Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended November 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-6807
FAMILY DOLLAR STORES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 56-0942963
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P. O. Box 1017, 10401 Old Monroe Road
Charlotte, North Carolina 28201-1017
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 704-847-6961
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class Outstanding at December 31, 1997
Common Stock, $.10 par value 85,892,345 shares
<PAGE>
FAMILY DOLLAR STORES, INC., AND SUBSIDIARIES
INDEX
Page No.
Part I - Financial Information
Item 1 - Consolidated Condensed Financial Statements:
Consolidated Condensed Balance Sheets -
November 30, 1997 and August 31, 1997 2
Consolidated Condensed Statements of Income -
Three Months Ended November 30, 1997 and 1996 3
Consolidated Condensed Statements of Cash Flows -
Three Months Ended November 30, 1997 and 1996 4
Notes to Consolidated Condensed Financial
Statements 5-6
Computation of Net Income per Common Share -
Note 5 6
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of
Operations 7-9
Part II - Other Information and Signatures
Item 6 - Exhibits and Reports on Form 8-K 10
Signatures 10
<PAGE>
<TABLE>
FAMILY DOLLAR STORES, INC., AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited)
<CAPTION>
November 30, August 31,
1997 1997
Assets
<S> <C> <C>
Current assets:
Cash and cash equivalents (Note 2) $ 34,071,331 $ 42,468,300
Merchandise inventories 530,133,860 467,945,483
Deferred income taxes 28,567,454 28,407,454
Prepayments and other current assets 8,809,488 5,881,520
Total current assets 601,582,133 544,702,757
Property and equipment, net 256,705,758 231,234,756
Other assets 2,932,130 4,356,339
$861,220,021 $780,293,852
<PAGE>
<CAPTION>
Liabilities and Shareholders' Equity
<S> <C> <C>
Current liabilities:
Accounts payable and accrued
liabilities $301,570,725 $250,107,926
Income taxes payable 22,238,340 11,118,803
Total current liabilities 323,809,065 261,226,729
Deferred income taxes 19,178,650 18,868,650
Shareholders' equity (Notes 4 and 5):
Preferred stock, $1 par; authorized
and unissued 500,000 shares
Common stock, $.10 par;
authorized 120,000,000 shares;
issued 91,064,573 shares at
November 30, 1997 and 91,031,478
shares at August 31, 1997 9,106,457 9,103,148
Capital in excess of par 21,732,917 21,157,973
Retained earnings 498,742,200 481,286,620
529,581,574 511,547,741
Less common stock held in treasury,
at cost (5,179,233 shares at
November 30, 1997 and August 31, 1997 -
Note 5) 11,349,268 11,349,268
Total shareholders' equity 518,232,306 500,198,473
$861,220,021 $780,293,852
See notes to consolidated condensed financial statements.
</TABLE>
<PAGE>
<TABLE>
FAMILY DOLLAR STORES, INC., AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Unaudited)
<CAPTION>
Three Months Ended
November 30, November 30,
1997 1996
<S> <C> <C>
Net sales $542,747,097 $454,882,647
Costs and expenses:
Cost of sales 356,419,630 300,301,913
Selling, general and
administrative expenses 146,975,498 126,232,912
503,395,128 426,534,825
Income before provision
for taxes on income 39,351,969 28,347,822
Provision for taxes on income 15,025,000 10,988,000
Net income $ 24,326,969 $ 17,359,822
Net income per common share
(Note 5)* $0.28 $0.20
Dividends per common share * $ .08 $0.07 1/3
Weighted average number of
common shares outstanding (Note 5)* 85,866,514 85,287,395
* November 30, 1996, figures were adjusted to reflect the three-for-two
stock split effective July 15, 1997.
See notes to consolidated condensed financial statements.
</TABLE>
<PAGE>
<TABLE>
FAMILY DOLLAR STORES, INC., AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Three Months Ended
November 30, November 30,
1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net income $24,326,969 $17,359,822
Adjustments to reconcile net income to
net cash provided by (used in) operating
activities:
Depreciation and amortization 7,918,180 6,963,224
Deferred income taxes 150,000 (145,001)
Gain on disposition of property
and equipment (59,700) (91,187)
Changes in operating assets and liabilities:
Inventories (62,188,377) (47,741,869)
Prepayments and other current assets (2,927,968) (4,136,800)
Other assets 1,424,208 33,316
Accounts payable and accrued
liabilities 51,459,832 20,570,795
Income taxes payable 11,119,537 9,011,595
31,222,681 1,823,895
Cash flows from investing activities:
Capital expenditures (33,490,762) (15,678,739)
Proceeds from dispositions of
property and equipment 161,279 901,519
(33,329,483) (14,777,220)
Cash flows from financing activities:
Net notes payable borrowings 26,600,000
Exercise of employee stock options 578,253 1,091,138
Payment of dividends (6,868,420) (6,263,369)
(6,290,167) 21,427,769
Net change in cash and cash equivalents (8,396,969) 8,474,444
Cash and cash equivalents at beginning
of period 42,468,300 18,844,839
Cash and cash equivalents at end of period $34,071,331 $27,319,283
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 5,925 $ 87,970
Income taxes 3,610,056 2,092,909
See notes to consolidated condensed financial statements.
