Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended February 28, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-6807
FAMILY DOLLAR STORES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 56-0942963
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P. O. Box 1017, 10401 Old Monroe Road
Charlotte, North Carolina 28201-1017
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 704-847-6961
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class Outstanding at March 31, 1997
Common Stock, $.10 par value 57,145,697 shares
<PAGE>
FAMILY DOLLAR STORES, INC., AND SUBSIDIARIES
INDEX
Page No.
Part I - Financial Information
Item I - Consolidated Condensed Financial Statements:
Consolidated Condensed Balance Sheets -
February 28, 1997 and August 31, 1996 2
Consolidated Condensed Statements of Income -
Three Months Ended February 28, 1997 and
February 29, 1996 3
Consolidated Condensed Statements of Income -
Six Months Ended February 28, 1997 and
February 29, 1996 4
Consolidated Condensed Statements of Cash Flows -
Six Months Ended February 28, 1997 and
February 29, 1996 5
Notes to Consolidated Condensed Financial
Statements 6-7
Computation of Net Income per Common Share -
Note 6 7
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of
Operations 8-10
Part II - Other Information and Signatures
Item 4 - Submission of Matters to a Vote of 11
Security Holders
Item 6 - Exhibits and Reports on Form 8-K 11
Signatures 12
<PAGE>
<TABLE>
FAMILY DOLLAR STORES, INC., AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited)
<CAPTION>
February 28, August 31,
1997 1996
Assets
<S> <C> <C>
Current assets:
Cash and cash equivalents (Note 2) $ 38,141,410 $ 18,844,839
Merchandise inventories 455,517,403 462,840,051
Deferred income taxes 21,207,129 20,372,129
Prepayments and other current assets 8,729,239 5,842,953
Total current assets 523,595,181 507,899,972
Property and equipment, net 199,216,367 184,607,229
Other assets 3,730,070 4,301,090
$726,541,618 $696,808,291
<PAGE>
<CAPTION>
Liabilities and Shareholders' Equity
<S> <C> <C>
Current liabilities:
Notes payable (Note 3) - $ 4,400,000
Accounts payable and accrued
liabilities $226,378,528 222,983,656
Income taxes payable 8,067,473 6,822,191
Total current liabilities 234,446,001 234,205,847
Deferred income taxes 17,885,325 17,645,325
Contingencies (Note 4)
Shareholders' equity (Notes 5 and 6):
Preferred stock, $1 par; authorized
and unissued 500,000 shares
Common stock, $.10 par;
authorized 120,000,000 shares;
issued 60,573,929 shares at
February 28, 1997 and 60,290,684
shares at August 31, 1996 6,057,393 6,029,068
Capital in excess of par 21,801,170 16,818,916
Retained earnings 457,700,997 433,458,403
485,559,560 456,306,387
Less common stock held in treasury,
at cost (3,452,822 shares at
February 28, 1997 and August 31, 1996 -
Note 6) 11,349,268 11,349,268
Total shareholders' equity 474,210,292 444,957,119
$726,541,618 $696,808,291
See notes to consolidated condensed financial statements.
</TABLE>
<PAGE>
<TABLE>
FAMILY DOLLAR STORES, INC., AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Unaudited)
<CAPTION>
Three Months Ended
February 28, February 29,
1997 1996
<S> <C> <C>
Net sales $530,259,064 $448,274,071
Costs and expenses:
Cost of sales 366,093,803 308,309,244
Selling, general and
administrative expeses 131,658,547 113,925,083
497,752,350 422,234,327
Income before provision
for taxes on income 32,506,714 26,039,744
Provision for taxes on income 12,505,000 10,103,000
Net income $ 20,001,714 $ 15,936,744
Net income per common share
(Note 6) $0.35 $0.28
Dividends per common share $0.12 $0.11
Weighted average number of
common shares outstanding (Note 6) 57,042,367 56,815,800
See notes to consolidated condensed financial statements.
</TABLE>
<PAGE>
<TABLE>
FAMILY DOLLAR STORES, INC., AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Unaudited)
<CAPTION>
Six Months Ended
February 28, February 29,
1997 1996
<S> <C> <C>
Net sales $985,141,711 $844,438,630
Costs and expenses:
Cost of sales 666,395,716 567,262,731
Selling, general and
administrative expenses 257,891,459 227,431,386
924,287,175 794,694,117
Income before provision for
taxes on income 60,854,536 49,744,513
Provision for taxes on income 23,493,000 19,300,000
Net income $ 37,361,536 $ 30,444,513
Net income per common share (Note 6) $0.66 $0.54
Dividends per common share $0.23 $0.21
Weighted average number of
common shares outstanding (Note 6) 56,949,806 56,791,251
See notes to consolidated condensed financial statements.
</TABLE>
<PAGE>
<TABLE>
FAMILY DOLLAR STORES, INC., AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Six Months Ended
February 28, February 29,
1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net income $ 37,361,536 $30,444,513
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization 14,296,753 11,962,247
Deferred income taxes (595,000) (444,000)
Loss on disposition of property
and equipment 66,462 151,716
Changes in operating assets and liabilities:
Inventories 7,322,648 (3,427,546)
Prepayments and other current assets (2,886,286) (1,277,495)
Other assets 571,020 597,166
Accounts payable and accrued
liabilities 2,792,043 (15,067,313)
Income taxes payable 1,245,282 (722,196)
60,174,458 22,217,092
Cash flows from investing activities:
Capital expenditures (29,980,532) (22,798,127)
Proceeds from dispositions of
property and equipment 1,008,179 946,327
(28,972,353) (21,851,800)
Cash flows from financing activities:
Net notes payable (repayments) borrowings (4,400,000) 19,500,000
Exercise of employee stock options 5,010,579 874,108
Payment of dividends (12,516,113) (11,354,283)
(11,905,534) 9,019,825
Net change in cash and cash equivalents 19,296,571 9,385,117
Cash and cash equivalents at beginning
of period 18,844,839 8,852,631
Cash and cash equivalents at end of period $ 38,141,410 $18,237,748
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 285,746 $ 399,732
Income taxes 22,411,221 20,300,781
See notes to consolidated condensed financial statements.
</TABLE>
<PAGE>
FAMILY DOLLAR STORES, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. In the opinion of the Company, the accompanying unaudited
consolidated condensed financial statements contain all
adjustments (consisting of only normal recurring accruals)
necessary to present fairly the financial position as of
February 28, 1997, and the results of operations for the three
and six months ended February 28, 1997, and February 29, 1996
and the cash flows for the six months ended February 28, 1997,
and February 29, 1996.
The results of operations for the six month period ended
February 28, 1997, are not necessarily indicative of the
results to be expected for the full year.
2. The Company considers all highly liquid investments with a
maturity of three months or less to be "cash equivalents."
3. The Company has two unsecured bank lines of credit for
short-term revolving borrowings of up to $50,000,000 each, or
$100,000,000 of total borrowing capacity. The lines of credit
expire on March 31, 1999 and March 29, 1998, respectively.
Borrowings under these lines of credit are at a variable
interest rate based on short-term market interest rates. The
Company may convert up to $50,000,000 of the line of credit
expiring March 31, 1999, into either a five or seven year term
loan, at the bank's variable prime rate.
4. The Internal Revenue Service has examined the Company's
consolidated 1993 and 1994 federal income tax returns and has
rendered an initial report and assessment as a result of the
examination. The Company has appealed the findings of the
report. Substantially all of the components of the assessment,
which totals approximately $1.9 million, involve the timing of
deductions, not the disallowance of deductions. These
components, which involve the timing of deductions for
depreciation, inventory shrinkage, medical expenses and costs
capitalized into inventory under the Uniform Capitalization
rules, will therefore have no effect on recorded financial
statement tax expense. Although the ultimate outcome of this
matter cannot presently be determined, the Company believes
that any impact on its financial statements will not be
material, and no loss contingencies have been recorded.
<PAGE>
5. The Company's non-qualified stock option plan provides for the
granting of options to key employees to purchase shares of
common stock at prices not less than the fair market value on
the date of grant. Options expire five years from the date of
grant and are exercisable to the extent of 40% after the second
anniversary of the grant and an additional 30% at each of the
following two anniversary dates on a cumulative basis.
