Family Dollar 2012 Annual Report Download - page 65

Gender Pay Litigation
On October 14, 2008, a complaint was filed in the U.S. District Court in Birmingham, Alabama, captioned Scott,
et al. v. Family Dollar Stores, Inc., alleging discriminatory pay practices with respect to the Company’s female
store managers. This case was pled as a putative class action or collective action under applicable statutes on
behalf of all current and former female store managers. The plaintiffs seek recovery of back pay, compensatory
and punitive damages, recovery of attorneys’ fees and equitable relief. The case was transferred to the N.C.
Federal Court. Presently, there are 48 named plaintiffs in Scott.
On January 13, 2012, the N.C. Federal Court ruled in the Company’s favor, striking the plaintiffs’ class claims
and denying plaintiffs’ motion to amend their complaint. On January 26, 2012, the plaintiffs filed a petition to
appeal this decision to the Fourth Circuit under Rule 23(f), which the Fourth Circuit granted on May 8, 2012.
Appellate briefing is currently scheduled to be concluded in November, 2012.
At this time, it is not possible to predict whether the Fourth Circuit will affirm the N.C. Federal Court’s decision
striking the class allegations. However, the claims of the 48 named plaintiffs remain under the Equal Pay Act and
Title VII of the Civil Rights Act. Although the Company intends to vigorously defend the action, no assurances
can be given that the Company will be successful in the defense on the merits or otherwise. For these reasons, the
Company is unable to estimate any potential loss or range of loss. The Company has tendered the matter to its
Employment Practices Liability Insurance (“EPLI”) carrier for coverage under its EPLI policy. At this time, the
Company expects that the EPLI carrier will participate in any potential resolution of some or all of the plaintiffs’
claims.
Other Matters
The Company is involved in numerous other legal proceedings and claims incidental to its business, including
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 has established accrued liabilities 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
effect on the Company’s financial position, liquidity or results of operations. 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
effect on the Company’s financial position, liquidity or results of operations.
12. 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 expired or were canceled or forfeited after the adoption of the 2006 Plan. As of August 25, 2012, there
were 9.4 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 2012, fiscal 2011 and fiscal 2010 include stock-based compensation expense of
$15.9 million, $14.7 million and $15.7 million, respectively. These amounts are included within SG&A on the
Consolidated Statements of Income. Tax benefits recognized in fiscal 2012, fiscal 2011 and fiscal 2010 for stock-
based compensation totaled $5.9 million, $5.4 million and $5.8 million, respectively.
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