</TABLE>
<PAGE>
FAMILY DOLLAR STORES, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. In the opinion of the Company, the accompanying unaudited
consolidated condensed financial statements contain all
adjustments (consisting of only normal recurring accruals)
necessary to present fairly the financial position as of
November 30, 1997, and the results of operations and the cash
flows for the three months ended November 30, 1997, and 1996.
The results of operations for the three month period ended
November 30, 1997, are not necessarily indicative of the
results to be expected for the full year.
2. The Company considers all highly liquid investments with a
maturity of three months or less to be "cash equivalents."
3. The Company has two unsecured bank lines of credit for
short-term revolving borrowings of up to $50,000,000 each, or
$100,000,000 of total borrowing capacity. The lines of credit
expire on March 31, 1999 and March 29, 1998, respectively, and
the Company expects that the line expiring on March 29, 1998,
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 March 31, 1999, into either a five or seven
year term loan, at the bank's variable prime rate.
4. The Company's non-qualified stock option plan provides for the
granting of options to key employees to purchase shares of
common stock at prices not less than the fair market value on
the date of grant. Options expire five years from the date of
grant and are exercisable to the extent of 40% after the second
anniversary of the grant and an additional 30% at each of the
following two anniversary dates on a cumulative basis.
<PAGE>
<TABLE>
The following is a summary of transactions under the plan during the
three months ended November 30, 1997, and 1996. November 30, 1996,
figures were adjusted to reflect the three-for-two stock split
effective July 15, 1997.
<CAPTION>
Three Months Ended
November 30, 1997 November 30, 1996
Number of Number of
shares Option price shares Option price
under option per share under option per share
<S> <C> <C> <C> <C>
Outstanding-beginning 1,571,004 $ 7.00-$21.75 1,503,450 $ 6.83-$14.17
Granted 371,950 $21.75-$22.75 442,350 $11.17-$11.83
Exercised (33,095) $ 8.67-$14.17 (97,350) $ 7.00-$11.17
Cancelled (18,255) (16,125)
Outstanding-ending 1,891,604 $ 7.00-$22.75 1,832,325 $ 6.83-$14.17
</TABLE>
At November 30, 1997, options to purchase 327,405 shares were
exercisable at prices ranging from $7.00 to $14.17 per share,
and at November 30, 1996, options to purchase 584,977 shares were
exercisable at prices ranging from $6.83 to $14.17 per share.
5. Net income per common share is based on the weighted average
number of shares outstanding during each reporting period after
giving retroactive effect to the three-for-two stock split as
shown on the consolidated condensed statements of income.
Exercise of outstanding stock options would have no material
dilutive effect on net income per common share.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
At November 30, 1997, the Company had working capital of
$277.8 million with cash and cash equivalents of approximately
$34.1 million and no outstanding borrowings. During the quarter
ended November 30, 1997, the increase in earnings, coupled with
improved inventory turnover compared with the quarter ended
November 30, 1996, produced $31.2 million cash flow from
operating activities compared with $1.8 million cash flow from
operating activities in the quarter ended November 30, 1996.
Capital expenditures for the quarter ended November 30,
1997, were approximately $33.5 million, and are currently
expected to be approximately $80 to $90 million for fiscal 1998.
The majority of planned capital expenditures for fiscal 1998 is
related to the Company's new store expansion, existing store
expansion, relocation and renovation and to the completion in
January 1998 of the construction and equipping of a new full-
service distribution center in Warren County, Virginia. The new
store expansion and the additional distribution center will
require additional investment in merchandise inventories. In
fiscal 1998, the Company currently expects to open approximately
300 stores and close approximately 50 stores for a net addition
of approximately 250 stores, compared with the opening of 236
stores and closing of 50 stores for a net addition of 186 stores
in fiscal 1997. The Company also currently plans to expand or
relocate approximately 150 stores and renovate an additional 200
to 300 stores in fiscal 1998, compared with the expansion or
relocation of 94 stores and renovation of 380 stores in fiscal
1997. In the first quarter of fiscal 1998, the Company opened
105 stores, closed 19 stores, and expanded or relocated 15
stores. The Company occupies most of its stores under operating
leases. Store opening, closing, expansion, relocation, and
renovation plans, as well as overall capital expenditure plans,
are continuously reviewed and are subject to change.
