FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the fiscal year ended August 29, 1998
Commission File No. 1-6807
FAMILY DOLLAR STORES, INC.
(Exact name of registrant as specified in its charter)
Delaware 56-0942963
(State of incorporation) (I.R.S. Employer Identification Number)
10401 Old Monroe Road, Matthews, North Carolina 28105
(Address of principal executive offices) (Zip Code)
P. O. Box 1017, Charlotte, North Carolina 28201-1017
(Mailing address)
Registrant's telephone number, including area code (704) 847-6961
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
Common Stock, $.10 Par Value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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 by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. x
The aggregate market value of the voting stock of the registrant held by
non-affiliates of the registrant based on the closing price of these shares
on the New York Stock Exchange on November 10, 1998, was approximately
$2,571,000,000.
The number of shares of the registrant's Common Stock outstanding as of
November 10, 1998, was 172,254,708.
DOCUMENTS INCORPORATED BY REFERENCE
Incorporated Documents
(To the extent indicated herein) Location in Form 10-K
Annual Report to Stockholders for the Part II (Items 5, 6, 7 and 8)
fiscal year ended August 29, 1998 Part IV (Item 14)
Proxy Statement dated November 25, 1998 Part III (Items 10, 11, 12 and 13)
for the Annual Meeting of Stockholders<PAGE>
<PAGE>
PART I
ITEM 1. BUSINESS
The original predecessor of Family Dollar Stores, Inc., was
organized in 1959 to operate a self-service retail store in Charlotte,
North Carolina. In subsequent years, additional stores were opened, and
separate corporations generally were organized to operate these stores.
Family Dollar Stores, Inc. (together with its direct and indirect
subsidiaries and related entities referred to herein as the "Company"),
was incorporated in Delaware in 1969, and all existing corporate entities
became wholly-owned subsidiaries. Additional stores continued to be
opened and operated in direct and indirect subsidiaries and related
entities. Four indirect subsidiaries organized as North Carolina
corporations provide distribution, trucking, operations, marketing and
other services to the Company.
The Company operates a chain of self-service retail discount stores.
As of November 1, 1998, there were 3,066 stores in 38 states and the
District of Columbia as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Texas 318 Indiana 96 New Mexico 26
North Carolina 219 Louisiana 96 Connecticut 22
Georgia 194 Illinois 90 Kansas 20
Ohio 191 West Virginia 88 Iowa 17
Florida 184 Mississippi 80 Delaware 16
Tennessee 148 Arkansas 64 Minnesota 12
Virginia 147 Missouri 57 Nebraska 11
Pennsylvania 129 Oklahoma 53 Rhode Island 10
Alabama 118 Massachusetts 49 New Hampshire 8
South Carolina 118 Maryland 47 Vermont 6
Michigan 114 Wisconsin 42 Maine 5
Kentucky 115 Colorado 26 South Dakota 3
New York 100 New Jersey 26 District of Columbia 1
</TABLE>
The number of stores operated by the Company at the end of each of
its last five fiscal years is as follows: 2,215 stores on August 31, 1994;
2,416 stores on August 31, 1995; 2,581 stores on August 31, 1996; 2,767
stores on August 31, 1997; and 3,017 stores on August 29, 1998.
During the fiscal year ended August 29, 1998, 65 stores were
closed, 38 stores were relocated within the same shopping center or market
area, 52 stores were expanded in size and 170 stores were renovated. All
of the stores are occupied under leases, except 137 stores owned by the
Company. (See "Properties" herein.) The Company has announced plans to
open approximately 350 to 400 stores and close approximately 50 stores
during the current fiscal year. Such plans are continually reviewed and
subject to change. From August 30, 1998, through November 1, 1998, the
<PAGE>
Company opened 50 new stores, closed 1 store, relocated 5 stores, expanded
5 stores and renovated 97 stores. All stores opening in the fiscal year
ending August 28, 1999, will have the new interior store layout that has
been utilized in all new stores opened since September 1, 1995. This
layout features increased emphasis on seasonal and promotional goods,
improved presentation of merchandise, lower fixtures and wider aisles for
an attractive, customer-friendly shopping environment.
As of November 1, 1998, the Company had in the aggregate
approximately 24,600,000 square feet of total store space (including
receiving rooms and other non-selling areas). The typical store has
approximately 6,000 to 8,000 square feet of total area. The stores are in
both rural and urban areas, and they are typically freestanding or located
in shopping centers with adequate parking available. As of November 1,
1998, there were approximately 1,565 stores located in communities with
populations of less than 15,000; approximately 615 stores in communities
with populations of 15,000 to 50,000; and approximately 886 stores in
communities with populations of over 50,000. All stores are similar in
appearance and display highly visible red and white "Family Dollar Stores"
or "Family Dollar" signs.
The Company's stores are operated on a self-service, cash-and-carry
basis, and low overhead permits the sale of merchandise at a
relatively moderate markup. During the fiscal year ended August 31,
1994, in the face of increasing competition, the Company began to change
its merchandising strategy away from promotional pricing and towards
everyday low prices. In December 1993, prices were reduced on a limited
number of items in 400 stores and in June 1994, this program was expanded
to 1,000 stores. In September and October 1994, the number of stores with
merchandise at reduced prices increased to 1,800, and the number of
stockkeeping units with price reductions increased from approximately 500
to approximately 2,500. A lesser number of price reductions were taken in
the balance of the stores in less competitive markets. No single store
accounted for more than one-eighth of one percent of sales during the
fiscal year ended August 29, 1998. Most of the stores are open six
evenings a week, and many are open on Sunday afternoons.
The stores offer a variety of merchandise including men's,
women's, boys', girls' and infants' clothing, shoes, domestics, household
products, health and beauty aids, toys, school supplies, candy and snack
food, electronics, housewares, paint and automotive supplies. During the
fiscal year ended August 29, 1998, soft goods, including wearing apparel,
shoes, linens, blankets, bedspreads and curtains, accounted for
approximately 32.6 percent of the Company's sales. During the fiscal
year ended August 29, 1998, nationally advertised brand merchandise
accounted for approximately 25 percent of sales, Family Dollar label
merchandise accounted for approximately 5 percent of sales and merchandise
sold under other labels, or which was unlabeled, accounted for the balance
of sales. Irregular merchandise accounted for approximately 1 percent of
sales during such period. The Company does not accept credit cards or
extend credit.
<PAGE>
The Company has a policy of uniform pricing of most items in its
stores. Selected merchandise in stores in the most competitive markets
carries lower prices and in stores in the least competitive markets with
higher operating costs carries higher prices. The Company advertises
through circulars which are inserted in newspapers or mailed directly to
consumers' residences, and also advertises to a limited degree in
newspapers. As part of the Company's plan to reduce expenses to support
the program of price reductions on merchandise in its stores, in the fiscal
year ended August 31, 1995, the number of advertising circulars distributed
to consumers' homes or inserted in newspapers was cut from 22 to 15. In
the fiscal year ended August 31, 1996, the number of advertising circulars
distributed was reduced from 15 to 14. In the fiscal year ended August 31,
1997, 14 circulars again were distributed. In the fiscal year ended
August 29, 1998, the number of advertising circulars distributed was
reduced from 14 to 9. In the fiscal year ending August 28, 1999, the
current plan is to distribute 6 circulars. The Company has an unadvertised
internal maximum price policy which currently is to price most items of
merchandise under $17.99.
The Company purchases its merchandise from approximately 1,725
suppliers and generally has not experienced difficulty in obtaining
adequate quantities of merchandise. Approximately 61 percent of the
merchandise is manufactured in the United States and substantially all such
merchandise is purchased directly from the manufacturer. Purchases of
imported merchandise are made directly from the manufacturer or from
importers. No single supplier accounted for more than 1.5 percent of the
merchandise sold by the Company in the fiscal year ended August 29, 1998.
Each of the Company's 20 buyers specializes in the purchase of specific
categories of goods.
During the fiscal year ended August 29, 1998, approximately
2.5 percent of the merchandise purchased by the Company was shipped
directly to its stores by the manufacturer or importer. Most of the
balance of the merchandise was received at the Company's Distribution
Centers in Matthews, North Carolina, West Memphis, Arkansas, and Warren
County, Virginia. Merchandise is delivered to the stores from the
Distribution Centers in Matthews, West Memphis and Warren County by
Company-owned trucks and by common and contract carriers. During the last
fiscal year, approximately 73 percent of the merchandise delivered was by
common or contract carriers. The average distance between the Distribution
Center in Matthews and the approximately 1,150 stores served by that
facility on August 29, 1998, is approximately 314 miles. The average
distance between the Distribution Center in West Memphis and the
approximately 1,120 stores served by that facility on August 29, 1998, is
approximately 467 miles. The average distance between the Distribution
Center in Warren County and the approximately 747 stores served by that
facility on August 29, 1998, is approximately 333 miles.
During the fiscal year ended August 29, 1998, the Company also
operated satellite distribution buildings in Salisbury, North Carolina, and
Memphis, Tennessee. High volume, bulk items of merchandise are shipped by
vendors directly to these facilities and then delivered to the stores by
contract carriers.
<PAGE>
The business in which the Company is engaged is highly competitive.
The principal competitive factors include location of stores, price and
quality of merchandise, in-stock consistency, merchandise assortment and
presentation, and customer service. The Company competes for sales and
store locations in varying degrees with national, regional and local
retailing establishments, including department stores, discount stores,
variety stores, dollar stores, discount clothing stores, drug stores,
grocery stores, convenience stores, outlet stores, warehouse stores and
other stores. Many of the largest retail merchandising companies in the
nation have stores in areas in which the Company operates. The relatively
small size of the Company's stores permits the Company to open new units in
rural areas and small towns, as well as in large urban centers, in
locations convenient to the Company's low and low-middle income customer
base. As the Company's sales are focused on low priced, basic merchandise,
the stores offer customers a reasonable selection of competitively priced
merchandise within a relatively narrow range of price points.
Generally, in a typical store the highest monthly volume of sales
occurs in December, and the lowest monthly volume of sales occurs in
January and February.
The Company maintains a substantial variety and depth of basic and
seasonal merchandise inventory in stock in its stores (and in distribution
centers for weekly store replenishment) to attract customers and meet their
shopping needs. Vendors' trade payment terms are negotiated to help
finance the cost of carrying this inventory. The Company must balance the
value of maintaining high inventory levels to meet customers' demands with
the cost of having inventories at levels that exceed such demands and that
must be marked down in price in order to sell.
The Company has registered with the U. S. Patent and Trademark Office
the name "Family Dollar Stores" as a service mark.
On August 29, 1998, the Company had approximately 13,300 full-time
employees and approximately 12,800 part-time employees. Approximately 825
additional employees were hired on a temporary basis for the 1997 Christmas
season. None of the Company's employees are covered by collective
bargaining agreements. The Company considers its employee relations
to be good.
ITEM 2. PROPERTIES
As of November 1, 1998, the Company operated 3,066 stores in 38
states and the District of Columbia. See "Business" herein. With the
exception of 137 stores owned by the Company, all of the Company's stores
were occupied under lease. Most of the leases are for fixed rentals. A
large majority of the leases contain provisions which may require
additional payments based upon a percentage of sales or property taxes,
insurance premiums or common area maintenance charges.
<PAGE>
Of the Company's 2,929 leased stores at November 1, 1998, all but
192 leases contain options to renew for additional terms; in most cases for
a number of successive five-year periods. The following table sets forth
certain data, as of November 1, 1998, concerning the expiration dates of all
leases with renewal options:
<TABLE>
<CAPTION>
Approximate Number of Approximate Number of
Leases Expiring Leases Expiring
Assuming No Exercise Assuming Full Exercise
Fiscal Years of Renewal Options of Renewal Options
<S> <C> <C>
1999 447 0
2000-2002 1,446 3
2003-2005 698 82
2006-2008 141 274
2009 and thereafter 5 2,378
</TABLE>
Of the 137 Company-owned stores, 18 are located in Texas, 16 in North
Carolina, 14 in Georgia, 12 in Indiana, 11 in Virginia, 10 in Illinois, 7
each in Michigan and Tennessee, 6 in Ohio, 4 each in Alabama, South
Carolina, West Virginia, Florida, Arkansas, Kentucky and Louisiana, 2 each
in Iowa and Oklahoma, and one each in Mississippi, New Jersey, Missouri and
Kansas. In these owned stores, there are approximately 1,075,000 total
square feet of space.
The Company also owns its Executive Offices and Distribution Center
located on a 64.5 acre tract of land in Matthews, North Carolina, just
outside of Charlotte, in a building containing approximately 810,000
square feet of which approximately 740,000 square feet are used for
the Distribution Center which includes receiving, warehousing and
shipping facilities, and approximately 70,000 square feet are used for
Executive Offices.
The Company owns a second full-service distribution center located on
a 75-acre tract of land in West Memphis, Arkansas, in a building
containing approximately 850,000 square feet. This facility became
operational in the spring of 1994 with 550,000 square feet of space, and a
300,000 square foot addition was substantially completed by the end of the
Company's fiscal year on August 31, 1996.
The Company owns a third full-service distribution center located on
a 75-acre tract of land in Warren County, Virginia, in a building containing
approximately 907,000 square feet. This facility became operational in
January 1998.
<PAGE>
Construction began in November 1998 on a fourth full-service
distribution center on an 85-acre tract of land leased by the Company in
Duncan, Oklahoma. Under the lease, the Company has the option to purchase
the land and the distribution facility. This facility will contain
approximately 907,000 square feet and the plan is to begin shipping
merchandise from this facility to stores in the fall of 1999. The estimated
cost for the land, building, equipment and related services is $50 million.
The aggregate of the lease payments and the purchase price is estimated to
be $50 million. The Company expects to exercise this purchase option within
the next twelve months. The lease payments and purchase price are expected
to be financed with cash flow from current operations and, if necessary,
short-term borrowing under the Company's bank lines of credit.