<TABLE>
The following is a summary of transactions under the plan
during the six months ended February 28, 1997 and February 29,
1996.
<CAPTION>
Six Months Ended
February 28, 1997 February 29, 1996
Number of Number of
shares Option price shares Option price
under option per share under option per share
<S> <C> <C> <C> <C>
Outstanding-beginning 1,002,300 $10.25-$21.25 1,114,960 $ 5.88-$21.25
Granted 459,400 $16.75-$22.50 17,150 $11.50-$18.75
Exercised (283,245) $10.50-$21.25 (84,020) $ 5.88-$17.25
Cancelled (27,200) (40,790)
Outstanding-ending 1,151,255 $10.25-$22.50 1,007,300 $10.00-$21.25
At February 28, 1997, options to purchase 344,539 shares were exercisable
at prices ranging from $10.25 to $21.25 per share, and at February 29,
l996, options to purchase 446,205 shares were exercisable at prices
ranging from $10.00 to $21.25 per share.
</TABLE>
6. Net income per common share is based on the weighted average number
of shares outstanding during each reporting period. Exercise of
outstanding stock options would have no material dilutive effect
on net income per common share.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
The Company's working capital increased by $15.5 million,
from $273.7 million at August 31, 1996 to $289.2 million at
February 28, 1997. The principal source of new working capital
continued to be the reinvestment of a significant portion of the
earnings of the Company. The Company had $38.1 million of cash
and cash equivalents and no short-term borrowings at February 28,
1997. This compares to $18.8 million of cash and cash
equivalents and $4.4 million of short-term borrowings at August
31, 1996. During the six months ended February 28, 1997, the
increase in existing store sales, as described in "Net sales"
below, coupled with improved inventory turnover compared with the
six months ended February 29, 1996, produced $60.2 million cash
flow from operating activities for the first half of fiscal 1997
compared with $22.2 million cash flow from operating activities
in the first half of fiscal 1996.
Capital expenditures for the six months ended February 28,
1997, were approximately $30 million, and are currently planned
to be approximately $75 million for fiscal 1997. The majority of
capital expenditures for fiscal 1997 is related to the Company's
retail store expansion program, existing store remodeling and
refurbishing, and to the construction of a new full-service
distribution center. In fiscal 1997, the Company plans to open
approximately 235 stores and close approximately 50 stores for a
net addition of approximately 185 stores, compared with the
opening of 223 stores and closing of 58 stores for a net addition
of 165 stores in fiscal 1996. The Company also currently plans
to expand or relocate approximately 100 stores in fiscal 1997,
compared with the expansion or relocation of 34 stores in fiscal
1996. All stores opening in fiscal 1996 and 1997 have a new
interior layout featuring wider aisles, lower fixtures and
updated signage. In the first six months of fiscal 1997, the
Company opened 94 stores, closed 38 stores and expanded or
relocated 44 stores. In addition, approximately 325 stores were
remodeled or refurbished during the first six months of fiscal
1997 with some or all of the features of the new interior layout.
The Company will continue to evaluate the results of the
remodeling and refurbishing program to determine longer-term
plans. The Company occupies most of its stores under operating
<PAGE>
leases. Store opening, closing, remodeling and refurbishing
plans, as well as overall capital expenditure plans, are
continuously reviewed and are subject to change depending on
developments in the economy and other factors.
RESULTS OF OPERATIONS
NET SALES
Net sales increased 18.3% in the quarter ended February 28,
1997, as compared with the quarter ended February 29, 1996, and
increased 16.7% in the six month period ended February 28, 1997,
as compared with the six month period ended February 29, 1996.
The increases were attributable to increased sales in existing
stores and sales from new stores opened as part of the Company's
store expansion program. Sales in existing stores increased
11.5% in the quarter ended February 28, 1997, as compared with
the same period ended February 29, 1996, with sales of hardlines
merchandise increasing approximately 15.1% and sales of softlines
merchandise increasing approximately 4.6%. Sales in existing
stores increased 10.0% in the six month period ended February 28,
1997 as compared to the six month period ended February 29, 1996,
with sales of hardlines merchandise increasing approximately
13.9% and sales of softlines merchandise increasing approximately
3.0%. Hardlines as a percentage of total sales increased to
approximately 67% in the second quarter of fiscal 1997 compared
to approximately 65% in the second quarter of fiscal 1996, and
increased to approximately 66% in the first six months of fiscal
1997 compared to approximately 64% in the first six months of
fiscal 1996. Customers continue to respond favorably to the
Company's everyday low price strategy in hardlines, and the
Company is continuing its efforts to improve sales of softlines
by placing more emphasis on lower priced basic apparel and on
closeout and other opportunistic purchases of apparel that offer
good values to its low and low-middle income customer base.
Hardlines merchandise includes primarily household chemical and
paper products, health and beauty aids, candy and snack food,
electronics, housewares and giftware, toys, hardware and
automotive supplies. Softlines merchandise includes men's,
women's, boy's, girl's and infant's clothing, shoes, and domestic
items such as blankets, sheets and towels.
<PAGE>
The average number of stores open during the first six
months of fiscal 1997 was 6.4% more than during the six months of
fiscal 1996. The Company had 2,637 stores in operation at
February 28, 1997, as compared with 2,488 stores in operation at
February 29, 1996, representing an increase of approximately
6.0%.
COST OF SALES
Cost of sales increased 18.7% in the quarter ended
February 28, 1997, as compared with the quarter ended
February 29, 1996, and increased 17.5% in the six months ended
February 28, 1997, as compared to the six months ended
February 29, 1996. These increases primarily reflected the
additional sales volume between years. Cost of sales, as a
percentage of net sales, was 69.0% in the quarter ended February
28, 1997, compared with 68.8% in the quarter ended February 29,
1996, and was 67.6% in the six months ended February 28, 1997,
compared with 67.2% in the six months ended February 29, 1996.
The increases in the cost of sales percentage for the quarter and
six months ended February 28, 1997 were due in part to the
strength of hardlines sales, which typically carry a lower margin
than softlines. Additionally, the increase in the cost of sales
percentage for the six month period was due in part to additional
markdowns taken during the first quarter of fiscal 1997 on
selected electronics and softlines merchandise that did not
achieve expected levels of sales. The cost of sales percentages
also are affected by other changes in the effectiveness of the
merchandise procurement programs and product mix, and by
merchandise shrinkage losses and freight costs.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses increased 15.6%
in the quarter ended February 28, 1997, as compared with the
quarter ended February 29, 1996, and increased 13.4% in the six
months ended February 28, 1997, as compared with the six months
ended February 29, 1996. The increases in these expenses were
due primarily to additional costs arising from the continued
growth in the number of stores in operation. Selling, general
<PAGE>
and administrative expenses, as a percentage of net sales, were
24.8% in the quarter ended February 28, 1997, as compared with
25.4% in the quarter ended February 29, 1996, and were 26.2% in
the six months ended February 28, 1997, as compared with 26.9% in
the six months ended February 29, 1996. The decreases in the
percentages for the quarter and six months ended February 28,
1997 were due primarily to the leverage provided by the increases
in existing store sales. The Company incurred additional
advertising expenditures during the second quarter ended
February 28, 1997, which were offset by less advertising
expenditures in the first quarter ended November 30, 1996, as a
result of shifting the distribution of one advertising circular
from the first quarter to the second quarter of fiscal 1997
compared to fiscal 1996. In addition, the increase in the
Federal minimum wage on October 1, 1996, increased store labor
costs during the six months ended February 28, 1997. The Company
estimates that during fiscal 1997 store labor costs will increase
approximately $3.6 million due to this minimum wage increase.
PROVISION FOR TAXES ON INCOME
The provision for taxes on income for the quarter ended
February 28, 1997 increased 23.8% as compared with the quarter
ended February 29, 1996, and increased 21.7% in the six months
ended February 28, 1997, as compared with the six months ended
February 29, 1996. The variance between the periods is primarily
due to the increase in income before the provision for income
taxes. The effective tax rate was 38.5% for the quarter ended
February 28, 1997, as compared to 38.8% for the quarter ended
February 29, 1996, and was 38.6% for the six months ended
February 28, 1997, and as compared to 38.8% for the six months
ended February 29, 1996. The decreases in the percentages for
the quarter and six months ended February 28, 1997 were due
primarily to the implementation of the federal Work Opportunity
Tax Credit program.
