Sally Beauty Supply 2011 Annual Report Download - page 120

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Sally Beauty Holdings, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
Fiscal Years ended September 30, 2011, 2010 and 2009
stock options, including grants under stock option plans of Alberto-Culver prior to the Separation
Transactions. Expected volatility is derived using the average volatility of both the Company and similar
companies (based on industry sector) since it is not practicable to estimate the Company’s expected
volatility on a stand-alone basis due to a lack of sufficient trading history. The risk-free interest rate is
based on the zero-coupon U.S. Treasury issue as of the date of the grant. Since the Company does not
currently expect to pay dividends, the dividend yield is 0%.
The weighted average fair value per option at the date of grant, of the stock options issued to the
Company’s grantees during the fiscal years 2011, 2010 and 2009 was $5.74, $4.15 and $2.33, respectively.
The total fair value of stock options issued to the Company’s grantees that vested during the fiscal years
2011, 2010 and 2009 was $8.5 million, $7.6 million and $6.2 million, respectively.
The total intrinsic value of options exercised during the fiscal years 2011, 2010 and 2009 was $15.9 million,
$1.8 million and $1.0 million, and the tax benefit realized for the tax deductions from these option
exercises was $6.2 million, $0.5 million and $0.4 million, respectively. The total cash received during the
fiscal years 2011, 2010 and 2009 from these option exercises was $10.9 million, $0.9 million and
$0.7 million, respectively.
At September 30, 2011, approximately $11.3 million of unrecognized compensation costs related to
unvested stock option awards are expected to be recognized over the weighted average period of 2.6 years.
Stock Awards
Restricted Stock Awards
The Company from time to time grants restricted stock awards to employees and consultants under the
2010 Plan. A restricted stock award is an award of shares of the Company’s common stock (which have full
voting and dividend rights but are restricted with regard to sale or transfer) the restrictions over which
lapse ratably over a specified period of time (generally five years). Restricted stock awards are independent
of stock option grants and are generally subject to forfeiture if employment terminates prior to these
restrictions lapsing, subject to certain retirement provisions of the 2010 Plan and certain predecessor
share-based compensation plans such as the 2007 Plan.
The Company expenses the cost of the restricted stock awards, which is determined to equal the fair value
of the restricted stock award at the date of grant, on a straight-line basis over the period (the ‘‘vesting
period’’) in which the restrictions on these stock awards lapse (‘‘vesting’’) or to the date a participant
becomes eligible for retirement, if earlier. For these purposes, the fair value of the restricted stock award is
determined based on the closing price of the Company’s common stock on the date of grant.
F-20