Dollar Tree 2009 Annual Report Download - page 47

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Notes to Consolidated Financial Statements
Stock Options
In฀2008฀and฀2007,฀the฀Company฀granted฀a฀total฀of฀0.5฀
million฀and฀0.4฀million฀service฀based฀stock฀options฀
from฀the฀EIP,฀EOEP฀and฀the฀NEDP,฀respectively.฀In฀
2009,฀the฀Company฀granted฀less฀than฀0.1฀million฀service฀
based stock options from these plans. The fair value of
all of these options is being expensed ratably over the
three-year vesting periods, or a shorter period based
on the retirement eligibility of the grantee. All options
granted to directors vest immediately and are expensed
on฀the฀grant฀date.฀During฀2009,฀2008฀and฀2007,฀the฀
Company฀recognized฀$3.7฀million,฀$4.7฀million฀and฀
$2.7฀million,฀respectively฀of฀expense฀related฀to฀service฀
based฀stock฀option฀grants.฀As฀of฀January฀30,฀2010,฀there฀
was฀approximately฀$3.3฀million฀of฀total฀unrecognized฀
compensation expense related to these stock options
which฀is฀expected฀to฀be฀recognized฀over฀a฀weighted฀
average period of 15 months.
In฀2008,฀the฀Company฀granted฀0.1฀million฀stock฀
options฀from฀the฀EIP฀and฀the฀EOEP฀to฀certain฀ofcers฀
of the Company, contingent on the Company meeting
certain฀performance฀targets฀in฀2008฀and฀future฀service฀
of฀these฀ofcers฀through฀scal฀2009.฀The฀Company฀
met฀these฀performance฀targets฀in฀scal฀2008;฀therefore,฀
the฀fair฀value฀of฀these฀stock฀options฀of฀$1.0฀million฀was฀
expensed over the service period. The Company recog-
nized฀$0.5฀million฀of฀expense฀on฀these฀stock฀options฀in฀
2009฀and฀in฀2008.฀The฀fair฀value฀of฀these฀stock฀options฀
was฀determined฀using฀the฀Company’s฀closing฀stock฀
price on the grant date.
The fair value of each option grant was estimated
on the date of grant using the Black-Scholes option-
pricing model. The expected term of the awards
granted฀was฀calculated฀using฀the฀“simplied฀method”฀in฀
accordance฀with฀Staff฀Accounting฀Bulletin฀No.฀107.฀
Expected volatility is derived from an analysis of the
historical฀and฀implied฀volatility฀of฀the฀Company’s฀
publicly traded stock. The risk free rate is based on the
U.S. Treasury rates on the grant date with maturity
dates approximating the expected life of the option on
the grant date. The weighted average assumptions used
in the Black-Scholes option pricing model for grants in
2009,฀2008฀and฀2007฀are฀as฀follows:
Fiscal
2009
Fiscal
2008
Fiscal
2007
Expected term in years 6.0 6.0 6.0
Expected volatility 43.6% 45.7% 28.4%
Annual dividend yield — — —
Risk free interest rate 2.0% 2.8% 4.5%
Weighted฀average฀fair฀value฀
of options granted during
the period $20.76 ฀$13.45฀ ฀$14.33฀
Options granted 15,939 558,293 386,490
฀฀฀DOLLAR฀TREE,฀INC.฀•฀2009฀Annual฀Report฀฀฀45