Annual report pursuant to Section 13 and 15(d)

STOCK-BASED COMPENSATION

v3.8.0.1
STOCK-BASED COMPENSATION
 12 Months Ended
Dec. 31, 2017
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
STOCK-BASED COMPENSATION
STOCK-BASED COMPENSATION
In December 2005, the Company adopted its 2005 Stock Incentive Plan, which has been amended and/or restated on several occasions. In connection with the Company’s merger with Ticketmaster Entertainment LLC, the Company adopted the Amended and Restated Ticketmaster 2008 Stock & Annual Incentive Plan. The plans authorize the Company to grant stock option awards, director shares, stock appreciation rights, restricted stock and deferred stock awards, other equity-based awards and performance awards. The Company has granted restricted stock awards, options to purchase its common stock and deferred stock awards to employees, directors and consultants of the Company and its affiliates under the stock incentive plans at no less than the fair market value of the underlying stock on the date of grant. The stock incentive plans contain anti-dilutive provisions that require the adjustment of the number of shares of the Company’s common stock represented by, and the exercise price of, each option for any stock splits or stock dividends.
The following is a summary of stock-based compensation expense recorded by the Company during the respective periods:
  
Year Ended December 31,
 
2017
 
2016
 
2015
 
(in thousands)
Selling, general and administrative expenses
$
24,364

 
$
15,687

 
$
16,380

Corporate expenses
18,391

 
17,036

 
16,981

Total
$
42,755

 
$
32,723

 
$
33,361


The increase in stock-based compensation expense for the year ended December 31, 2017 as compared to the prior year is due primarily to other equity awards granted to employees during 2017 that vested immediately. During 2017, the Company recorded stock-based compensation expense for these other awards of $10.0 million as a component of selling, general and administrative expenses.
As of December 31, 2017, there was $116.2 million of total unrecognized compensation cost related to stock-based compensation arrangements for stock options, restricted stock and deferred stock awards. This cost is expected to be recognized over a weighted-average period of 4.1 years.
Stock Options
Stock options are granted for a term not exceeding ten years and the nonvested options are generally forfeited in the event the employee, director or consultant terminates his or her employment or relationship with the Company or one of its affiliates. Any options that have vested at the time of termination are forfeited to the extent they are not exercised within the applicable post-employment exercise period provided in their option agreements. These options vest over two to five years.
The following assumptions were used to calculate the fair value of the Company’s options on the date of grant:  
 
Year Ended December 31,
 
2017
 
2016
 
2015
Risk-free interest rate
1.87% - 2.27%

 
1.24% - 1.49%

 
1.47% - 1.75%

Dividend yield
0.0
%
 
0.0
%
 
0.0
%
Volatility factors
25.88% - 27.58%

 
29.42% - 36.11%

 
34.18% - 43.36%

Weighted average expected life (in years)
5.78

 
5.76

 
5.94


The following table presents a summary of the Company’s stock options outstanding at the dates given, and stock option activity for the period between such dates (“Price” reflects the weighted average exercise price per share):  
 
Year Ended December 31,
 
2017
 
2016
 
2015
 
    Options     
 
 
    Price     
 
 
    Options     
 
 
    Price     
 
 
    Options     
 
 
    Price     
 
 
(in thousands, except per share data)
Outstanding January 1
16,283

 
$
13.55

 
16,309

 
$
13.54

 
16,999

 
$
13.78

Granted
1,164

 
33.48

 
1,103

 
19.53

 
1,667

 
25.32

Exercised
(3,138
)
 
16.27

 
(1,063
)
 
19.10

 
(1,098
)
 
14.50

Forfeited or expired
(70
)
 
24.05

 
(66
)
 
22.39

 
(1,259
)
 
31.58

Outstanding December 31
14,239

 
$
14.52

 
16,283

 
$
13.55

 
16,309

 
$
13.54

 
 
 
 
 
 
 
 
 
 
 
 
Exercisable December 31
11,906

 
$
12.00

 
12,628

 
$
12.01

 
11,177

 
$
11.54

Weighted average fair value per option granted
 
 
$
10.18

 
 
 
$
6.98

 
 

 
$
9.93


The total intrinsic value of stock options exercised during the years ended December 31, 2017, 2016 and 2015 was $57.5 million, $8.5 million and $14.1 million, respectively. Cash received from stock option exercises for the years ended December 31, 2017, 2016 and 2015 was $51.1 million, $20.3 million and $16.3 million, respectively.
There were 7.4 million shares available for future grants under the stock incentive plans at December 31, 2017. Upon share option exercise or vesting of restricted or deferred stock, the Company issues new shares or treasury shares to fulfill these grants. Vesting dates on the stock options range from January 2018 to December 2021, and expiration dates range from January 2018 to December 2027 at exercise prices and average contractual lives as follows:  
Range of
Exercise
Prices
 