During the fiscal year ended August 29, 1998, the Company leased
buildings in Salisbury, North Carolina (approximately 300,000 square feet)
and Memphis, Tennessee (approximately 270,000 square feet) to serve as
satellite distribution facilities, and a building in Charlotte
(approximately 310,000 square feet) to provide storage space for the
Distribution Center in nearby Matthews. The Company also leased another
building in Charlotte (approximately 78,000 square feet) as a reclamation
facility for merchandise returned from the stores and for storage. During
the current fiscal year, the Company is no longer leasing the 300,000 square
foot space in Salisbury or the 310,000 square foot space in Charlotte. The
270,000 square foot space in Memphis is currently being leased to provide
storage space for the Distribution Center in nearby West Memphis, Arkansas,
and the 78,100 square foot space in Charlotte currently is being leased for
storage. Additional storage space also is being leased on a short-term
basis in Charlotte and Winchester, Virginia.
The Company owns and operates a fleet of tractor-trailers and trucks
to distribute merchandise to some of its stores.
ITEM 3. LEGAL PROCEEDINGS
The Company knows of no material pending legal proceedings, other
than ordinary routine litigation incidental to the business, to which the
Company is a party or of which any of its property is subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted during the fourth quarter of the
fiscal year ended August 29, 1998, to a vote of security holders through the
solicitation of proxies or otherwise.
<PAGE>
ITEM 4a. EXECUTIVE OFFICERS OF THE REGISTRANT
The following information is furnished with respect to each of the
executive officers of the Company as of November 1, 1998:
<TABLE>
<CAPTION>
Name Position and Office Age
<S> <C> <C>
Leon Levine (1) Chairman of the Board 61
Howard R. Levine (2) President 39
R. James Kelly (3) Vice Chairman 51
George R. Mahoney, Jr. (4) Executive Vice President- 56
General Counsel and Secretary
R. David Alexander, Jr. (5) Senior Vice President- 41
Distribution and
Logistics
Albert S. Rorie (6) Senior Vice President- 48
Information Technology
John J. Scanlon (7) Senior Vice President- 49
Merchandising and Advertising
C. Martin Sowers (8) Senior Vice President- 40
Finance
Phillip W. Thompson (9) Senior Vice President- 49
Store Operations
Samuel J. Bernstein (10) Vice President- 39
General Merchandise Manager
Charles W. Broome (11) Vice President- 50
Store Operations
Charles A. Brunjes (12) Vice President- 39
Store Development
Terry A. Cozort (13) Vice President- 55
Human Resources
Charles D. Curry (14) Vice President- 43
Asset Protection
Bruce W. Fosson (15) Vice President- 52
Store Operations
<PAGE>
<S> <C> <C>
Charles S. Gibson, Jr. (16) Vice President- 37
Logistics
Owen R. Humphrey (17) Vice President- 57
Distribution and
Transportation
Gilbert A. LaFare (18) Vice President- 52
Real Estate
Edgar L. Paxton (19) Vice President- 56
Advertising and
Sales Promotion
Lou Scognamiglio (20) Vice President- 49
General Merchandise Manager
Richard P. Siliakus (21) Vice President- 39
General Merchandise Manager
Kenneth T. Smith (22) Vice President- 36
Business Development
</TABLE>
(1) Mr. Leon Levine founded the Company's business in 1959 and
was its President, Chief Executive Officer and Treasurer
from 1959 until September 1977 when he was elected Chairman
of the Board, Chief Executive Officer and Treasurer.
He served in these positions until August 1998 when he
resigned as Chief Executive Officer and Treasurer.
Leon Levine retains the position of Chairman of the Board.
He is the father of Howard R. Levine.
(2) Mr. Howard R. Levine was employed by the Company in
various capacities in the Merchandising Department from
1981 to 1987, including employment as Senior Vice
President-Merchandising and Advertising. From 1988 to
1992, Mr. Levine was President of Best Price Clothing
Stores, Inc., a chain of ladies' apparel stores. From 1992
to April 1996, he was self-employed as an investment
manager. He rejoined the Company in April 1996, and was
elected Vice President-General Merchandise Manager:
Softlines in April 1996, Senior Vice President-
Merchandising and Advertising in September 1996,
President and Chief Operating Officer in April 1997,
and Chief Executive Officer in August 1998. He is the
son of Leon Levine.
<PAGE>
(3) Mr. R. James Kelly was employed by the Company as Vice
Chairman-Chief Financial and Administrative Officer in
January 1997. For more than five years prior to his
employment by the Company, he was a partner with
PricewaterhouseCoopers LLP.
(4) Mr. George R. Mahoney, Jr. was employed by the Company as
General Counsel in October 1976. He was elected Vice
President-General Counsel and Secretary in April 1977,
Senior Vice President-General Counsel and Secretary in
January 1984 and Executive Vice President-General Counsel
and Secretary in October 1991.
(5) Mr. R. David Alexander, Jr. was employed by the Company as
Senior Vice President-Distribution and Transportation in
August 1995, and was promoted to Senior Vice President-
Distribution and Logistics in September 1997. Prior to his
employment by the Company, he was employed by Northern
Automotive Co., Inc., a chain of discount automotive supply
stores, from June 1993 to August 1995, where he was Senior
Vice President-Distribution and Transportation. Prior to
his employment by Northern Automotive Co., Inc., he was
employed by Best Products Co., Inc., a chain of catalogue
showroom stores, from June 1985 to May 1993 where he was
Senior Vice President-Distribution and Transportation.
(6) Mr. Albert S. Rorie was employed by the Company in various
capacities in the Data Processing area from March 1973
through January 1981, including employment as Director of
Data Processing. Mr. Rorie was self-employed as a data
processing consultant from January 1981 through May 1982,
when he rejoined the Company and was elected Vice
President-Data Processing. He was elected Senior Vice
President-Data Processing in January 1988 and Senior Vice
President-Information Technology in September 1997.
(7) Mr. John J. Scanlon was employed by the Company as
Divisional Vice President in March 1992. Mr. Scanlon was
elected Vice President-General Merchandise Manager:
Hardlines in April 1996, and was elected Senior Vice
President-Merchandising and Advertising in June 1998.
(8) Mr. C. Martin Sowers was employed by the Company as an
Accountant in October 1984 and was promoted to Assistant
Controller in January 1985. He was elected Controller in
January 1986, Vice President-Controller in July 1989 and
Senior Vice President-Finance in December 1991.
(9) Mr. Phillip W. Thompson was employed by the Company in
January 1984 in the Store Operations Department. He was
elected Vice President-Store Operations in January 1985,
and Senior Vice President-Store Operations in January 1992.
<PAGE>
(10) Mr. Samuel J. Bernstein was employed by the Company in 1980
and became a Buyer in the Merchandising Department in 1983.
He was promoted to Divisional Vice President-Merchandising
in July 1996, and was elected Vice President-General
Merchandise Manager in June 1998.
(11) Mr. Charles W. Broome was employed by the Company in 1977
in the Store Operations Department. He was promoted to
Regional Vice President-Store Operations in February 1992.
He was elected Vice President-Store Operations in
October 1996.
(12) Mr. Charles A. Brunjes was employed by the Company in 1988
as Director of Merchandise and Store Presentation in the
Store Operations Department. He was promoted to Divisional
Vice President-Store Services in July 1995, and was elected
Vice President-Store Development in September 1998.
(13) Mr. Terry A. Cozort was employed by the Company as Director
of Human Resources in April 1988. He was elected Vice
President-Human Resources in July 1989.
(14) Mr. Charles D. Curry was employed by the Company in May
1982 in the Store Operations Department and served in
several positions including Regional Vice President-Store
Operations. He was elected Vice President-Asset Protection
in June 1997.
(15) Mr. Bruce W. Fosson was employed by the Company in March
1992 as Regional Vice President-Store Operations. He was
elected Vice President-Store Operations in March 1996.
(16) Mr. Charles S. Gibson, Jr. was employed by the Company as
Vice President-Logistics in September 1997. Prior to his
employment by the Company, he was employed by Campo
Electronics, Appliances and Computers, Inc. a regional
chain of electronics stores, from November 1994 to August
1997, where his last position was Chief Operating Officer
and his previous position was Vice President-Logistics and
Operations. Prior to his employment by Campo Electronics,
Appliances and Computers, Inc., he was employed by Big B,
Inc., a drug store chain, from August 1991 to November 1994
where he was Vice President-Logistics.
(17) Mr. Owen R. Humphrey was employed by the Company in August
1979, and was promoted to Distribution Center Operations
Manager in December 1983. Mr. Humphrey was promoted
to Director of Distribution in January 1988, and was
elected Vice President-Distribution and Transportation
in July 1989.
(18) Mr. Gilbert A. LaFare was employed by the Company in August
1992 as Vice President-Real Estate.
<PAGE>
(19) Mr. Edgar L. Paxton was employed by the Company in December
1985 as Director of Advertising. He was elected Vice
President-Advertising and Sales Promotion in January 1988.
(20) Mr. Lou Scognamiglio was employed by the Company as Vice
President-General Merchandise Manager: Softlines in
February 1997. For more than five years prior to his
employment by the Company, he was employed by One Price
Clothing Stores, Inc., a regional chain of apparel stores,
where his last position was Divisional Merchandise Manager.
(21) Mr. Richard P. Siliakus was employed by the Company in 1981
as a Buyer in the Merchandising Department. He was
promoted to Divisional Vice President-Merchandising in
December 1994, and was elected Vice President-General
Merchandise Manager in June 1998.
(22) Mr. Kenneth T. Smith was employed by the Company as a
financial analyst in March 1990. Mr. Smith was promoted to
Director of Information Services-Operations in February
1992 and to Director of Accounting in October 1992. He was
elected Vice President-Controller in October 1995 and Vice
President-Loss Prevention in June 1997. He became Vice
President-Business Development in March 1998.
All executive officers of the Company are elected by and serve at
the pleasure of the Board of Directors.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
The information required by this item is included in the Company's
Annual Report to Stockholders for the fiscal year ended August 29, 1998, on
page 16 under the captions "Market Price and Dividend Information" and
"Market Prices and Dividends" and is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
The information required by this item is included in the Company's
Annual Report to Stockholders for the fiscal year ended August 29, 1998, on
pages 14 and 15 under the caption "Summary of Selected Financial Data" and is
incorporated herein by reference. The Company did not have any long-term
debt at the end of each of its last five fiscal years.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The information required by this item is included in the Company's
Annual Report to Stockholders for the fiscal year ended August 29, 1998, on
pages 14 through 16 under the caption "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and is incorporated herein
by reference.
<PAGE>
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
Not Applicable
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item is included in the Company's
Annual Report to Stockholders for the fiscal year ended August 29, 1998, on
pages 17 through 24 and is incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item as to the Company's
directors and compliance by the Company's directors, executive officers and
certain beneficial owners of the Company's Common Stock with Section 16(a) of
the Securities Exchange Act of 1934 is included in the Company's proxy
statement dated November 25, 1998, on pages 4 through 7 under the caption
"Election of Directors" and on page 15 under the caption "Section 16(a)
Beneficial Ownership Reporting Compliance" and is incorporated herein by
reference. The information required by this item as to executive officers is
included in Item 4A in Part I of this report.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is included in the Company's
proxy statement dated November 25, 1998, on pages 7 through 14 under the
caption "Executive Compensation" and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is included in the Company's
proxy statement dated November 25, 1998, on pages 3 and 4 under the caption
"Ownership of the Company's Securities" and is incorporated herein by
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is included in the Company's
proxy statement dated November 25, 1998, on pages 14 and 15 under the caption
"Related Transactions" and is incorporated herein by reference.
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Documents filed as part of this report:
1 and 2. Financial Statements and Financial Statement Schedules:
The consolidated financial statements of Family Dollar Stores,
Inc., and subsidiaries which are incorporated by reference to the
Annual Report to Stockholders for the fiscal year ended August 29,
1998, are set forth in the index on page 19 of this report.
All schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission
are not required under the related instructions, are inapplicable
or the information is included in the consolidated financial
statements, and therefore, have been omitted.
The financial statements of Family Dollar Stores, Inc. (Parent
Company) are omitted because the registrant is primarily a
holding company and all subsidiaries included in the consolidated
financial statements being filed, in the aggregate, do not have
minority equity and/or indebtedness to any person other than the
registrant or its consolidated subsidiaries in amounts which
together exceed 5 percent of the total assets as shown by the most
recent year-end consolidated balance sheet.
3. Exhibits:
Exhibits incorporated by reference:
3(a)(i) Certificate of Incorporation, dated November 24, 1969,
(filed as Exhibit 3(a) to the Company's Registration
Statement on Form S-1, No. 2-35468).
(ii) Certificate of Amendment, dated February 2, 1972, of
Certificate of Incorporation (filed as Exhibit 3(a)(ii)
to the Company's Form 10-K (File No. 1-6807) for the year
ended August 31, 1980).
(iii) Certificate of Amendment, dated January 23, 1979, of
Certificate of Incorporation (filed as Exhibit 2 to the
Company's Form 10-Q (File No. 1-6807) for the quarter
ended February 28, 1979).
(iv) Certificate of Amendment, dated January 20, 1983, of
Certificate of Incorporation (filed as Exhibit 4(iv) to
the Company's Registration Statement on Form S-3,
No. 2-85343).
(v) Certificate of Amendment, dated January 16, 1986, of
Certificate of Incorporation (filed as Exhibit 3(a)(v) to
the Company's Form 10-K (File No. 1-6807) for the year
ended August 31, 1986).
<PAGE>
(vi) Certificate of Amendment, dated January 15, 1987, of
Certificate of Incorporation (filed as Exhibit 3(a)(vi)
to the Company's Form 10-K (File No. 1-6807) for the year
ended August 31, 1987).
(vii) Certificate of Amendment, dated January 15, 1998, of
Certificate of Incorporation (filed as Exhibit 3.1 to
the Company's Registration Statement on Form S-8,
No. 333-48751).
* 10 (i) Incentive Profit Sharing Plan amended as of January 16, 1997
(filed as Exhibit 10(ii) to the Company's Form 10-Q (File
No. 1-6807) for the quarter ended February 28, 1997).
* 10 (ii) 1989 Non-Qualified Stock Option Plan, amended as of
January 15, 1998 (filed as Exhibit 99.1 to the Company's
Registration Statement on Form S-8, No. 333-48751).