<PAGE>
RESULTS OF OPERATIONS
NET SALES
Net sales increased 19.3% in the quarter ended November 30,
1997, as compared with 14.8% in the quarter ended November 30,
1996. The increase was attributable to increased sales in
existing stores and sales from new stores opened as part of the
Company's store expansion program. Sales in existing stores
increased 10.1% in the quarter ended November 30, 1997, as
compared with the same period ended November 30, 1996, with sales
of hardlines merchandise increasing approximately 14.1% and sales
of softlines merchandise increasing approximately 2.5%.
Hardlines as a percentage of total sales increased to
approximately 67% in the first quarter of fiscal 1998 compared to
65% in the first quarter of fiscal 1997. 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. Customers continue to respond favorably to the
Company's everyday low price strategy. The sales increases in
the first quarter were achieved despite the fact that the
elimination of two advertising circulars negatively impacted
sales. The Company also plans to eliminate two additional
circulars in the second quarter of fiscal 1998, which will
negatively impact sales in that quarter. The average number of
stores open during the first quarter of fiscal 1998 was 8.1% more
than during the first quarter of fiscal 1997. The Company had
2,853 stores in operation at November 30, 1997, as compared with
2,619 stores in operation at November 30, 1996, representing an
increase of approximately 8.9%.
COST OF SALES
Cost of sales increased 18.7% in the quarter ended
November 30, 1997, as compared with the quarter ended
November 30, 1996. This increase primarily reflected the additional
sales volume between years. Cost of sales, as a percentage of net sales,
was 65.7% in the quarter ended November 30, 1997 compared with 66.0%
in the quarter ended November 30, 1996. The decrease in the cost
of sales percentage for the quarter was due in part to decreases
in promotional markdowns, related to the elimination of two
advertising circulars and the inclusion of more items at the
everyday low price in the remaining circulars. The cost of sales
percentages also are affected by changes in the effectiveness of
the merchandise purchasing programs and product mix.
<PAGE>
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses increased 16.4%
in the quarter ended November 30, 1997, as compared with the
quarter ended November 30, 1996. The increase in these expenses
was due primarily to additional costs arising from the continued
growth in the number of stores in operation and to the increase
in hourly wage rates resulting from the increase in the federal
minimum wage rate on September 1, 1997. Selling, general and
administrative expenses, as a percentage of net sales, were 27.1%
in the quarter ended November 30, 1997, as compared with 27.8% in
the quarter ended November 30, 1996. The decrease in the
percentage for the quarter ended November 30, 1997, was due in
part to a decrease in store labor costs and occupancy costs as a
percentage of net sales due to more efficient utilization of
store labor hours and to the leverage provided by the 10.1%
increase in existing store sales. Additionally, advertising
expenses decreased during the quarter due to the elimination of
two advertising circulars.
PROVISION FOR TAXES ON INCOME
The effective tax rate was 38.2% for the quarter ended
November 30, 1997, as compared to 38.8% for the quarter ended
November 30, 1996. The decrease in the effective tax rate for
the quarter ended November 30, 1997, resulted from changes in
effective state income tax rates and from the implementation of
the federal Work Opportunity Tax Credit program.
FORWARD-LOOKING STATEMENTS
Certain statements contained herein and elsewhere in this
Form 10-Q which are not historical facts are forward-looking
statements made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. These forward-
looking statements address activities or events which the Company
expects will or may occur in the future, such as future capital
expenditures, store openings, closings, remodelings,
refurbishing, expansions and relocations, additional distribution
facilities, and other aspects of the Company's future business
and operations. The Company cautions that a number of important
factors could cause actual results to differ materially from
those expressed in any forward-looking statements, whether
written or oral, made by or on behalf of the Company. Such
factors include, but are not limited to competitive factors and
pricing pressures, general economic conditions, changes in
consumer demand, inflation, merchandise supply constraints,
changes in currency exchange rates, tariffs, quotas, and freight
rates, availability of real estate, construction and start-up of
a new distribution center and the effects of legislation on wage
levels and entitlement programs. Consequently, all of the
forward-looking statements made are qualified by these and other
factors, risks and uncertainties.
<PAGE>
RECENT ACCOUNTING PRONOUNCEMENTS AND OTHER ISSUES
The Financial Accounting Standards Board has issued
Statement of Financial Accounting Standards No. 128, "Earnings
Per Share" ("SFAS 128") effective for fiscal years ending after
December 15, 1997. SFAS 128, which requires dual presentation of
basic and diluted earnings per share (EPS) on the face of the
statement of income and requires a reconciliation of the
numerators and denominators of the basic and diluted EPS
calculations, will be implemented in the second quarter of fiscal
1998. The Company does not expect that basic and diluted EPS
will be materially different from its current EPS calculation
since potential common shares in the form of stock options are
not expected to be materially dilutive.
