Family Dollar 2011 Annual Report Download - page 63

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measured based on two pre-tax metrics: Return on Equity and Income Growth. The Leadership Development and
Compensation Committee of the Board of Directors establishes the peer group and performance metrics. The
performance share rights vest at the end of the performance period (generally three years) and the shares are
issued shortly thereafter. The actual number of shares issued can range from 0% to 200% of the employee’s
target award depending on the Company’s performance relative to the peer group. The following table
summarizes the transactions under the performance share rights program during fiscal 2011:
(in thousands, except per share amounts)
Performance
Share Rights
Outstanding
Weighted
Average
Grant-Date
Fair Value
Nonvested—August 28, 2010 .................................... 694 $26.27
Granted ..................................................... 160 46.38
Vested ...................................................... (335) 27.10
Cancellations ................................................. (29) 32.96
Adjustments .................................................. 92 N/A
Nonvested—August 27, 2011 .................................... 582 $31.13
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 $46.38 during fiscal 2011,
$28.37 during fiscal 2010 and $23.56 during fiscal 2009. 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 $15.0 million during fiscal 2011, $6.9 million during fiscal 2010 and $5.3
million during fiscal 2009. As of August 27, 2011, 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
1.6 years.
12.Stock Repurchases:
During fiscal 2011, the Company purchased a total of 13.9 million shares of its common stock at a cost of $670.5
million, of which 8.6 million shares were purchased on the open market at a cost of $420.5 million. 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 purchased 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. Upon settlement, another 0.9 million shares were delivered to the Company.
During fiscal 2010, the Company purchased 9.4 million shares of its common stock at a cost of $332.2 million, of
which 6.7 million shares were purchased on the open market at a cost of $232.2 million. During fiscal 2010, the
Company entered into two structured repurchase agreements with large financial institutions for a total of $100
million. 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.
During fiscal 2009, the Company purchased 2.3 million shares at a cost of $71.1 million, all of which were
purchased on the open market.
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