<PAGE>
FORWARD-LOOKING STATEMENTS
Certain statements contained herein and elsewhere in this
Form 10-Q which are not historical facts are forward-looking
statements made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. These forward-
looking statements address activities or events which the Company
expects will or may occur in the future, such as future capital
expenditures, store openings, closings, remodels, refurbishing,
expansions and relocations, additional distribution facilities,
and other aspects of the Company's future business and
operations. The Company cautions that a number of important
factors could cause actual results to differ materially from
those expressed in any forward-looking statements, whether
written or oral, made by or on behalf of the Company. Such
factors include, but are not limited to, competitive pricing
pressures, general economic conditions, inflation, merchandise
supply constraints, availability of real estate, construction and
start-up of a new distribution center, and the effects of
legislation on wage levels and entitlement programs.
Consequently, all of the forward-looking statements made are
qualified by these and other factors, risks and uncertainties.
<PAGE>
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
At the Annual Meeting of Stockholders of the Company held
January 16, 1997, stockholders voted to:
(a) Elect to the Board of Directors of the Company the
six nominees named in the Proxy Statement for the
Annual Meeting as follows:
<TABLE>
<CAPTION>
Shares Shares Witholding
Nominee Voting For Authority to Vote
<S> <C> <C>
Leon Levine 49,613,357 282,105
John D. Reier 49,616,385 279,077
George R. Mahoney, Jr. 49,615,885 279,577
Mark R. Bernstein 49,615,147 280,315
James H. Hance, Jr. 49,616,457 279,005
James G. Martin 49,127,545 767,917
</TABLE>
(b) Approve the proposal to amend the 1989 Non-Qualified Stock
Option Plan, with 48,332,753 shares voted for, 321,101
against and 1,241,608 shares abstaining.
(c) Approve the proposal to approve the Incentive Profit Sharing
Plan, with 48,301,641 shares voted for, 348,246 shares
against and 1,245,575 shares abstaining.
(d) Ratify the action of the Board of Directors in selecting
Price Waterhouse as independent accountants to audit the
consolidated financial statements of the company and its
subsidiaries for the year ending August 31, 1997, with
49,799,974 shares voted for, 30,092 shares against and
65,396 shares abstaining.
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits filed herewith:
*10 (i) Employment Agreement dated December 17, 1996,
between the Company and R. James Kelly
*10 (ii) Incentive Profit Sharing Plan, amended as of
January 16, 1997
*10 (iii) 1989 Non-Qualified Stock Option Plan,
amended as of January 16, 1997
11 Statements Re: Computations of Per Share Earnings
27 Financial Data Schedule
(b) Reports on Form 8-K - None
* Exhibit represents a management contract or compensatory
plan.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FAMILY DOLLAR STORES, INC.
(Registrant)
Date: April 4, 1997 R. JAMES KELLY
R. JAMES KELLY
Vice Chairman
Date: April 4, 1997 C. MARTIN SOWERS
C. MARTIN SOWERS
Senior Vice President-Finance
Principal Financial Officer
<TABLE>
<CAPTION>
EXHIBIT 11
PAGE 1 of 2
FAMILY DOLLAR STORES, INC.
STATEMENT RE COMPUTATIONS OF PER SHARE EARNINGS
THREE MONTHS ENDED THREE MONTHS ENDED
FEBRUARY 28, 1997 FEBRUARY 29, 1996
PRIMARY FULLY DILUTED PRIMARY FULLY DILUTED
AS PRESENTED
<S> <C> <C> <C> <C>
AVERAGE SHARES OUTSTANDING FOR
THE THREE MONTHS ENDED 57,042,367 57,042,367 56,815,800 56,815,800
NET INCOME $20,001,714 $20,001,714 $15,936,744 $15,936,744
EARNINGS PER SHARE $ .35 $ .35 $ .28 $ .28
PRO FORMA DILUTION IMPACT OF COMMON STOCK EQUIVALENTS
ADDITIONAL WEIGHTED AVERAGE
SHARES FROM ASSUMED EXERCISE AT
THE BEGINNING OF THE YEAR OF
DILUTIVE STOCK OPTIONS 1,096,702 1,226,835 413,897 414,230
WEIGHTED AVERAGE SHARES ASSUMED
REPURCHASED FROM ASSUMED PROCEEDS
OF EXERCISES USING TREASURY STOCK
METHOD (AVERAGE MARKET PRICE FOR
PRIMARY AND, IF GREATER, ENDING
MARKET PRICE FOR FULLY DILUTED) (937,513) (997,561) (392,583) (383,125)
<PAGE>
<CAPTION>
<S> <C> <C> <C> <C>
NET PRO FORMA COMMON STOCK
EQUIVALENT INCREMENTAL SHARES 159,189 229,274 21,314 31,105
PERCENTAGE DILUTION FROM PRO FORMA
COMMON STOCK EQUIVALENT
INCREMENTAL SHARES 0.28% 0.40% 0.04% 0.05%
TOTAL COMMON STOCK AND COMMON
STOCK EQUIVALENTS 57,201,556 57,271,641 56,837,114 56,846,905
NET INCOME $20,001,714 $20,001,714 $15,936,744 $15,936,744
PRO FORMA EARNINGS PER SHARE (INCLUDING
DILUTIVE COMMON STOCK EQUIVALENTS) $ .35 $ .35 $ .28 $ .28
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 11
PAGE 2 OF 2
FAMILY DOLLAR STORES, INC.
STATEMENT RE COMPUTATIONS OF PER SHARE EARNINGS
SIX MONTHS ENDED SIX MONTHS ENDED
AS PRESENTED FEBRUARY 28, 1997 FEBRUARY 29, 1996
PRIMARY FULLY DILUTED PRIMARY FULLY DILUTED
<S> <C> <C> <C> <C>
AVERAGE SHARES OUTSTANDING FOR THE
SIX MONTHS ENDED 56,949,806 56,949,806 56,791,251 56,791,251
NET INCOME $37,361,536 $37,361,536 $30,444,513 $30,444,513
EARNINGS PER SHARE $ .66 $ .66 $ .54 $ .54
PRO FORMA DILUTION IMPACT OF COMMON STOCK EQUIVALENTS
ADDITIONAL WEIGHTED AVERAGE SHARES FROM
ASSUMED EXERCISE AT THE BEGINNING
OF THE YEAR OF DILUTIVE STOCK OPTIONS 1,051,833 1,189,133 434,447 434,447
WEIGHTED AVERAGE SHARES ASSUMED REPURCHASED FROM
ASSUMED PROCEEDS OF EXERCISES USING TREASURY STOCK
METHOD (AVERAGE MARKET PRICE FOR PRIMARY AND, IF
GREATER, ENDING MARKET PRICE FOR FULLY DILULTED) (930,262) (954,361) (374,206) (374,099)
NET PRO FORMA COMMON STOCK
EQUIVALENT INCREMENTAL SHARES 121,571 234,772 60,241 60,348
PERCENTAGE DILUTION FROM PRO FORMA COMMON
STOCK EQUIVALENT INCREMENTAL SHARES 0.21% 0.41% 0.11% 0.11%
TOTAL COMMON STOCK AND COMMON
STOCK EQUIVALENTS 57,071,377 57,184,578 56,851,492 56,851,599
NET INCOME $37,361,536 $37,361,536 $30,444,513 $30,444,513
PRO FORMA EARNINGS PER SHARE (INCLUDING DILUTIVE
COMMON STOCK EQUIVALENTS) $ .66 $ .65 $ .54 $ .54
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED CONDENSED FINANCIAL STATEMENTS OF FAMILY DOLLAR STORES, INC.
AND SUBSIDIARIES FOR THE PERIOD ENDED FEBRUARY 28, 1997, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000034408
<NAME> FAMILY DOLLAR STORES, INC.