The Company has evaluated its information systems for Year
2000 compliance, which refers to information systems that will
accurately process date and time data for the Year 2000 and
beyond. The Company expects to replace certain software programs
and modify other software programs during the next two years in
order to achieve Year 2000 compliance, and does not currently
expect these costs to have a material adverse impact on the
Company's financial condition or results of operations.
<PAGE>
PART II - OTHER INFORMATION
Item 6.
Exhibits and Reports on Form 8-K
(a) Exhibits filed herewith:
10 (i) 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.
10 (ii) 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.
11 Statements Re: Computations of Per Share Earnings
27 Financial Data Schedule
(b) Reports on Form 8-K - None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
FAMILY DOLLAR STORES, INC.
(Registrant)
Date: January 8, 1998 R. JAMES KELLY
R. JAMES KELLY
Vice Chairman
Date: January 8, 1998 C. MARTIN SOWERS
C. MARTIN SOWERS
Senior Vice President-Finance
<TABLE>
<CAPTION>
EXHIBIT 11
FAMILY DOLLAR STORES, INC.
STATEMENT RE COMPUTATIONS OF PER SHARE EARNINGS
THREE MONTHS ENDED THREE MONTHS ENDED
AS PRESENTED NOVEMBER 30, 1997 NOVEMBER 30, 1996 *
PRIMARY FULLY DILUTED PRIMARY FULLY DILUTED
<S> <C> <C> <C> <C>
AVERAGE SHARES OUTSTANDING FOR THE
THREE MONTHS ENDED 85,866,514 85,866,514 85,287,395 85,287,395
NET INCOME $24,326,969 $24,326,969 $17,359,822 $17,359,822
EARNINGS PER SHARE
$ .28 $ .28 $ .20 $ .20
PRO FORMA DILUTION IMPACT OF COMMON STOCK EQUIVALENTS
ADDITIONAL WEIGHTED AVERAGE SHARES FROM
ASSUMED EXERCISE AT THE BEGINNING
OF THE YEAR OF DILUTIVE STOCK OPTIONS 1,791,678 1,791,678 1,634,425 1,699,700
WEIGHTED AVERAGE SHARES ASSUMED REPURCHASED FROM
ASSUMED PROCEEDS OF EXERCISES USING TREASURY STOCK
METHOD (AVERAGE MARKET PRICE FOR PRIMARY AND, IF
GREATER, ENDING MARKET PRICE FOR FULLY DILUTED) (1,283,912) (1,214,165) (1,510,868) (1,515,912)
NET PRO FORMA COMMON STOCK
EQUIVALENT INCREMENTAL SHARES 507,766 577,513 123,557 183,788
PERCENTAGE DILUTION FROM PRO FORMA COMMON
STOCK EQUIVALENT INCREMENTAL SHARES 0.59% 0.67% 0.15% 0.22%
TOTAL COMMON STOCK AND COMMON
STOCK EQUIVALENTS 86,374,280 86,444,027 85,410,952 85,471,183
NET INCOME $24,326,969 $24,326,969 $17,359,822 $17,359,822
PRO FORMA EARNINGS PER SHARE (INCLUDING DILUTIVE
COMMON STOCK EQUIVALENTS) $ .28 $ .28 $ .20 $ .20
* All figures have been adjusted for the three-for-two stock split effective July 15, 1997.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED CONDENSED FINANCIAL STATEMENTS OF FAMILY DOLLAR STORES, INC.
AND SUBSIDIARIES FOR THE PERIOD ENDED NOVEMBER 30, 1997, AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000034408
<NAME> FAMILY DOLLAR STORES, INC.
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> AUG-31-1998
<PERIOD-START> SEP-01-1997
<PERIOD-END> NOV-30-1997
<EXCHANGE-RATE> 1
<CASH> 34,071,331
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 530,133,860
<CURRENT-ASSETS> 601,582,133
<PP&E> 382,017,405
<DEPRECIATION> 125,311,647
<TOTAL-ASSETS> 861,220,021
<CURRENT-LIABILITIES> 323,809,065
<BONDS> 0
0
0
<COMMON> 9,106,457
<OTHER-SE> 509,125,849
<TOTAL-LIABILITY-AND-EQUITY> 861,220,021
<SALES> 542,747,097
<TOTAL-REVENUES> 542,747,097
<CGS> 356,419,630
<TOTAL-COSTS> 503,395,128
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 39,351,969
<INCOME-TAX> 15,025,000
<INCOME-CONTINUING> 24,326,969
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 24,326,969
<EPS-PRIMARY> .28
<EPS-DILUTED> .28
</TABLE>
EXHIBIT 10 (i)
AMENDMENT NO. 1
THIS AMENDMENT NO. 1 (the "Amendment") is dated as of the
26th day of March, 1997, and is between Family Dollar Stores,
Inc., a corporation organized under the laws of the state of
Delaware (the "Borrower") and NationsBank, N.A. (the "Bank").
