Stock-Based Compensation and Employee Stock Plans

The Company has the ability to grant restricted shares of common stock, restricted stock units and options to purchase common stock under the Dick's Sporting Goods, Inc. 2012 Stock and Incentive Plan (the "Plan"). As of February 1, 2014, shares of common stock available for future issuance pursuant to the Plan were 11,352,865 shares.

The following represents total stock-based compensation recognized in the Consolidated Statements of Income for the fiscal years presented (in thousands):



	2013		2012		2011
Stock option expense	$	8,263	$	10,215	$	9,734
Restricted stock expense	18,856		21,966		14,185
Total stock-based compensation expense	$	27,119	$	32,181	$	23,919
Total related tax benefit	$	9,230	$	11,561	$	8,947

Stock Option Plans – Stock options are generally granted on an annual basis, vest 25% per year over four years and have a seven-year maximum term.

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 assumptions:



	Employee Stock Option Plans
Black-Scholes Valuation Assumptions	2013			2012			2011
Expected life (years)⁽¹⁾	5.33			5.70			5.76
Expected volatility⁽²⁾	36.10% - 47.86%			44.52% - 49.38%			44.27% - 48.93%
Weighted average volatility	46.71		%	47.25		%	46.16		%
Risk-free interest rate⁽³⁾	0.73% - 1.73%			0.59% - 1.57%			0.89% - 2.70%
Expected dividend yield ⁽⁴⁾	0.98% - 1.04%			0.98% - 1.25%			—
Weighted average grant date fair value	$	18.31		$	19.24		$	18.06


⁽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 declared its first dividend in December 2011. Options granted subsequent to the declaration of the initial dividend reflect the anticipated future cash dividend payouts.

The assumptions used to calculate the fair value of options granted are evaluated and revised, as necessary, to reflect market conditions and experience.

The stock option activity from January 29, 2011 through February 1, 2014 is presented in the following table:



	Shares Subject to Options		Weighted Average Exercise Price per Share		Weighted Average Remaining Contractual Life (Years)	Aggregate Intrinsic Value (in thousands)
Outstanding, January 29, 2011	13,693,877		$	16.91	4.13	$	258,697
Granted	639,047		39.78
Exercised	(2,420,960	)	13.67
Forfeited / Expired	(253,875	)	27.75
Outstanding, January 28, 2012	11,658,089		$	18.60	3.45	$	262,995
Granted	581,665		48.35
Exercised	(5,431,053	)	14.38
Forfeited / Expired	(99,977	)	25.48
Outstanding, February 2, 2013	6,708,724		$	24.50	3.60	$	157,380
Granted	682,344		47.31
Exercised	(2,154,201	)	20.18
Forfeited / Expired	(282,820	)	41.57
Outstanding, February 1, 2014	4,954,047		$	28.55	3.19	$	118,784
Exercisable, February 1, 2014	3,617,457		$	22.87	2.46	$	107,179
Vested and expected to vest, February 1, 2014	4,822,326		$	28.05	3.12	$	118,008

The aggregate intrinsic value reported in the table above is based on the Company's closing stock prices for the last business day of the period indicated. The total intrinsic value for stock options exercised during 2013, 2012 and 2011 was $67.2 million, $186.5 million and $61.3 million, respectively. The total fair value of options vested during 2013, 2012 and 2011 was $14.9 million, $7.1 million and $12.2 million, respectively. The nonvested stock option activity for the year ended February 1, 2014 is presented in the following table:



	Shares Subject to Options		Weighted Average Grant Date Fair Value
Nonvested, February 2, 2013	2,616,875		$	11.88
Granted	682,344		18.31
Vested	(1,684,187	)	8.85
Forfeited	(278,442	)	17.07
Nonvested, February 1, 2014	1,336,590		$	17.90

As of February 1, 2014, unrecognized stock-based compensation expense related to nonvested stock options was approximately $14.5 million, net of estimated forfeitures, which is expected to be recognized over a weighted average period of approximately 2.28 years.

The Company issues new shares of common stock upon exercise of stock options.

Additional information regarding options outstanding as of February 1, 2014 is as follows:



	Options Outstanding				Options Exercisable
Range of Exercise Prices	Shares	Weighted Average Remaining Contractual Life (Years)	Weighted Average Exercise Price		Shares	Weighted Average Exercise Price
$8.17 - $17.98	1,307,546	1.76	$	14.97	1,307,546	$	14.97
$18.14 - $27.87	1,369,573	2.44	23.14		1,225,448	22.77
$28.09 - $44.61	1,238,804	3.42	32.67		977,697	30.77
$45.34 - $57.59	1,038,124	5.70	47.85		106,766	48.45
$8.17 - $57.59	4,954,047	3.19	$	28.55	3,617,457	$	22.87

Restricted Stock – The Company issues shares of restricted stock to eligible employees, which are subject to forfeiture until the end of an applicable vesting period. The awards generally vest on the third anniversary of the date of grant, subject to the employee's continuing employment as of that date.

The restricted stock activity from January 29, 2011 through February 1, 2014 is presented in the following table:



	Shares		Weighted Average Grant Date Fair Value
Nonvested, January 29, 2011	1,991,068		$	24.11
Granted	658,393		39.54
Vested	(304,068	)	27.12
Forfeited	(254,960	)	27.12
Nonvested, January 28, 2012	2,090,433		$	28.16
Granted	542,221		48.55
Vested	(381,278	)	15.09
Forfeited	(159,281	)	32.76
Nonvested, February 2, 2013	2,092,095		$	35.48
Granted	1,806,949		46.85
Vested	(913,769	)	27.46
Forfeited	(553,621	)	39.93
Nonvested, February 1, 2014	2,431,654		$	45.93

As of February 1, 2014, total unrecognized stock-based compensation expense related to nonvested shares of restricted stock, net of estimated forfeitures, was approximately $24.5 million before income taxes, which is expected to be recognized over a weighted average period of approximately 2.45 years.

In March 2010, the Company issued a special grant of performance-based restricted stock in support of the Company's long-term strategic initiatives which vested, in whole or in part, at the end of a three-year period upon the successful achievement of pre-established performance criteria. As of February 2, 2013, nonvested restricted stock outstanding included 654,194 shares of these performance-based awards, of which seventy-five percent vested on April 5, 2013. The remaining shares were forfeited and are available for issuance under the Plan.

During 2013, the Company granted 1,185,793 shares of performance-based restricted stock in support of the Company's five-year strategic plan. As of February 1, 2014, nonvested restricted stock outstanding included 992,632 shares of these performance-based awards, which vest at the end of a five-year period based upon the achievement of certain pre-established financial performance metrics at the end of the performance period, with an opportunity for earlier vesting if the target metrics are achieved at the end of any fiscal year within the performance period. As of February 1, 2014, these awards were not deemed probable of achieving the pre-established financial performance metric.