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-START> SEP-01-1996
<PERIOD-END> FEB-28-1997
<EXCHANGE-RATE> 1
<CASH> 38,141,410
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 455,517,403
<CURRENT-ASSETS> 523,595,181
<PP&E> 321,828,116
<DEPRECIATION> 122,611,749
<TOTAL-ASSETS> 726,541,618
<CURRENT-LIABILITIES> 234,446,001
<BONDS> 0
0
0
<COMMON> 6,057,393
<OTHER-SE> 468,152,899
<TOTAL-LIABILITY-AND-EQUITY> 726,541,618
<SALES> 985,141,711
<TOTAL-REVENUES> 985,141,711
<CGS> 666,395,716
<TOTAL-COSTS> 924,287,175
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 60,854,536
<INCOME-TAX> 23,493,000
<INCOME-CONTINUING> 37,361,536
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 37,361,536
<EPS-PRIMARY> .66
<EPS-DILUTED> .65
</TABLE>
EXHIBIT 10(i)
STATE OF NORTH CAROLINA
EMPLOYMENT AGREEMENT
COUNTY OF MECKLENBURG
THIS AGREEMENT, made and entered into effective the 17th
day of December 1996, by and between FAMILY DOLLAR STORES, INC.,
a Delaware corporation (hereinafter referred to as the
"Company"); and R. James Kelly (hereinafter referred to as the
"Employee");
W I T N E S S E T H:
WHEREAS, the Company desires to employ the Employee and the
Employee desires to be employed by the Company;
NOW, THEREFORE, in consideration of the mutual covenants
herein contained, the Company and the Employee agree as follows:
1. DEFINITIONS. When used in this Agreement, these words
shall be defined as follows:
1.01 "Affiliate" - Any corporation directly or
indirectly controlling, controlled by or under the common control
of or with the Company.
1.02. "Group" - The Company and all Affiliates.
1.03. "Confidential Information" - Any information
(including, without limitation, any method of operation, source
of supply, organizational details, personnel information,
information regarding real estate activities, including
landlords, prospective landlords and lease data, business
secret, or any formula, pattern, patent, device, plan, process
or compilation of information) which (a) is, or is designed to
be, used in the business of any member of the Group, (b) is
private or confidential in that it is not generally known or
available to the public, and (c) gives any member of the Group
an opportunity to obtain an advantage over competitors who do
not know or use it.
1.04. "Present Territory" - All counties, towns and
cities in North Carolina, Virginia, Georgia, South Carolina, West
Virginia, Maryland, Pennsylvania, Kentucky, Tennessee,
Mississippi, Alabama, Florida, Louisiana, Arkansas, Ohio, Texas,
Delaware, Indiana, New Jersey, Missouri, Oklahoma, Illinois,
Michigan, Kansas, Iowa, New York, Wisconsin, Massachusetts,
Connecticut, Rhode Island, Vermont, New Hampshire, Minnesota,
Nebraska, South Dakota, Colorado, New Mexico and Maine.
1.05. "Future Territory" - All counties, towns and
cities in States other than those listed in the definition of
Present Territory in which the Company does business while the
Employee is employed by the Company.
<PAGE>
1.06. "Competitive Company" - A corporation,
partnership, proprietorship or any other legal entity operating
discount retail stores in the Present Territory or the Future
Territory, or in any portion thereof, the majority of which
stores each have 50,000 square feet or less of total space,
including non-selling areas, and that sell or offer for sale
merchandise similar or identical to merchandise sold by the
Group.
1.07. "Cause" -
(a) Willful failure of the Employee to comply
with reasonable written directives of the Chairman of the Board
or Executive Committee or Board of Directors of the Company.
(b) Chronic absenteeism that prevents the
Employee from being able to actively and regularly perform his
duties and responsibilities under this Agreement, including
absenteeism due to medical related reasons but not resulting from
Medical Disability.
(c) Willful misconduct or gross negligence.
(d) Willful violation of substantive Company
policies, practices or procedures.
(e) Indictment of or conviction of the
Employee of a crime involving an act of moral turpitude.
(f) Should the Employee become an alcoholic or
become addicted to habit-forming drugs.
1.08. "Medical Disability" - An illness or medical
condition preventing the Employee from being able to actively and
regularly perform his duties and responsibilities under this
Agreement and that qualifies the Employee for benefits under the
Company's Long Term Disability Insurance Plan.
2. EMPLOYMENT. The Employee shall be employed by the
Company and any Affiliate in the capacity provided for in
Paragraph 3 for the period commencing February 3, 1997, or sooner
if it is reasonably practicable for the Employee to report to
work prior thereto (the "Commencement Date"), and ending on
January 31, 2000, or upon the termination of this Agreement as
provided in Paragraph 6.
3. DUTIES AND RESPONSIBILITIES. The Employee shall be
employed as Vice Chairman and Chief Financial Officer of the
Company and shall perform such reasonable duties and
responsibilities as the Chairman of the Board of the Company
or Board of Directors of the Company or the Executive Committee
of the Board of Directors of the Company may, from time to time,
assign to the Employee. The Employee agrees to accept this
employment and to devote his full time and attention and his best
efforts, ability and fidelity to the performance of the duties
attaching to such employment. In addition, the Employee shall
serve as a director and officer of the Company and any
<PAGE>
corporation in the Group, if appropriately elected. During
the period of his employment, the Employee shall not, for
remuneration or profit, directly or indirectly, render any
service to, or undertake any employment for, any other person,
firm or corporation, whether in an advisory or consulting
capacity or otherwise, without first obtaining the written
consent of the Company.
4. COVENANT NOT TO COMPETE AND DISCLOSE CONFIDENTIAL
INFORMATION.
4.01. The Employee will not, directly or indirectly,
for a period of one (1) year from the date of the termination of
his employment with the Company, whether such termination is
voluntary or involuntary or due to the expiration of the term of
this Agreement, (a) engage in competition with the Company, any
Affiliates, or their successors or assigns, for or on behalf of
any Competitive Company, or (b) provide information to, or
travel, canvass, advertise, solicit or sell for, or acquire an
interest in, become employed by, act as agent for, or in any
manner assist, any Competitive Company; provided that the
Employee may become employed by or act as agent or consultant
for, in any capacity, a Competitive Company when his duties and
responsibilities with the Competitive Company do not, directly or
indirectly, involve any business activity in the Present
Territory or the Future Territory; or (c) directly or indirectly
approach, solicit, offer employment to or in any manner induce or
seek to induce any employee of the Group to become employed by a
Competitive Company or to otherwise interfere with the Company's
relationship with any employee in the Group.
The foregoing provisions, however, shall not
prohibit the Employee from making investments in any securities
listed on the New York or American Stock Exchanges or actively
traded in the over-the-counter market in amounts not exceeding 1%
of any single class of such securities outstanding, nor prohibit
the Employee from making investments of any nature in any
securities of the Company.
4.02. The Employee acknowledges that the signing of
this Agreement is a condition of employment and understands that
in the performance of his services hereunder, he may have access
to and obtain knowledge of Confidential Information (as
hereinbefore defined) relating to the business and activities of
the Group. The Employee shall not, without the written consent
of the Company, either during the period of his employment or
thereafter, except to the extent required to be disclosed by law
or judicial action (a) use or disclose any Confidential
Information outside the Group, (b) publish any article with
respect thereto, or (c) except in the performance of his services
hereunder, remove or aid in the removal from the premises of the
<PAGE>
members of the Group any such Confidential Information or any
property or material which relates thereto.
5. COMPENSATION.
5.01. In consideration of the services to be rendered
by the Employee pursuant to this Agreement, the Company shall
pay, or cause to be paid, to the Employee a weekly base salary
from the Commencement Date to August 31, 1998 of $8,653.85
($450,000.00 per annum). For subsequent periods during the term
of this Agreement, the Compensation Committee of the Board of
Directors annually shall review and establish the weekly base
salary, which salary is subject to ratification by the Board of
Directors; provided that such weekly base salary shall not be
reduced below $8,653.85.
The salary shall be payable at such intervals
in conformity with the Company's prevailing practice as such
practice shall be established or modified from time to time.
5.02. In addition, during the term of this Agreement
the Employee shall be entitled to:
(a) Participate in the Company's Target Bonus
Plan, as it may be amended or modified in any respect, including
achievement of established goals, as Vice Chairman. The Target
Bonus Plan generally will give the Employee the opportunity to
earn a bonus of up to fifty (50%) percent of the Employee's base
salary actually received for a fiscal year, subject to the
Company's achievement of certain financial goals, the Employee's
performance, and all terms and conditions of the Target Bonus
Plan as in effect for said fiscal year; provided that the amount
of bonus paid may not be increased by the annual individual
performance rating of the Employee by the Chairman of the Board.