* 10 (iii) Family Dollar Employee Savings and Retirement Plan and Trust
amended and restated as of January 1, 1987 (filed as Exhibit
10 (viii) to the Company's Form 10-K (File No. 1-6807) for
the year ended August 31, 1995).
* 10 (iv) Amendment No. One dated January 15, 1996, to Family Dollar
Employee Savings and Retirement Plan and Trust (filed as
Exhibit 10(v) to the Company's Form 10-K (File No. 1-6807)
for the year ended August 31, 1996).
* 10 (v) Amendment No. 2, dated January 15, 1998, to Family Dollar
Employee Savings and Retirement Plan and Trust (filed as
Exhibit 10(ii) to the Company's Form 10-Q (File No. 1-6807)
for the quarter ended February 28, 1998).
* 10 (vi) Amendment No. 3, dated March 19, 1998, to Family Dollar
Employee Savings and Retirement Plan and Trust (filed as
Exhibit 10(iii) to the Company's Form 10-Q (File No. 1-6807)
for the quarter ended February 28, 1998).
* 10 (vii) Trust Agreement between Merrill Lynch Trust Company of North
Carolina, as Trustee, and the Company and Family Dollar,
Inc., as Employer, with respect to Family Dollar Employee
Savings and Retirement Plan and Trust (filed as Exhibit 10
to the Company's Form 10-Q (File No. 1-6807) for the quarter
ended May 31, 1998.)
10(viii) Credit Agreement, dated as of March 31, 1996, between the
Company and NationsBank, N.A.,(filed as Exhibit 10 to the
Company's Form 10-Q (File No. 1-6807) for the quarter ended
May 31, 1996).
10 (ix) Amendment No. 1, dated as of March 26, 1997, to the Credit
Agreement, dated as of March 31, 1996, between the Company
and NationsBank, N.A. (filed as Exhibit 10(i) to the
Company's Form 10-Q (File No. 1-6807) for the quarter ended
November 30, 1997).
<PAGE>
10 (x) Amendment No. 2, dated as of December 31, 1997, to the
Credit Agreement, dated as of March 31, 1996, between the
Company and NationsBank, N.A. (filed as Exhibit 10(ii) to
the Company's Form 10-Q (File No. 1-6807) for the quarter
ended November 30, 1997).
10 (xi) 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.
(filed as Exhibit 10(i) to the Company's Form 10-Q (File
No. 1-6807) for the quarter ended February 28, 1998).
* 10 (xii) Employment Agreement dated December 17, 1996, between the
Company and R. James Kelly (filed as Exhibit 10(i) to the
Company's Form 10-Q (File No. 1-6807) for the quarter ended
February 28, 1997).
* 10(xiii) Employment Agreement dated April 29, 1997, between the
Company and Howard R. Levine (filed as Exhibit 10(i) to the
Company's Form 10-Q (File No. 1-6807) for the quarter ended
May 31, 1997).
* 10 (xiv) Amendment dated August 28, 1997, to the Employment
Agreement dated April 29, 1997, between the Company
and Howard R. Levine (filed as Exhibit 10(i) to the
Company's Form 10-K (File No. 1-6807) for the year ended
August 31, 1997).
Exhibits filed herewith:
3(b) Bylaws as amended on August 19, 1998.
10 (i) Amendment, dated as of November 19, 1998, to the Credit
Agreement, dated as of March 31, 1996, between the Company,
Family Dollar, Inc. and NationsBank, N.A.
* 10 (ii) Amendment dated August 19, 1998, to the Employment
Agreement dated April 29, 1997, as amended, between the
Company and Howard R. Levine.
11 Statement Re: Computations of Per Share Earnings.
13 Annual Report to Stockholders for the fiscal year ended
August 29, 1998 (only those portions specifically
incorporated by reference herein shall be deemed filed).
21 Subsidiaries of the Company.
27 Financial Data Schedule
* Exhibit represents a management contract or compensatory plan.
<PAGE>
(b) A report on Form 8-K, dated July 13, 1998, was filed during
the last quarter of the fiscal year ended August 29, 1998.
This Form 8-K reported a change in the Company's fiscal
reporting calendar to a more commonly used "Retail"
calendar. Accordingly, the Company's fiscal year 1998 ended
on August 29, 1998, and the fourth quarter and fiscal year
1998 had two less days than they otherwise would have.
As reported in the Form 8-K, the Company's future fiscal
years will now generally end on the Saturday closest to
August 31, but may deviate from this convention during
certain years by one week in order to coincide with the
standard "Retail" calendar. Previously, the Company's
fiscal year consisted of 12 calendar months ending
August 31.
FAMILY DOLLAR STORES, INC., AND SUBSIDIARIES
Index
The consolidated financial statements of Family Dollar Stores, Inc., and
subsidiaries together with the report of PricewaterhouseCoopers LLP
incorporated in this report appear on the following pages of the Annual
Report to Stockholders for the fiscal year ended August 29, 1998.
<TABLE>
<CAPTION>
Page of the
Annual Report
<S> <C>
Report of Independent Accountants 17
Consolidated Statements of Income 17
Consolidated Balance Sheets 18
Consolidated Statements of Shareholders'
Equity 19
Consolidated Statements of Cash Flows 20
Notes to Consolidated Financial Statements 21-24
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 November 19, 1998 By HOWARD R. LEVINE
HOWARD R. LEVINE
President (Chief Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the registrant
and in the capacities and on the date indicated.
Signature Title Date
LEON LEVINE Chairman of the Board and November 19, 1998
LEON LEVINE Director
HOWARD R. LEVINE President and Director November 19, 1998
HOWARD R. LEVINE (Chief Executive Officer)
R. JAMES KELLY Vice Chairman-Chief November 19, 1998
R. JAMES KELLY Financial and Administrative
Officer and Director
(Principal Financial
Officer)
GEORGE R. MAHONEY, JR. Executive Vice President November 19, 1998
GEORGE R. MAHONEY, JR. and Director
C. MARTIN SOWERS Senior Vice President- November 19, 1998
C. MARTIN SOWERS Finance (Principal
Accounting Officer)
MARK R. BERNSTEIN Director November 19, 1998
MARK R. BERNSTEIN
JAMES H. HANCE, JR. Director November 19, 1998
JAMES H. HANCE, JR.
JAMES G. MARTIN Director November 19, 1998
JAMES G. MARTIN
<TABLE>
<CAPTION>
FAMILY DOLLAR STORES, INC. STATEMENT RE COMPUTATIONS OF PER SHARE EARNINGS
AS PRESENTED FY 1998 FY 1997
BASIC DILUTED BASIC DILUTED
<S> <C> <C> <C> <C>
AVERAGE SHARES OUTSTANDING FOR THE YEAR ENDED 172,008,335 172,008,335 171,187,420 171,187,420
NET INCOME $103,287,925 $103,287,925 $74,676,737 $74,676,737
EARNINGS PER SHARE:
NET INCOME $0.60 $0.60 $0.44 $0.44
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 3,710,285 3,231,482
WEIGHTED AVERAGE SHARES ASSUMED REPURCHASED FROM
ASSUMED PROCEEDS OF EXERCISES USING TREASURY STOCK
METHOD (AVERAGE MARKET PRICE) (2,494,985) (2,700,950)
NET PRO FORMA COMMON STOCK EQUIVALENT INCREMENTAL SHARES 1,215,300 530,532
PERCENTAGE DILUTION FROM PRO FORMA COMMON
STOCK EQUIVALENT INCREMENTAL SHARES 0.71% 0.31%
TOTAL COMMON STOCK AND COMMON STOCK EQUIVALENTS 173,223,635 171,717,952
NET INCOME $103,287,925 $74,676,737
PRO FORMA EARNINGS PER SHARE (INCLUDING DILUTIVE
COMMON STOCK EQUIVALENTS):
NET INCOME $0.60 $0.44
<PAGE>
<CAPTION>
FY 1996
BASIC DILUTED
<C> <C>
170,440,692 170,440,692
$60,587,746 $60,587,746
$0.35 $0.35
1,214,931
(1,046,577)
168,354
0.10%
170,609,046
$60,587,746
$0.35
</TABLE>
Market Price and Dividend Information
Family Dollar's Common Stock is traded on the New York Stock Exchange under
the ticker symbol FDO. At November 1, 1998, there were approximately 2,325
holders of record of the Common Stock. The accompanying tables give the high
and low sales prices of the Common Stock and the dividends declared per share
for each quarter of fiscal 1998 and 1997. All figures have been adjusted to
reflect the two-for-one stock split distributed April 30, 1998.
<TABLE>
Market Prices and Dividends
<CAPTION>
1998 High Low Dividend
<S> <C> <C> <C>
First Quarter.............. $15.00 $10.34 $ .04
Second Quarter............. 18.31 13.06 .04 1/2
Third Quarter.............. 19.56 15.31 .04 1/2
Fourth Quarter............. 21.88 13.38 .04 1/2
<CAPTION>
1997 High Low Dividend
<S> <C> <C> <C>
First Quarter.............. $ 6.29 $ 5.50 $ .03 2/3
Second Quarter............. 7.88 6.17 .04
Third Quarter.............. 9.00 7.63 .04
Fourth Quarter............. 11.69 8.34 .04
</TABLE>
<PAGE>
<TABLE>
SUMMARY OF SELECTED FINANCIAL DATA
<CAPTION>
August 29, August 31, August 31, August 31,
Years Ended 1998 1997 1996 1995
<S> <C> <C> <C> <C>
Net sales............................. $2,361,930,395 $1,994,973,237 $1,714,627,092 $1,546,894,565
Cost of sales and operating expenses.. 2,195,942,470 1,873,496,500 1,615,861,346 1,452,519,040
Income before income taxes and
cumulative effect of accounting
change.............................. 165,987,925 121,476,737 98,765,746 94,375,525
Income taxes.......................... 62,700,000 46,800,000 38,178,000 36,266,000
Income before cumulative effect
of accounting change................ 103,287,925 74,676,737 60,587,746 58,109,525
Cumulative effect of change in
method of accounting for income
taxes............................... - - - -
Net income............................ 103,287,925 74,676,737 60,587,746 58,109,525
Earnings per common share:
Income before cumulative effect of
accounting change(1)................ $.60 $ .44 $ .35 $ .34
Net income(1)(2).................... $.60 $ .44 $ .35 $ .34
Dividends declared.................... $ 30,116,216 $ 26,848,520 $ 24,435,102 $ 21,837,249
Dividends declared per common share(1) $.17 1/2 $.15 2/3 $.14 1/3 $.12 2/3
Total assets.......................... $942,180,070 $ 780,293,852 $696,808,291 $636,233,767
Working capital....................... $303,354,419 $ 283,476,028 $273,694,125 $264,671,854
Shareholders' equity.................. $578,150,707 $ 500,198,473 $444,957,119 $407,750,588
Stores opened......................... 315 236 223 213
Stores closed......................... (65) (50) (58) (12)
Number of stores - end of year........ 3,017 2,767 2,581 2,416
<PAGE>
SUMMARY OF SELECTED FINANCIAL DATA
<CAPTION>
August 31, August 31, August 31, August 31, August 31, August 31,
1994 1993 1992 1991 1990 1989
<C> <C> <C> <C> <C> <C>
$1,428,440,427 $1,297,430,787 $1,158,703,861 $989,345,265 $874,395,095 $756,886,681
1,328,323,366 1,194,510,816 1,069,764,555 925,619,376 826,764,773 721,799,222
100,117,061 102,919,971 88,939,306 63,725,889 47,630,322 35,087,459
38,157,175 38,491,288 33,267,370 23,484,031 18,897,177 13,570,222
61,959,886 64,428,683 55,671,936 40,241,858 28,733,145 21,517,237
1,139,153 - - - - -
63,099,039 64,428,683 55,671,936 40,241,858 28,733,145 21,517,237
$ .36 $ .39 $ .34 $ .24 $ .18 $ .13
$ .37 $ .39 $ .34 $ .24 $ .18 $ .13
$ 18,656,163 $ 16,325,918 $ 13,988,516 $ 11,960,851 $ 10,819,248 $ 9,709,104
$.11 $.09 2/3 $.08 1/3 $.07 $.06 1/2 $.05 2/3
$592,821,871 $537,445,610 $478,027,178 $399,271,302 $355,096,527 $324,012,452
$230,234,774 $205,863,199 $170,288,208 $136,207,278 $107,879,235 $ 87,228,450
$370,172,275 $323,281,504 $271,772,441 $227,319,970 $197,076,663 $179,135,552
202 174 160 122 122 161
(22) (24) (34) (43) (22) (10)
2,215 2,035 1,885 1,759 1,680 1,580
(1) Adjusted to reflect two-for-one stock split distributed April 30, 1998.
(2) Figures represent both basic and diluted earnings per common share.
</TABLE>
<PAGE>
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Net Sales
Net sales increased approximately 18.4% ($367.0 million) in fiscal
1998 compared with fiscal 1997, and approximately 16.4% ($280.3 million)
in fiscal 1997 compared with fiscal 1996. The sales increases in fiscal
1998 and fiscal 1997 were attributable to increased sales in existing
stores and sales from new stores opened as part of the Company's store
expansion program.
Comparable store sales increased approximately 9.4% in fiscal 1998
and 9.3% in fiscal 1997, as compared with the respective prior years.
Customers continued to respond favorably during fiscal 1998 to the
Company's everyday low pricing strategy that was implemented during
fiscal 1995. Increased sales of hardlines merchandise have been the
primary contributor to the overall sales increases, with hardlines sales
increases in comparable stores of approximately 12.5% in fiscal 1998.
Hardlines as a percentage of total sales increased to 67.4% in fiscal
1998 compared to 65.5% in fiscal 1997. The Company has broadened its
assortment of hardlines merchandise and dedicated more selling space in
its stores to hardlines over the past two fiscal years. The Company has
correspondingly reduced its assortment and selling space for softlines
merchandise during this time period. Even with reduced softline
inventory levels due to these changes, softlines sales in comparable
stores increased approximately 3.0% in fiscal 1998. The Company expects
the shift in merchandise mix to hardlines to continue in fiscal 1999.
The Company reduced the number of advertising circulars distributed
in fiscal 1998 to nine, which was five fewer circulars than were
distributed in fiscal 1997. The adverse sales impact of discontinuing
the circulars was more than offset by the increased customer traffic
generated by the everyday low price strategy.
The comparable store sales increase of 9.3% in fiscal 1997 was also
primarily attributable to the favorable customer response to everyday low
pricing and increased sales of hardlines. In fiscal 1997, comparable
store hardlines sales increased approximately 12.8% and softlines sales
increased approximately 3.2%. Although increased hardlines sales
represented the majority of overall comparable store sales increase, the
increase in fiscal 1997 comparable store softlines sales represented the
first such annual increase since fiscal 1993. The Company distributed 14
advertising circulars in fiscal 1997, which was the same number as in
fiscal 1996.
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.
During fiscal 1998, the Company opened 315 stores and closed 65
stores for a net addition of 250 stores, compared with the opening of 236
stores and closing of 50 stores for a net addition of 186 stores during
<PAGE>
fiscal 1997. The Company also expanded or relocated 90 stores in fiscal
1998, compared with 94 stores that were expanded or relocated in fiscal
1997. In addition, approximately 170 stores in fiscal 1998 and
approximately 380 stores in fiscal 1997 were renovated to the current
store layout design. The Company currently plans to open approximately
350 to 400 stores and close approximately 50 stores for a net addition of
300 to 350 stores during fiscal 1999. The Company also currently expects
to renovate an additional 300 to 400 stores and expand or relocate
approximately 100 stores in fiscal 1999. Store opening, closing,
expansion, relocation, and renovation plans are continuously reviewed and
are subject to change.
Cost of Sales and Margin
Cost of sales increased approximately 17.7% ($238.5 million) in fiscal
1998 compared with fiscal 1997, and approximately 16.8% ($194.0 million)
in fiscal 1997 compared with fiscal 1996. These increases primarily
reflected the additional sales volume in each of the years. Cost of
sales, as a percentage of net sales, was 67.3% in fiscal 1998, 67.7% in
fiscal 1997, and 67.4% in fiscal 1996. The decrease in the cost of sales
percentage for fiscal 1998 was due in part to decreases in advertising
markdowns related to the elimination of five advertising circulars and to
the inclusion of more items at the everyday low price in the remaining
circulars. Merchandise shrinkage losses also decreased slightly as a
percentage of sales compared with the same period last year. The
decrease in the cost of sales percentage for 1998 was mitigated by the
increase in sales of hardlines merchandise, which typically carries a
lower margin than softlines. The shift in the product mix to hardlines
was the primary reason for the increase in the cost of sales percentage
for fiscal 1997 compared with fiscal 1996.
For fiscal 1999, the Company's plan is for the cost of sales
percentage to remain relatively flat as the continued shift in product
mix to hardlines is planned to be offset by the elimination of another 2
to 3 advertising circulars.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased approximately
16.0% ($83.95 million) in fiscal 1998 compared with fiscal 1997, and
approximately 13.9% ($63.67 million) in fiscal 1997 compared with fiscal
1996. The increases in these expenses primarily were attributable to
additional costs arising from the continued growth in the number of
stores in operation. As a percentage of net sales, selling, general and
administrative expenses were 25.7% in fiscal 1998, 26.2% in fiscal 1997,
and 26.8% in fiscal 1996. The percentage decrease in fiscal 1998
primarily was due to the leverage provided by the 9.4% increase in sales
in comparable stores, as well as a reduction in advertising expenses due
to the elimination of five advertising circulars. These effects were
<PAGE>
partially offset by an estimated $4 million increase in store labor
costs due to the federal minimum wage increase that was effective on
September 1, 1997, and by start-up costs of the Company's third
full-service distribution center in Warren County, Virginia.
The percentage decrease in expenses in fiscal 1997 primarily was
due to the leverage provided by the 9.3% increase in sales in comparable
stores and to cost control measures. The Company estimates that during
fiscal 1997 store labor costs increased approximately $3.6 million due to
the federal minimum wage increase that was effective October 1, 1996.
Selling, general and administrative expenses also are expected to
increase in the latter half of fiscal 1999 due to start-up costs of the
Company's fourth full-service distribution center that is expected to
open prior to the end of the calendar year 1999. Advertising expenses
are expected to decrease in fiscal 1999 with the planned elimination of
another 2 to 3 advertising circulars. With planned increases in sales in
comparable stores, the Company is planning for selling, general, and
administrative expenses in fiscal 1999 to decrease modestly as a
percentage of net sales.
Income Taxes
The effective tax rate was 37.8% in fiscal 1998, 38.5% in fiscal
1997 and 38.7% in fiscal 1996. The decrease in the effective tax rate in
fiscal 1998 and fiscal 1997 compared to the prior year resulted from
changes in effective state income tax rates and from increases in federal
Work Opportunity Tax Credits.
Liquidity and Capital Resources
The Company has consistently maintained a strong position of liquidity
and financial strength. Cash provided by operating activities during
fiscal 1998 was $211.5 million as compared to $123.2 million in fiscal
1997 and $81.2 million in fiscal 1996. These amounts have enabled the
Company to fund its regular operating needs, capital expenditure program
and cash dividend payments. In addition, the Company maintains $100
million of unsecured bank lines of credit for short-term financing and
periodically utilizes short-term borrowings to meet the cash needs of its
expansion program and seasonal inventory increases. Improved system-wide
inventory flows continue to offset merchandise inventory increases for
new stores and a new distribution center which resulted in a decrease of
approximately 9% in average inventory per store in fiscal 1998 compared
to fiscal 1997. There were no long-term borrowings during fiscal 1998,
1997 or 1996.
The increase in capital expenditures to $96.9 million in fiscal
1998 from $77.0 million in fiscal 1997 primarily was due to expenditures
incurred in fiscal 1998 to complete construction of the third
distribution center in Warren County, Virginia, as well as costs to
open an additional 79 new stores. The Company also expanded its
<PAGE>
investment in information technology in fiscal 1998. Capital
expenditures for fiscal 1999 are currently expected to be approximately
$125 million, which primarily represent estimated expenditures for new
store expansion, existing store expansion, relocation, and renovation,
and construction and equipping of the fourth distribution center. The
new store expansion and the additional distribution center also will
require additional investment in merchandise inventories.
Capital spending plans, including store expansion, are continuously
reviewed and are subject to change. Cash flow from current operations
and short-term borrowings under the bank lines of credit are expected to
be sufficient to meet all foreseeable liquidity and capital resource
needs, including store expansion and other capital spending programs. No
long-term borrowings are now expected to be required during fiscal 1999.
Year 2000
The Company has completed the assessment phase of its Year 2000
compliance program, during which the Company evaluated its exposure to
Year 2000 risks in its information technology (IT) systems, as well as
potential risks in other non-IT systems with embedded technology and
risks from the non-compliance of third parties with which the Company has
significant dealings. The Company has substantially completed planned
remediation of its software applications to be Year 2000 compliant, and
expects to complete testing of these applications by January 1999. In
addition, the Company is implementing financial and human resource
software as part of its strategic IT plan. The implementation of this
software is expected to be completed by January 1999, and was not
accelerated due to Year 2000 issues. The Company estimates that it will
expend approximately $1 million for Year 2000 assessment and remediation,
the majority of which was incurred in and prior to fiscal 1998.
The Company presently believes that with the remediation of
existing software and implementation of new software, the Year 2000 issue
will not pose significant internal operational problems. However, there
can be no assurances that this will be the case, and there are also risks
to the Company's operations from third-party Year 2000 failures. Since
no single merchandise supplier accounts for more than 1.5% of the
Company's merchandise purchases, the Company does not currently foresee
any significant impairment in its ability to procure merchandise.
Approximately 39% of the Company's merchandise is imported, and any
significant disruptions in the global transportation industry could cause
a material adverse impact on the Company's operations. Also, any
widespread interruptions of utility service could have material adverse
consequences. The Company will continue to evaluate these risks and
develop appropriate contingency plans by June 1999.
<PAGE>
Inflation and Other Matters
The Company's results are impacted by the effect of inflation on
the cost of its merchandise and on operating expenses. Due to the nature
of the Company's merchandise, sales levels generally have incorporated an
inflation factor which neither exceeds nor is significantly lower than
general inflation trends. The Company attempts to combat inflation in
the cost of its merchandise by shifting its source of supply or by
changing merchandise assortments. The Company's operating expenses also
tend to rise with general inflation. The increase in the federal minimum
wage rate on September 1, 1997, increased store labor costs during fiscal
1998. Legislative initiatives to reduce federal aid to low and low-
middle income families also may adversely impact the Company's sales.
Forward-Looking Statements
Certain statements contained herein and elsewhere in this Annual Report
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, the impact of the Year 2000 on information systems and the
Company's operations, 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>
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME
Family Dollar Stores, Inc. and Subsidiaries
<CAPTION>
August 29, August 31, August 31,
Years Ended 1998 1997 1996
<S> <C> <C> <C>
Net sales.......................................... $ 2,361,930,395 $ 1,994,973,237 $ 1,714,627,092
Costs and expenses:
Cost of sales.................................... 1,588,655,757 1,350,157,693 1,156,194,732
Selling, general and administrative.............. 607,286,713 523,338,807 459,666,614
2,195,942,470 1,873,496,500 1,615,861,346
Income before income taxes......................... 165,987,925 121,476,737 98,765,746
Income taxes (Note 5).............................. 62,700,000 46,800,000 38,178,000
Net income......................................... $ 103,287,925 $ 74,676,737 $ 60,587,746
Net income per common share-basic (Note 9):........ $.60 $.44 $.35
Average shares - basic (Note 9)................ 172,008,335 171,187,420 170,440,692
Net income per common share - diluted (Note 9):... $.60 $.44 $.35
Average shares - diluted (Note 9).............. 173,223,635 171,717,952 170,609,046
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders
of Family Dollar Stores, Inc.
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of income, of shareholders' equity and of
cash flows present fairly, in all material respects, the financial
position of Family Dollar Stores, Inc. and its subsidiaries at August 29,
1998 and August 31, 1997, and the results of their operations and their
cash flows for each of the three years in the period ended August 29,
1998, in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements
based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that
we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for the opinion expressed
above.
PRICEWATERHOUSECOOPERS LLP
September 29, 1998
Charlotte, North Carolina
<PAGE>
<TABLE>
CONSOLIDATED BALANCE SHEETS
Family Dollar Stores, Inc. and Subsidiaries
<CAPTION>
August 29, August 31,
1998 1997
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................... $ 134,220,673 $ 42,468,300
Merchandise inventories..................... 465,556,559 467,945,483
Deferred income taxes (Note 5).............. 40,695,920 28,407,454
Prepayments and other current assets........ 6,156,514 5,881,520
Total current assets .................... $ 646,629,666 $ 544,702,757
Property and equipment, net (Note 2).......... 291,759,866 231,234,756
Other assets.................................. 3,790,538 4,356,339
$ 942,180,070 $ 780,293,852
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable............................. $ 214,099,581 $ 165,150,085
Accrued liabilities (Note 4)................. 117,486,601 84,957,841
Income taxes payable (Note 5)................ 11,689,065 11,118,803
Total current liabilities................. 343,275,247 261,226,729
Deferred income taxes (Note 5)................. $ 20,754,116 $ 18,868,650
Commitments and Contingencies (Note 7)
Shareholders' equity (Notes 8 and 9):
Preferred stock, $1 par; authorized and
unissued 500,000 shares
Common stock, $.10 par; authorized
300,000,000 shares ......................... 18,256,237 9,103,148
Capital in excess of par..................... 16,785,409 21,157,973
Retained earnings............................ 554,458,329 481,286,620
589,499,975 511,547,741
Less common stock held in treasury, at cost.. 11,349,268 11,349,268
578,150,707 500,198,473
$ 942,180,070 $ 780,293,852
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Family Dollar Stores, Inc. and Subsidiaries
<CAPTION>
Capital in
Common excess Retained Treasury
Years Ended August 29, 1998, and August 31, 1997 and 1996 stock of par earnings stock
<S> <C> <C> <C> <C>
Balance, September 1, 1995
(60,196,664 shares common stock;
3,452,822 shares treasury stock)................. $ 6,019,666 $15,774,431 $397,305,759 $11,349,268
Net income for the year............................... 60,587,746
Issuance of 94,020 common shares under employee
stock option plan, including tax benefits (Note 8) 9,402 1,044,485
Less dividends on common stock, $.14 1/3 per share
(adjusted for stock split - Note 9)................. (24,435,102)
Balance, August 31, 1996
(60,290,684 shares common stock;
3,452,822 shares treasury stock)................ 6,029,068 16,818,916 433,458,403 11,349,268
Net income for the year.............................. 74,676,737
Issuance of 421,757 common shares under employee
stock option plan, including tax benefits
(347,560 shares issued prior to stock split and
74,197 shares issued after stock split-Note 8).. 42,176 7,370,961
Issuance of 30,319,037 common shares as a result of
stock split, including 1,726,411 shares of treasury
stock............................................. 3,031,904 (3,031,904)
Less dividends on common stock, $.15 2/3 per share
(adjusted for stock split-Note 9)................. (26,848,520)
Balance, August 31, 1997
(91,031,478 shares common stock;
5,179,233 shares treasury stock)................. 9,103,148 21,157,973 481,286,620 11,349,268
Net income for the year............................. 103,287,925
Issuance of 267,236 common shares under employee
stock option plan, including tax benefits
(232,176 shares issued prior to stock split and
35,060 shares issued after stock split-Note 8)... 26,724 4,753,801
Issuance of 91,263,654 common shares as a result of
stock split, including 5,179,233 shares of treasury
stock (Note 9).................................... 9,126,365 (9,126,365)
Less dividends on common stock, $.17 1/2 per share.... (30,116,216)
Balance, August 29, 1998
(182,562,368 shares common stock;
10,358,466 shares treasury stock) $18,256,237 $16,785,409 $554,458,329 $11,349,268
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Family Dollar Stores, Inc. and Subsidiaries
<CAPTION>
August 29, August 31, August 31,
Years Ended 1998 1997 1996
<S> <C> <C> <C>
Cash flows from operating activities:
Net income........................... $103,287,925 $ 74,676,737 $ 60,587,746
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization.... 34,842,830 29,116,624 24,621,033
Deferred income taxes............ (10,403,000) (6,812,000) (4,436,380)
(Gain) Loss on disposition of property and equipment (37,710) 39,207 257,167
Changes in operating assets and liabilities:
Merchandise inventories........ 2,388,924 (5,105,432) (19,394,603)
Prepayments and other current assets (274,994) (38,567) 472,927
Other assets................... 565,801 (55,249) 262,745
Accounts payable and accrued liabilities 80,597,237 27,124,270 14,435,775
Income taxes payable........ 570,262 4,296,612 4,434,629
211,537,275 123,242,202 81,241,039
Cash flows from investing activities:
Capital expenditures................. (96,853,635) (77,061,959) (54,264,515)
Proceeds from dispositions of property and equipment 1,523,405 1,278,601 1,419,310
(95,330,230) (75,783,358) (52,845,205)
Cash flows from financing activities:
Net change in short-term borrowings - (4,400,000) 4,400,000
Exercise of employee stock options
including tax benefits 4,780,525 7,413,137 1,053,887
Payment of dividends............... (29,235,197) (26,848,520) (23,857,513)
(24,454,672) (23,835,383) (18,403,626)
Net increase in cash and cash equivalents 91,752,373 23,623,461 9,992,208
Cash and cash equivalents at beginning of year 42,468,300 18,844,839 8,852,631
Cash and cash equivalents at end of year $134,220,673 $ 42,468,300 $ 18,844,839
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest..................... $ 12,574 $ 320,830 $ 576,695
Income taxes................. 70,840,009 48,440,176 37,920,059
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Family Dollar Stores, Inc. and Subsidiaries
Years Ended August 29, 1998, and August 31, 1997 and 1996
1. Description of business and summary of significant accounting policies:
Description of business:
The Company operates a chain of neighborhood retail discount stores in 38
contiguous states in the Northeast, Southeast, Midwest and Southwest.
