Family Dollar 2006 Annual Report Download - page 69

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Vice President, equity awards are approved by the Committee at a meeting held the same day. The exercise price for all stock options
is determined by the closing price of Family Dollar stock on the date the option grant is approved.
Performance Share Rights Awards PSRs were awarded under the 2006 Plan, and according to the terms of the 2006
Incentive Plan Guidelines for Long Term Incentive Performance Share Rights Awards. When an employee is awarded PSRs, that
employee receives a right to be issued shares of the Company’s common stock if the Company performs at a certain level, as
compared to a selected peer group of companies, over the relevant performance period. Performance is determined by analyzing the
Company’s net income growth (“earnings growth”) and average annual return on equity (“ROE”). Each of these factors is given equal
weight. Performance share rights are generally determined using a three−year performance period. However, the Company made
one−year performance period awards in fiscal 2006 and in fiscal 2007 to help employees understand the metrics of these awards.
Each participating employee is awarded a “target” number of shares. These shares are awarded to the employee at the end of
a performance period if the Company is at the 50th percentile in relation to its peer group for earnings growth and ROE. If the
Company’s performance is above or below the 50th percentile, the number of shares will be adjusted upward or downward,
respectively. No awards are made if the Company’s performance is below the 30th percentile, and awards are increased to a maximum
of twice the “target” award if the Company’s relative performance is above the 90th percentile, as follows:
Performance Against
Selected Peer Group
Percent of Award
Adjustment
(to Target Award)
100th Percentile 200%
75th Percentile 150%
50th Percentile 100%
40th Percentile 75%
30th Percentile 25%
<30th Percentile 0%
For fiscal 2006, the peer group consisted of the following companies: 7−Eleven, 99 Cent Only Stores, Big Lots, Casey’s
General Stores, Cato, CVS, Dollar General, Dollar Tree Stores, Fred’s, Kohl’s Department Stores, Longs Drug Stores, Office Depot,
Payless ShoeSource, Shopko, SuperValu, Target Corporation, TJX Companies, Inc., The Pantry, Inc., Walgreens and Wal−Mart
Stores, Inc. For fiscal 2007, the peer group consists of the same companies with the exception of 7−Eleven and Shopko.
56
Source: FAMILY DOLLAR STORES, 10−K, March 28, 2007