The Employee acknowledges that he has received a copy of the form
of the Target Bonus Plan and Bonus Conditions for the fiscal year
commencing September 1, 1996, and is familiar with the terms and
conditions thereof. Nothing contained herein shall limit the
Company's right to alter, amend or terminate the Target Bonus
Plan at any time for any reason. The Employee further
acknowledges that, as provided in the Target Bonus Plan, in the
event the Employee is not employed by the Company, for whatever
reason, at the time the bonus for the fiscal year is customarily
paid in December following the end of the fiscal year, the
Employee will not be entitled to receive the bonus.
(b) Be granted an option to purchase one
hundred fifty thousand (150,000) shares of the Common Stock of
the Company under and in accordance with the Company's 1989
Non-Qualified Stock Option Plan and the standard form of Option
Agreement used thereunder. The Employee represents that the
<PAGE>
Employee has received copies of said Plan and form of Option
Agreement and is familiar with the terms of said Plan and the
standard form of Option Agreement used thereunder. Such stock
option shall be granted within ten (10) days after the
Commencement Date on a date to be determined by the Stock Option
Committee of the Board of Directors of the Company. In addition,
the Chairman agrees that the Chairman will recommend to the Stock
Option Committee that the Stock Option Committee grant an option
to the Employee within ten (10) days after February 1, 1998, to
purchase one hundred thousand (100,000) shares of the Common
Stock of the Company under and in accordance with said Plan and
the standard form of Option Agreement used thereunder. The
Employee acknowledges that by the terms of said Plan, no options
may be granted under said Plan after November 30, 1998. However,
if the Company adopts and the Stockholders approve (to the extent
Stockholders' approval is required) another Stock Option Plan
(the "New Plan") or an extension of the 1989 Non-Qualified Stock
Option Plan that is effective in February 1999, the Chairman
agrees that the Chairman will recommend to the Stock Option
Committee that the Stock Option Committee grant an option to the
Employee within ten (10) days after February 1, 1999, to purchase
fifty thousand (50,000) shares of the Common Stock of the Company
under and in accordance with the New Plan or the extended
existing Plan. The Employee acknowledges that under the 1989
Non-Qualified Stock Option Plan and under the New Plan, he will
have to be employed by the Company at the date of the grant of an
option in order to be entitled to the grant and that with limited
exceptions as set forth in the 1989 Non-Qualified Stock Option
Plan, he will have to be employed by the Company on the date of
the exercise of an option in order to be entitled to exercise an
option.
(c) Take twenty days (exclusive of Saturdays,
Sundays and paid Company holidays) of vacation during the period
between the Commencement Date and January 31, 1998, and take
twenty days (exclusive of Saturdays, Sundays and paid Company
holidays) of vacation during each succeeding twelve-month period
during the term of this Agreement. Vacation time will accrue
ratably during the course of said periods and cannot be
accumulated from year to year.
(d) Additional benefits and/or compensation
in such form and in such manner and at such times as the
Compensation Committee of the Board of Directors of the Company,
in the exercise of its absolute discretion, shall determine. It
is understood and agreed that any additional salary, benefits and
compensation shall only be paid by the Company upon the approval
of the Compensation Committee of the Board of Directors and not
by any officer or any other person acting on behalf of the
Company.
<PAGE>
(e) All insurance and other fringe benefits
afforded to the Company employees pursuant to any plan adopted by
the Company in accordance with the terms of the plan and the
Employee's position in the Company.
6. TERMINATION.
6.01. It is agreed that either party may terminate
this Agreement for any reason at any time upon five (5) days'
prior written notice to the other party, whereupon (except as
provided in Paragraphs 4, 6, 7 and 8), this Agreement shall no
longer be of any force and effect (the expiration date of this
notice period is herein called the "Termination Date"). If
either party terminates this Agreement, the Company may relieve
the Employee of all duties and responsibilities effective on the
date of the notice. The Company may also terminate this
Agreement should the Employee experience a Medical Disability,
which termination shall be effective upon the Company's giving
written notice to the Employee following the occurrence of the
Medical Disability. Upon the death of the Employee, the Company
shall pay to his widow or his estate if his widow predeceases him
only such amount as was due and payable to the Employee at the
time of his death. The Company may terminate this Agreement at
any time, without notice, for Cause.
6.02. Upon termination of this Agreement by the
Company, other than for Cause, except for the provisions of
Paragraph 4, the Employee's employment under the terms of this
Agreement and all other agreements and contracts between the
Employee, the Company and the Company's Affiliate and subsidiary
corporations, shall be terminated effective on the Termination
Date. Should the Company terminate this Agreement prior to
January 31, 2000, for reasons other than for Cause or Medical
Disability, it shall pay to the Employee the balance of the base
salary set forth in, or established by the Compensation Committee
in accordance with, Paragraph 5.01 above due for the period from
the Termination Date through January 31, 2000 (which shall
constitute payment in full of the compensation due to the
Employee hereunder). Any such payments shall be made in equal
monthly installments with the first such installment due and
payable not later than thirty (30) days after the Termination
Date. In the event this Agreement is not terminated by the
Company or the Employee for any reason prior to August 31, 1999,
and the Company and the Employee do not agree in writing before
August 31, 1999, to extend the term of this Agreement beyond
January 31, 2000, or to enter into a new agreement to extend the
employment relationship beyond January 31, 2000, this Agreement
shall terminate automatically on August 31, 1999, which shall be
the Termination Date, and the Company shall pay to the Employee
six (6) months of the base salary established by the Compensation
<PAGE>
Committee of the Board of Directors and in effect on August 31,
1999 (which shall constitute payment in full of the compensation
due to the Employee hereunder). Any such payments shall be made
in six (6) equal monthly installments with the first installment
due and payable not later than thirty (30) days after the
Termination Date. Payments made by the Company to the Employee
under this Paragraph 6.02 are herein called "Termination
Compensation." In the event the Employee accepts or begins other
employment as an employee, consultant or in any other capacity
prior to the date on which the last monthly installment of
Termination Compensation is due and payable, the monthly payments
of any unpaid balance of the Termination Compensation as of the
date of such new employment shall be (i) eliminated if the
monthly base salary and all other monthly remuneration and
compensation from the new employment exceeds the monthly base
salary of the Employee in effect on the date of the notice, or
(ii) reduced to the amount by which the monthly base salary of
the Employee in effect on the date of the notice exceeds the
monthly base salary and all other monthly remuneration and
compensation from the new employment. The Employee agrees to
pursue reasonable, good faith efforts to obtain other employment
in a position suitable to his background and experience.
6.03. On the Termination Date and at the end of the
term of this Agreement, the Employee agrees that the Company, its
Affiliates, and their officers, directors, members of the
Executive Committee, and employees, and their successors, heirs
and assigns, shall be fully released and discharged from any and
all expenses, claims, considerations, liabilities, obligations
and causes of action of every kind and nature arising out of or
in any manner related to this Agreement, and any and all previous
agreements, contracts and other rights, claims and obligations
between the parties, to the Employee's employment with the
Company, its Affiliate and subsidiary corporations, and to the
Employee's association or relationship with the Company and its
Affiliates, including but not limited to, all compensations,
salaries, bonuses (including Target Bonus Plan bonuses and
guarantees of bonuses thereunder), director's pay, vacation pay,
stock options (except as otherwise provided in Paragraph 7),
stockholder's claims or suits, loans and other similar
liabilities or related claims; provided, that nothing herein
contained shall qualify or in any manner restrict the right of
the Employee to realize his Termination Compensation, if any, and
his interests in any of the fringe benefits (such as insurance,
401(k) plan and stock options) of the Company to which he has
become legally entitled.
6.04. On the Termination Date or at the end of
the term of this Agreement, the Employee agrees that he will
resign as an officer, director and member of the Executive
Committee of the Company, its Affiliate and subsidiary
<PAGE>
corporations (if and when elected), and from any other positions,
which resignations shall become effective on the Termination
Date.
6.05. After the Termination Date or the end of the
term of this Agreement, the Employee covenants to render further
advice and assistance to the Company as may be required from time
to time, and to provide all information available to him on
matters handled by and through him while employed by the Company
or of which he has personal knowledge, and by making available to
the Company at reasonable times and circumstances, upon request
by the Company, information pertinent to its operations in his
possession; and, to the extent that it is necessary, to cooperate
with and assist the Company to conclude any matters that are
pending and which may require his assistance; provided, that he
shall be paid reasonable compensation by the Company in the event
he is required to expend time in the performance of such
services; and provided further, that the Employee may perform
such services in a manner that does not unreasonably interfere
with other employment obtained by the Employee. The Employee
shall be reimbursed for any expenses incurred by him in the
performance of the covenants herein set forth in this Paragraph
6.05, provided the Company approves such expenses in writing in
advance.
6.06. After the Termination Date or the end of the
term of this Agreement, the Employee agrees that he will not
discuss his employment and resignation or termination or
Termination Compensation, if any, with any representatives of the
media, either directly or indirectly, without the written consent
and approval of the Company.
7. EXERCISE OF STOCK OPTIONS. Notwithstanding any other
provision of this Agreement and the 1989 Non-Qualified Stock
Option Plan and the New Plan and form of Option Agreement, if the
Company (a) terminates this Agreement prior to the end of the
term of this Agreement on January 31, 2000, for reasons other
than for Cause or Medical Disability or (b) terminates the
Employee's employment after the end of the term of this Agreement
and prior to February 28, 2001, (i) for reasons other than for
Cause or Medical Disability, or (ii) because the Employee will
not agree to the extension of the term of this Agreement for the
period through February 28, 2001, on the same terms and
conditions of this Agreement, including a weekly base salary of
not less than $8,653.85, but without the grant of any options,
the Employee shall be considered an employee of the Company
through February 28, 2001, for the sole and limited purpose of
permitting the Employee to exercise said option for one hundred
fifty thousand (150,000) shares as described in Paragraph 5.02(b)
above and to exercise any portion of the options for one hundred
thousand (100,000) shares and fifty thousand (50,000) shares
<PAGE>
exercisable by the Employee in accordance with the terms of the
1989 Non-Qualified Stock Option Plan and the New Plan if said
options have been granted to the Employee as referred to in
Paragraph 5.02(b) above. Except as expressly provided in this
Agreement, after the Termination Date or the end of the term of
this Agreement the Employee shall not be entitled to any
compensation or benefits and shall not be considered an employee
other than for the limited purpose of permitting the Employee to
exercise said option or options.
8. TARGET BONUS PLAN. Notwithstanding any other
provision of this Agreement, if the Company terminates this
Agreement prior to the end of the term of this Agreement on
January 31, 2000, for reasons other than for Cause or Medical
Disability, the Employee shall be entitled to receive as a
severance payment an amount equal to the pro rata share of the
bonus, if any, under and subject to the terms and conditions of
the Target Bonus Plan referred to in Section 5.02(a) based on
fifty (50%) percent of the Employee's base salary actually
received for the period from the beginning of the fiscal year in
which the Company so terminates this Agreement through the
Termination Date. This payment is equal to the amount, if any,
the Employee would have received in December following the end of
the fiscal year if the Target Bonus Plan did not have a
requirement that the Employee be employed by the Company at the
time the bonus is customarily paid. Such payment shall be made
to the Employee on December 15 following the end of the fiscal
year in which the Company so terminated this Agreement.
9. SPECIAL PROVISIONS. This Agreement shall inure to the
benefit of any successor to or assignee of the Company, and the
Employee specifically agrees on demand to execute any and all
necessary documents in connection with the performance of this
Agreement. No waiver by either party of any breach by the other
of any provision hereof shall be deemed to be a waiver of any
later or other breach thereof or as a waiver of any such or other
provision of this Agreement. If any provision of this Agreement
shall be declared invalid or unenforceable as a matter of law,
such invalidity or unenforceability shall not affect the validity
or enforceability of any other provision of this Agreement or of
the remainder of this Agreement as a whole.
This Agreement sets forth all of the terms of the
understanding between the parties with reference to the subject
matter set forth herein and may not be waived, changed,
discharged or terminated orally or by any course of dealing
between the parties, but only by an instrument in writing signed
by the party against whom any waiver, change, discharge or
termination is sought.
<PAGE>
10. NORTH CAROLINA LAW APPLIES. This Agreement shall be
governed by and construed in accordance with the laws of the
State of North Carolina.
11. NOTICES. Any notice or other communications to be
given hereunder shall be deemed to have been given or delivered
when delivered by hand to the individuals named below or three
(3) days after deposit in United States mail, registered or
certified, with proper postage and registration or certification
fees prepaid, addressed to the parties as follows (or to such
other address as one party shall give the other in the manner
provided herein):
Family Dollar Stores, Inc. Post Office Box 1017
Charlotte, NC 28201-1017
Attention: Mr. Leon Levine
With copy to: George R. Mahoney, Jr.
Family Dollar Stores, Inc.
Post Office Box 1017
Charlotte, NC 28201-1017
R. James Kelly: 3400 Royden Place
Charlotte, NC 28226
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement in triplicate, all as of the day and year first
above written.
FAMILY DOLLAR STORES, INC.
By LEON LEVINE
LEON LEVINE
Attest: Chairman of the Board
GEORGE R. MAHONEY, JR.
GEORGE R. MAHONEY, JR.
Secretary
(Corporate Seal)
R. JAMES KELLY (SEAL)
R. JAMES KELLY
Witness:
VIRGINIA L. KELLY
VIRGINIA L. KELLY
EXHIBIT 10(ii)
Amended as of
January 16, 1997
FAMILY DOLLAR STORES, INC.
Incentive Profit Sharing Plan
ARTICLE I.
Purpose of Plan.
Section 1.1. Family Dollar Stores, Inc. has prepared this
Plan in order to compensate and reward executive and supervisory
personnel for their share in the growth and success of the
Company and in order to retain and attract persons of competence.
The Plan provides a means of sharing certain incentive
compensation dependent on profits of the Company and its
subsidiaries and supersedes the practice of prior years of making
bonus payments to executive and supervisory personnel following
the Christmas season.
ARTICLE II.
Determination of Incentive Compensation
and Participants.
Section 2.1. In respect of each fiscal year of the Company,
the Compensation Committee of the Board of Directors (the
"Committee") and the Board of Directors may after the end of each
fiscal year appropriate as additional compensation for the
preceding fiscal year to be paid to participants under the Plan
an amount up to but not in excess of the Incentive Compensation
Net Earnings, as hereinafter defined, of the preceding fiscal
year as the Committee and the Board of Directors, in their
discretion, shall determine.
Section 2.2. The term "Incentive Compensation Net Earnings"
shall consist of an amount equal to five percent (5%) of the net
profit of the Company and its subsidiaries computed on a
consolidated basis determined in accordance with generally
accepted accounting principles, provided that, in any event, such
net profit shall be determined before any deduction for federal
or state taxes based on income and before any deduction in
respect of or provision for appropriations or distributions made
or to be made under this Plan or in respect of or provision for
payments made to officers or other employees under any agreement
or other arrangements based upon or relating to profits of the
Company or any subsidiary.
<PAGE>
Section 2.3. (A) As soon as feasible after the close of
each fiscal year, the fiscal officers of the Company shall
determine the amount of the Incentive Compensation Net Earnings
for the preceding fiscal year in accordance with the provisions
of Section 2.2 hereof, and shall report such determination to the
Committee and to the Board of Directors of the Company and to the
independent public accountants of the Company.
(B) The independent public accountants of the Company shall
review such determination and report to the Committee and to the
Board of Directors their opinion thereof and any corrections
which they deem proper.
(C) Such reports of the fiscal officers of the Company and
of the independent public accountants shall be reviewed by and
subject to the approval of the Committee and the Board of
Directors, which shall authorize the appropriation to be made for
the preceding year as provided in Section 2.1, within the maximum
limit therein provided.
Section 2.4. The Committee and the Board of Directors shall
each year, after consultation with the management, determine the
executive and supervisory personnel of the Company or any
subsidiary of the Company who shall be entitled to participate
under the Plan for the preceding year, and the amount to be paid
to each such person as incentive compensation for such year. The
total compensation to each participant, including salary,
incentive compensation payable pursuant to the Plan, retirement,
and all other benefits, shall not, in the opinion of the
Committee and the Board of Directors, be in excess of the fair
and reasonable compensation for the services of such participant.