RECITALS
(a) The Borrower and the Bank have entered into that
certain Credit Agreement, dated as of March 31, 1996 (the
"Agreement").
(b) The Borrower and the Bank desire to amend the Agreement
as set forth herein.
NOW THEREFORE, in consideration of the mutual covenants
contained herein and intending to be legally bound hereby, the
parties agree as follows:
SECTION 1. Definitions. Capitalized terms used in this
Amendment and not defined herein shall have the meanings assigned
to such terms in the Agreement.
SECTION 2. Amendments to the Agreement. The Agreement is,
effective as of the date first above written, hereby amended by
deleting the date "March 30, 1997" in the definition of "Tranch B
Termination Date" and replacing it with "March 29, 1998".
SECTION 3. Obligations. The Borrower shall remain
responsible for the performance of its obligations under the
Agreement, as amended hereby, and its obligations under the other
Loan Documents.
SECTION 4. Integration; Confirmation. On and after the
date hereof, each reference in the Agreement to "this Agreement,"
"herein," "hereunder" or words of similar import, and each such
reference in all other documents delivered in connection with the
Agreement shall be deemed to be a reference to the Agreement as
amended by this Amendment, and the Agreement as so amended shall
be read as a single integrated document. Except as specifically
amended by this Amendment, all other terms and provisions of the
Agreement shall continue in full force and effect and unchanged
and are hereby confirmed in all respects.
SECTION 5. Counterparts. This Amendment may be signed in
any number of counterparts (including counterparts signed and
delivered by facsimile), each of which shall be an original, with
the same effect as if the signatures thereto and hereto were upon
the same instrument.
<PAGE>
SECTION 6. Governing Law. This Amendment shall be
construed in accordance with and governed by the law of the State
of North Carolina.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed by their respective authorized
officers as of the day and year first above written.
BANK: BORROWER;
NATIONSBANK, N.A. FAMILY DOLLAR STORES, INC.
BY: LOY D. THOMPSON III By: C. MARTIN SOWERS
Name: LOY D. THOMPSON III Name: C. MARTIN SOWERS
Title: Senior Vice President Title: Senior Vice President-
Finance
Consented to by:
GUARANTORS:
FAMILY DOLLAR SERVICES, INC. FAMILY DOLLAR OPERATIONS, INC.
BY: C. MARTIN SOWERS By: C. MARTIN SOWERS
Name: C. MARTIN SOWERS Name: C. MARTIN SOWERS
Title: Senior Vice President- Title: Senior Vice President-
Finance Finance
FAMILY DOLLAR TRUCKING, INC.
BY: C. MARTIN SOWERS
Name: C. MARTIN SOWERS
Title: Senior Vice President-
Finance
EXHIBIT 10 (ii)
AMENDMENT NO. 2 TO CREDIT
AGREEMENT; CONSENT AND WAIVER
THIS AMENDMENT NO. 2 (the "Amendment") is dated as of the
31st day of December, 1997, by and among Family Dollar Stores,
Inc., a Delaware corporation ("FDSI"), Family Dollar, Inc.
("FDI") (FDSI and FDI are collectively referred to as the
"Borrower") and NationsBank, N.A. (The "Bank").
RECITALS
(a) FDSI and the Bank previously have entered into that
certain Credit Agreement, dated as of March 31, 1996, as amended
by Amendment No. 1 dated March 26, 1997 (the "Agreement")
pursuant to which the Bank has made a revolving credit facility
available to FDSI.
(b) FDSI intends to reorganize its corporate structure and
has requested that the Bank consent to such reorganization.
(c) FDSI has requested certain changes in the terms of the
Credit Agreement and the Bank is willing to agree to those
changes on the terms and conditions set forth herein.
(d) FDI desires to join in the Credit Agreement as a
Borrower.
(e) FDSI, FDI and the Bank desire to amend the Agreement as
set forth herein.
NOW THEREFORE, in consideration of the mutual covenants
contained herein and for other good and valuable consideration,
the parties agree as follows:
SECTION 1. Definitions. Capitalized terms used in this
Amendment and not defined herein shall have the meanings assigned
to such terms in the Agreement.
