Sally Beauty Supply 2013 Annual Report Download - page 121

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Sally Beauty Holdings, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
Fiscal Years ended September 30, 2013, 2012 and 2011
basis over the vesting period (generally four years) of the stock options or to the date a participant
becomes eligible for retirement, if earlier.
The weighted average assumptions relating to the valuation of the Company’s stock options are as follows:
Year Ended
September 30,
2013 2012 2011
Expected life (in years) ............................. 5.0 5.0 5.0
Expected volatility ................................. 56.3% 58.4% 59.0%
Risk-free interest rate .............................. 0.8% 1.1% 1.1%
Dividend yield .................................... 0.0% 0.0% 0.0%
The expected life of options represents the period of time that the options granted are expected to be
outstanding and is based on historical experience of employees of the Company who have been granted
stock options. The expected volatility used for awards made during the fiscal years 2013 and 2012, reflects
the average volatility for the Company’s common stock. For awards made prior to the fiscal year 2012, the
expected volatility used was derived using the average volatility of both the Company and similar
companies (based on industry sector) since it was 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 notes with a comparable term as of the date of the grant. Since the
Company does not currently expect to pay dividends, the dividend yield used is 0%.
The weighted average fair value of the stock options issued to the Company’s grantees at the date of grant
during the fiscal years 2013, 2012 and 2011 was $11.29, $9.60 and $5.74, respectively. The total fair value of
stock options issued to the Company’s grantees that vested during the fiscal years 2013, 2012 and 2011 was
$12.7 million, $10.4 million and $8.5 million, respectively.
The total intrinsic value of options exercised during the fiscal years 2013, 2012 and 2011 was $55.4 million,
$53.2 million and $15.9 million, and the tax benefit realized for the tax deductions from these option
exercises was $18.7 million, $18.9 million and $6.2 million, respectively. The total cash received during the
fiscal years 2013, 2012 and 2011 from these option exercises was $25.5 million, $28.0 million and
$10.9 million, respectively.
At September 30, 2013, approximately $15.1 million of total unrecognized compensation costs related to
unvested stock option awards are expected to be recognized over the weighted average period of 2.3 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.
F-19