Annual report pursuant to Section 13 and 15(d)

STOCK-BASED COMPENSATION PLAN

v2.4.0.6
STOCK-BASED COMPENSATION PLAN
 12 Months Ended
Feb. 02, 2013
STOCK-BASED COMPENSATION PLAN [Abstract]  
STOCK-BASED COMPENSATION PLAN
STOCK-BASED COMPENSATION PLANS
At February 2, 2013, the Company has eight stock-based compensation plans.  Each plan and the accounting method are described below.
Fixed Stock Option Compensation Plans
Under the 1995 Stock Incentive Plan (SIP), the Company granted options to its employees for the purchase of up to 37.8 million shares of Common Stock.  The exercise price of each option equaled the market price of the Company's stock at the date of grant, unless a higher price was established by the Board of Directors, and an option's maximum term is 10 years.  Options granted under the SIP generally vested over a three-year period.  This plan was terminated on July 1, 2003 and replaced with the Company’s 2003 Equity Incentive Plan (EIP).
Under the EIP, the Company granted up to 18.0 million shares of its Common Stock, plus any shares available for future awards under the SIP, to the Company’s employees, including executive officers and independent contractors.  The EIP permitted the Company to grant equity awards in the form of stock options, stock appreciation rights and restricted stock.  The exercise price of each stock option granted equaled the market price of the Company’s stock at the date of grant.  The options generally vest over a three -year period and have a maximum term of 10 years.  This plan was terminated on June 16, 2011 and replaced with the Company’s Omnibus Incentive Plan (Omnibus Plan).
The Executive Officer Equity Incentive Plan (EOEP) was available only to the Chief Executive Officer and certain other executive officers.  These officers no longer received awards under the EIP.  The EOEP allowed the Company to grant the same type of equity awards as the EIP.  These awards generally vest over a three-year period, with a maximum term of 10 years.  This plan was terminated on June 16, 2011 and replaced with the Company’s Omnibus Incentive Plan (Omnibus Plan).
Stock appreciation rights may be awarded alone or in tandem with stock options.  When the stock appreciation rights are exercisable, the holder may surrender all or a portion of the unexercised stock appreciation right and receive in exchange an amount equal to the excess of the fair market value at the date of exercise over the fair market value at the date of the grant.  No stock appreciation rights have been granted to date.
Any restricted stock or RSUs awarded are subject to certain general restrictions.  The restricted stock shares or units may not be sold, transferred, pledged or disposed of until the restrictions on the shares or units have lapsed or have been removed under the provisions of the plan.  In addition, if a holder of restricted shares or units ceases to be employed by the Company, any shares or units in which the restrictions have not lapsed will be forfeited.
The 2003 Non-Employee Director Stock Option Plan (NEDP) provided non-qualified stock options to non-employee members of the Company's Board of Directors.  The stock options were functionally equivalent to such options issued under the EIP discussed above.  The exercise price of each stock option granted equaled the closing market price of the Company’s stock on the date of grant.  The options generally vested immediately.  This plan was terminated on June 16, 2011 and replaced with the Company’s Omnibus Incentive Plan (Omnibus Plan).
The 2003 Director Deferred Compensation Plan permits any of the Company's directors who receive a retainer or other fees for Board or Board committee service to defer all or a portion of such fees until a future date, at which time they may be paid in cash or shares of the Company's common stock, or receive all or a portion of such fees in non-statutory stock options.  Deferred fees that are paid out in cash will earn interest at the 30-year Treasury Bond Rate.  If a director elects to be paid in common stock, the number of shares will be determined by dividing the deferred fee amount by the closing market price of a share of the Company's common stock on the date of deferral.  The number of options issued to a director will equal the deferred fee amount divided by 33% of the price of a share of the Company's common stock.  The exercise price will equal the fair market value of the Company's common stock at the date the option is issued.  The options are fully vested when issued and have a term of 10 years.
Under the Omnibus Plan, the Company may grant up to 4.0 million shares of its Common Stock, plus any shares available for future awards under the EIP, EOEP, or NEDP plans, to the Company’s employees, including executive officers and independent contractors.  The Omnibus Plan permits the Company to grant equity awards in the form of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock awards, restricted stock units, performance bonuses, performance units, non-employee director stock options and other equity-related awards.  These awards generally vest over a three-year period with a maximum term of 10 years.
Restricted Stock
