Dollar Tree 2007 Annual Report Download - page 49

DOLLAR TREE, INC. • 2007 ANNUAL REPORT 47
In 2006, the Company granted 6,000 RSUs from
the EOEP and the EIP to certain officers of the
Company, contingent on the Company meeting cer-
tain performance targets in 2006 and future service of
the these officers through fiscal 2006. The Company
met these performance targets in fiscal 2006; there-
fore, the Company recognized the fair value of these
RSUs of $0.2 million during fiscal 2006. The fair value
of these RSUs was determined using the Company’s
closing stock price on the grant date in accordance
with SFAS 123R.
The following table summarizes the status of
RSUs as of February 2, 2008, and changes during the
year then ended:
Weighted
Average
Grant
Date Fair
Shares Value
Nonvested at February 3, 2007 456,777 $26.57
Granted 350,470 38.12
Vested (206,076) 26.60
Forfeited (45,236) 32.96
Nonvested at February 2, 2008 555,935 26.57
In connection with the vesting of RSUs in 2007
and 2006, certain employees elected to receive shares
net of minimum statutory tax withholding amounts
which totaled $2.9 million and $1.0 million, respec-
tively. The total fair value of the restricted shares vest-
ed during the years ended February 2, 2008 and
February 3, 2007 was $8.2 million and $2.8 million,
respectively. The total fair value of restricted shares
vested during the year ended January 28, 2006 was
less than $0.1 million.
Employee Stock Purchase Plan
Under the Dollar Tree, Inc. Employee Stock Purchase
Plan (ESPP), the Company is authorized to issue up to
1,759,375 shares of common stock to eligible employ-
ees. Under the terms of the ESPP, employees can
choose to have up to 10% of their annual base earnings
withheld to purchase the Company’s common stock.
The purchase price of the stock is 85% of the lower of
the price at the beginning or the end of the quarterly
offering period. Under the ESPP, the Company has
sold 1,074,420 shares as of February 2, 2008.
The fair value of the employees’ purchase rights is
estimated on the date of grant using the Black-Scholes
option-pricing model with the following weighted
average assumptions:
Fiscal Fiscal Fiscal
2007 2006 2005
Expected term 3 months 3 months 3 months
Expected volatility 16.3% 13.1% 12.0%
Annual dividend yield ———
Risk free interest rate 4.4% 4.8% 3.9%
The weighted average per share fair value of those
purchase rights granted in 2007, 2006 and 2005 was
$5.74, $4.59 and $4.11, respectively. Total expense
recognized for these purchase rights was $0.9 million
and $0.4 million in 2007 and 2006, respectively.
On March 2, 2008, the ESPP was adopted by
Dollar Tree, Inc. as a part of the holding company
reorganization. Refer to Note 1 for discussion of the
holding company reorganization.
NOTE 10 – ACQUISITION
On March 25, 2006, the Company completed its
acquisition of 138 Deal$ stores. These stores are locat-
ed primarily in the Midwest part of the United States
and the Company has existing logistics capacity to
service these stores. This acquisition also includes a
few “combo” stores that offer an expanded assortment
of merchandise including items that sell for more than
$1. Substantially all Deal$ stores acquired will contin-
ue to operate under the Deal$ banner while providing
the Company an opportunity to leverage its Dollar
Tree infrastructure in the testing of new merchandise
concepts, including higher price points, without dis-
rupting the single-price point model in its Dollar Tree
stores.
The Company paid approximately $32.0 million
for store-related and other assets and $22.1 million for
inventory. This amount includes approximately $0.6
million of direct costs associated with the acquisition.
The results of Deal$ store operations are included in
the Company’s financial statements since the acquisi-
tion date and did not have a significant impact on the
Company’s operating results in 2006. This acquisition
is immaterial to the Company’s operations as a whole
and therefore no proforma disclosure of financial
information has been presented. The following table
summarizes the allocation of the purchase price to the
fair value of the assets acquired.