Principles of consolidation:
The consolidated financial statements include the accounts of the Company
and its subsidiaries, all of which are wholly-owned. All significant
intercompany balances and transactions have been eliminated.
Cash equivalents:
The Company considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents.
Merchandise inventories:
Inventories are valued using retail prices less markon percentages, and
approximate the lower of first-in, first-out (FIFO) cost or market.
Property and equipment and depreciation:
Property and equipment is stated at cost. Depreciation for financial
reporting purposes is being provided principally by the straight-line
method over the estimated useful lives of the related assets, and by
straight-line and accelerated methods for income tax reporting purposes.
Estimated useful lives are as follows:
Buildings 33-40 years
Furniture, fixtures and equipment 3-10 years
Transportation equipment 3- 6 years
Leasehold improvements 5- 7 years
Store opening and closing costs:
The Company charges pre-opening costs against operating results when
incurred. When a store is identified for closing, the remaining
investment in fixed assets, net of expected recovery value, is expensed.
For properties under operating lease agreements, the present value of any
remaining liability under the lease, net of expected sublease and lease
termination recoveries, is expensed when the closing is determined.
<PAGE>
Selling, general and administrative expenses:
Buying, warehousing and occupancy costs are included in selling, general
and administrative expenses.
Stock Options:
The Company accounts for stock based compensation using the intrinsic
value method prescribed in Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees," and related Interpretations.
The exercise price of options awarded under the Company's non-qualified
stock option plan has been equal to the fair market value of the
underlying common stock on the date of grant. Accordingly, no
compensation expense has been recognized for options granted under the
plan. Income tax benefits attributable to stock options exercised are
credited to capital in excess of par.
Change in Fiscal Year:
Effective for fiscal 1998, the Company changed its fiscal reporting
calendar to a more commonly used "retail" calendar. The Company's fiscal
year 1998 ended on August 29, 1998, and the fourth quarter and the fiscal
year had two less days than it otherwise would have. The Company's
future fiscal years will now generally end on the Saturday closest to
August 31, but may deviate from this convention during certain years by
one week in order to coincide with the standard "retail" calendar.
Previously, the Company's fiscal year consisted of 12 calendar months
ending August 31.
Use of Estimates:
The preparation of the Company's's consolidated financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions. These estimates and
assumptions affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of the
financial statements, and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from these
estimates.
<PAGE>
2. Property and equipment:
<TABLE>
<CAPTION>
August 29, August 31,
1998 1997
<S> <C> <C>
Buildings............................ $ 103,092,778 $ 74,182,859
Furniture, fixtures and equipment.... 240,087,682 195,725,850
Transportation equipment............. 22,135,664 19,481,899
Leasehold improvements............... 60,964,347 47,832,733
Construction in progress............. 6,549,739 21,551,427
432,830,210 358,774,768
Less accumulated depreciation
and amortization................. 151,440,949 136,773,358
281,389,261 222,001,410
Land................................ 10,370,605 9,233,346
$ 291,759,866 $ 231,234,756
</TABLE>
3. Lines of credit and short-term borrowings:
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, and the Company expects that the line expiring on March 28,
1999, will be extended. 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 on March 31,
2000, into either a five or seven year term loan, at the bank's variable prime
rate.
<PAGE>
Interest expense, average and maximum borrowings outstanding and interest
rates for each of the three years in the period ended August 29, 1998, were as
follows:
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
Interest expense............ $ 12,574 $ 312,147 $ 585,378
Average borrowings
outstanding............ $ 209,000 $ 5,222,000 $ 8,710,000
Maximum month-end
outstanding............ $ 6,300,000 $ 31,000,000 $ 45,800,000
Interest rates at
year-end............... N/A N/A 5.7%
Daily weighted average
interest rates.......... 5.9% 5.7% 6.2%
The Company had outstanding letters of credit of $51,710,665 and $36,754,487
at August 29, 1998 and August 31, 1997, respectively.
</TABLE>
4. Accrued liabilities:
<TABLE>
<CAPTION>
August 29, August 31,
1998 1997
<S> <C> <C>
Compensation........................... $ 27,466,711 $ 23,054,512
Insurance................................ 43,497,526 34,599,071
Taxes other than income taxes............ 21,916,366 17,042,783
Other................................. 24,605,998 10,261,475
$ 117,486,601 $ 84,957,841
</TABLE>
<PAGE>
5. Income Taxes:
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities as of
August 29, 1998 and August 31, 1997, were as follows:
<TABLE>
<CAPTION>
August 29, August 31,
1998 1997
<S> <C> <C>
Deferred income tax liabilities:
Excess of book over tax valuation of
property and equipment.............. $ 20,754,116 $ 18,868,650
Deferred income tax assets:
Excess of tax over book valuation
of inventories...................... $ 16,549,238 $ 11,419,697
Currently nondeductible accruals for:
Insurance........................... 17,273,955 13,796,383
Vacation pay........................ 2,097,021 1,933,431
Closed store lease liabilities...... 1,984,014 1,332,878
State net operating losses............ 983,000 983,000
Other................................. 3,158,692 292,065
Gross deferred income tax assets.... 42,045,920 29,757,454
Valuation allowance for deferred
income tax assets................... (1,350,000) (1,350,000)
Net deferred income tax assets...... $ 40,695,920 $ 28,407,454
</TABLE>
A valuation allowance has been established for a portion of the
benefits of state tax net operating losses and for a portion of
certain other state tax benefits because the Company currently
believes that it is more likely than not that these benefits
will not be realized in future years.
<PAGE>
5. Income taxes (continued):
The provisions for income taxes in each of the three years in the
period ended August 29, 1998, were as follows:
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
Current:
Federal... $67,103,000 $47,142,000 $37,542,400
State..... 6,000,000 6,470,000 5,075,000
73,103,000 53,612,000 42,617,400
Deferred:
Federal... (9,431,000) (5,753,000) (4,115,600)
State.... (972,000) (1,059,000) (323,800)
(10,403,000) (6,812,000) (4,439,400)
$62,700,000 $46,800,000 $38,178,000
</TABLE>
<PAGE>
The following table summarizes the components of income tax expense
in each of the three years in the period ended August 29, 1998:
<TABLE>
<CAPTION>
1998 1997 1996
% % %
Income tax of pre-tax Income tax of pre-tax Income tax of pre-tax
expense income expense income expense income
<S> <C> <C> <C> <C> <C> <C>
Computed "expected" federal income tax $58,095,773 35.0 $42,516,858 35.0 $34,549,635 35.0
State income taxes, net of federal
income tax benefit........... 4,943,200 3.0 4,187,150 3.4 3,990,375 4.1
Other............................. (338,973) (0.2) 95,992 0.1 (362,010) (0.4)
Actual income tax expense......... $62,700,000 37.8 $46,800,000 38.5 $38,178,000 38.7
</TABLE>
<PAGE>
6. Employee benefit plans:
Incentive compensation plan:
The Company has an incentive profit-sharing plan whereby, at the
discretion of the Board of Directors, the Company may pay certain
employees and officers an aggregate amount not to exceed 5% of the
Company's consolidated income before income taxes. Expenses under
the profit-sharing plan were $3,455,060 in fiscal 1998, $2,446,586
in fiscal 1997, and $1,355,200 in fiscal 1996.
Compensation deferral plan:
The Company has a voluntary compensation deferral plan, under
Section 401(k) of the Internal Revenue Code, available to eligible
employees. At the discretion of the Board of Directors, the Company
makes contributions to the plan which are allocated to participants,
and in which they become vested, in accordance with formulas and
schedules defined by the plan. Company expenses for contributions
to the plan were $1,124,569 in fiscal 1998, $1,066,966 in fiscal
1997, and $923,352 in fiscal 1996.
<PAGE>
7. Commitments and contingencies:
Operating leases:
Except for its executive offices and primary distribution centers, the
Company generally conducts its operations from leased facilities.
Normally, store real estate leases are for initial terms of from five to
fifteen years with multiple renewal options for additional five year
periods. Certain leases provide for contingent rental payments based upon
a percentage of store sales.
Rental expenses on all operating leases, both cancellable and non-
cancellable, for each of the three years in the period ended August 29,
1998, were as follows:
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
Minimum rentals,
net of minor
sublease rentals....... $90,616,520 $78,414,264 $67,844,955
Contingent rentals....... 2,619,790 1,707,010 1,095,944
$93,236,310 $80,121,274 $68,940,899
</TABLE>
Future minimum rental payments required under operating leases that
have initial or remaining non-cancellable lease terms in excess of one
year as of August 29, 1998, were as follows:
<TABLE>
<CAPTION>
Fiscal Year: Minimum Rental
<C> <C>
1999 $ 82,049,900
2000 68,568,623
2001 55,705,621
2002 40,235,074
2003 22,160,040
Thereafter 31,487,168
$300,206,426
</TABLE>
<PAGE>
8. Employee stock option plan:
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 fair market value on the date of the grant. Options are
exercisable to the extent of 40% after the second anniversary of the
grant, an additional 30% annually on a cumulative basis, and expire five
years from the date of the grant.
The Company has adopted the disclosure-only provisions of Statement of
Financial Accounting Standards No 123, "Accounting for Stock-Based
Compensation." If compensation cost for the Company's stock-based
compensation plan had been determined based on the fair value at the
grant date for awards under this plan consistent with the methodology
prescribed under this statement, net income and net income per share
would have been reduced to the pro forma amounts indicated in the table
below.
<TABLE>
<CAPTION>
August 29, August 31, August 31,
1998 1997 1996
<S> <C> <C> <C>
Net income-as reported $103,287,925 $74,676,737 $60,587,746
Net income-pro forma $102,367,767 $74,493,973 $60,562,982
Net income per share-as reported
basic $.60 $.44 $.35
diluted $.60 $.44 $.35
Net income per share-pro forma
basic $.60 $.44 $.35
diluted $.59 $.43 $.35
</TABLE>
<PAGE>
Net income per share has been adjusted for the April 30, 1998,
two-for-one stock split.
The pro forma effects on net income for fiscal 1998, 1997 and 1996
are not representative of the pro forma effect on net income in future
years because they do not take into consideration pro forma compensation
expense related to grants made prior to fiscal 1996. The fair value of
options granted during fiscal 1998, 1997 and 1996 is $3.66, $1.66 and
$1.17 per share, respectively.
The fair value of each option grant is estimated on the date of
grant using the Black-Scholes option pricing model with the following
assumptions:
<TABLE>
<CAPTION>
August 29, August 31, August 31,
1998 1997 1996
<S> <C> <C> <C>
Expected dividend yield 1.36% 2.36% 2.97%
Expected stock price volatility 30.53% 28.75% 29.47%
Weighted average risk-free
interest rate 5.73% 6.35% 6.11%
Expected life of options (years) 3.5 3.5 3.5
</TABLE>
<PAGE>
The summary of the status of the Company's stock-based compensation
plan as of August 29, 1998, August 31, 1997 and 1996 and changes during
the years then ended were as follows:
<TABLE>
<CAPTION>
Options Range of Option Weighted Average
Outstanding Prices Per Share Exercise Price
<S> <C> <C> <C>
Balance, September 1, 1995 3,344,880 $ 1.96 to $ 7.08 $ 5.08
Granted 271,050 3.84 to 6.25 4.96
Exercised (282,060) 1.96 to 5.75 2.82
Cancelled (326,970) 1.96 to 7.08 4.98
Balance, August 31, 1996 3,006,900 $ 3.42 to $ 7.08 $ 5.29
Granted 1,705,700 5.59 to 10.88 6.58
Exercised (1,191,074) 3.50 to 7.08 5.49
Cancelled (379,518) 3.42 to 7.08 4.85
Balance, August 31, 1997 3,142,008 $ 3.50 to $10.88 $ 5.96
Granted 1,224,800 10.88 to 20.75 13.31
Exercised (499,413) 3.50 to 7.08 6.20
Cancelled (128,060) 4.08 to 18.00 7.50
Balance, August 29, 1998 3,739,335 $ 3.50 to $20.75 $ 8.28
</TABLE>
<PAGE>
At August 29, 1998, August 31, 1997 and 1996, options for 660,687,
709,066 and 1,275,796 shares were exercisable, respectively. The
following table summarizes information about stock options outstanding
at August 29, 1998:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
Number Weighted Average Number
Range of Outstanding Remaining Weighted Average Exercisable Weighted Average
Exercise Prices at 8/29/98 Contractual Life Exercise Price at 8/29/98 Exercise Price
<S> <C> <C> <C> <C> <C>
$ 3.42 to $ 5.60 965,085 1.44 Years $ 4.76 627,267 $ 4.86
5.61 to 8.49 1,367,850 3.19 6.29 33,420 6.14
8.50 to 20.75 1,406,400 4.18 12.62 - -
$ 3.42 to $20.75 3,739,335 3.11 Years $ 8.28 660,687 $ 4.93
</TABLE>
At August 29, 1998, August 31, 1997 and 1996, shares available for
granting of stock options under the Company's stock option plan were
6,846,464, 1,943,188 and 1,769,370 shares, respectively. All figures have
been adjusted for the two-for-one stock split distributed April 30, 1998.
