**Form 10-Q**

 

**SECURITIESAND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

 
| **(Mark One)**                                             |
|------------------------------------------------------------|
|                                                       |
| **ý**                                                 | **QUARTERLY REPORT PURSUANT TO  SECTION 13 OR 15(d) OF THE  SECURITIES EXCHANGE ACT OF 1934** |
|                                                       |   |
| **For the quarterly period ended February 28,  2004** |
|                                                       |   |
| **OR**                                                     |
|                                                       |   |
| **o**                                                      | **TRANSITION REPORT PURSUANT TO  SECTION 13 OR 15(d) OF THE  SECURITIES EXCHANGE ACT OF 1934** |

 

**Commission FileNumber  1-6807**

 

**FAMILYDOLLAR STORES, INC.**

(Exact name of registrant asspecified in its charter)

 
| **DELAWARE**                                                             |   | **56-0942963**                        |
|--------------------------------------------------------------------------|--------|---------------------------------------|
| (State or other jurisdiction of  incorporation or organization)          |   | (I.R.S. Employer  Identification No.) |
|                                                                     |   |                                  |
| **P. O. Box 1017, 10401 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) ofthe Securities Exchange Act of 1934 during the preceding 12 months (or for suchshorter 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  ý  No  o

 

Indicate by check mark whether the registrantis an accelerated filer (as defined in Rule 12-b of the Exchange Act).  Yes  ý  No  o

 

Indicate the number of shares outstanding ofeach of the issuer’s classes of common stock, as of the latest practicabledate.

 
| **Class**                    |   | **Outstanding  at April 1, 2004** |
|------------------------------|--------|----------------------------------------|
| Common Stock, $.10 par value |   | 171,517,578 shares                     |

 

 

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**FAMILYDOLLAR STORES, INC., AND SUBSIDIARIES**

 

**INDEX**

 
| Part I – Financial Information |                             |
|-------------------------------------|----------------------------------|
|                                |                             |
|                                | Item 1 –                    | Consolidated Condensed  Financial Statements: |   |
|                                |                             |   |   |
|                                |                             | Consolidated Condensed Balance Sheets –  February 28, 2004 and August 30, 2003 |   |
|                                |                             |   |   |
|                                |                             | Consolidated Condensed Statements of Income  –  Quarter Ended February 28, 2004 and March 1, 2003 |   |
|                                |                             |   |   |
|                                |                             | Consolidated  Condensed Statements of Income –  First Half Ended February 28, 2004 and March 1, 2003 |   |
|                                |                             |   |   |
|                                |                             | Consolidated Condensed Statements of Cash  Flows –  First Half Ended February 28, 2004 and March 1, 2003 |   |
|                                |                             |   |   |
|                                |                             | Notes to Consolidated Condensed Financial  Statements |   |
|                                |                             |   |   |
|                                | Item 2 –                    | Management’s Discussion and Analysis of  Financial Condition and Results of Operations |   |
|                                |                             |   |   |
|                                | Item 4 –                    | Controls and Procedures |   |
|                                |                             |   |   |
| Part II –                      | Other Information and Signatures |   |
|                                |                             |   |   |
|                                | Item 1 –                    | Legal Proceedings |   |
|                                |                             |   |   |
|                                | Item 2 –                    | Changes in Securities, Use of Proceeds and Issuer Purchases of Equity  Securities |   |
|                                |                             |   |   |
|                                | Item 4 –                    | Submission of Matters to a Vote of Security Holders |   |
|                                |                             |   |   |
|                                | Item 6 –                    | Exhibits and Reports on Form 8-K |   |
|                                |                             |   |   |
|                                | Signatures                       |   |   |

 

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**FAMILY DOLLAR STORES,INC., AND SUBSIDIARIES**

 