SECTION 2. Amendments to the Agreement. The Agreement is,
effective as of the date first above written, hereby amended as
follows:
(a) All references to the "Borrower" in the Agreement are
hereby amended to mean FDSI and FDI collectively and
individually as the context requires.
<PAGE>
(b) Section 1.01 is amended by adding the following
definitions:
"FDI" means Family Dollar, Inc., a North Carolina
corporation and wholly owned subsidiary of FDSI.
"FDSI" means Family Dollar Stores, Inc., a Delaware
corporation.
SECTION 3. Obligations of Borrower. FDSI shall remain
responsible for the performance of its obligations under the
Agreement, as amended hereby, and its obligations under the other
Loan Documents.
By signing this Amendment, FDI hereby agrees to become a
Borrower under the Credit Agreement and assumes all of the
benefits and obligations, whether now existing or hereafter
arising, of the Borrower under the Agreement and the other Loan
Documents. FDI agrees to be bound by the provisions of the
Agreement and will perform in accordance with its terms all of
the obligations which by the terms of the Agreement are required
to be performed as the Borrower. FDI and FDSI agree that all of
their obligations as the Borrower under the Agreement and the
Notes shall be joint and several.
SECTION 4. Representations and Warranties. In order to
induce the Bank to enter into this Amendment and the transactions
described herein, each of the Borrowers hereby represents and
warrants that each has examined or re-examined the Agreement and
that as of the date hereof:
(i) This Amendment has been duly authorized, executed and
delivered on its behalf, and the Credit Agreement, as
amended hereby, constitutes its legal, valid and
binding obligation enforceable against it in
accordance with its terms, except as limited by
applicable Debtor Relief Laws and general principles
of equity;
(ii) The representations and warranties made by the
Borrower in Article V thereof (except that the
financial statements referred to in Section 5.02
shall be those most recently furnished to the Bank
pursuant to Section 6.01) are true on and as of the
date hereof;
(iii) There has been no material change in the condition,
financial or otherwise, of the Borrowers and its
Subsidiaries since the date of the most recent
financial reports of the Borrowers received by the
<PAGE>
Bank under Section 6.01 thereof, other than changes in
the ordinary course of business, none of which has
been a material adverse change; and
(iv) No event has occurred and no condition exists which,
upon the consummation of the transaction contemplated
hereby, would constitute a Default or an Event or
Default on the part of the Borrower under the
Agreement or the Notes, either immediately or with
the lapse of time or the giving of notice, or both.
SECTION 5. Consent and Waiver. The Bank hereby consents to
the corporate reorganization of FDSI and its Subsidiaries as
outlined in the letters from George R. Mahoney, Jr. to the Bank
dated December 11, 1997 and December 23, 1997, respectively (the
"Reorganization"). To the extent the Reorganization causes any
violation or non-compliance with Section 6.08, the Bank waives
such violation or non-compliance. This consent and waiver is
effective only as to the Reorganization and shall not constitute
a consent or waiver to any other transactions or to any other
disposition of any other property of the Borrower or in any way
modify the Agreement or discharge any of the Borrower's
obligations thereunder.
SECTION 6. Amended and Restated Notes. FDSI and FDI agree
to execute and deliver to the Bank, the Amended and Restated
Tranche A Note and the Amended and Restated Tranche B Note
substantially in the forms of Exhibits A, B, C and D hereto.
FDSI, FDI and the Bank acknowledge and agree that such Amended
and Restated Notes collectively evidence the principal
indebtedness of the Tranche A Loan and the Tranche B Loan under
the Agreement, and that such principal indebtedness of the
Borrower or the obligation of the Bank to make Loans shall not
exceed the amounts of the Tranche A Commitment and the Tranche B
Commitment, rspectively. Upon receipt of such Amended and
Restated Notes, the Bank agrees to return promptly the Tranche A
Note and the Tranche B Note originally delivered in connection
with the Agreement.
SECTION 7. Guarantors. Each of the Guarantors has joined
in this Amendment for the purpose of consenting hereto and
confirming that the Guarantee remains in full force and effect.
SECTION 8. Integration: Confirmation. On and after the
date hereof, each reference in the Agreement to "this Agreement,"
"herein," "hereunder" or words of similar import, and each such
reference in all other documents delivered in connection with the
Agreement shall be deemed to be a reference to the Agreement as
amended by this Amendment, and the Agreement as so amended shall
be read as a single integrated document. Except as specifically
amended by this Amendment, all other terms and provisions of the
<PAGE>
Agreement shall continue in full force and effect and unchanged
and are hereby confirmed in all respects.
SECTION 9. Counterparts. This Amendment may be signed in
any number of counterparts (including counterparts signed and
delivered by facsimile), each of which shall be an original, with
the same effect as if the signatures thereto and hereto were upon
the same instrument.
