Family Dollar 2009 Annual Report Download - page 61

money damages, recovery of attorneys’ fees and equitable relief. The case has been transferred to the N.C.
Federal Court. The Company intends to vigorously defend the allegations in the Scott case; however, no
assurances can be given that the Company will be successful in the defense of this action.
The Company is involved in numerous other legal proceedings and claims incidental to its business, including, as
noted above, litigation related to alleged failures to comply with various state and federal employment laws,
some of which are or may be pled as class or collective actions, and litigation related to alleged personal or
property damage, as to which the Company carries insurance coverage and/or, pursuant to SFAS No. 5,
“Accounting for Contingencies,” has established reserves as set forth in the Company’s financial
statements. While the ultimate outcome cannot be determined, the Company currently believes that these
proceedings and claims, both individually and in the aggregate, should not have a material adverse effect on the
Company’s financial position, liquidity or results of operations, except as noted above. However, the outcome of
any litigation is inherently uncertain and, if decided adversely to the Company, or if the Company determines
that settlement of such actions is appropriate, the Company may be subject to liability that could have a material
adverse effect on the Company’s financial position, liquidity or results of operations.
Other
The Consumer Product Safety Improvement Act of 2008 was signed into law in August 2008. The new
legislation addresses a number of consumer product safety issues, including the permissible levels of lead and
phthalates in certain products. During fiscal 2009, the Company incurred markdown expense of approximately
$6.8 million in response to the new legislation. While the Company does not believe the new legislation will
have a material impact on its future operating results, the scope and impact of the new legislation is still being
determined in the retail marketplace generally and future adjustments to merchandise inventories as a result of
such legislation could adversely impact future operating results.
10. Stock-Based Compensation:
The Family Dollar Stores, Inc. 2006 Incentive Plan (the “2006 Plan”) permits the granting of a variety of
compensatory award types. The Company currently grants non-qualified stock options and performance share
rights under the 2006 Plan. Shares issued related to stock options and performance share rights represent new
issuances of common stock. A total of 12.0 million common shares are reserved and available for issuance under
the 2006 Plan, plus any shares awarded under the Company’s previous plan (1989 Non-Qualified Stock Option
Plan) that expire or are canceled or forfeited after the adoption of the 2006 Plan. As of August 29, 2009, there
were 11.3 million shares remaining available for grant under the 2006 Plan. The Company also issues shares
under the 2006 Plan in connection with director compensation. These shares are currently issued out of treasury
stock and are not material.
The Company’s results for fiscal 2009, fiscal 2008 and fiscal 2007 include stock-based compensation expense of
$13.3 million, $11.3 million and $11.7 million, respectively. These amounts are included within SG&A on the
Consolidated Statements of Income. Tax benefits recognized in fiscal 2009, fiscal 2008 and fiscal 2007 for stock-
based compensation totaled $4.9 million, $4.2 million and $4.3 million, respectively.
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