The Company granted 0.5 million, 0.7 million and 1.1 million service-based RSUs, net of forfeitures in 2012, 2011 and 2010, respectively, from the Omnibus Plan, EIP and the EOEP to the Company’s employees and officers.  The fair value of all of these RSUs is being expensed ratably over the three-year vesting periods, or a shorter period based on the retirement eligibility of the grantee.  The fair value was determined using the Company’s closing stock price on the date of grant.  The Company recognized $21.9 million, $19.2 million and $17.3 million of expense related to these RSUs during 2012, 2011 and 2010, respectively.  As of February 2, 2013, there was approximately $21.8 million of total unrecognized compensation expense related to these RSUs which is expected to be recognized over a weighted-average period of 21 months.
In 2012, the Company granted 0.2 million RSUs from the Omnibus Plan to certain officers of the Company, contingent on the Company meeting certain performance targets in 2012 and future service of these officers through March 2015.  The Company met these performance targets in fiscal 2012; therefore, the fair value of these RSUs of $8.1 million is being expensed over the service period or a shorter period based on the retirement eligibility of the grantee.  The Company recognized $5.7 million of expense related to these RSUs in 2012.  The fair value of these RSUs was determined using the Company’s closing stock price on the grant date.
In 2011, the Company granted 0.3 million RSUs from the EIP and the EOEP to certain officers of the Company, contingent on the Company meeting certain performance targets in 2011 and future service of these officers through March 2014.  The Company met these performance targets in fiscal 2011; therefore, the fair value of these RSUs of $7.3 million is being expensed over the service period or a shorter period based on the retirement eligibility of the grantee.  The Company recognized $0.9 million and $5.4 million of expense related to these RSUs in 2012 and 2011, respectively.  The fair value of these RSUs was determined using the Company’s closing stock price on the grant date.
In 2010, the Company granted 0.4 million RSUs from the EIP and the EOEP to certain officers of the Company, contingent on the Company meeting certain performance targets in 2010 and future service of these officers through March 2013.  The Company met these performance targets in fiscal 2010; therefore, the fair value of these RSUs of $7.8 million is being expensed over the service period or a shorter period based on the retirement eligibility of the grantee.  The Company recognized $1.0 million, $1.8 million and $4.8 million of expense related to these RSUs in 2012, 2011 and 2010, respectively.  The fair value of these RSUs was determined using the Company’s closing stock price on the grant date.
In 2012, the Company granted RSUs with an estimated value of $1.7 million from the Omnibus Plan to certain officers of the Company. Each officer has the opportunity to earn an amount between zero percent (0%) and two hundred percent (200%) of the individual target award contingent on the Company meeting certain performance targets for the period beginning on January 29, 2012 and ending on January 31, 2015. Providing the vesting conditions are satisfied, the awards will vest at the end of the performance period. The estimated value is being expensed over the performance period or a shorter period based on the retirement eligibility of the grantee. The Company recognized $1.0 million of expense related to these RSUs in 2012. The estimated value of these RSUs was determined using the Company's closing stock price on the grant date.
In 2011, the Company granted RSUs with an estimated value of $0.7 million from the Omnibus Plan to certain officers of the Company.  Each officer has the opportunity to earn an amount between zero percent (0%) and two hundred percent (200%) of the individual target award contingent on the Company meeting certain performance targets for the period beginning on January 30, 2011 and ending on February 1, 2014.  Providing the vesting conditions are satisfied, the awards will vest at the end of the performance period.  The estimated value is being expensed over the performance period or a shorter period based on the retirement eligibility of the grantee. The Company recognized $0.2 million and $0.4 million of expense related on these RSUs in 2012 and 2011, respectively.  The estimated value of these RSUs was determined using the Company’s closing stock price on the grant date.
In 2012, the Company granted 0.2 million RSUs with a fair value of $10.0 million from the Omnibus Plan to the Chief Executive Officer of the Company, contingent on the Company meeting certain performance targets for the period beginning July 29, 2012 and ending on August 3, 2013 and the grantee completing a five-year service requirement. The fair value of these RSUs is being expensed ratably over the five-year vesting period. The Company recognized $1.3 million of expense related to these RSUs in 2012. The fair value of these RSUs was determined using the Company's closing stock price on the grant date.
The following table summarizes the status of RSUs as of February 2, 2013, and changes during the year then ended: 
 
