Dick's Sporting Goods 2010 Annual Report Download - page 79

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The following represents total stock-based compensation and ESPP expense recognized in the Consolidated Statements of
Operations for the fiscal years presented (in thousands):
2010 2009 2008
Stock option expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $13,272 $16,829 $20,345
Restricted stock expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,556 4,039 3,465
ESPP expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 446 1,790
Total stock-based compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $24,828 $21,314 $25,600
Total related tax benefit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,591 $ 8,239 $ 6,514
Stock Option Plans — The Company grants options to purchase common stock under the Plans, which generally vest over four
years in 25% increments from the date of grant and expire seven to ten years from date of grant.
The fair value of each stock option granted is estimated on the grant date using the Black-Scholes (“Black Scholes”) option
valuation model. The assumptions used to calculate the fair value of options granted are evaluated and revised, as necessary, to
reflect market conditions and the Company’s experience. These options are expensed on a straight-line basis over the vesting
period, which is considered to be the requisite service period. Compensation expense is recognized only for those options
expected to vest, with forfeitures estimated at the date of grant based on the Company’s historical experience and future
expectations.
The fair value of stock-based awards to employees is estimated on the date of grant using the Black Scholes valuation with the
following weighted average assumptions:
Black Scholes Valuation
Assumptions 2010 2009 2008 2008 (4)
Employee Stock Option Plans Employee Stock Purchase Plan
Expected life (years) (1) . . . . . . . . . . . 5.59 5.69 5.51 0.5
Expected volatility (2) . . . . . . . . . . . . . 45.22% - 48.03% 35.89% - 47.54% 35.89% - 41.80% 53.93% - 88.03%
Weighted average volatility . . . . . . . . . 46.56% 45.93% 36.34% 67.26%
Risk - free interest rate (3) . . . . . . . . 1.23% - 2.87% 1.54% - 2.73% 2.01% - 3.51% 0.28% - 2.13%
Expected dividend yield . . . . . . . . . . . — — — —
Weighted average grant date fair
value . . . . . . . . . . . . . . . . . . . . . . . $ 12.20 $ 6.21 $ 10.26 $ 3.75
(1) The expected term of the options represents the estimated period of time until exercise and is based on historical experience
of similar awards giving consideration to the contractual terms, vesting schedules and expectations of future employee
behavior.
(2) Expected volatility is based on the historical volatility of the Company’s common stock over a timeframe consistent with the
expected life of the stock options.
(3) The risk-free interest rate is based on the implied yield available on U.S. Treasury constant maturity interest rates whose
term is consistent with the expected life of the stock options.
(4) The Company suspended the ESPP in March 2009.
The assumptions used to calculate the fair value of options granted are evaluated and revised, as necessary, to reflect market
conditions and experience.
Dick’s Sporting Goods, Inc. ¬2010 Annual Report 59
DICK’S SPORTING GOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)