All determination by the Committee and the Board of the Incentive
Compensation Net Earnings for any year, the determination of the
persons to participate under the Plan, and the amounts to be paid
to each participant under the Plan, shall be final and conclusive
and binding upon all interested parties. No director shall vote
on his own participation in the Plan. If all of the Incentive
Compensation Net Earnings for a fiscal year shall not be paid as
incentive compensation, the excess shall be credited to the
earnings of such fiscal year.
Section 2.5. There shall be deducted from all payments
under the Plan any taxes required to be withheld by the Federal
or any State or local government and paid over to such government
for the account of such participant.
<PAGE>
ARTICLE III.
General Conditions; Miscellaneous Provisions.
Section 3.1. The Board of Directors may from time to time
amend, suspend or terminate in whole or in part or may reinstate
any or all of the provisions of the Plan, except that (a) no
amendment, suspension or termination may, without the
participant's consent, apply to the payment to any participant
made to the participant prior to the effective date of such
amendment, suspension or termination and (b) no amendment may be
made which will increase the maximum amount which may be
appropriated annually under the Plan without prior approval of
the holders of a majority of the outstanding shares of the common
stock of the Company.
Section 3.2. The selection of any employee for
participation in the Plan in any year shall not give such
participant any right to participate in the Plan in any future
year or to be retained in the employ of the Company or any
subsidiary and the right and power of the Company or any
subsidiary to dismiss or discharge any participant is
specifically reserved.
Section 3.3. No participant shall have any right with
respect to any payment, until such payment or written notice
thereof shall have been delivered to him; nor shall any such
participant or any person claiming under or through him have any
right or interest in this Plan, or in any allotment hereunder,
unless and until all the terms, conditions and provisions of the
Plan that affect such participant have been complied with as
specified herein.
Section 3.4. Nothing in the Plan shall be construed as
preventing the Company or any of its subsidiaries from
establishing other or different plans providing for incentive
compensation for employees.
Section 3.5. The Committee and the Board of Directors may
rely upon any information supplied to them by any officer of the
Company or by the Company's independent public accountants in
connection with the administration of the Plan. The
determination of the Company's independent public accountants as
to the Incentive Compensation Net Earnings of the Company for any
year and any other matters arising under the Plan and referred to
such independent public accountants by the Committee or the Board
for determination shall be final, conclusive and binding on the
Company and on all participants and upon all persons claiming
through or under any participant.
<PAGE>
No member of the Committee or the Board of Directors shall
be liable for any act or action, whether of commission or
omission, taken by any other member, or by any officer, agent, or
employee; nor, except in circumstances involving the member's bad
faith, for anything done or omitted to be done by the member.
Section 3.6. The Committee shall administer and interpret
the Plan.
Section 3.7. The Committee shall be comprised of two or
more members of the Board of Directors meeting the qualifications
of an "outside director" under Section 162(m) of the Internal
Revenue Code and any regulations thereunder. If any member does
not meet these qualifications, then that member shall be replaced
by another director meeting such qualifications such that the
Committee shall always be comprised of at least two "outside
directors".
Section 3.8. The amount of the payments under the Plan for
any fiscal year of the Company to any one individual participant
shall not exceed $1 million.
ARTICLE IV.
General Definitions.
Section 4.l. For the purposes of the Plan, unless the
context otherwise indicates, the following definitions shall be
applicable:
(a) The word "Plan" shall mean the Incentive Profit
Sharing Plan as set forth in this instrument and as from
time to time amended.
(b) The word "Company" shall mean Family Dollar Stores,
Inc., a Delaware Corporation, its successors and assigns.
(c) The term "Board of Directors" or "Board" shall mean
the Board of Directors of the Company.
(d) The term "executive and supervisory personnel" shall
include executive and supervisory personnel of the Company
and of its subsidiaries, and the word "employee" shall mean
an employee of the Company or of a subsidiary of the
Company.
(e) The word "Committee" shall mean the Compensation
Committee of the Board of Directors.
EXHIBIT 10(iii)
Amended as of
January 16, 1997
FAMILY DOLLAR STORES, INC.
1989 NON-QUALIFIED STOCK OPTION PLAN
1. PURPOSE. The purpose of the 1989 Non-Qualified Stock
Option Plan (the "Plan") of Family Dollar Stores, Inc. is to
encourage ownership of a stock interest in Family Dollar Stores,
Inc. by certain officers and other key employees of the Company
(as such term is defined below) as an added incentive to remain
in the employ of the Company and to increase their efforts on its
behalf, and in order for the Company to retain and attract
persons of competence, and to gain for the organization the
advantages inherent in key employees having a sense of
proprietorship.
The term "subsidiary," as used herein, shall be deemed to
mean any corporation (other than Family Dollar Stores, Inc.), in
an unbroken chain of corporations beginning with and including
Family Dollar Stores, Inc. if, at the time of the granting of the
option, each of the corporations other than the last corporation
in the unbroken chain owns stock possessing 50 percent or more of
the total combined voting power of all classes of stock in one of
the other corporations in such chain. The term "Company," as
used herein, shall include Family Dollar Stores, Inc. and any
present or future subsidiary thereof.
2. THE STOCK. The shares of stock which may be issued
and sold under the Plan shall not, except as such number may be
adjusted pursuant to Article 10 hereof, exceed 2,061,390 shares
of Common Stock of Family Dollar Stores, Inc. which may be either
authorized and unissued shares or issued shares reacquired by
Family Dollar Stores, Inc. Any shares subjected to an option
under the Plan which terminates, is cancelled or expires for any
reason unexercised as to such shares may again be sub-jected to
an option under the Plan notwithstanding the above limitation.
3. ELIGIBILITY. Options shall be granted only to
officers and other key employees (including those who are also
directors) who, at the time of the grant of the option, (a) are
employees of the Company and (b) are primarily responsible for
the management and growth of the Company or who otherwise
materially contribute to the conduct and direction of its
business and affairs. A person eligible to receive an option
under the Plan is hereinafter sometimes referred to as an
"employee" and a person to whom an option is granted hereunder is
hereinafter sometimes referred to as an "optionee."
<PAGE>
4. GRANT OF OPTIONS. The Stock Option Committee (the
"Committee") of the Board of Directors of Family Dollar Stores,
Inc. (the "Board") shall determine the employees who are to be
granted options under the Plan, the number of shares subject to
each option and the consideration to the Company for the granting
of options under the Plan, as well as the conditions, if any,
which it may deem appropriate to insure that such consideration
will be received by, or will accrue to, the Company. In the
discretion of the Committee, such consideration need not be the
same but may vary for options granted under the Plan at the same
time or from time to time.
The Committee may grant more than one option to an
employee during the life of the Plan and such option may be in
addition to, or in substitution for, an option or options,
previously granted. The maximum aggregate number of shares of
Common Stock of Family Dollar Stores, Inc. subject to options
which may be granted under the Plan to any optionee during any
twelve-month period is 150,000. No options shall be granted
under the Plan after November 30, 1998.
Each option granted pursuant to the Plan shall be
evidenced by a written option agreement between Family Dollar
Stores, Inc. and the optionee which shall contain such
provisions, terms and conditions (which need not be the same for
all options) as the Committee shall in its discretion determine
to be appropriate and within the contemplation of the Plan. Each
option agreement shall provide that the option granted thereby
will not be treated as an "incentive stock option" within the
meaning of Section 422A of the Internal Revenue Code of 1986.
5. OPTION PRICE. (a) The price or prices per share for
shares of Common Stock of Family Dollar Stores, Inc. to be sold
pursuant to an option shall be such as shall be fixed by the
Committee, but not less in any case than 100 percent of the fair
market value per share for such stock on the date of the granting
of the option, subject to adjustment as provided in Article 10
hereof.
For the purpose hereof, the term "fair market value" per
share shall mean the mean between the average high bid and low
asked prices quoted by the National Quotations Bureau Inc. for
the over-the-counter market on the date of the grant of such
option or, if no bid and asked prices are quoted on such day,
then on the next preceding day on which there were such
quotations, or if such stock is listed on a national securities
exchange, then the average of the highest price and the lowest
price at which the Common Stock shall have been sold regular way
on the national securities exchange on the date of the grant of
such option or, if no sales occur on such day, then on the next
preceding day on which there were such sales of Common Stock or,
<PAGE>
if any time the Common Stock shall not be quoted by the National
Quotations Bureau Inc. for the over-the-counter market and the
Common Stock shall not be listed on any national securities
exchange, the Committee shall determine the fair value on the
basis of available prices for such stock or in such manner as the
Board may deem reasonable.