9. Common stock:
The Board of Directors declared a two-for-one stock split in the form of a
100% stock distribution on March 24, 1998, pursuant to which 91,263,654
common shares were issued on April 30, 1998, to holders of record of common
stock on April 16, 1998.
The Company 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.
<PAGE>
The following table sets forth the computation of basic and diluted net
income per common share:
<TABLE>
<CAPTION>
August 29, August 31, August 31,
1998 1997 1996
<S> <C> <C> <C>
Basic net income per share:
Net income $103,287,925 $ 74,676,737 $ 60,587,746
Weighted average number of shares
outstanding 172,008,335 171,187,420 170,440,692
Net income per common share - basic $.60 $.44 $.35
Diluted net income per share:
Net income $103,287,925 $ 74,676,737 $ 60,587,746
Weighted average number of shares
outstanding 172,008,335 171,187,420 170,440,692
Effect of dilutive securities -
stock options 1,215,300 530,532 168,354
Average shares - diluted 173,223,635 171,717,952 170,609,046
Net income per common share - diluted $.60 $.44 $.35
</TABLE>
<PAGE>
10. Unaudited summaries of quarterly results:
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
(In thousands, except per share data)
<S> <C> <C> <C> <C>
1998
Net sales..................... $542,747 $635,877 $585,807 $597,499
Gross margin.................. 186,327 199,179 200,116 187,653
Net income.................... 24,327 27,597 31,343 20,021
Net income per
common share*.............. $.14 $.16 $.18 $.12
1997
Net sales..................... $454,883 $530,259 $498,404 $511,427
Gross margin.................. 154,581 164,165 167,732 158,338
Net income.................... 17,360 20,002 23,088 14,227
Net income per
common share.*............. $.10 $.12 $.13 $.08
1996
Net sales..................... $396,165 $448,274 $427,941 $442,247
Gross margin.................. 137,211 139,965 144,010 137,247
Net income.................... 14,508 15,937 18,780 11,363
Net income per
common share*.............. $.09 $.09 $.11 $.07
* Net income per common share gives retroactive effect to the stock split
discussed in Note 9. Figures represent both basic and diluted earnings
per share. The sum of the quarterly net income per common share may not
equal the annual net income per common share due to rounding.
</TABLE>
FAMILY DOLLAR STORES, INC.
Listing of Active Corporations and other Entities
Family Dollar Stores, Inc.
Family Dollar, Inc.
Family Dollar Holdings, Inc.
Family Dollar Services, Inc.
Family Dollar Operations, Inc.
Family Dollar Trucking, Inc.
Family Dollar Marketing, Inc.
Family Dollar Stores of Alabama, Inc.
Family Dollar Stores of Arkansas, 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 Indiana, L.P.
Family Dollar Stores of Iowa, Inc.
Family Dollar Stores of Kentucky, Ltd.
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 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 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 Texas, L.P.
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.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF FAMILY DOLLAR STORES, INC. AND
SUBSIDIARIES FOR THE FISCAL YEAR ENDED AUGUST 29, 1998, AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000034408
<NAME> FAMILY DOLLAR STORES, INC.
<MULTIPLIER> 1
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<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> AUG-29-1998
<PERIOD-START> SEP-01-1997
<PERIOD-END> AUG-29-1998
<EXCHANGE-RATE> 1
<CASH> 134,220,673
<SECURITIES> 0
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<INVENTORY> 465,556,559
<CURRENT-ASSETS> 646,629,666
<PP&E> 443,200,815
<DEPRECIATION> 151,440,949
<TOTAL-ASSETS> 942,180,070
<CURRENT-LIABILITIES> 343,275,247
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0
0
<COMMON> 18,256,237
<OTHER-SE> 559,894,470
<TOTAL-LIABILITY-AND-EQUITY> 942,180,070
<SALES> 2,361,930,395
<TOTAL-REVENUES> 2,361,930,395
<CGS> 1,588,655,757
<TOTAL-COSTS> 2,195,942,470
<OTHER-EXPENSES> 0
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<INCOME-PRETAX> 165,987,925
<INCOME-TAX> 62,700,000
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</TABLE>
Exhibit 10(i)
AMENDMENT TO
CREDIT AGREEMENT
THIS AMENDMENT TO CREDIT AGREEMENT is dated as of
November 19, 1998 (the "Amendment") and is among NATIONSBANK,
N.A., a national banking association (the "Bank"), FAMILY DOLLAR
STORES, INC. ("FDSI") and FAMILY DOLLAR, INC. ("FDI"; each of
FDSI and FDI may be referred to herein as a "Borrower" and
collectively as the "Borrowers").
R E C I T A L S
WHEREAS, the Borrowers and the Bank are parties to that
certain Credit Agreement dated as of March 31, 1996 (as amended,
modified or extended prior to the date hereof, the "Original
Agreement") providing for Tranche A Loans and Tranche B Loans in
an aggregate principal amount not to exceed $100,000,000;
WHEREAS, the Borrowers have requested that the Bank amend
certain terms of the Original Agreement in accordance with the
terms of this Amendment.
WHEREAS, the Bank has agreed to such amendment based on the
terms and conditions set forth herein.
A G R E E M E N T
NOW, THEREFORE, in consideration of the premises and other
good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as
follows:
1. Sections 6.06(a) and (b) of the Original Agreement are
hereby deleted in their entirety and replaced by the following:
"Section 6.06. Consolidated Capital Expenditures.
The Borrower will not permit the aggregate amount of
Consolidated Capital Expenditures for any fiscal year of
the Borrower to exceed the amount set forth below for such
fiscal year.
<PAGE>
<TABLE>
<CAPTION>
Fiscal Year Ending
August 31 Amount
<C> <C>
1999 $150,000,000
2000 $165,000,000
2001 $180,000,000
2002 $195,000,000
2003 $215,000,000
2004 $235,000,000
2005 $255,000,000
2006 $275,000,000
Thereafter $275,000,000 plus
$20,000,000 for each
fiscal year occurring
after 2006
</TABLE>
The amounts set forth above are expressed solely with
respect to a single fiscal year and shall not carry-over to
succeeding periods to the extent such amounts are not fully
utilized for the applicable fiscal year.
2. Representations and Warranties. Each Borrower hereby
represents and warrants that (a) this Amendment has been duly
authorized, executed and delivered on its behalf, and the
Original Agreement, as amended hereby, constitutes its legal,
valid and binding obligation enforceable against it in accordance
with its terms; (b) the representations and warranties set forth
in Article V of the Original Agreement remain true and correct in
all material respects as of the date hereof with the same force
and effect as if made on and as of such date; and (c) no Default
or Event of Default as set forth in Article VII of the Original
Agreement has occurred and is continuing or will result from the
execution and delivery of this Amendment.
3. No Other Amendments. Except as modified hereby, all
other terms, conditions and provisions of the Original Agreement
shall remain in full force and effect.
4. Counterparts. This Amendment may be executed in any
number of counterparts, each of which when executed and delivered
shall be deemed to be an original and it shall not be necessary
in making proof of this Amendment to produce or account for more
than one such counterpart.
5. Governing Law. This Amendment shall be governed by, and
construed in accordance with, the laws of the State of North
Carolina.
[signature pages to follow]
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused
this Amendment to be duly executed and delivered by its duly
authorized officer as of the date first above written.
NATIONSBANK, N.A.
By: TIMOTHY H. SPANOS
TIMOTHY H. SPANOS
Senior Vice President
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)
STATE OF NORTH CAROLINA AMENDMENT TO
EMPLOYMENT AGREEMENT
COUNTY OF MECKLENBURG
THIS AMENDMENT, made and entered into effective the 19th day
of August 1998, by and between FAMILY DOLLAR STORES, INC., a Delaware
corporation (hereinafter referred to as the "Company"); and
Howard R. Levine (hereinafter referred to as the "Employee");
W I T N E S S E T H:
WHEREAS, the Company and the Employee entered into an
Employment Agreement dated April 29, 1997, as amended by Amendment to
Employment Agreement dated August 28, 1997 (hereinafter referred to
as the "Agreement)"; and
WHEREAS, the Company and the Employee desire to amend the
Agreement;
NOW, THEREFORE, in consideration of the mutual covenants
herein contained, the Company and the Employee agree as follows:
1. Section 2 of the Agreement is deleted and the following
is substituted in lieu thereof:
"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 April 29, 1997, (the "Commencement Date"),
and ending on August 28, 1999, or upon the termination of this
Agreement as provided in Paragraph 6."
2. The first sentence of Section 3 of the Agreement is
deleted and the following sentence is substituted in lieu
thereof:
"The Employee shall be employed as President and Chief
Executive Officer of the Company and shall perform such reasonable
duties and responsibilities as the Chairman of the Board 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."
3. The first paragraph of Section 5.01 of the Agreement is
deleted and the following paragraph is substituted in
lieu thereof:
"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 (i) from the
Commencement Date to August 31, 1997, of $5,769.24 ($300,000.00
per annum), (ii) from September 1, 1997, to August 19, 1998, of
$6,250.00 ($325,000.00 per annum), and (iii) from August 20, 1998,
to August 28, 1999, of $7,211.54 ($375,000.00 per annum)."
<PAGE>
4. Subparagraphs (a) and (b) of Section 5.02 of the
Agreement are deleted and the following subparagraphs are
substituted in lieu thereof:
"5.02. In addition, 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 President, for the fiscal years
commencing September 1, 1996, and September 1, 1997, and as President
and Chief Executive Officer for the fiscal year commencing August 30,
1998. 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 services on and after
April 29, 1997, through August 31, 1997, for the fiscal year ending
August 31, 1997, and up to fifty (50%) percent of the Employee's base
salary actually received for services on and after September 1, 1997,
through August 19, 1998, and up to seventy-five (75%) percent of the
Employee's base salary actually received for services on and after
August 20, 1998, through August 31, 1998, for the fiscal year ending
August 29, 1998, and up to seventy-five (75%) percent of the
Employee's base salary actually received for services on and after
August 30, 1998, through August 28, 1999, for the fiscal year ending
August 28, 1999, subject to the Company's achievement of certain
financial goals to be established, the Employee's performance, and
all terms and conditions of the Target Bonus Plan as in effect for
each such 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 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 October or November following
the end of the fiscal year, the Employee will not be entitled to
receive the bonus.
(b) Take fifteen days (exclusive of Saturdays,
Sundays and paid Company holidays) of vacation during the twelve
month periods commencing May 1, 1997, and May 1, 1998. For the
period from May 1, 1999, through the end of the term of this
Agreement on August 28, 1999, five days of vacation may be taken.
Vacation time will accrue ratably during the course of said periods
and cannot be accumulated from year to year."
5. All other terms and provisions of the Agreement shall
remain in full force and effect.
<PAGE>
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.
Attest:
By LEON LEVINE
LEON LEVINE
Chairman of the Board
GEORGE R. MAHONEY, JR.
GEORGE R. MAHONEY, JR.
Secretary
(Corporate Seal)
HOWARD R. LEVINE (SEAL)
HOWARD R. LEVINE
Witness:
ALICE R. BARRIER
ALICE R. BARRIER
Exhibit 3(b)
Amended on
August 19, 1998
BYLAWS
OF
FAMILY DOLLAR STORES, INC.
ARTICLE I
Offices
Section 1. DELAWARE OFFICE. The registered office of
the Corporation in the State of Delaware shall be in the City of
Wilmington, County of New Castle, State of Delaware, and the name
of the registered agent in charge thereof is The Prentice-Hall
Corporation System, Inc.
Section 2. OTHER OFFICES. The Corporation may have
an office or offices at such other places in the United States
or elsewhere as the Board of Directors may from time to time
determine or the business of the Corporation may require.
ARTICLE II
Meetings of Stockholders
Section 1. ANNUAL MEETING. Commencing with the year
1971, the annual meeting of stockholders of the Corporation for
the election of directors and for the transaction of such other
business as may properly come before said meeting shall be held
on the third Thursday in January of each year, if not a legal
holiday and if a legal holiday, then on the next succeeding full
business day, at such hour and at such place, within or without
the State of Delaware, as shall be designated by the Board of
Directors and stated in the notice of said meeting.
Section 2. SPECIAL MEETINGS. Special meetings of
stockholders for any purpose or purposes may, except as otherwise
prescribed by law or in the Certificate of Incorporation, be
called at any time by the Chairman of the Board or by resolution
of the Board of Directors, to be held at such time and place,
within or without the State of Delaware, as may be designated in
the notice thereof, and the Chairman of the Board, the Vice
Chairman, the President or a Vice President or the Secretary
shall call such a meeting whenever stockholders, holding not
less than a majority of all of the outstanding stock of the
Corporation entitled to vote at such meeting, shall make written
application therefor, stating the purpose or purposes of the
meeting applied for.
<PAGE>
Section 3. NOTICE OF MEETING. Except as otherwise
provided or permitted by law or in the Certificate of
Incorporation or in these Bylaws, written notice of all meetings
of stockholders, stating the place, date and hour and in general
terms only, the purpose or purposes thereof, shall be given by
the Chairman of the Board, the Vice Chairman, the President or a
Vice President or the Secretary or an Assistant Secretary to each
stockholder of record having voting power in respect of the
business to be transacted thereat, either by serving such notice
upon him or her personally or by mailing the same to his or her
address as it appears on the records of the Corporation, at least
ten days but not more than sixty days prior to the date of the
meeting, and the Secretary or an Assistant Secretary or the
transfer agent or agents of the Corporation shall make affidavit
as to the giving of such notice.