SECTION 10. Governing Law. This Amendment shall be
construed in accordance with and governed by the law of the State
of North Carolina.
SECTION 11. Other Documents. FDI and FDSI agree to deliver
or cause to be delivered within thirty days from the date hereof,
an Incumbency Certificate and a Secretary's Certificate of FDI
including certified copies of FDI's Articles of Incorporation,
bylaws and resolutions of the board of directors authorizing the
entering into of this Amendment and assuming its obligations as a
Borrower under the Agreement. FDSI also agrees to deliver a
certified copy of its board of directors resolutions approving
the Reorganization.
SECTION 12. Further Assurances. All instruments and
documents incident to the consummation of the transactions
contemplated hereby shall be satisfactory in form and substance
to the Bank; the Bank shall have received copies of all
additional agreements, instruments and documents which it may
reasonably request in connection therewith, including copies of
resolutions of the Borrowers authorizing the transactions
contemplated by this Amendment, such documents, when appropriate,
to be certified by appropriate corporate or governmental
authorities; and all proceedings of the Borrowers relating to the
matters provided for herein shall be satisfactory to the Bank.
SECTION 13. Ratification. Except as hereby specifically
amended, modified or supplemented, the Agreement and all of the
other Loan Documents are hereby confirmed and ratified in all
respects and shall remain in full force and effect according to
their respective terms.
SECTION 14. Counterparts. This Amendment may be executed in
any number of counterparts, each of which shall be deemed to be
an original as against any party whose signature appears thereon
and all of which shall together constitute one and the same
instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed by their respective authorized
officers as of the day and year first above written.
BORROWERS:
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
Acknowledged and Consented to by:
GUARANTORS:
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
BANK:
NATIONSBANK, N.A.
BY: RICHARD G. PARKHURST, JR.
Name: RICHARD G. PARKHURST, JR.
Title: Vice President
<PAGE>
EXHIBIT A
AMENDED AND RESTATED TRANCHE A NOTE
$50,000,000.00 December 31, 1997
FOR VALUE RECEIVED, the undersigned, FAMILY DOLLAR STORES,
INC., a Delaware corporation (the "Borrower"), hereby promises to
pay to the order of NATIONSBANK, N.A. (the "Bank"), at the
Principal Office, in lawful money of the United States of
America, the principal amount of Fifty Million Dollars
($50,000,000) or such lesser amount as shall equal the aggregate
unpaid principal amount of the Tranche A Loans made by the Bank
to the Borrower under the Credit Agreement referred to below, on
the dates and in the principal amounts provided in the Credit
Agreement, and to pay interest on the unpaid principal amount of
each such Tranche A Loan, at such office, in like money, for the
period commencing on the date of such Tranche A Loan until such
Tranche A Loan shall be paid in full, at the rates per annum and
on the dates provided in the Credit Agreement.
The books and records of the Bank shall be prima facie
evidence of all amounts outstanding hereunder.
This Note is the Tranche A Note referred to in the Credit
Agreement of even date herewith, between the Borrower and the
Bank (such Credit Agreement, as the same may be amended,
modified, or supplemented from time to time, being referred to
herein as the "Credit Agreement"), and evidences Tranche A Loans
made by the Bank thereunder. The Credit Agreement, among other
things, contains provisions for acceleration of the maturity of
this Note upon the happening of certain stated events and for
prepayments of Tranche A Loans prior to the maturity of this Note
upon the terms and conditions specified in the Credit Agreement.
Capitalized terms used in this Note have the respective meanings
assigned to them in the Credit Agreement.
This Note shall be governed by and construed in accordance
with the laws of the State of North Carolina and the applicable
laws of the United States of America.
FAMILY DOLLAR STORES, INC.
By:
Title:
<PAGE>
EXHIBIT B
AMENDED AND RESTATED TRANCHE A NOTE
$50,000,000.00 December 31, 1997
FOR VALUE RECEIVED, the undersigned, FAMILY DOLLAR, INC., a
North Carolina corporation (the "Borrower"), hereby promises to
pay to the order of NATIONSBANK, N.A. (the "Bank"), at the
Principal Office, in lawful money of the United States of
America, the principal amount of Fifty Million Dollars
($50,000,000) or such lesser amount as shall equal the aggregate
unpaid principal amount of the Tranche A Loans made by the Bank
to the Borrower under the Credit Agreement referred to below, on
the dates and in the principal amounts provided in the Credit
Agreement, and to pay interest on the unpaid principal amount of
each such Tranche A Loan, at such office, in like money, for the
period commencing on the date of such Tranche A Loan until such
Tranche A Loan shall be paid in full, at the rates per annum and
on the dates provided in the Credit Agreement.