(b) For the purposes of Articles 5 and 6 hereof, the date
of the granting of an option under the Plan shall be the date
fixed by the Committee as the date for such option for the
employee who is to be the recipient thereof.
6. PERIOD OF OPTION AND CERTAIN
LIMITATIONS ON RIGHT TO EXERCISE.
Options will be exercisable over the Option Period, which,
in the case of each option, shall be a period of not more than
five years from the date of the grant of such option, as follows:
(i) at any time during the third year of the Option Period the
optionee may purchase up to 40 percent of the total number of
shares to which his option relates (adjusted, if a fraction of a
share would otherwise result thereby, to the nearest full number
of shares);
(ii) at any time during the Option Period after the end of the
third year the optionee may purchase on a cumulative basis up to
70 percent of the total number of shares to which his option
relates (adjusted, if a fraction of a share would otherwise
result thereby, to the nearest full number of shares); and
(iii) at any time during the Option Period after the end of the
fourth year the optionee may purchase on a cumulative basis up to
100 percent of the total number of shares to which his option
relates; provided, however, that except as provided in Articles 8
and 9 hereof, no option may be exercised unless the optionee is
then in the employ of the Company and shall have been
continuously so employed since the date of the grant of his
option. Absence on leave approved by the Committee shall not be
considered an interruption of employment for any purpose of the
Plan. Family Dollar Stores, Inc. may, if it or its counsel shall
deem it necessary or desirable for any reason, require the
optionee (or the purchaser acting under Article 9 hereof) to
represent in writing to Family Dollar Stores, Inc. at the time of
the exercise of such option that it is his then intention to
acquire the shares of Common Stock as to which his option is then
being exercised for investment and not with a view to the
distribution thereof.
<PAGE>
7. NON-TRANSFERABILITY OF OPTION. No option granted under
the Plan to an employee shall be transferable by him otherwise
than by will or by the laws of descent and distribution, and such
option shall be exercisable, during his lifetime, only by him or
by his guardian or legal representative.
8. TERMINATION OF EMPLOYMENT. If an optionee shall cease
to be employed by the Company for any reason (other than death or
discharge for cause), he may, but only within three months after
the date he ceases to be an employee of the Company (and in no
event after the expiration of the Option Period), exercise his
option to the extent that he was entitled to exercise it at the
date of such cessation. The Plan shall not confer upon any
optionee any right with respect to continuation of employment by
the Company, nor shall it interfere in any way with his right or
the Company's right to terminate his employment at any time.
Notwithstanding any of the provisions hereinabove set forth, in
the event that any optionee shall be discharged for cause, he
shall forthwith forfeit all rights under any options granted to
him under the Plan. "Cause" shall be deemed to include, but not
be limited to, dishonesty, the proven commission of crime,
disclosure of the Company's affairs to competitors or other
unfaithfulness to the interests of the Company, continued
absence except on account of illness or disability, or gross
insubordination.
9. DEATH OF OPTIONEE. If an optionee dies while in the
employ of the Company, or within three months after the date he
ceases to be an employee of the Company (other than by reason of
discharge for cause), the option theretofore granted to him shall
be exercisable by the estate of the optionee, or by a person who
acquired the right to exercise such option by bequest or
inheritance or by reason of the death of the optionee, but only
within a period of fifteen calendar months next succeeding such
death (and in no event after expiration of the Option Period),
and then only if and to the extent that he was entitled
to exercise it at the date of his death, except as the number of
shares may be adjusted in accordance with the provisions of
Article 10 hereof.
10. STOCK ADJUSTMENTS.
(a) In the event of a recapitalization, stock split, reverse
stock split, stock dividend, reclassification, or merger,
consolidation, or reorganization in which the Company is the
surviving corporation, or any other change in the corporate
structure or Common Stock of the Company, the Committee shall
make such adjustments, if any, proportionate to such change, as
it may deem appropriate in the number of shares authorized by the
Plan, in the number of shares covered by the options granted, and
in the option price.
<PAGE>
(b) In the event of dissolution or liquidation of the
Company, or a reorganization, merger or consolidation of the
Company with one or more corporations in which the Company is not
the surviving corporation, or a sale of substantially all the
property or more than eighty percent (80%) of the then
outstanding stock of the Company to another corporation, the Plan
shall terminate and any option heretofore granted pursuant to the
Plan shall terminate unless provision be made in writing in
connection with such transaction for the continuance of the Plan
and/or for the assumption of options theretofore granted, or the
substitution for such options of new options covering the stock
of a successor employer corporation, or a parent or subsidiary
thereof, with appropriate adjustments as to the number and kind
of shares and prices, in which event the Plan and options
theretofore granted shall continue in the manner and under the
terms so provided.
(c) Adjustments under Article 10 hereof shall be made by
the Committee whose determination as to what adjustments shall be
made, and the extent thereof, shall be final, binding and
conclusive. No fractional shares of Common Stock shall be issued
pursuant to any such adjustment, and any fraction resulting from
any such adjustment shall be eliminated in each case by rounding
downward to the nearest whole share or unit.
11. ADMINISTRATION OF THE PLAN. The Plan shall be
administered by the Committee. The Committee shall consist of
two or more members of the Board who are appointed to the
Committee by the Board, and each of whom is an "outside director"
as such term is defined in Section 162(m) of the Internal Revenue
Code and any regulations thereunder. If any member of the
Committee does not meet the qualifications for an "outside
director," then that member shall be replaced with another
director meeting such qualifications such that the Committee
shall always be comprised of at least two persons meeting such
qualifications. The Committee is authorized to establish such
rules and regulations for the proper administration of the Plan
as it may deem advisable and not inconsistent with the provisions
of the Plan. All questions arising under the Plan or under any
rule or regulation with respect to the Plan adopted by the
Committee, whether such questions involve an interpretation of
the Plan or otherwise, shall be decided by the Committee.
12. PAYMENT FOR SHARES. Payment for shares purchased shall
be made in full at the time of the exercise of the option. No
loan or advance shall be made by the Company for the purpose of
financing, in whole or in part, the purchase of optioned shares.
An optionee or his legal representatives shall have none of the
rights of a stockholder with respect to shares subject to option
until such shares shall be issued upon exercise of the option.
<PAGE>
13. AMENDMENT AND TERMINATION OF PLAN.
(a) The Board may at any time suspend or terminate the
Plan. The Board may also at any time amend or revise the terms
of the Plan or any option to be granted thereunder, provided
that no such amendment or revision shall affect the determination
of officers and directors to participate in the Plan or of
the timing, pricing and amount of a grant, all of which
determinations and amendments and revisions thereof shall be
made by the Committee, and provided further that, without
stockholder approval, no such amendment or revision shall:
(i) materially increase the benefits accruing to employees
under the Plan; or
(ii) increase the number of shares subject to the Plan
(except as permitted under the provisions of Article 10 hereof);
or
(iii) materially modify the requirements as to eligibility
for participation in the Plan.
(b) No amendment, suspension or termination of the Plan
shall, without the consent of the optionee, alter or impair any
rights or obligations under any option theretofore granted under
the Plan.
14. COMPLIANCE WITH LAW AND OTHER CONDITIONS. No shares
shall be issued pursuant to the exercise of any option granted
under the Plan prior to compliance by Family Dollar Stores, Inc.
to the satisfaction of its counsel with any applicable laws.
15. WITHHOLDING OF TAXES. Each optionee who exercises an
option shall agree that no later than the date of such exercise
or receipt of shares pursuant thereto he will pay to the Company,
or make arrangements satisfactory to the Committee regarding
payment of, any federal, state or local taxes of any kind
required by law to be withheld with respect to the transfer to
him of such shares of Common Stock.
16. APPROVAL BY STOCKHOLDERS. The Plan shall become
effective December 1, 1988, subject to approval thereof by vote
(in person or by proxy) of the holders of a majority of all
outstanding shares of Common Stock of Family Dollar Stores, Inc.
entitled to vote at the annual meeting of stockholders on
January 19, 1989, called to take action thereon.
