 101

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IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Restricted Stock Units and Performance-based Stock Units
RSUs and PSUs are awards in the form of phantom shares or units, denominated in a hypothetical equivalent number of shares of IAC
common stock and with the value of each RSU and PSU equal to the fair value of IAC common stock at the date of grant. RSUs and PSUs may be
settled in cash, stock or both, as determined by the Committee at the time of grant. Each RSU and PSU grant is subject to service-based vesting,
where a specific period of continued employment must pass before an award vests. PSUs also include performance-based vesting, where certain
performance targets set at the time of grant must be achieved before an award vests. The Company recognizes expense for all RSUs and PSUs for
which vesting is considered probable. For RSU grants, the expense is measured at the grant date as the fair value of IAC common stock and
expensed as non-cash compensation over the vesting term. For PSU grants, the expense is measured at the grant date as the fair value of IAC
common stock and expensed as non-cash compensation over the vesting term if the performance targets are considered probable of being achieved.
Unvested RSUs and PSUs outstanding at December 31, 2014 and changes during the year ended December 31, 2014 are as follows:
_______________________________________________________________________________
The weighted average fair value of RSUs and PSUs granted during the years ended December 31, 2014 , 2013 and 2012 based on market
prices of IAC's common stock on the grant date was $68.13 , $42.32 and $46.24 , respectively. The total fair value of RSUs and PSUs that vested
during the years ended December 31, 2014 , 2013 and 2012 was $20.4 million , $14.5 million and $139.0 million , respectively.
Equity Instruments Denominated in the Shares of Certain Subsidiaries
IAC has granted stock options and phantom equity units, which are denominated in the equity of its subsidiaries, to employees and
management of certain subsidiaries. These equity awards vest over a period of years or upon the occurrence of certain prescribed events. In some
cases, IAC has taken a preferred interest in the subsidiary with a face value equal to the subsidiary's acquisition price; or, when funding a start-up
business, its investment cost, or a certain fixed other amount. In some cases, these preferred interests accrete interest or dividends at a prescribed
rate of return. The value of the stock options and phantom equity units is tied to the value of the common stock of the entity, with the equity awards
employees and management receive as a whole generally representing a small minority of the total common stock outstanding. Accordingly, these
interests only have value to the extent the relevant business appreciates in value above the preferred interest (including the accretion of interest or
dividends), our investment cost or other fixed amount or, in the case of stock options, the initial value utilized to determine the exercise price. These
interests can have significant value in the event of significant appreciation. The interests are ultimately settled in IAC common stock or cash at the
option of IAC, with fair market value generally determined by negotiation or arbitration, at various dates through 2024. The expense associated
with these equity awards is initially measured at fair value at the grant date and is expensed as non-cash compensation over the vesting term. The
aggregate number of IAC common shares that would be required to settle these interests at current estimated fair values, including vested and
unvested
77
RSUs
PSUs
Number
of shares
Weighted
Average
Grant Date
Fair Value
Number
of shares
(a)
Weighted
Average
Grant Date
Fair Value
(Shares in thousands)
Unvested at January 1, 2014
692
$
43.50
322
$
31.27
Granted
257
67.69
35
71.39
Vested
(199
)
36.70
(102
)
31.15
Forfeited
—
—
(
220
)
31.32
Unvested at December 31, 2014
750
$
53.61
35
$
71.39
(a) Included in the table are PSUs which vest at the end of two years in varying amounts depending upon certain performance conditions. The PSU table above includes these
awards at their maximum potential payout.