Shares
 
Weighted
Average
Grant
Date Fair
Value
Nonvested at January 28, 2012
2,511,450

 
$
22.49

Granted
933,346

 
48.43

Vested
(1,315,755
)
 
20.24

Forfeited
(74,868
)
 
31.41

Nonvested at February 2, 2013
2,054,173

 
$
35.37


In connection with the vesting of RSUs in 2012, 2011 and 2010, certain employees elected to receive shares net of minimum statutory tax withholding amounts which totaled $22.1 million, $13.2 million and $11.1 million, respectively.  The total fair value of the restricted shares vested during the years ended February 2, 2013, January 28, 2012 and January 29, 2011 was $26.6 million, $20.9 million and $19.1 million, respectively.
Stock Options
In 2012, 2011 and 2010, the Company granted less than 0.1 million service based stock options from the Omnibus Plan, EIP, EOP and the NEDP, respectively.  All options granted to directors vest immediately and are expensed on the grant date.  During 2012, 2011 and 2010, the Company recognized $1.2 million, $1.1 million and $2.3 million, respectively of expense related to service-based stock option grants.
The following tables summarize the Company's various option plans and information about options outstanding at February 2, 2013 and changes during the year then ended.
Stock Option Activity
 
 
February 2, 2013
 
 
 
 
Weighted
 
 
 
 
 
 
 
 
Average
 
Weighted
 
Aggregate
 
 
 
 
Per Share
 
Average
 
Intrinsic
 
 
 
 
Exercise
 
Remaining
 
Value (in
 
 
Shares
 
Price
 
Term
 
millions)
Outstanding, beginning of period
 
1,311,106

 
$
10.15

 
 
 
 
Granted
 
11,284

 
47.00

 
 
 
 
Exercised
 
(574,585
)
 
9.02

 
 
 
 
Forfeited
 
(29,550
)
 
9.29

 
 
 
 
Outstanding, end of period
 
718,255

 
$
11.66

 
3.8
 
$
20.4

Options vested and expected to vest
 
 

 
 

 
 
 
 

at February 2, 2013
 
718,255

 
$
11.66

 
3.8
 
$
20.4

Options exercisable at end of period
 
718,255

 
$
11.66

 
3.8
 
$
20.4


 
 
 
 
Options Outstanding
 
Options Exercisable
 
 
Options
 
 
 
 
 
Options
 
 
Range of
 
Outstanding
 
Weighted Avg.
 
Weighted Avg.
 
Exercisable
 
Weighted Avg.
Exercise
 
at February 2,
 
Remaining
 
Exercise
 
at February 2,
 
Exercise
Prices
 
2013
 
Contractual Life
 
Price
 
2013
 
Price
$5.38 to $7.09
 
77,357

 
0.1
 
$
6.67

 
77,357

 
$
6.67

$7.10 to $9.93
 
327,900

 
3.3
 
8.90

 
327,900

 
8.90

$9.94 to $14.52
 
254,462

 
4.5
 
12.63

 
254,462

 
12.63

$14.53 to $16.12
 
11,050

 
6.8
 
16.11

 
11,050

 
16.11

$16.13 to $28.04
 
20,924

 
7.5
 
23.26

 
20,924

 
23.26

$28.05 to $53.99
 
26,562

 
9.0
 
39.93

 
26,562

 
39.93

$5.38 to $53.99
 
718,255

 
3.8
 
$
11.66

 
718,255

 
$
11.66


The intrinsic value of options exercised during 2012, 2011 and 2010 was approximately $21.8 million, $16.4 million and $16.0 million, respectively.
Employee Stock Purchase Plan
Under the Dollar Tree, Inc. Employee Stock Purchase Plan (ESPP), the Company is authorized to issue up to 5,278,125 shares of Common Stock to eligible employees.  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 4,656,492 shares as of February 2, 2013.
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 2012
 
Fiscal 2011
 
Fiscal 2010
Expected term
3 months
 
3 months
 
3 months
Expected volatility
11.9
%
 
12.6
%
 
13.2
%
Annual dividend yield
—
%
 
—
%
 
—
%
Risk free interest rate
0.1
%
 
0.1
%
 
0.1
%
 
The weighted average per share fair value of purchase rights granted in 2012, 2011 and 2010 was $6.97, $5.22 and $3.30, respectively.  Total expense recognized for these purchase rights was $0.9 million in each of 2012, 2011 and 2010.