Share-Based Compensation

General

In July 2009, the Company’s shareholders approved and adopted The Finish Line, Inc. 2009 Incentive Plan (the “2009 Incentive Plan”), previously approved by the Company’s Board of Directors. In July 2014, the Company’s shareholders approved and adopted The Finish Line, Inc. 2009 Incentive Plan Amended and Restated as of April 16, 2014, which was further amended as of June 27 and July 14, 2016 (the “Amended and Restated 2009 Incentive Plan”). All such amendments were previously approved by the Company’s Board of Directors. The Company’s Board of Directors has reserved an aggregate of 10,500,000 shares of common stock available for issuance under the Amended and Restated 2009 Incentive Plan. The number of shares which may be used for awards other than stock options or stock appreciation rights is limited to 4,000,000. Under the Amended and Restated 2009 Incentive Plan, the Company can provide newly issued shares or treasury stock to satisfy stock option exercises and for the issuance of restricted stock. Future grants are no longer permitted under the 2002 Stock Incentive Plan of The Finish Line, Inc. (the “2002 Incentive Plan”); however, options previously issued under the 2002 Incentive Plan remain outstanding and exercisable.

Total share-based compensation expense in fiscal 2017, 2016, and 2015 was $11.0 million ($9.9 million from continuing operations and $1.1 million from discontinued operations), $10.9 million ($10.6 million from continuing operations and $0.3 million from discontinued operations), and $8.2 million ($8.0 million from continuing operations and $0.2 million from discontinued operations), respectively.

Stock Option Activity

Stock options have been granted to non-employee directors, officers, and other key employees. Generally, options outstanding under the 2002 Incentive Plan and Amended and Restated 2009 Incentive Plan are exercisable at a price equal to the fair market value on the date of grant, vest over four years, and expire ten years after the date of grant. The estimated weighted-average fair value of the individual options granted during fiscal 2017, 2016, and 2015 was $4.82, $6.49, and $8.40, respectively, on the date of the grants. The fair values of all options granted were determined using a Black-Scholes option-pricing model with the following weighted average assumptions for each fiscal year:



	2017		2016		2015
Dividend yield	2.2	%	1.5	%	1.2	%
Volatility	32.9	%	33.4	%	36.6	%
Risk-free interest rate	1.3	%	1.4	%	1.7	%
Expected life	5.0 years		5.0 years		5.0 years

The dividend yield assumption is based on the Company’s history and expectation of dividend payouts. The expected volatility assumption is based on the Company’s analysis of historical volatility. The risk-free interest rate assumption is based on the average daily closing rates during the period for U.S. treasury notes that have a life which approximates the expected life of the option. The expected life of employee stock options represents the weighted-average period the stock options are expected to remain outstanding based on historical exercise experience.

A reconciliation of the Company’s stock option activity, including stock option activity with employees of the Company’s discontinued operations, and related information for fiscal 2017 is as follows:



	Number of Shares		Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Life (Years)	Aggregate Intrinsic Value
Outstanding at February 27, 2016	2,546,228		$	21.81
Granted	1,450,635		20.04
Exercised	(178,480	)	16.04			$	1,257,000
Forfeited and expired	(225,791	)	22.22
Outstanding at February 25, 2017	3,592,592		$	21.35	7.4	$	1,719,000
Exercisable at February 25, 2017	1,816,854		$	21.14	6.4	$	1,694,000

As of February 25, 2017, there was $5.8 million of total unrecognized compensation cost, net of estimated forfeitures, related to nonvested options. That cost is expected to be recognized over a weighted average period of 1.6 years.

Intrinsic value for stock options is the difference between the current market value of the Company’s stock and the option strike price. The total intrinsic value of options exercised during fiscal 2017, 2016, and 2015 was $1.3 million, $1.1 million, and $6.7 million, respectively.

The following table summarizes information concerning outstanding and exercisable options at February 25, 2017:



Range of Exercise Prices	Number Outstanding	Weighted-Average Remaining Contractual Life	Weighted-Average Exercise Price		Number Exercisable	Weighted-Average Exercise Price
$1.00 - $10.00	135,833	2.6	$	6.08	135,833	$	6.08
$10.01 - $15.00	47,404	4.0	13.14		47,404	13.14
$15.01 - $20.00	720,910	8.0	18.58		397,302	19.22
$20.01 - $25.00	2,178,406	9.1	21.93		902,125	22.23
$25.01 +	510,039	8.1	27.60		334,190	27.73
	3,592,592	8.4	$	21.35	1,816,854	$	21.14

The Company recorded compensation expense related to stock options of $4.4 million, $5.9 million, and $3.9 million in fiscal 2017, 2016, and 2015, respectively.

Restricted Stock Activity

The Company has granted shares of the Company’s stock to non-employee directors, officers, and other key employees that are subject to restrictions. The restricted stock granted to employees under the Amended and Restated 2009 Incentive Plan either vests upon the achievement of specified levels of net income or earnings per share growth over a three-year period or cliff-vest after a three-year period. For performance-based awards, should the net income or earnings per share growth criteria not be met over the three-year period, the shares will be forfeited. All restricted stock awards issued to non-employee directors cliff-vest after a one-year period from the grant date. The Company recorded compensation expense related to restricted stock of $6.5 million, $4.9 million, and $4.2 million in fiscal 2017, 2016, and 2015, respectively.

A reconciliation of the Company’s restricted stock activity and related information for fiscal 2017 is as follows:



	Number of Shares		Weighted Average Grant Date Fair Value
Unvested at February 27, 2016	712,617		$	23.22
Granted	479,781		19.64
Vested	(400,117	)	22.06
Forfeited	(195,136	)	22.87
Unvested at February 25, 2017	597,145		$	21.36

As of February 25, 2017, there was $5.3 million of total unrecognized compensation cost, net of estimated forfeitures, related to nonvested restricted stock. That cost is expected to be recognized over a weighted average period of 1.4 years. The total fair value of awards for which restrictions lapsed (upon which the stock vested) during fiscal 2017 was $8.8 million.

Employee Stock Purchase Plan

The Company has an Employee Stock Purchase Plan (“ESPP”). Under the ESPP, participating employees are able to contribute up to 15% of their annual compensation to acquire shares of the Company’s common stock at 85% of the market price on a specified date each offering period. The amount of shares purchased per calendar year per employee cannot have a fair market value in excess of $25,000. There are 2,400,000 shares of common stock authorized for purchase under the ESPP, of which 37,000, 39,000, and 29,000 shares were purchased during fiscal 2017, 2016, and 2015, respectively. The Company recognizes compensation expense based on the 15% discount at purchase. The Company recorded compensation expense related to the ESPP of $0.1 million in each of fiscal 2017, 2016, and 2015.