Family Dollar 2010 Annual Report Download - page 62

The grant-date fair value of the performance share rights is based on the stock price on the grant date. The weighted-
average grant-date fair value of performance share rights granted was $28.37 during fiscal 2010, $23.56 during
fiscal 2009 and $26.96 during fiscal 2008. Compensation cost is recognized on a straight-line basis, net of estimated
forfeitures, over the requisite service period and adjusted quarterly to reflect the ultimate number of shares expected
to be issued. The adjustments of performance share rights outstanding in the table above represent the performance
adjustment for shares vested during the period. The total fair value of performance share rights vested was $6.9
million during fiscal 2010, $5.3 million during fiscal 2009 and $2.3 million during fiscal 2008. As of August 28,
2010, there was approximately $10.8 million of unrecognized compensation cost related to outstanding performance
share rights, based on the Company’s most recent performance analysis. The unrecognized compensation cost will
be recognized over a weighted-average period of 1.5 years.
12. Stock Repurchases:
During fiscal 2010, the Company purchased 9.4 million shares of its common stock at a cost of $332.2 million.
During fiscal 2009, the Company purchased 2.3 million shares of its common stock at a cost of $71.1 million,
and during fiscal 2008, the Company purchased 3.7 million shares at a cost of $97.7 million.
All of the share repurchases during fiscal 2010 were made in the open market, with the exception of $100.0
million, which was repurchased under two structured repurchase agreements with large financial institutions. In
connection with each agreement, the Company made a prepayment of $50.0 million to the financial institution.
The financial institution purchased shares of the Company’s common stock in the open market and delivered
shares to the Company at specified intervals during the contract term. The number of shares delivered was based
on the volume weighted average price (“VWAP”) of the Company’s common stock during the purchase period
less an agreed upon discount. The Company received 2.7 million shares under the agreements, which were
completed prior to the end of fiscal 2010.
All shares are purchased pursuant to share repurchase authorizations approved by the Board of Directors. On
November 18, 2009, the Company announced that the Board of Directors authorized the Company to purchase up
to $400 million of the Company’s outstanding common stock from time to time as market conditions warrant. As
of August 28, 2010, the Company had $129.8 million remaining under this authorization.
On September 29, 2010, subsequent to the end of fiscal 2010, the Company announced that the Board of
Directors authorized the Company to purchase up to $750 million of the Company’s outstanding common stock.
The remaining amount under the previous authorization was cancelled. On October 5, 2010, the Company
entered into an accelerated share repurchase agreement with a large financial institution. In connection with the
agreement, the Company made a prepayment of $250.0 million to the financial institution and immediately
received 4.4 million shares (80% of the prepayment amount). The financial institution will purchase shares of the
Company’s common stock in the open market over an averaging period in order to cover its position with respect
to shares it borrowed for the initial delivery and for any shares payable upon settlement. The averaging period
began on October 7, 2010, and is expected to end during the second quarter of fiscal 2011, but the financial
institution may accelerate the end of the averaging period. The number of shares to be delivered upon settlement
of the agreement will be based on the VWAP during the averaging period less an agreed upon discount. In the
event that the total number of shares to be delivered is less than the initial delivery amount, the Company will be
required, at its option, to deliver either shares or cash to the financial institution for the difference.
There is no expiration date related to the above referenced authorization. Shares purchased under the share
repurchase authorizations are generally held in treasury or have been cancelled and returned to the status of
authorized but unissued shares.
On November 2, 2007, the Company retired 35.8 million shares of its common stock held in treasury. The shares
were returned to the status of authorized but unissued shares. As a result, treasury stock decreased approximately
$758.7 million. The Company reduced common stock, capital in excess of par, and retained earnings by
approximately $3.6 million, $37.4 million, and $717.7 million, respectively.
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