Stock Plans

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. The Company’s Board of Directors has reserved 6,500,000 shares of common stock for issuance upon exercise of options or other awards under the 2009 Incentive Plan. The number of shares reserved for issuance of all awards other than options and stock appreciation rights, is limited to 2,500,000 under the 2009 Incentive Plan. Upon approval of the 2009 Incentive Plan, the 2002 Stock Incentive Plan of The Finish Line, Inc. (the “2002 Incentive Plan”) is limited in future grants to awards from shares returned to the 2002 Incentive Plan by forfeiture after July 23, 2009. The Company provides newly issued shares and treasury stock to satisfy stock option exercises and for the issuance of restricted stock.

Total share-based compensation expense in 2014, 2013 and 2012 was $7.1 million, $6.6 million and $5.2 million, respectively.

Stock Option Activity

Stock options have been granted to directors, officers and other key employees. Generally, options outstanding under the plans 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 2014, 2013 and 2012 was $8.24, $9.56 and $8.98, respectively on the date of the grant. The fair values for all years were determined using a Black-Scholes option-pricing model with the following weighted average assumptions:



	2014		2013		2012
Dividend yield	1.38	%	1.05	%	1.12	%
Volatility	53.4	%	58.3	%	57.8	%
Risk-free interest rate	0.84	%	0.95	%	1.98	%
Expected life	5.0 years		4.9 years		4.8 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 upon 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 and related information for 2014 is as follows:



	Number of Shares		Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Life (Years)	Aggregate Intrinsic Value
Outstanding at March 2, 2013	2,196,177		$	14.54
Granted	700,811		19.73
Exercised	(750,637	)	11.10			$	8,380,000
Forfeited	(229,755	)	19.72
Outstanding at March 1, 2014	1,916,596		$	17.14	7.2	$	18,866,000
Exercisable at March 1, 2014	590,017		$	12.08	5.0	$	8,816,000

As of March 1, 2014, there was $6.4 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 1.7 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 2014, 2013 and 2012 was $8.4 million, $6.4 million and $14.7 million, respectively.

The following table summarizes information concerning outstanding and exercisable options at March 1, 2014:



Range of Exercise Prices	Number Outstanding	Weighted-Average Remaining Contractual Life	Weighted-Average Exercise Price		Number Exercisable	Weighted-Average Exercise Price
$1-$10	233,202	4.6	$	5.75	233,202	$	5.75
$10-$15	288,048	4.9	13.11		167,631	13.09
$15-$20	848,186	8.0	19.08		134,843	18.15
$20-$30	547,160	8.2	21.14		54,341	21.05
	1,916,596	7.2	$	17.14	590,017	$	12.08

The Company recorded compensation expense related to stock options of $3.5 million, $2.7 million and $2.1 million in 2014, 2013 and 2012, 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 2002 and 2009 Incentive Plans either vest upon the achievement of specified levels of net income growth over a three-year period or were granted such that they cliff-vest after a three-year period. For performance-based awards, should the net income 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 $3.5 million, $3.8 million and $3.0 million in 2014, 2013 and 2012, respectively.

A reconciliation of the Company’s restricted stock activity and related information for 2014 is as follows:



	Number of Shares		Weighted Average Grant Date Fair Value
Unvested at March 2, 2013	757,160		$	18.95
Granted	324,927		20.32
Vested	(191,500	)	14.42
Forfeited	(97,858	)	15.42
Unvested at March 1, 2014	792,729		$	20.47

As of March 1, 2014, there was $7.0 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 2.2 years. The total fair value of awards for which restrictions lapsed (vested) during 2014 was $2.8 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 10 percent of their annual compensation to acquire shares of common stock at 85% of the market price on a specified date each offering period. As of March 1, 2014, 2,400,000 shares of common stock were authorized for purchase under the ESPP, of which 31,000, 33,000 and 27,000 shares were purchased during 2014, 2013 and 2012, 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 2014, 2013 and 2012.