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 25, 2000
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, 2000
Common Stock, $.10 par value 171,281,367 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 25, 2000 and August 26, 2000 2
Consolidated Condensed Statements of Income -
Quarters Ended November 25, 2000 and
November 27, 1999 3
Consolidated Condensed Statements of Cash Flows -
Quarters Ended November 25, 2000 and
November 27, 1999 4
Notes to Consolidated Condensed Financial
Statements 5-7
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of
Operations 8-10
Part II - Other Information and Signatures
Item 6 - Exhibits and Reports on Form 8-K 11
Signatures 11
<PAGE>
<TABLE>
FAMILY DOLLAR STORES, INC., AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited)
<CAPTION>
November 25, August 26,
2000 2000
Assets
<S> <C> <C>
Current assets:
Cash and cash equivalents (Note 2) $ 207,220 $ 43,558,010
Merchandise inventories 692,759,443 644,614,067
Deferred income taxes 49,533,130 51,563,225
Prepayments and other current assets 19,983,888 10,937,390
Total current assets 762,483,681 750,672,692
Property and equipment, net 515,633,427 487,585,296
Other assets 7,253,805 5,456,363
$1,285,370,913 $1,243,714,351
<PAGE>
</TABLE>
<TABLE>
Liabilities and Shareholders' Equity
<S> <C> <C>
Current liabilities:
Notes payable (Note 3) $ 36,700,000 $ -
Accounts payable and accrued
liabilities 356,468,917 404,840,303
Income taxes payable 26,883,853 7,176,816
Total current liabilities 420,052,770 412,017,119
Deferred income taxes 34,106,620 33,732,753
Shareholders' equity (Notes 4 and 5):
Preferred stock, $1 par; authorized
and unissued 500,000 shares
Common stock, $.10 par;
authorized 300,000,000 shares;
issued 183,751,848 shares at
November 25, 2000 and 183,636,698
shares at August 26, 2000 18,375,185 18,363,670
Capital in excess of par 29,710,450 28,516,899
Retained earnings 828,081,434 796,039,456
876,167,069 842,920,025
Less common stock held in treasury,
at cost (12,504,786 shares at
November 25, 2000 and
August 26, 2000 (Note 5) 44,955,546 44,955,546
Total shareholders' equity 831,211,523 797,964,479
$1,285,370,913 $1,243,714,351
See notes to consolidated condensed financial statements.
</TABLE>
<PAGE>
<TABLE>
FAMILY DOLLAR STORES, INC., AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Unaudited)
<CAPTION>
Quarters Ended
November 25, November 27,
2000 1999
<S> <C> <C>
Net sales $ 820,147,681 $ 713,520,628
Costs and expenses:
Cost of sales 535,734,060 466,179,823
Selling, general and
administrative expenses 219,175,781 189,757,284
754,909,841 655,937,107
Income before provision
for taxes on income 65,237,840 57,583,521
Provision for taxes on income 23,776,600 21,000,000
Net income $ 41,461,240 $ 36,583,521
Net income per common share-Basic
(Note 5) $0.24 $0.21
Average shares-Basic (Note 5) 171,177,121 172,804,326
Net income per common share - Diluted
(Note 5) $0.24 $0.21
Average shares-Diluted (Note 5) 172,062,110 173,994,669
Dividends per common share $.05 1/2 $.05
See notes to consolidated condensed financial statements.
</TABLE>
<PAGE>
<TABLE>
FAMILY DOLLAR STORES, INC., AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
CAPTION>
Quarters Ended
November 25, November 27,
2000 1999
<S> <C> <C>
Cash flows from operating activities:
Net income $41,461,240 $36,583,521
Adjustments to reconcile net income to
net cash provided by (used in) operating
activities:
Depreciation and amortization 14,914,084 12,800,556
Deferred income taxes 2,403,962 375,000
Loss on disposition of property
and equipment 30,682 4,354
Changes in operating assets and liabilities:
Inventories (48,145,376) (25,884,656)
Prepayments and other current assets (9,046,498) (4,605,983)
Other assets (1,797,442) 116,177
Accounts payable and accrued
liabilities (48,377,632) (15,018,741)
Income taxes payable 19,707,037 16,895,748
(28,849,943) 21,265,976
Cash flows from investing activities:
Capital expenditures (43,081,492) (38,603,880)
Proceeds from dispositions of
property and equipment 88,595 19,794
(42,992,897) (38,584,086)
Cash flows from financing activities:
Net notes payable borrowings 36,700,000 -
Purchases of common stock for treasury - (940,745)
Exercise of employee stock options 1,205,066 1,543,529
Payment of dividends (9,413,016) (8,637,543)
28,492,050 (8,034,759)
Net change in cash and cash equivalents (43,350,790) (25,352,869)
Cash and cash equivalents at beginning
of period 43,558,010 95,301,411
Cash and cash equivalents at end of period $ 207,220 $ 69,948,542
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 491,302 $ -
Income taxes 1,224,273 2,930,602
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 25, 2000, and the
results of operations and the cash flows for the
quarters ended November 25, 2000, and November 27,
1999.
The results of operations for the quarter ended
November 25, 2000, are not necessarily indicative of
the results to be expected for the full year.
2. The Company considers all highly liquid investments
with an original maturity of three months or less to
be "cash equivalents." The carrying amount of the
Company's cash equivalents approximates fair value due
to the short maturities of these investments.
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, 2002,and
March 27, 2001, respectively, and the Company expects
that the line expiring on March 27, 2001, 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,
2002, into either a five or seven year term loan, at
the bank's variable prime rate. At November 25, 2000, the
Company had $36,700,000 of outstanding notes payable under
these lines of credit.
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
quarters ended November 25, 2000, and November 27, 1999.
<CAPTION>
Quarters Ended
November 25, 2000 November 27, 1999
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 4,168,775 $ 3.83-$24.75 3,910,750 $ 3.83-$24.75
Granted 1,221,750 $17.56-$19.00 742,850 $17.50-$21.75
Exercised (115,150) $ 3.83-$17.50 (133,445) $ 3.83-$11.38
Cancelled (51,750) (11,700)
Outstanding-ending 5,223,625 $ 4.17-$24.75 4,508,455 $ 3.83-$24.75
</TABLE>
At November 25, 2000, options to purchase 1,839,882 shares were
exercisable at prices ranging from $4.17 to $20.75 per share, and
at November 27, 1999, options to purchase 1,341,256 shares were
exercisable at prices ranging from $3.83 to $11.38 per share.
5. 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.
On November 5, 1999, the Company announced that the Board of Directors
had authorized the purchase of up to 5,000,000 shares of its outstanding
Common Stock from time to time as market conditions warrant. As of
November 25, 2000, the Company had purchased in the open market,
2,148,000 shares at a cost of $33,611,352. No shares were purchased
during the quarter ended November 25, 2000.
<PAGE>
The following table sets forth the computation of basic and diluted
net income per common share:
<TABLE>
<CAPTION>
Quarter Ended
November 25, November 27,
2000 1999
<S> <C> <C>
Basic Net Income Per Share:
Net Income $ 41,461,240 $ 36,583,521
Weighted Average Number of Shares
Outstanding 171,177,121 172,804,326
Net Income Per Common Share - Basic $.24 $.21
Diluted Net Income Per Share:
Net Income $ 41,461,240 $ 36,583,521
Weighted Average Number of Shares
Outstanding 171,177,121 172,804,326
Effect of Dilutive Securities -
Stock Options 884,989 1,190,343
Average Shares - Diluted 172,062,110 173,994,669
Net Income Per Common Share - Diluted $.24 $.21
</TABLE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
The Company's working capital increased $3.7 million from $338.7
million at August 26, 2000 to $342.4 million at November 25, 2000.
Changes in working capital and cash and cash equivalents during the first
quarter of fiscal 2001 and 2000 were primarily the result of earnings,
seasonal increases in merchandise inventories, and capital expenditures.
Seasonal increases in merchandise inventories also contributed in the
first quarter of fiscal 2001 to an increase in notes payable.
Capital expenditures for the quarter ended November 25, 2000, were
approximately $43.1 million, and are currently expected to be
approximately $165 million for fiscal 2001. The majority of planned
capital expenditures for fiscal 2001 is related to the Company's new
store expansion, including construction of an increased number of stores,
existing store expansion, relocation and renovation and to the start of
construction of a new full-service distribution center in the spring of
2001. The new store expansion will require additional investment in
merchandise inventories. In fiscal 2001, the Company currently expects
to open approximately 500 stores and close approximately 50 stores for a
net addition of approximately 450 stores, compared with the opening of
406 stores and closing of 41 stores for a net addition of 365 stores in
fiscal 2000. The Company also currently plans to expand or relocate
approximately 200 stores and renovate approximately 200 stores in fiscal
2001, compared with the expansion or relocation of 153 stores and
renovation of 125 stores in fiscal 2000. In the first quarter of fiscal
2001, the Company opened 138 stores, closed 10 stores, expanded or
relocated 46 stores and renovated 51 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.
On November 5, 1999, the Company announced that the Board of
Directors had authorized the purchase of up to 5,000,000 shares of its
outstanding Common Stock from time to time as market conditions
warrant. As of November 25, 2000, the Company had purchased in the
open market, 2,148,000 shares at a cost of $33,611,352. No shares
were purchased during the quarter ended November 25, 2000.
<PAGE>
RESULTS OF OPERATIONS
NET SALES
Net sales increased 14.9% in the quarter ended November 25, 2000, as
compared with an increase of 13.6% in the quarter ended November 27,
1999. The sales increase in the first quarter was achieved despite the
fact that the Company eliminated an advertising circular during the
quarter. 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 4.6% in the
quarter ended November 25, 2000, as compared with the similar period in
the prior fiscal year, with sales of hardlines merchandise increasing
approximately 9.1% and sales of softlines merchandise decreasing
approximately 6.7%. Hardlines as a percent of total sales increased to
approximately 74.5% in the first quarter of fiscal 2001, compared to
71.4% in the first quarter of 2000. Softlines as a percentage of sales
decreased to 25.5% in the first quarter of fiscal 2001 (with hanging
apparel and shoes representing 13.0%, basic apparel 5.1% and domestics
7.4%) compared to 28.6% in fiscal 2000 (with hanging apparel and shoes
representing 15.1%, basic apparel 5.6% and domestics 7.9%). The space
reallocation program that began in the fourth quarter of fiscal 2000
dedicated more selling space to hardlines, including name brand, basic
consumable merchandise and reduced space for hanging apparel. This
program was completed in all stores in October 2000 and the Company
expects the shift in the merchandise mix to hardlines to continue in
fiscal 2001. Hardlines merchandise includes primarily household chemical
and paper products, health and beauty aids, candy, snack and other food,
electronics, housewares, giftware, toys, school supplies, hardware and
automotive supplies. Softlines merchandise includes men's, women's,
boys', girls' and infants' clothing and accessories, shoes, and domestic
items such as blankets, sheets and towels.
The average number of stores open during the first quarter of fiscal
2001 was 11.7% more than during the first quarter of fiscal 2000. The
Company had 3,816 stores in operation at November 25, 2000, as compared
with 3,395 stores in operation at November 27, 1999, representing an
increase of approximately 12.4%.
COST OF SALES
Cost of sales increased 14.9% in the quarter ended November 25,
2000, as compared with the quarter ended November 27, 1999. This
increase primarily reflected the additional sales volume between years.
Cost of sales, as a percentage of net sales, was 65.3% in the quarters
ended November 25, 2000 and November 27, 1999. The cost of sales
percentage for the quarter remained unchanged as sales gains in higher
margin hardlines departments such as giftware, housewares, and stationery
largely offset the adverse margin impact of increased sales of basic
consumables and lower sales of apparel. The cost of sales percentages
also are affected by changes in the effectiveness of the merchandise
purchasing programs and by changes in merchandise shrinkage losses and
freight costs.
<PAGE>
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses increased 15.5% in the
quarter ended November 25, 2000, as compared with the quarter ended
November 27, 1999. The increase in these expenses was due primarily to
additional costs arising from the continued growth in the number of
stores in operation. Selling, general and administrative expenses, as a
percentage of net sales, were 26.7% in the quarter ended November 25,
2000, as compared with 26.6% in the quarter ended November 27, 1999. The
slight increase in the selling, general and administrative expenses as a
percentage of net sales was due primarily to additional costs related to
the completion of the space reallocation program in existing stores, a
significant increase in the number of new store openings, and higher
store occupancy costs, which more than offset the savings from the
elimination of an advertising circular.
PROVISION FOR TAXES ON INCOME
The effective tax rate was 36.5% for the quarters ended November 25,
2000, and November 27, 1999.
FORWARD-LOOKING STATEMENTS
Certain statements contained herein and elsewhere in this Form 10-Q
which are not historical facts are forward-looking statements made
pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. These forward-looking statements address
activities or events which the Company expects will or may occur in the
future, such as future capital expenditures, store openings, closings,
renovations, expansions and relocations, additional distribution
facilities, and other aspects of the Company's 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 and product mix, inflation, merchandise supply
constraints, general transportation delays or interruptions, dependence
on imports, changes in currency exchange rates, tariffs, quotas, and
freight rates, availability of real estate, costs and delays associated
with building, opening and operating new distribution facilities and
stores, costs and potential problems associated with the implementation
of new systems and technology, including supply chain systems and
electronic commerce, changes in energy prices and the impact on consumer
spending and the Company's costs, 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. The Company does not undertake to publicly update or
revise its forward-looking statements even if experience or future
changes make it clear that projected results expressed or implied in such
statements will not be realized.
<PAGE>
PART II - OTHER INFORMATION
Item 6.
Exhibits and Reports on Form 8-K
(a) Exhibits filed herewith:
11 Statements Re: Computations of Per Share Earnings
(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 5, 2001 /s/ R. JAMES KELLY
R. JAMES KELLY
Vice Chairman
Date: January 5, 2001 /s/ C. MARTIN SOWERS
C. MARTIN SOWERS
Senior Vice President-Finance