**CONSOLIDATED CONDENSED BALANCE SHEETS**

**(Unaudited)**

 
| **(In thousands, except share  amounts)**                                                                                                                    |   | **February 28,  2004** |      | **August 30,  2003** |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------|-----------|---------------------------|--------|
| Assets                                                                                                                                                       |   |                        |      |                      |   |
| Current assets:                                                                                                                                              |   |                        |      |                      |   |
| Cash and cash equivalents (Note 2)                                                                                                                           |   | $                           | 354,787   |                      | $      | 206,731 |   |
| Merchandise inventories                                                                                                                                      |   | 823,160                     |      | 854,370                   |   |
| Deferred income taxes                                                                                                                                        |   | 68,173                      |      | 61,769                    |   |
| Prepayments and other current assets                                                                                                                         |   | 34,868                      |      | 33,622                    |   |
| Total current assets                                                                                                                                         |   | 1,280,988                   |      | 1,156,492                 |   |
|                                                                                                                                                         |   |                        |      |                      |   |
| Property and equipment, net                                                                                                                                  |   | 829,002                     |      | 812,123                   |   |
|                                                                                                                                                         |   |                        |      |                      |   |
| Other assets                                                                                                                                                 |   | 19,019                      |      | 17,080                    |   |
|                                                                                                                                                         |   |                        |      |                      |   |
|                                                                                                                                                         |   | $                           | 2,129,009 |                      | $      | 1,985,695 |   |
|                                                                                                                                                         |   |                        |      |                      |   |
| Liabilities and Shareholders’ Equity                                                                                                                    |   |                        |      |                      |   |
|                                                                                                                                                         |   |                        |      |                      |   |
| Current liabilities:                                                                                                                                         |   |                        |      |                      |   |
| Accounts payable and accrued liabilities                                                                                                                     |   | $                           | 615,480   |                      | $      | 594,660 |   |
| Income taxes payable                                                                                                                                         |   | 16,406                      |      | 671                       |   |
| Total current liabilities                                                                                                                                    |   | 631,886                     |      | 595,331                   |   |
|                                                                                                                                                         |   |                        |      |                      |   |
| Deferred income taxes                                                                                                                                        |   | 87,365                      |      | 79,395                    |   |
|                                                                                                                                                         |   |                        |      |                      |   |
| Shareholders’ equity (Notes 5 and 6):                                                                                                                   |   |                        |      |                      |   |
| Preferred stock, $1 par; authorized and  unissued 500,000 shares                                                                                             |   |                        |      |                      |   |
| Common stock, $.10 par; authorized  600,000,000 shares; issued 187,425,888 shares at February 28, 2004, and  186,909,993 shares at August 30, 2003 |   | 18,743                      |      | 18,691                    |   |
| Capital in excess of par                                                                                                                                     |   | 101,261                     |      | 87,457                    |   |
| Retained earnings                                                                                                                                            |   | 1,433,959                   |      | 1,315,600                 |   |
|                                                                                                                                                         |   | 1,553,963                   |      | 1,421,748                 |   |
| Less common stock held in treasury, at cost  (15,654,220 shares at February 28, 2004 and 14,701,283 at  August 30, 2003)(Note 6)                   |   | 144,205                     |      | 110,779                   |   |
| Total shareholders’ equity                                                                                                                              |   | 1,409,758                   |      | 1,310,969                 |   |
|                                                                                                                                                         |   |                        |      |                      |   |
|                                                                                                                                                         |   | $                           | 2,129,009 |                      | $      | 1,985,695 |   |

 

See notes to consolidated condensedfinancial statements

 

2

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**FAMILY DOLLAR STORES,INC., AND SUBSIDIARIES**

 

**CONSOLIDATED CONDENSED STATEMENTS OF INCOME**

**(Unaudited)**

 
|                                                 |   | **Quarter  Ended**          |      |
|------------------------------------------------------|--------|-----------------------------|-----------|
| **(In thousands, except per share  amounts)**        |   | **February 28,  2004** |      | **March 1,  2003** |   |
|                                                 |   |                        |      |   |   |
| Net sales                                            |   | $                           | 1,402,798 |   | $ | 1,256,183 |   |
|                                                 |   |                        |      |   |   |
| Cost and expenses:                                   |   |                        |      |   |   |
| Cost of sales                                        |   | 928,984                     |      | 838,662 |   |
| Selling, general and administrative expenses         |   | 345,560                     |      | 303,010 |   |
|                                                 |   | 1,274,544                   |      | 1,141,672 |   |
| Income before provision for taxes on income          |   | 128,254                     |      | 114,511 |   |
| Provision for taxes on income                        |   | 46,813                      |      | 41,796 |   |
|                                                 |   |                        |      |   |   |
| Net income                                           |   | $                           | 81,441    |   | $ | 72,715 |   |
|                                                 |   |                        |      |   |   |
| Net income per common share – Basic (Note  6)   |   | $                           | 0.47      |   | $ | 0.42 |   |
|                                                 |   |                        |      |   |   |
| Average shares – Basic (Note 6)                 |   | 172,061                     |      | 172,151 |   |
|                                                 |   |                        |      |   |   |
| Net income per common share – Diluted (Note  6) |   | $                           | 0.47      |   | $ | 0.42 |   |
|                                                 |   |                        |      |   |   |
| Average shares – Diluted (Note 6)               |   | 173,003                     |      | 173,037 |   |
|                                                 |   |                        |      |   |   |
| Dividends per common share                           |   | $                           | 0.085     |   | $ | 0.075 |   |

 

See notes to consolidated condensedfinancial statements.

 

3

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|                                                 |   | **First Half E****nded**    |      |
|------------------------------------------------------|--------|-----------------------------|-----------|
| **(In thousands, except per share  amounts)**        |   | **February 28,  2004** |      | **March 1,  2003** |   |
|                                                 |   |                        |      |   |   |
| Net sales                                            |   | $                           | 2,647,481 |   | $ | 2,364,820 |   |
|                                                 |   |                        |      |   |   |
| Cost and expenses:                                   |   |                        |      |   |   |
| Cost of sales                                        |   | 1,742,342                   |      | 1,566,467 |   |
| Selling, general and administrative  expenses        |   | 675,386                     |      | 593,325 |   |
|                                                 |   | 2,417,728                   |      | 2,159,792 |   |
| Income before provision for taxes on income          |   | 229,753                     |      | 205,028 |   |
| