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, 1998
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, 1998
Common Stock, $.10 par value 86,081,211 shares
<PAGE>
FAMILY DOLLAR STORES, INC., AND SUBSIDIARIES
INDEX
Page No.
Part I - Financial Information
Item 1 - Consolidated Condensed Financial Statements:
Consolidated Condensed Balance Sheets -
February 28, 1998 and August 31, 1997 2
Consolidated Condensed Statements of Income -
Three Months Ended February 28, 1998 and
February 28, 1997 3
Consolidated Condensed Statements of Income -
Six Months Ended February 28, 1998 and
February 28, 1997 4
Consolidated Condensed Statements of Cash Flows -
Six Months Ended February 28, 1998 and
February 28, 1997 5
Notes to Consolidated Condensed Financial
Statements 6-8
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of
Operations 9-11
Part II - Other Information and Signatures
Item 4 - Submission of Matters to a Vote of 12
Security Holders
Item 6 - Exhibits and Reports on Form 8-K 12
Signatures 13
<PAGE>
<TABLE>
FAMILY DOLLAR STORES, INC., AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited)
<CAPTION>
February 28, August 31,
1998 1997
Assets
<S> <C> <C>
Current assets:
Cash and cash equivalents (Note 2) $108,081,979 $ 42,468,300
Merchandise inventories 460,805,770 467,945,483
Deferred income taxes 32,267,454 28,407,454
Prepayments and other current assets 6,827,583 5,881,520
Total current assets 607,982,786 544,702,757
Property and equipment, net 271,002,743 231,234,756
Other assets 2,817,446 4,356,339
$881,802,975 $780,293,852
<PAGE>
<CAPTION>
Liabilities and Shareholders' Equity
<S> <C> <C>
Current liabilities:
Accounts payable and accrued
liabilities $306,481,255 $250,107,926
Income taxes payable 14,154,697 11,118,803
Total current liabilities 320,635,952 261,226,729
Deferred income taxes 19,513,650 18,868,650
Shareholders' equity (Notes 4, 5 and 6):
Preferred stock, $1 par; authorized
and unissued 500,000 shares
Common stock, $.10 par;
authorized 300,000,000 shares;
issued 91,258,314 shares at
February 28, 1998 (182,516,628 shares
as adjusted for 2 for 1 stock split -
Note 4) and 91,031,478
shares at August 31, 1997 9,125,831 9,103,148
Capital in excess of par 25,285,163 21,157,973
Retained earnings 518,591,647 481,286,620
553,002,641 511,547,741
Less common stock held in treasury,
at cost (5,179,233 shares at
February 28, 1998) (10,358,466 shares
as adjusted for 2 for 1 stock split -
Note 4) and 5,179,233 shares at
August 31, 1997 (Notes 4 and 6) 11,349,268 11,349,268
Total shareholders' equity 541,653,373 500,198,473
$881,802,975 $780,293,852
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 28,
1998 1997
<S> <C> <C>
Net sales $635,877,376 $530,259,064
Costs and expenses:
Cost of sales 436,698,591 366,093,803
Selling, general and
administrative expenses 154,827,222 131,658,547
591,525,813 497,752,350
Income before provision
for taxes on income 44,351,563 32,506,714
Provision for taxes on income 16,755,000 12,505,000
Net income $ 27,596,563 $ 20,001,714
Net income per common share - Basic
(Note 6)* $ 0.32 $ 0.23
Average shares - Basic (Note 6)* 85,969,768 85,563,550
Net income per common share as adjusted
for 2 for 1 stock split - Basic
(Notes 4 and 6) * $ 0.16 $ 0.12
Average shares as adjusted
for 2 for 1 stock split - Basic
(Notes 4 and 6)* 171,939,536 171,127,100
Net income per common share - Diluted
(Note 6)* $ 0.32 $ 0.23
Average shares - Diluted (Note 6)* 86,589,594 85,802,333
Net income per common share as adjusted
for 2 for 1 stock split - Diluted
(Notes 4 and 6)* $ 0.16 $ 0.12
Average shares as adjusted for 2 for 1
stock split - Diluted (Notes 4 and 6)* 173,179,188 171,604,666
Dividends per common share *
As declared $ 0.09 $ 0.08
As adjusted for 2 for 1 stock split (Note 4) $ 0.045 $ 0.04
* February 28, 1997, figures were adjusted to reflect the three-for-two
stock split effective July 15, 1997.
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 28,
1998 1997
<S> <C> <C>
Net sales $1,178,624,473 $985,141,711
Costs and expenses:
Cost of sales 793,118,221 666,395,716
Selling, general and
administrative expenses 301,802,720 257,891,459
1,094,920,941 924,287,175
Income before provision for
taxes on income 83,703,532 60,854,536
Provision for taxes on income 31,780,000 23,493,000
Net income $ 51,923,532 $ 37,361,536
Net income per common share - Basic
(Note 6)* $ 0.60 $ 0.43
Average shares - Basic (Note 6)* 85,917,856 85,424,709
Net income per common share
as adjusted for 2 for 1 stock split
- Basic (Notes 4 and 6)* $ 0.30 $ 0.22
Average shares as adjusted for 2 for l
stock split - Basic (Notes 4 and 6) 171,835,712 170,849,418
Net income per common share - Diluted
(Note 6)* $ 0.60 $ 0.43
Average shares - Diluted (Note 6)* 86,487,956 85,607,065
Net income per common share as adjusted
for 2 for 1 stock split - Diluted
(Notes 4 and 6)* $ 0.30 $ 0.22
Average shares as adjusted for 2 for 1
stock split - Diluted (Notes 4 and 6)* 172,975,912 171,214,130
Dividends per common share *
As declared $ 0.17 $ 0.15
As adjusted for 2 for 1 stock split
(Note 4) $ 0.085 $ 0.075
* February 28, 1997, figures were adjusted to reflect the three-for-two
stock split effective July 15, 1997.
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 28,
1998 1997
<S> <C> <C>
Cash flows from operating activities:
Net income $ 51,923,532 $37,361,536
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization 16,084,513 14,296,753
Deferred income taxes (3,215,000) (595,000)
Loss on disposition of property
and equipment 84,380 66,462
Changes in operating assets and liabilities:
Inventories 7,139,713 7,322,648
Prepayments and other current assets (946,063) (2,886,286)
Other assets 1,538,893 571,020
Accounts payable and accrued
liabilities 55,494,631 2,792,043
Income taxes payable 3,035,894 1,245,282
131,140,493 60,174,458
Cash flows from investing activities:
Capital expenditures (56,310,144) (29,980,532)
Proceeds from dispositions of
property and equipment 373,264 1,008,179
(55,936,880) (28,972,353)
Cash flows from financing activities:
Net notes payable (repayments) borrowings - (4,400,000)
Exercise of employee stock options 4,149,873 5,010,579
Payment of dividends (13,739,807) (12,516,113)
(9,589,934) (11,905,534)
Net change in cash and cash equivalents 65,613,679 19,296,571
Cash and cash equivalents at beginning
of period 42,468,300 18,844,839
Cash and cash equivalents at end of period $108,081,979 $38,141,410
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 12,564 $ 285,746
Income taxes 30,683,188 22,411,221
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, 1998, and the results of operations for
the three and six months ended February 28, 1998, and
February 28, 1997, and the cash flows for the six months
ended February 28, 1998, and February 28, 1997.
The results of operations for the six month period ended
February 28, 1998, 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, 2000 and March 28, 1999,
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, 2000, into either a five or
seven year term loan, at the bank's variable prime rate.
4. The Board of Directors declared a 2 for 1 stock split on
March 24, 1998, effective April 30, 1998, in the form of a
100% stock distribution to holders of record of common stock
on April 16, 1998. The proforma effect of the stock split on
net income and dividends declared per common share, and on
weighted average number of common shares outstanding, is
presented in the consolidated condensed statements of income
(unaudited) for the three and six month periods ended
February 28, 1998 and 1997. The proforma effect of the
stock split on the summary of transactions of the Company's
non-qualified stock option plan for the six month period
ended February 28, 1998 and 1997 is presented in Note 5 to
the consolidated condensed financial statements. The effect
of the stock split on shareholder's equity will be the
transfer of the par value for the additional shares issued
from the capital in excess of par account to the common
stock account.
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.
<PAGE>
The following is a summary of transactions under the plan during
the six months ended February 28, 1998 and February 28, 1997.
Amounts for the six months ended February 28, 1997, were adjusted
to reflect the three-for-two stock split effective July 15, 1997.
<TABLE>
<CAPTION>
Six Months Ended
February 28, 1998 February 28, 1997
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 1,571,004 $ 7.00-$21.75 1,503,450 $ 6.83-$14.17
Granted 548,550 $21.75-$35.00 689,100 $11.17-$15.00
Exercised (226,836) $ 7.67-$14.17 (424,867) $ 7.00-$14.17
Cancelled (36,435) (40,800)
Outstanding-ending 1,856,283 $ 7.00-$35.00 1,726,883 $ 6.83-$15.00
Exercisable options 294,603 $ 7.00-$12.50 516,808 $ 6.83-$14.17
</TABLE>
The following is a summary of transactions under the plan during
the six months ended February 28, 1998 and February 28, 1997, as
adjusted for the 2 for 1 stock split - see Note 4:
<TABLE>
<CAPTION>
Six Months Ended
February 28, 1998 February 28, 1997
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 3,142,008 $ 3.50-$10.88 3,006,900 $ 3.42-$ 7.09
Granted 1,097,100 $10.88-$17.50 1,378,200 $ 5.59-$ 7.50
Exercised (453,672) $ 3.84-$ 7.09 (849,734) $ 3.50 $ 7.09
Cancelled (72,870) (81,600)
Outstanding-ending 3,712,566 $ 3.50-$17.50 3,453,766 $ 3.42-$ 7.50
Exercisable options 589,206 $ 3.50-$ 6.25 1,033,616 $ 3.42-$ 7.09
</TABLE>
<PAGE>
6. The Company has adopted Statement of Financial Accounting
Standards No. 128, "Earnings per Share" (SFAS 128) during the
quarter ended February 28, 1998. All prior period net income per
common share amounts have been restated. Basic net income per
common share is computed by dividing net income by the weighted
average number of shares outstanding during each period. Diluted
net income per common share gives effect to all securities
representing potential common shares that were dilutive and
outstanding during the period. In the calculation of diluted net
income per common share, the denominator includes the number of
additional common shares that would have been outstanding if the
Company's outstanding stock options had been exercised.
The following table sets forth the computation of basic and
diluted net income per common share:
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended
February 28, February 28,
1998 1997
<S> <C> <C>
Basic Net Income Per Share:
Net Income $27,596,563 $20,001,714
Weighted Average Number of Shares
Outstanding 85,969,768 85,563,550
Net Income Per Common Share - Basic $.32 $ .23
Diluted Net Income Per Share:
Net Income $27,596,563 $20,001,714
Weighted Average Number of Shares
Outstanding 85,969,768 85,563,550
Effect of Dilutive Securities -
Stock Options 619,826 238,783
Average Shares - Diluted 86,589,594 85,802,333
Net Income Per Common Share - Diluted $.32 $ .23
Six Months Ended
February 28, February 28,
1998 1997
Basic Net Income Per Share:
Net Income $51,923,532 $37,361,536
Weighted Average Number of Shares
Outstanding 85,917,856 85,424,709
Net Income Per Common Share - Basic $ .60 $ .43
Diluted Net Income Per Share:
Net Income $51,923,532 $37,361,536
Weighted Average Number of Shares
Outstanding 85,917,856 85,424,709
Effect of Dilutive Securities -
Stock Options 570,100 182,356
Average Shares - Diluted 86,487,956 85,607,065
Net Income Per Common Share - Diluted $ .60 $ .43
</TABLE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
At February 28, 1998, the Company had working capital of
$287.3 million with cash and cash equivalents of approximately
$108.1 million and no outstanding borrowings. During the six
months ended February 28, 1998, the increase in earnings, coupled
with improved inventory turnover compared with the six months
ended February 28, 1997, produced $131.1 million cash flow from
operating activities compared with $60.2 million cash flow from
operating activities in the six months ended February 28, 1997.
Improved system-wide inventory flows largely offset merchandise
inventory increases for new stores and a new distribution center.
Capital expenditures for the six months ended February 28,
1998, were approximately $56.3 million, and are currently
expected to be approximately $85 to $90 million for fiscal 1998.
The majority of planned capital expenditures for fiscal 1998 is
related to the Company's new store expansion, existing store
expansion, relocation and renovation and to the completion in
January 1998 of the new full-service distribution center in
Warren County, Virginia. In fiscal 1998, the Company currently
expects to open approximately 300 stores and close approximately
50 stores for a net addition of approximately 250 stores,
compared with the opening of 236 stores and closing of 50 stores
for a net addition of 186 stores in fiscal 1997. The Company
also currently plans to expand or relocate approximately 125
stores and renovate an additional 200 to 300 stores in fiscal
1998, compared with the expansion or relocation of 94 stores and
renovation of 380 stores in fiscal 1997. In the first six months
of fiscal 1998, the Company opened 168 stores, closed 37 stores,
and expanded or relocated 28 stores. The Company occupies most
of its stores under operating leases. Store opening, closing,
expansion, relocation, and renovation plans, as well as overall
capital expenditure plans, are continuously reviewed and are
subject to change.
RESULTS OF OPERATIONS
NET SALES
Net sales increased 19.9% in the quarter ended February 28,
1998, as compared with the quarter ended February 28, 1997, and
increased 19.6% in the six month period ended February 28, 1998,
as compared with the six month period ended February 28, 1997.
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
10.3% in the quarter ended February 28, 1998, as compared with
<PAGE>
the same period ended February 28, 1997, with sales of hardlines
merchandise increasing approximately 13.0% and sales of softlines
merchandise increasing approximately 4.2%. Sales in existing
stores increased 10.2% in the six month period ended February 28,
1998, as compared to the six month period ended February 28,
1997, with sales of hardlines merchandise increasing
approximately 13.4% and sales of softlines merchandise increasing
approximately 3.9%. Hardlines as a percentage of total sales
increased to approximately 69% in the second quarter of fiscal
1998 compared to approximately 67% in the second quarter of
fiscal 1997, and increased to approximately 68% in the first six
months of fiscal 1998 compared to approximately 66% in the first
six months of fiscal 1997. Hardlines merchandise includes
primarily household chemical and paper products, health and
beauty aids, candy, snack and other 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. Customers continue to respond favorably to the Company's
everyday low price strategy. The sales increases were achieved
in the second quarter and the first six months of fiscal 1998
despite the elimination of two advertising circulars in each of
the first and second quarters.
The average number of stores open during the first six
months of fiscal 1998 was 8.6% more than during the first six
months of fiscal 1997. The Company had 2,898 stores in operation
at February 28, 1998, as compared with 2,637 stores in operation
at February 28, 1997, representing an increase of approximately
9.9%.
COST OF SALES
Cost of sales increased 19.3% in the quarter ended
February 28, 1998, as compared with the quarter ended February 28,
1997, and increased 19.0% in the six months ended February 28,
1998, as compared to the six months ended February 28, 1997. These
increases primarily reflected the additional sales volume between
years. Cost of sales, as a percentage of net sales, was 68.7% in
the quarter ended February 28, 1998, compared with 69.0% in the
quarter ended February 28, 1997, and was 67.3% in the six months
ended February 28, 1998, compared with 67.6% in the six months
ended February 28, 1997. The decrease in the cost of sales
percentage for the quarter and the first six months of fiscal
1998 was due in part to decreases in advertising markdowns,
related to the elimination of two advertising circulars in each
of the first and second quarters and the inclusion of more items
at the everyday low price in the remaining circulars. Freight
costs and merchandise shrinkage losses also decreased slightly
as a percentage of sales in the quarter and six months ended
February 28, 1998, compared with the same periods last year.
The cost of sales percentages also are affected by changes in
the effectiveness of the merchandise purchasing programs and
product mix.
<PAGE>
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses increased 17.6%
in the quarter ended February 28, 1998, as compared with the
quarter ended February 28, 1997, and increased 17.0% in the six
months ended February 28, 1998, as compared with the six months
ended February 28, 1997. The increases in these expenses were
due primarily to additional costs arising from the continued
growth in the number of stores in operation and to the increase
in hourly wage rates resulting from the increase in the federal
minimum wage rate on September 1, 1997. Selling, general and
administrative expenses, as a percentage of net sales, were 24.3%
in the quarter ended February 28, 1998, as compared with 24.8% in
the quarter ended February 28, 1997, and were 25.6% in the six
months ended February 28, 1998, as compared with 26.2% in the six
months ended February 28, 1997. The decreases in the percentages
for the quarter and six months ended February 28, 1998 were due
in part to a decrease in store labor costs and occupancy costs as
a percentage of net sales due to more efficient utilization of
store labor hours and to the leverage provided by the increases
in existing store sales. Additionally, advertising expenses
decreased during the quarter and the first six months of fiscal
1998 due to the elimination of two advertising circulars in each
of the first and second quarters. These decreases were partially
offset during the quarter ended February 28, 1998, by start-up
costs for the new full service distribution center.
PROVISION FOR TAXES ON INCOME
The effective tax rate was 37.8% for the quarter ended
February 28, 1998, as compared to 38.5% for the quarter ended
February 28, 1997, and was 38.0% for the six months ended
February 28, 1998, as compared to 38.6% for the six months ended
February 28, 1997. The decreases in the effective tax rate for
the quarter and six months ended February 28, 1998, resulted from
changes in effective state income tax rates and from increases in
federal Work Opportunity Tax Credits.
OTHER ISSUES
The Company has evaluated its information systems for Year
2000 compliance, which refers to information systems that will
accurately process date and time data for the Year 2000 and
beyond. The Company expects to replace certain software programs
and modify other software programs prior to January 1, 2000 in
order to achieve Year 2000 compliance, and does not currently
expect these costs to have a material adverse impact on the
Company's financial condition or results of operations.
<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,
renovations, 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 factors and
pricing pressures, general economic conditions, changes in
consumer demand, inflation, merchandise supply constraints,
general transportation delays or interruptions, changes in
currency exchange rates, tariffs, quotas, and freight rates,
availability of real estate, costs and delays associated with
building, opening and operating new distribution facilities, 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 15, 1998, 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 Withholding
Nominee Voting For Authority to Vote
<S> <C> <C>
Leon Levine 75,497,812 1,990,053
Howard R. Levine 75,493,025 1,994,840
R. James Kelly 75,494,795 1,993,070
George R. Mahoney, Jr. 75,497,625 1,990,240
Mark R. Bernstein 74,188,067 3,299,798
James H. Hance, Jr. 75,649,112 1,838,753
James G. Martin 75,856,068 1,631,797
</TABLE>
(b) Approve the proposal to amend the 1989 Non-Qualified
Stock Option Plan, with 67,242,314 shares voted for,
1,336,784 shares against and 271,591 shares abstaining.
(c) Approve the proposal to amend the Certificate of
Incorporation to increase the authorized number of
shares of Common Stock from 120,000,000 to 300,000,000
with 57,648,016 shares voted for, 19,720,775 shares
against, and 119,074 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, 1998, with
77,487,865 shares voted for, 36,315 shares against and
64,079 shares abstaining.
<PAGE>
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits filed herewith:
10 (i) Letter Agreement dated March 5, 1998, among
NationsBank, N.A., the Company and Family Dollar,
Inc., amending Credit Agreement dated as of
March 31, 1996, as amended, among NationsBank,
N.A., the Company and Family Dollar, Inc.
10 (ii) Amendment No.2, dated January 15, 1998, to Family
Dollar Employee Savings and Retirement Plan and
Trust.
10 (iii) Amendment No. 3, dated March 19, 1998, to Family
Dollar Employee Savings and Retirement Plan and
Trust.
11 Statements Re: Computations of Per Share Earnings
27 Financial Data Schedule
(b) Reports on Form 8-K - None
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 there unto duly authorized.
FAMILY DOLLAR STORES, INC.
(Registrant)
Date: April 3, 1998 /s/ R. JAMES KELLY
R. JAMES KELLY
Vice Chairman
Date: April 3, 1998 /s/ C. MARTIN SOWERS
C. MARTIN SOWERS
Senior Vice President-Finance
<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
AS PRESENTED FEBRUARY 28, 1998 FEBRUARY 28, 1997
BASIC DILUTED BASIC DILUTED
<S> <C> <C> <C> <C>
AVERAGE SHARES OUTSTANDING 85,969,768 85,969,768 85,563,550 85,563,550
NET INCOME $27,596,563 $27,596,563 $20,001,714 $20,001,714
NET INCOME PER SHARE $ .32 $ .32 $ .23 $ .23
NET INCOME PER SHARE AS ADJUSTED
FOR 2 FOR 1 STOCK SPLIT $ .16 $ .16 $ .12 $ .12
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 1,878,402 1,645,053
WEIGHTED AVERAGE SHARES ASSUMED REPURCHASED FROM
ASSUMED PROCEEDS OF EXERCISES USING TREASURY STOCK
METHOD (AVERAGE MARKET PRICE) (1,258,576) (1,406,270)
NET PRO FORMA COMMON STOCK EQUIVALENT INCREMENTAL SHARES 619,826 238,783
PERCENTAGE DILUTION FROM PRO FORMA COMMON
STOCK EQUIVALENT INCREMENTAL SHARES .72% .28%
TOTAL COMMON STOCK AND COMMON STOCK EQUIVALENTS 86,589,594 85,802,333
NET INCOME $27,596,563 $20,001,714
PRO FORMA NET INCOME PER SHARE (INCLUDING DILUTIVE
COMMON STOCK EQUIVALENTS) $ .32 $ .23
PRO FORMA NET INCOME PER SHARE (INCLUDING DILUTIVE COMMON
STOCK EQUIVALENTS) AS ADJUSTED FOR 2 FOR 1 STOCK SPLIT $ .16 $ .12
* All figures have been adjusted for the three-for-two stock split effective July 15, 1997.
</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, 1998 FEBRUARY 28, 1997
BASIC DILUTED BASIC DILUTED
<S> <C> <C> <C> <C>
AVERAGE SHARES OUTSTANDING 85,917,856 85,917,856 85,424,709 85,424,709
NET INCOME $51,923,532 $51,923,532 $37,361,536 $37,361,536
NET INCOME PER SHARE $ .60 $ .60 $ .43 $ .43
NET INCOME PER SHARE AS ADJUSTED
FOR 2 FOR 1 STOCK SPLIT $ .30 $ .30 $ .22 $ .22
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 1,887,615 1,577,749
WEIGHTED AVERAGE SHARES ASSUMED REPURCHASED FROM
ASSUMED PROCEEDS OF EXERCISES USING TREASURY STOCK
METHOD (AVERAGE MARKET PRICE) (1,317,515) (1,395,393)
NET PRO FORMA COMMON STOCK EQUIVALENT INCREMENTAL SHARES 570,100 182,356
PERCENTAGE DILUTION FROM PRO FORMA COMMON
STOCK EQUIVALENT INCREMENTAL SHARES .66% .21%
TOTAL COMMON STOCK AND COMMON STOCK EQUIVALENTS 86,487,956 85,607,065
NET INCOME $51,923,532 $37,361,536
PRO FORMA NET INCOME PER SHARE (INCLUDING DILUTIVE
COMMON STOCK EQUIVALENTS) $ .60 $ .43
PRO FORMA NET INCOME PER SHARE (INCLUDING DILUTIVE COMMON
STOCK EQUIVALENTS) AS ADJUSTED FOR 2 FOR 1 STOCK SPLIT $ .30 $ .22
* All figures have been adjusted for the three-for-two stock split effective July 15, 1997.
</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, 1998, 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-31-1998
<PERIOD-START> SEP-01-1997
<PERIOD-END> FEB-28-1998
<EXCHANGE-RATE> 1
<CASH> 108,081,979
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 460,805,770
<CURRENT-ASSETS> 607,982,786
<PP&E> 403,881,942
<DEPRECIATION> 132,879,199
<TOTAL-ASSETS> 881,802,975
<CURRENT-LIABILITIES> 320,635,952
<BONDS> 0
0
0
<COMMON> 9,125,831
<OTHER-SE> 532,527,542
<TOTAL-LIABILITY-AND-EQUITY> 881,802,975
<SALES> 1,178,624,473
<TOTAL-REVENUES> 1,178,624,473
<CGS> 793,118,221
<TOTAL-COSTS> 1,094,920,941
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 83,703,532
<INCOME-TAX> 31,780,000
<INCOME-CONTINUING> 51,923,532
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 51,923,532
<EPS-PRIMARY> .60
<EPS-DILUTED> .60
</TABLE>
Exhibit 10(i)
March 5, 1998
C. Martin Sowers
Family Dollar Stores, Inc.
P. O. Box 1017
Charlotte, NC 28201-1017
Re: Credit Agreement dated as of March 31, 1996 among
NationsBank, N.A. ("NationsBank"), Family Dollar Stores,
Inc. ("FDSI") and Family Dollar, Inc. ("FDI") (as amended,
the "Credit Agreement")
Dear Marty:
You have requested, on behalf of FDSI and FDI, (i) an extension
of the Tranche A Termination Date for an additional period of one
year in accordance with Section 2.14 of the Credit Agreement and
(ii) an extension of the Tranche B Termination Date for an
additional period of 364 days in accordance with Section 2.15 of
the Credit Agreement. NationsBank agrees to such extensions and
hereby agrees to amend (a) the date "March 31, 1999" in the
definition of "Tranche A Termination Date" to March 31, 2000 and
(b) the date "March 29, 1998" in the definition of "Tranche B
Termination Date" to March 28, 1999. Capitalized terms not
otherwise defined herein have the same meaning given to such
terms in the Credit Agreement.
Except as expressly amended by this letter, the Credit Agreement
and all of the other Loan Documents are confirmed and ratified in
all respects and shall remain in full force and effect in
accordance with their respective terms.
This amendment shall be effective upon signing by each of the
parties to the Credit Agreement and the Guarantors. Please
acknowledge your agreement by signing and returning to me the
enclosed copy of this letter.
Very truly yours,
NATIONSBANK, N.A.
By: RICHARD G. PARKHURST, JR.
RICHARD G. PARKHURST, JR.
Senior Vice President
<PAGE>
C. Martin Sowers
March 5, 1998
Page 2
Acknowledged and Agreed
Family Dollar Stores, Inc. Family Dollar, Inc.
By: C. MARTIN SOWERS By: C. MARTIN SOWERS
Name: C. MARTIN SOWERS Name: C. MARTIN SOWERS
Title: Senior Vice President- Title: Senior Vice President-
Finance Finance
Each of the Guarantors below acknowledges and consents to this
amendment and ratifies its Guaranty:
Family Dollar Services, Inc. Family Dollar Operations, Inc.
By: C. MARTIN SOWERS By: C. MARTIN SOWERS
Name: C. MARTIN SOWERS Name: C. MARTIN SOWERS
Title: Senior Vice President- Title: Senior Vice President-
Finance Finance
Family Dollar Trucking, Inc.
By: C. MARTIN SOWERS
Name: C. MARTIN SOWERS
Title: Senior Vice President-
Finance
Exhibit 10(ii)
AMENDMENT NO. TWO
TO THE
FAMILY DOLLAR
EMPLOYEE SAVINGS AND RETIREMENT PLAN AND TRUST
AMENDED AND RESTATED AS OF
JANUARY 1, 1987
THIS AMENDMENT, made and executed as of January 15,
1998, by and among Family Dollar Stores, Inc. and Family Dollar,
Inc., for themselves and their related corporations and other
entities which have joined or will join as participating
employers under this Plan as identified on Appendix A to the Plan
(collectively, the "Employer"); and George R. Mahoney, Jr.,
C. Martin Sowers and R. James Kelly (collectively, the
"Trustee");
WITNESSETH;
A. Family Dollar Stores, Inc. previously adopted the
Family Dollar Employee Savings and Retirement Plan and Trust (the "Plan")
for the benefit of eligible employees and has reserved the right
to amend the same from time to time.
B. Family Dollar Stores, Inc. desires to amend the Plan in
the manner hereinafter set forth in connection with a corporate
reorganization.
THEREFORE, the Plan is amended as follows:
1. Effective as of January 1, 1998, Section 2.1(27) of the
Plan shall be amended to read as follows:
"(27) EMPLOYER: Family Dollar Stores, Inc.,
a corporation organized and existing under the
laws of the State of Delaware, and Family Dollar,
Inc., a corporation organized and existing under
the laws of the State of North Carolina, or their
successor or successors that assume Plan
liabilities pursuant to Article 12, and any
related corporation or entity which adopts this
Plan with the consent of the Parent Company.
Adopting employers are listed on Appendix A.
Appendix A may be updated from time to time by an
authorized officer of the Parent Company."
2. Effective as of January 1, 1998, Section 2.1(52) of the
Plan shall be amended to read as follows:
"(52) PARENT COMPANY: Family Dollar Stores,
Inc., a corporation organized and existing under
the laws of the State of Delaware, and Family
Dollar, Inc., a corporation organized and existing
under the laws of the State of North Carolina, or
their successor or successors."
<PAGE>
3. Effective as of January 15, 1998, Section 2.1(72) of
the Plan shall be amended to read as follows:
"(72) TRUSTEE: The corporation or individuals
appointed by the Board of Directors to administer
the Trust. For purposes of this Agreement,
effective as of January 15, 1998, the Trustees
shall be George R. Mahoney, Jr., C. Martin Sowers
and R. James Kelly."
IN WITNESS WHEREOF, Family Dollar Stores, Inc. and Family
Dollar, Inc., for themselves and all other Employers listed on
Appendix A, and the Trustee have caused the Amendment to be
properly executed as of January 15, 1998.
FAMILY DOLLAR STORES, INC.,
(Corporate Seal)
C. MARTIN SOWERS
By: C. MARTIN SOWERS
Title: Senior Vice President-
Finance
Attest:
JANICE B. BURRIS
By: JANICE B. BURRIS
Title: Assistant Secretary
FAMILY DOLLAR, INC.,
(Corporate Seal)
C. MARTIN SOWERS
By: C. MARTIN SOWERS
Title: Senior Vice President-
Finance
Attest:
JANICE B. BURRIS
By: JANICE B. BURRIS
Title: Assistant Secretary
GEORGE R. MAHONEY, JR. (SEAL)
GEORGE R. MAHONEY, JR.
Trustee
C. MARTIN SOWERS (SEAL)
C. MARTIN SOWERS
Trustee
R. JAMES KELLY (SEAL)
R. JAMES KELLY
Trustee
<PAGE>
APPENDIX A
RELATED EMPLOYERS WHO HAVE ADOPTED THE
FAMILY DOLLAR EMPLOYER SAVINGS AND RETIREMENT
PLAN AND TRUST
AS OF JANUARY 1, 1998
Family Dollar Stores of Indiana, L.P.
Family Dollar Stores of Kentucky, Ltd.
Family Dollar of Texas, L.P.
Family Dollar Stores of Alabama, Inc.
Family Dollar Stores of Arizona, Inc.
Family Dollar Stores of Arkansas, Inc.
Family Dollar Stores of California, Inc.
Family Dollar Stores of Colorado, Inc.
Family Dollar Stores of Connecticut, Inc.
Family Dollar Stores of Delaware, Inc.
Family Dollar Stores of D.C., Inc.
Family Dollar Stores of Florida, Inc.
Family Dollar Stores of Georgia, Inc.
Family Dollar Stores of Iowa, Inc.
Family Dollar Stores of Louisiana, Inc.
Family Dollar Stores of Maryland, Inc.
Family Dollar Stores of Massachusetts, Inc.
Family Dollar Stores of Michigan, Inc.
Family Dollar Stores of Mississippi, Inc.
Family Dollar Stores of Missouri, Inc.
Family Dollar Stores of Nevada, Inc.
Family Dollar Stores of New Jersey, Inc.
Family Dollar Stores of New Mexico, Inc.
Family Dollar Stores of New York, Inc.
Family Dollar Stores of North Carolina, Inc.
Family Dollar Stores of North Dakota, Inc.
Family Dollar Stores of Ohio, Inc,.
Family Dollar Stores of Oklahoma, Inc.
Family Dollar Stores of Pennsylvania, Inc.
Family Dollar Stores of Rhode Island, Inc.
Family Dollar Stores of South Carolina, Inc.
Family Dollar Stores of South Dakota, Inc.
Family Dollar Stores of Tennessee, Inc.
Family Dollar Stores of Vermont, Inc.
Family Dollar Stores of Virginia, Inc.
Family Dollar Stores of West Virginia, Inc.
Family Dollar Stores of Wisconsin, Inc.
Family Dollar Stores of Wyoming, Inc.
Family Dollar Holdings, Inc.
Family Dollar Services, Inc.
Family Dollar Operations, Inc.
Family Dollar Trucking, Inc.
Family Dollar Marketing, Inc.
Exhibit 10(iii)
AMENDMENT NO. THREE
TO THE
FAMILY DOLLAR EMPLOYEE SAVINGS
AND RETIREMENT PLAN AND TRUST
AMENDED AND RESTATED
AS OF JANUARY 1, 1987
THIS AMENDMENT, made and executed as of the 19th day of
March, 1998, by and among Family Dollar Stores, Inc. and Family
Dollar, Inc., for themselves and their related corporations and
other entities which have joined or will join as participating
employers under this Plan as identified in Appendix A to the Plan
(collectively, the "Employer"); and George R. Mahoney, Jr.,
C. Martin Sowers and R. James Kelly (the "Former Trustee");
W I T N E S S E T H:
A. The Employer has entered into the Family Dollar
Employee Savings and Retirement Plan and Trust (the "Plan") for
the benefit of eligible employees and has reserved the right to
amend the same from time to time.
B. The Employer desires to amend the Plan so as to replace
the Former Trustee with Merrill Lynch Trust Company (the
"Trustee"), effective May 1, 1998, and to establish a separate
Trust Agreement between Merrill Lynch Trust Company and Family
Dollar Stores, Inc. and Family Dollar, Inc. (the "Trust
Agreement") to control on all issues related to the responsi-
bility, authority or powers of the Trustee.
THEREFORE, in consideration of the Employer's power in
Section 7.12 to replace the Former Trustee, it is agreed as
follows:
1. Effective May 1, 1998, Merrill Lynch Trust Company
shall become the Trustee of the Plan, replacing the Former
Trustee, George R. Mahoney, Jr., C. Martin Sowers and
R. James Kelly.
2. The Former Trustee shall transfer the assets of the
Plan's Trust to the Trustee as of May 1, 1998; and shall file its
accounting with the Employer indicating the assets distributed to
the Trustee; and shall cooperate to the extent required to
provide a smooth transition to the Trustee.
3. Section 2.1(71) of the Plan shall be amended to read as
follows:
"(71) TRUST or TRUST FUND: The fund known as the
"Trust for the Family Dollar Employee Savings and Retirement
Plan," maintained in accordance with the terms of the
separate Trust Agreement with Merrill Lynch Trust Company,
as amended from time to time."
<PAGE>
4. Section 2.1(72) of the Plan shall be amended to read as
follows;
"(72) TRUSTEE: Merrill Lynch Trust Company, until
changed as herein provided. Prior to May 1, 1998, the
Trustee was George R. Mahoney, Jr., C. Martin Sowers and
R. James Kelly."
5. In the event that there is a conflict between the
provisions of this Plan and the Trust Agreement with respect to
any subject involving the responsibility, authority or powers of
the Trustee, the provisions of the Trust Agreement shall be
controlling.
IN WITNESS WHEREOF, the Employer and the Former Trustee have
caused this Amendment to be properly executed as of the 19th day
of March, 1998.
FAMILY DOLLAR STORES, INC.
("Employer")
(Corporate Seal)
C. MARTIN SOWERS
By: C. MARTIN SOWERS
Title: Senior Vice President
Attest:
JANICE B. BURRIS
By: JANICE B. BURRIS
Title: Assistant Secretary
FAMILY DOLLAR, INC.
("Employer")
(Corporate Seal)
C. MARTIN SOWERS
By: C. MARTIN SOWERS
Title: Senior Vice President
Attest:
JANICE B. BURRIS
By: JANICE B. BURRIS
Title: Assistant Secretary
GEORGE R. MAHONEY, JR.
GEORGE R. MAHONEY, JR.
("Former Trustee")
C. MARTIN SOWERS
C. MARTIN SOWERS
("Former Trustee")
R. JAMES KELLY
R. JAMES KELLY
(Corporate Seal) ("Former Trustee")