Outstanding
as of
12/31/17
 
Weighted
Average
Remaining
Contractual
Life
 
Weighted
Average
Exercise
Price 
 
Exercisable
as of
12/31/17
 
Weighted
Average
Remaining
Contractual
Life
 
Weighted
Average
Exercise
Price
 
 
(in thousands) 
 
(in years) 
 
 
 
(in thousands) 
 
(in years) 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$2.75 - $4.99
 
1,713

 
1.2
 
$
2.82

 
1,713

 
1.2
 
$
2.82

$5.00 - $9.99
 
4,455

 
4.8
 
$
8.81

 
4,455

 
4.8
 
$
8.81

$10.00 - $14.99
 
2,540

 
3.3
 
$
11.34

 
2,540

 
3.3
 
$
11.34

$15.00 - $19.99
 
1,269

 
7.0
 
$
19.04

 
745

 
6.2
 
$
18.82

$20.00 - $24.99
 
1,842

 
6.2
 
$
21.15

 
1,467

 
6.1
 
$
21.15

$25.00 - $29.99
 
2,061

 
7.9
 
$
26.77

 
986

 
7.1
 
$
25.35

$30.00 - $44.99
 
359

 
9.9
 
$
43.50

 
—

 
0.0
 
$
—



The total intrinsic value of options outstanding and options exercisable as of December 31, 2017 was $606.1 million and $506.8 million, respectively.
Restricted Stock
The Company has granted restricted stock awards to its employees, directors and consultants under its stock incentive plans. These common shares carry a legend which restricts their transferability for a term of one to five years and are forfeited in the event the recipient’s employment or relationship with the Company is terminated prior to the lapse of the restriction. In addition, certain restricted stock awards require the Company or the recipient to achieve minimum performance targets in order for these awards to vest.
In 2017, the Company granted 0.9 million shares of restricted stock and 0.2 million shares of performance-based awards, respectively, under the Company’s stock incentive plans. These awards will all vest over one or four years with the exception of the performance-based awards which will vest within one to two years if the performance criteria are met.
In 2016, the Company granted 0.4 million shares of restricted stock and 0.4 million shares of performance-based awards, respectively, under the Company’s stock incentive plans. These awards will vest over one or four years with the exception of the performance-based awards which will generally vest within two years if the performance criteria are met. As of December 31, 2017, the performance-based criteria for these awards have been met unless otherwise forfeited.
In 2015, the Company granted 0.3 million shares of restricted stock and 0.2 million shares of performance-based awards, respectively, under the Company’s stock incentive plans. These awards will generally vest over one or four years with the exception of the performance-based awards which will generally vest within two years if the performance criteria are met. As of December 31, 2017, the performance-based criteria for these awards have been met unless otherwise forfeited.
The following table presents a summary of the Company’s unvested restricted stock awards outstanding at December 31, 2017, 2016 and 2015 (“Price” reflects the weighted average share price at the date of grant):
 
 
Restricted Stock 
 
Awards
 
Price
 
(in thousands, except per share data)
Unvested at December 31, 2014
1,171

 
$
16.18

Granted
456

 
26.11

Forfeited
(6
)
 
10.02

Vested
(760
)
 
14.74

Unvested at December 31, 2015
861

 
$
22.67

Granted
751

 
20.65

Forfeited
(50
)
 
21.63

Vested
(482
)
 
21.73

Unvested at December 31, 2016
1,080

 
$
21.67

Granted
1,132

 
35.97

Forfeited
(82
)
 
22.96

Vested
(523
)
 
21.89

Unvested at December 31, 2017
1,607

 
$
31.79


The total grant date fair market value of the shares issued upon the vesting of restricted stock awards during the years ended December 31, 2017, 2016 and 2015 was $11.5 million, $10.5 million and $11.2 million, respectively. As of December 31, 2017, there were 0.2 million restricted stock awards outstanding which require the Company or the recipient to achieve minimum performance targets in order for the awards to vest.
Deferred Stock
The Company has granted deferred stock awards to its employees where the employees are entitled to receive shares of common stock in the future. Deferred stock can only be settled in stock as determined at the time of the grant. All of the deferred stock awards require the Company to achieve minimum market conditions in order for these awards to issue and vest.
In 2017, the Company granted 2.5 million shares of deferred stock awards with market conditions under the Company’s stock incentive plans. These awards will all vest over five years if specified stock prices are achieved over a specific number of days during the five years.
The following table presents a summary of the Company’s unvested deferred stock awards outstanding at December 31, 2017 and 2016 (“Price” reflects the weighted average share price at the date of grant):
 
Deferred Stock 
 
Awards
 
Price
 
(in thousands, except per share data)
Unvested at December 31, 2016
—

 
$
—

Granted
2,500

 
26.69

Forfeited
—

 
—

Vested
—

 
—

Unvested at December 31, 2017
2,500

 
$
26.69


As of December 31, 2017, there were 2.5 million deferred stock awards outstanding which require the Company to achieve minimum market conditions in order for the awards to issue and vest.