Section 4. QUORUM. The holders of a majority of the
stock issued and outstanding and entitled to vote thereat,
present in person or by proxy, shall be required to and shall
constitute a quorum at all meetings of the stockholders for the
transaction of business, except as otherwise provided by law, by
the Certificate of Incorporation or by these Bylaws. If,
however, such quorum shall not be present or represented at any
meeting of the stockholders, the stockholders entitled to vote
thereat, present in person or by proxy, shall have power to
adjourn the meeting from time to time, without notice other than
announcement at the meeting of the time and place of the
adjourned meeting, until a quorum shall be present or
represented. At such adjourned meeting any business may be
transacted which might have been transacted at the original
meeting. If any adjournment, whether a quorum is present or not,
is for more than thirty days, or if after the adjournment a new
record date is fixed for the adjourned meeting, a notice of the
adjourned meeting shall be given to each stockholder of record
entitled to vote at the meeting. When a quorum is present at any
meeting, the vote of the holders of a majority of the stock
having voting power present in person or by proxy shall decide
any question brought before such meeting, unless the question is
one upon which by express provision of law or of the Certificate
of Incorporation or of these Bylaws a larger or different vote is
required, in which case such express provision shall govern and
control the decision of such question. The stockholders present
or represented at any duly called and held meeting at which a
quorum is present or represented may continue to do business
until adjournment, notwithstanding the withdrawal of such number
as to leave less than a quorum.
Section 5. ORGANIZATION. Each meeting of stockholders
shall be presided over by the Chairman of the Board, or in his or
her absence, by the Vice Chairman or the President or a Vice
President thereunto designated by the Chairman of the Board or by
<PAGE>
the Board of Directors, or in the absence of the Chairman of the
Board, Vice Chairman, President, and a Vice President so
designated, by any other person selected to preside by vote of
the holders of a majority of the outstanding stock present in
person or by proxy and entitled to vote at the meeting. The
Secretary, or in his or her absence an Assistant Secretary, or in
the absence of both the Secretary and an Assistant Secretary any
person designated by the Chairman of the Board or other person
presiding at the meeting, shall act as secretary of the meeting.
Section 6. PROXIES AND VOTING OF SHARES. At any
meeting of stockholders, each stockholder entitled to vote any
shares on any matter to be voted upon at such meeting may
exercise such voting right either in person or by proxy appointed
by an instrument in writing, which shall be filed with the
Secretary of the meeting before being voted. Such proxies shall
entitle the holders thereof to vote at any adjournment of such
meeting, but shall not be valid after the final adjournment
thereof. All questions regarding the qualification of voters,
the validity of proxies, and the acceptance or rejection of
voters, the validity of proxies, and the acceptance or rejection
of votes shall be decided by two inspectors of election who shall
be appointed by the Board of Directors or if not so appointed,
then by the presiding officer of the meeting. No proxy shall be
voted on after three years from its date unless said proxy
provides for a longer period. Except as otherwise expressly
required by statute, the vote on any question need not be by
written ballot.
Section 7. VOTING LIST OF STOCKHOLDERS. The officer
who shall have charge of the stock ledger of the Corporation
shall prepare and make, at least ten days before every meeting of
stockholders, a complete list of the stockholders entitled to
vote at said meeting, arranged in alphabetical order and showing
the address and the number of shares registered in the name of
each such stockholder. Such list shall be open to the
examination of any stockholder, for any purpose germane to the
meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city
where said meeting is to be held, which place shall be specified
in the notice of the meeting, or, if not so specified, at the
place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the
whole time thereof and may be inspected by any stockholder who is
present. The stock ledger shall be the only evidence as to who
are the stockholders entitled to examine the stock ledger or the
list of stockholders referred to above or the books of the
Corporation, or to vote in person or by proxy at the meeting of
stockholders.
<PAGE>
Section 8. CONSENT OF STOCKHOLDERS IN LIEU OF MEETING.
Any action, except election of directors, which may be taken by
the vote of the stockholders at a meeting, may be taken without a
meeting if authorized by the written consent of stockholders
holding at least a majority of the voting power, unless by
express provision of law or of the Certificate of Incorporation
or of these Bylaws a greater proportion of voting power is
required to authorize such action, in which case such greater
proportion of written consents shall be required.
ARTICLE III
Directors
Section 1. POWER AND DUTIES OF THE BOARD OF DIRECTORS.
The Board of Directors shall have the general management of the
affairs, property and business of the Corporation and they may
adopt such rules and regulations for that purpose and for the
conduct of their meetings as they may deem proper. The Board may
exercise and shall be vested with the powers of the Corporation
insofar as not inconsistent with law, the Certificate of
Incorporation or these Bylaws.
Section 2. NUMBER AND QUALIFICATIONS. The Board upon
the adoption of these Bylaws shall consist of three directors.
Thereafter the authorized number of directors shall be determined
by the affirmative vote of a majority of the whole Board given at
a regular or special meeting of the Board of Directors; provided
that, if the number so determined is to be increased or
decreased, notice of the proposed increase or decrease shall be
included in the notice of such meeting unless all of the
directors at the time in office be present at such meeting or
those not present shall at any time waive or have waived notice
thereof in writing; and provided further, that the number of
directors which shall constitute the whole Board shall not be
reduced to a number less than the number of directors then in
office unless such reduction shall become effective only at and
after the next ensuing meeting of stockholders for the election
of directors or upon the resignation of an incumbent director.
Directors need not be stockholders of the Corporation.
Section 3. ELECTION AND TERM. Except as otherwise
provided by law or by these Bylaws, the directors of the
Corporation elected after the adoption of these Bylaws shall be
elected at the annual meeting of stockholders in each year.
Each director shall be elected to serve until the next annual
meeting of stockholders and until a successor shall have been
duly elected and shall qualify, subject to the provisions of
ARTICLE V hereof.
<PAGE>
Section 4. REGULAR MEETINGS. Regular meetings of the
Board of Directors shall be held at such time and place, either
within or outside of the State of Delaware, as may be determined
by resolution of the Board. No notice of a regular meeting need
be given (any practice or custom at any time to the contrary
notwithstanding) and any business may be transacted at a regular
meeting, held as aforesaid, subject only to the requirements of
Section 2 of ARTICLE III and clause (b) in ARTICLE XIV hereof.
Section 5. SPECIAL MEETINGS. Special meetings of the
Board of Directors may, unless otherwise expressly provided by
law, be called from time to time by the Chairman of the Board or
the Vice Chairman or the President, or by a written call signed
by any two or more directors and filed with the Secretary. Each
special meeting of the Board shall be held at such place, either
within or outside of the State of Delaware, as shall be
designated in the notice of such meeting.
Section 6. NOTICE OF SPECIAL MEETINGS. Notice of a
special meeting of the Board of Directors, stating the place,
date and hour thereof, shall, except as otherwise expressly
provided by law or as provided in Section 2 of ARTICLE VII
hereof, be given by mailing or telecopying the same to each
director at his or her residence or business address at any time
on or before the second day before the day of the meeting or by
delivering the same to him or her personally or telephoning the
same to him or her personally at his or her residence or business
address not later than the day before the day of the meeting,
unless, in case of exigency, the Chairman of the Board, or in the
absence of the Chairman of the Board, the Vice Chairman, the
President, a Vice President or the Secretary, shall prescribe a
shorter notice to each director at his or her residence or
business address. Except as otherwise required by statute or the
Bylaws, no notice or waiver of notice of a special meeting of the
Board need state the purpose or purposes of such meeting, and any
business may be transacted thereat, any practice or custom at any
time to the contrary notwithstanding.
Section 7. QUORUM. A majority of the directors at the
time in office shall constitute a quorum for the transaction of
business at any meeting of the Board of Directors. If less than
a quorum be present at a meeting, the directors present may
adjourn the meeting and the meeting may be held as adjourned
without further notice. If a quorum be present at a meeting and
the meeting is adjourned to reconvene at a later time and/or
date, no notice need be given other than announcement at the
meeting. Except as otherwise provided by law, by the Certificate
of Incorporation or by these Bylaws, when a quorum is present
at any meeting of the Board of Directors, a majority of the
directors present at such meeting shall decide any question
brought before such meeting and the action of such majority shall
<PAGE>
be deemed to be the action of the Board. The directors present
at any duly called and held meeting at which a quorum is present
or represented may continue to do business until adjournment,
notwithstanding the withdrawal of such number as to leave less
than a quorum.
Section 8. ORGANIZATION. Each meeting of the Board of
Directors shall be presided over by the Chairman of the Board,
or, in the absence of the Chairman of the Board, by any director
selected to preside by vote of a majority of the directors
present. The Secretary, or in his or her absence an Assistant
Secretary, or in the absence of both the Secretary and an
Assistant Secretary, any person designated by the chairman of
the meeting shall act as secretary of the meeting.
Section 9. COMPENSATION OF DIRECTORS. The directors
may be paid their expenses of attendance at each meeting of the
Board of Directors and may be paid a fixed sum for attendance at
each meeting of the Board of Directors or a stated salary as
director. The Board of Directors shall have the authority to
fix the compensation of the directors. No such payment shall
preclude any director from serving the Corporation in any other
capacity and receiving compensation therefor. Members of special
or standing committees may be allowed like reimbursement and
compensation for attending committee meetings.
Section 10. COMMITTEES. The Board of Directors may,
by resolution or resolutions adopted by a majority of the whole
Board, designate one or more committees, each committee to
consist of two or more of the directors of the Corporation,
which, to the extent provided in said resolution or resolutions,
shall have and may exercise the powers of the Board in the
management of the business and affairs of the Corporation, and
may have the power to authorize the seal of the Corporation to be
affixed to all papers which may require it, but no such committee
shall have power or authority in reference to amending the
Certificate of Incorporation, adopting an agreement of merger or
consolidation, recommending to the stockholders the sale, lease
or exchange of all or substantially all of the Corporation's
property and assets, recommending to the stockholders a
dissolution of the Corporation or a revocation of a dissolution,
or amending the Bylaws of the Corporation. Such committee or
committees shall have such name or names as may be determined
from time to time by resolution adopted by the Board. The
committees shall keep regular minutes of their proceedings and
report the same to the Board when required.
Section 11. WRITTEN CONSENTS. Any action required or
permitted to be taken at any meeting of the Board of Directors or
by any committee thereof may be taken without a meeting, if all
members of the Board or of such committee, as the case may be,
consent thereto in writing, and the writing or writings are filed
with the minutes of proceedings of the Board or committee.
<PAGE>
Section 12. TELEPHONIC PARTICIPATION. Members of the
Board of Directors or any committee thereof may participate in a
meeting of the Board of Directors or such committee by means of a
conference telephone or similar communications equipment by means
of which all persons participating in the meeting can hear each
other, and participation in a meeting in such manner shall
constitute presence in person at such meeting.
ARTICLE IV
Officers
Section 1. NUMBER AND ELECTION. The officers of the
Corporation shall be elected by the Board of Directors and shall
be a Chairman of the Board, a Vice Chairman, a President, a
Secretary and a Treasurer. The Board of Directors may also elect
one or more Vice Presidents, a Comptroller and one or more
Assistant Vice Presidents, Assistant Comptrollers, Assistant
Secretaries and Assistant Treasurers. Any number of offices
may be held by the same person but no officer shall execute,
acknowledge or verify any instrument in more than one capacity.
Section 2. TERM OF OFFICE AND QUALIFICATION. The
officers shall be elected by the Board at the first meeting
thereof after each annual meeting of stockholders. A meeting of
the directors may be held without notice for this purpose, as
well as for the transaction of any other business, immediately
after the annual meeting of stockholders of the Corporation and
at the same place. In the event of the failure so to elect any
such officer, such officer may be elected at any subsequent
meeting (regular or special) of the Board. Each officer, except
such officers as may be appointed in accordance with the
provisions of Section 3 of this ARTICLE IV, shall hold office
until the next annual election of officers and until his or her
successor shall have been duly elected and qualified, subject,
however, to the provisions of ARTICLE V hereof. None of the
officers of the Corporation need be directors.
Section 3. OTHER OFFICERS. The Board of Directors may
also appoint such other officers and agents as it may deem
necessary for the transaction of the business of the Corporation.
Such officers and agents shall hold office for such period, have
such authority and perform such duties as shall be determined
from time to time by the Board.
Section 4. THE CHAIRMAN OF THE BOARD. The Chairman
of the Board shall preside at all meetings of the stockholders
and of the Board of Directors. The Chairman of the Board shall
perform such other duties and have such other powers as the Board
of Directors may from time to time prescribe.
<PAGE>
Section 5. THE VICE CHAIRMAN. The Vice Chairman
shall be the chief financial and administrative officer of the
Corporation and shall see that all orders of the Chairman of the
Board and orders and resolutions of the Board of Directors are
carried into effect. The Vice Chairman shall perform such other
duties and have such other powers and responsibilities as the
Board of Directors or the Chairman of the Board or President may
from time to time prescribe.
Section 6. THE PRESIDENT. The President shall be the
chief executive officer of the Corporation. The President shall
have general and active supervision of the business of the
Corporation, shall manage the regular business of the
Corporation, and shall see that all orders of the Chairman of the
Board and orders and resolutions of the Board of Directors are
carried into effect. The President shall perform such other
duties and have such other powers and responsibilities as the
Board of Directors or the Chairman of the Board may from time to
time prescribe.
Section 7. VICE PRESIDENTS. Each Vice President shall
perform such duties as from time to time may be assigned to him
or her by the Board of Directors, the Chairman of the Board, the
Vice Chairman, the President or as may be prescribed by the
Bylaws. A Vice President may be designated as the chief
accounting officer of the Corporation who shall have general
supervision over the Corporation's accounting division and the
Treasurer's department, subject to the control of the Board of
Directors and the Chairman of the Board and the Vice Chairman and
the President.
Section 8. THE SECRETARY. The Secretary shall record
or cause to be recorded in books provided for the purpose all the
proceedings of the meetings of the Corporation including those of
the stockholders, the Board of Directors and all committees
thereof; shall see that all notices are duly given in accordance
with the provisions of these Bylaws and as required by law; shall
be custodian of the records (other than financial) and of the
seal of the Corporation and see that the seal is affixed to all
documents the execution of which on behalf of the Corporation
under its seal is duly authorized in accordance with the
provisions of these Bylaws; shall see that the books, reports,
statements, certificates and all other documents and records
required by law are properly kept and filed; and in general, the
Secretary shall perform all duties incident to the office of
Secretary and such other duties as may, from time to time, be
assigned to him or her by the Board of Directors, the Chairman of
the Board, the Vice Chairman or the President.
<PAGE>
Section 9. ASSISTANT SECRETARIES. In the absence of
the Secretary, or in case of his or her inability to act, an
Assistant Secretary designated by the Chairman of the Board, the
Vice Chairman, the President or the Board of Directors shall
perform all duties of the Secretary and, when so acting, shall
have all the powers of the Secretary. The Assistant Secretaries
shall perform such other duties as from time to time shall be
assigned to them by the Board of Directors, the Chairman of the
Board, the Vice Chairman, the President or the Secretary.
Section 10. THE TREASURER. The Treasurer shall have
charge and custody of and be responsible for all funds and
securities of the Corporation, and deposit all such funds in the
name of the Corporation in such banks, trust companies or other
depositories as shall be selected in accordance with the
provisions of these Bylaws; receive, and give receipts for,
monies due and payable to the Corporation from any source
whatsoever; and in general, perform all the duties incident to
the office of Treasurer and such other duties as from time to
time may be assigned to him or her by the Board of Directors, the
Chairman of the Board, the Vice Chairman, the President or the
Vice President designated as the chief accounting officer of the
Corporation.
Section 11. ASSISTANT TREASURERS. In the absence of
the Treasurer, or in case of his or her inability to act, an
Assistant Treasurer designated by the Chairman of the Board, the
Vice Chairman, the President or the Board of Directors shall
perform all the duties of the Treasurer and, when so acting,
shall have all the powers of the Treasurer. The Assistant
Treasurers shall perform such other duties as from time to time
may be assigned to them by the Board of Directors, the Chairman
of the Board, the Vice Chairman, the President, the Treasurer or
the Vice President designated as the chief accounting officer of
the Corporation.
Section 12. COMPENSATION. The compensation of all
officers, agents and employees of the Corporation shall be fixed
from time to time by the Board of Directors, or pursuant to
authority of general or special resolutions of the Board. No
officer shall be prevented from receiving such salary by reason
of the fact that he or she is also a director of the Corporation
or a member of any committee.
<PAGE>
ARTICLE V
Resignations and Removals
Section 1. RESIGNATIONS. Any director, officer or
agent of the Corporation may, subject to contrary provision in
any applicable contract, resign at any time by giving written
notice to the Board of Directors or to the Chairman of the Board
or to the Vice Chairman or to the President or to the Secretary
of the Corporation, and any member of any committee may resign at
any time by giving notice either as aforesaid or to the committee
of which he or she is a member or to the chairman thereof. Any
such resignation shall take effect at the time specified therein
or, if the time be not specified, upon receipt thereof; and
unless otherwise specified herein, acceptance of such resignation
shall not be necessary to make it effective.
Section 2. REMOVALS. The stockholders at any meeting
called for the purpose, by vote of the majority of the
outstanding stock entitled to vote, may remove from office either
for or without cause any director and elect his or her successor.
The Board of Directors by vote of not less than a majority of the
whole Board may remove from office any officer, agent or member
of any committee, elected or appointed by it.
<PAGE>
ARTICLE VI
Vacancies
Section 1. AMONG DIRECTORS. If the office of any
director becomes vacant at any time by reason of death,
resignation, retirement, disqualification, removal from office or
otherwise, or if any new directorship is created by any increase
in the authorized number of directors, a majority of the
directors then in office, although less than a quorum, or the
sole remaining director, may choose a successor or fill the newly
created directorship, and the director so chosen shall hold
office, subject to the provisions of these Bylaws, until the next
annual election of directors and until his or her successor shall
be duly elected and shall qualify. In the event that a vacancy
arising as aforesaid shall not have been filled by the Board of
Directors, such vacancy may be filled by the stockholders at any
meeting thereof after such office becomes vacant. If one or more
directors shall resign from the Board, effective at a future
date, a majority of the directors then in office, including those
who have so prospectively resigned, shall have the power to fill
such vacancy or vacancies, the vote thereon to take effect when
such resignation or resignations shall become effective, and each
director so chosen shall hold office as herein provided in the
filling of other vacancies.
Section 2. AMONG OFFICERS, ETC. If the office of the
Chairman of the Board, Vice Chairman, President, any Vice
President, the Secretary or the Treasurer, or of any other
officer or agent or member of any committee, becomes vacant at
any time by reason of death, resignation, retirement,
disqualification, removal from office, or otherwise, such vacancy
or vacancies shall be filled by the Board of Directors or as
authorized by it.
<PAGE>
ARTICLE VII
Notices
Section 1. MANNER OF GIVING. Whenever under the
provisions of the laws of the State of Delaware, the Certificate
of Incorporation or these Bylaws, notice is required to be given
to any director or stockholder, it shall not be construed to mean
personal notice, but such notice may be given by mailing or
telecopying the same to each such director or stockholder at
such address as appears on the books or in the records of the
Corporation, and such notice shall be deemed to be given at the
time when the same is thus mailed or telecopied.
Section 2. WAIVER OF NOTICE. Whenever under the
provisions of these Bylaws, or of the Certificate of
Incorporation, or of any of the laws of the State of Delaware,
the stockholders or directors are authorized to hold any meeting
or take any action after notice or after the lapse of any
prescribed period of time, a waiver thereof, in writing, signed
by the person or persons entitled to such notice or lapse of
time, whether before or after the time of meeting or action
stated therein, shall be deemed equivalent thereto. The presence
at any meeting of a person or persons entitled to notice thereof
shall be deemed a waiver of such notice as to such person or
persons.
<PAGE>
ARTICLE VIII
Capital Stock
Section 1. FORM AND ISSUANCE. Certificates of stock
shall be issued in such form as may be approved by the Board of
Directors and shall be signed by, or in the name of the
Corporation by, the Chairman of the Board, or the Vice Chairman,
or the President or a Vice President, and by the Treasurer or an
Assistant Treasurer or the Secretary or an Assistant Secretary of
the Corporation; provided, however, that if such certificate is
countersigned (1) by a transfer agent other than the Corporation
or its employee, or, (2) by a registrar other than the
Corporation or its employee, the signatures of the officers of
the Corporation may be facsimiles. In case any officer who has
signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer before such
certificate is issued, it may be issued by the Corporation with
the same effect as if he or she were such officer at the date
of issue.
Section 2. TRANSFERS OF STOCK. The Board of Directors
shall have power and authority to make such rules and regulations
or amendments thereto as they may deem expedient concerning the
issue, registration and transfer of certificates of stock and may
appoint transfer agents and registrars thereof.
Section 3. LOST, STOLEN AND DESTROYED CERTIFICATES.
The Board of Directors may direct a new certificate or
certificates to be issued in place of any certificate or
certificates theretofore issued by the Corporation alleged to
have been lost, stolen or destroyed, upon satisfactory proof of
that fact by the person claiming the certificate or certificates
for shares to be lost, stolen or destroyed. When authorizing
such issue of a new certificate or certificates, the Board of
Directors may, at its discretion, and as a condition precedent to
the issuance thereof, require the owner of such lost, stolen or
destroyed certificate or certificates, or his or her legal
representative, to give the Corporation and its agents a bond in
such sum as the Board of Directors may direct as indemnity
against any claim that may be made against the Corporation or any
of its agents with respect to the certificate or certificates
alleged to have been lost, stolen or destroyed.
Section 4. FIXING OF RECORD DATE. In order that the
Corporation may determine the stockholders entitled to notice of
or to vote at any meeting of stockholders or any adjournment
therof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend
or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or
<PAGE>
exchange of stock or for the purpose of any other lawful action,
the Board of Directors may fix, in advance, a record date, which
shall not be more than sixty nor less than ten days before the
date of such meeting, nor more than sixty days prior to any other
action. Only such stockholders as shall be stockholders of
record on the date so fixed shall be entitled to such notice of,
and to vote at, such meeting and any adjournment thereof, or to
receive payment of such dividend or other distribution, or to
receive such allotment of rights, or to exercise such rights in
respect of any such change, conversion or exchange of stock, or
to participate in such other action, or to give such consent, as
the case may be, notwithstanding any transfer of any stock on the
books of the Corporation after any such record date fixed as
aforesaid. A determination of stockholders of record entitled to
notice of or to vote at a meeting of stockholders shall apply to
any adjournment of the meeting; provided however, that the Board
of Directors may fix a new record date for the adjourned meeting.
ARTICLE IX
Negotiable Instruments, Contracts, Etc.
Section 1. SIGNATURES ON CHECKS, ETC. All checks,
drafts, bills of exchange, notes or other instruments or orders
for the payment of money or evidences of indebtedness shall be
signed for or in the name of the Corporation by such officer or
officers, person or persons, as the Board of Directors may from
time to time designate by resolution.
Section 2. EXECUTION OF CONTRACTS, DEEDS, ETC. The
Board of Directors may authorize any officer or officers, agent
or agents, in the name of and on behalf of the Corporation, to
enter into or execute and deliver any and all deeds, bonds,
mortgages, contracts and other obligations or instruments, and
such authority may be general or confined to specific instances.
ARTICLE X
Corporate Seal
The seal of the Corporation shall have inscribed
thereon the name of the Corporation, the year of its organization
and the words "Corporate Seal - Delaware". Said seal may be used
by causing it or a facsimile thereof to be impressed or affixed
or reproduced in any manner whatsoever.
<PAGE>
ARTICLE XI
Fiscal Year
The fiscal year of the Corporation shall be determined
by the Board of Directors.
ARTICLE XII
Voting of Stock Held
Unless otherwise provided by resolution of the Board of
Directors, the Chairman of the Board, or any officer designated
by the Chairman of the Board, may from time to time appoint an
attorney or attorneys or agent or agents of the Corporation, in
the name and on behalf of the Corporation to cast the votes which
the Corporation may be entitled to cast as a stockholder or
otherwise in any other corporation or association, any of whose
stock or securities may be held by the Corporation, at meetings
of the holders of the stock or other securities of such other
corporations or associations, or to consent in writing to any
action by any such other corporation or association, and may
instruct the person or persons so appointed as to the manner of
casting such votes or giving such consent, and may execute or
cause to be executed on behalf of the Corporation and under its
corporate seal, or otherwise, such written proxies, consents,
waivers or other instruments as he or she may deem necessary or
proper in the premises; or the Chairman of the Board, or any
officer designated by the Chairman of the Board, may attend any
meeting of the holders of stock or other securities of any such
other corporation or association and thereat vote or exercise any
or all other powers of the Corporation as the holder of such
stock or other securities of such other corporation or
association, or may consent in writing to any action by any such
other corporation or association.
<PAGE>
ARTICLE XIII
Indemnification and Insurance
Section 1. INDEMNIFICATION. The Corporation shall
indemnify each director, officer, employee and agent of the
Corporation, his or her heirs, executors, administrators and all
other persons whom the Corporation is authorized to indemnify
under the provisions of the General Corporation Law of the State
of Delaware, to the fullest extent permitted by law, (a) against
all expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by
him or her in connection with any action, suit or proceeding,
whether civil, criminal, administrative or investigative, or in
connection with any appeal therein, or otherwise, and (b) against
all expenses (including attorneys' fees) actually and reasonably
incurred by him or her in connection with the defense or
settlement of any action or suit by or in the right of the
Corporation, or in connection with any appeal therein, or
otherwise; and no provision of the Bylaws is intended to be
construed as limiting, prohibiting, denying or abrogating any of
the general or specific powers or rights conferred under the
General Corporation Law of the State of Delaware upon the
Corporation to furnish, or upon any court to award, such
indemnification, or indemnification as otherwise authorized
pursuant to the General Corporation Law of the State of Delaware
or any other law now or hereafter in effect.
Section 2. INSURANCE. The Board of Directors of the
Corporation may, in its discretion, authorize the Corporation to
purchase and maintain insurance on behalf of any person who is or
was a director, officer, employee or agent of the Corporation, or
is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any
liability asserted against him or her or incurred by him or her
in any such capacity, or arising out of his or her status as
such, whether or not the Corporation would have the power to
indemnify him or her against such liability under the provisions
of Section 1 of ARTICLE XIII.
<PAGE>
ARTICLE XIV
Amendments
All Bylaws of the Corporation shall be subject to
alteration or repeal, and new Bylaws may be made, either
(a) by the affirmative vote of the holders of record of
a majority of the outstanding stock of the Corporation entitled
to vote, given at an annual meeting or at any special meeting of
such stockholders, or
(b) by the affirmative vote of a majority of the whole
Board of Directors at any regular or special meeting of the Board
provided that reference is made in the notice or waiver of notice
of such Board meeting to the fact that a proposed alteration or
repeal of the Bylaws or the adoption of proposed new Bylaws is to
be considered and acted on at such meeting, in any such case
without it being necessary to set forth or describe the Bylaw
proposed to be altered or repealed or the new Bylaws proposed to
be adopted, or
(c) without any such Board meeting, by written consent
signed by all members of the Board in accordance with Section 11
of ARTICLE III of these Bylaws.
ARTICLE XV
Shareholder Protection Act
The provisions of NORTH CAROLINA GENERAL STATUTES,
Chapter 55, Sections 55-75 through 55-79, as amended, shall not
be applicable to the Corporation.
ARTICLE XVI
The North Carolina Control
Share Acquisition Act
To the extent otherwise deemed applicable, if any, the
provisions of Article 7A of Chapter 55 of the NORTH CAROLINA
GENERAL STATUTES entitled The North Carolina Control Share
Acquisition Act shall not be applicable to the Corporation.