The books and records of the Bank shall be prima facie
evidence of all amounts outstanding hereunder.
This Note is the Tranche A Note referred to in the Credit
Agreement of even date herewith, between the Borrower and the
Bank (such Credit Agreement, as the same may be amended,
modified, or supplemented from time to time, being referred to
herein as the "Credit Agreement"), and evidences Tranche A Loans
made by the Bank thereunder. The Credit Agreement, among other
things, contains provisions for acceleration of the maturity of
this Note upon the happening of certain stated events and for
prepayments of Tranche A Loans prior to the maturity of this Note
upon the terms and conditions specified in the Credit Agreement.
Capitalized terms used in this Note have the respective meanings
assigned to them in the Credit Agreement.
This Note shall be governed by and construed in accordance
with the laws of the State of North Carolina and the applicable
laws of the United States of America.
FAMILY DOLLAR, INC.
By:
Title:
<PAGE>
EXHIBIT C
AMENDED AND RESTATED TRANCHE B NOTE
$50,000,000.00 December 31, 1997
FOR VALUE RECEIVED, the undersigned, FAMILY DOLLAR STORES,
INC., a Delaware corporation (the "Borrower"), hereby promises to
pay to the order of NATIONSBANK, N.A. (the "Bank"), at the
Principal Office, in lawful money of the United States of
America, the principal amount of Fifty Million Dollars
($50,000,000) or such lesser amount as shall equal the aggregate
unpaid principal amount of the Tranche B Loans made by the Bank
to the Borrower under the Credit Agreement referred to below, on
the dates and in the principal amounts provided in the Credit
Agreement, and to pay interest on the unpaid principal amount of
each such Tranche B Loan, at such office, in like money, for the
period commencing on the date of such Tranche B Loan until such
Tranche B Loan shall be paid in full, at the rates per annum and
on the dates provided in the Credit Agreement.
The books and records of the Bank shall be prima facie
evidence of all amounts outstanding hereunder.
This Note is the Tranche B Note referred to in the Credit
Agreement of even date herewith, between the Borrower and the
Bank (such Credit Agreement, as the same may be amended,
modified, or supplemented from time to time, being referred to
herein as the "Credit Agreement"), and evidences Tranche B Loans
made by the Bank thereunder. The Credit Agreement, among other
things, contains provisions for acceleration of the maturity of
this Note upon the happening of certain stated events and for
prepayments of Tranche B Loans prior to the maturity of this Note
upon the terms and conditions specified in the Credit Agreement.
Capitalized terms used in this Note have the respective meanings
assigned to them in the Credit Agreement.
This Note shall be governed by and construed in accordance
with the laws of the State of North Carolina and the applicable
laws of the United States of America.
FAMILY DOLLAR STORES, INC.
By:
Title:
<PAGE>
EXHIBIT D
AMENDED AND RESTATED TRANCHE B NOTE
$50,000,000.00 December 31, 1997
FOR VALUE RECEIVED, the undersigned, FAMILY DOLLAR, INC., a
North Carolina corporation (the "Borrower"), hereby promises to
pay to the order of NATIONSBANK, N.A. (the "Bank"), at the
Principal Office, in lawful money of the United States of
America, the principal amount of Fifty Million Dollars
($50,000,000) or such lesser amount as shall equal the aggregate
unpaid principal amount of the Tranche B Loans made by the Bank
to the Borrower under the Credit Agreement referred to below, on
the dates and in the principal amounts provided in the Credit
Agreement, and to pay interest on the unpaid principal amount of
each such Tranche B Loan, at such office, in like money, for the
period commencing on the date of such Tranche B Loan until such
Tranche B Loan shall be paid in full, at the rates per annum and
on the dates provided in the Credit Agreement.
The books and records of the Bank shall be prima facie
evidence of all amounts outstanding hereunder.
This Note is the Tranche B Note referred to in the Credit
Agreement of even date herewith, between the Borrower and the
Bank (such Credit Agreement, as the same may be amended,
modified, or supplemented from time to time, being referred to
herein as the "Credit Agreement"), and evidences Tranche B Loans
made by the Bank thereunder. The Credit Agreement, among other
things, contains provisions for acceleration of the maturity of
this Note upon the happening of certain stated events and for
prepayments of Tranche B Loans prior to the maturity of this Note
upon the terms and conditions specified in the Credit Agreement.
Capitalized terms used in this Note have the respective meanings
assigned to them in the Credit Agreement.
This Note shall be governed by and construed in accordance
with the laws of the State of North Carolina and the applicable
laws of the United States of America.
FAMILY DOLLAR, INC.
By:
Title:
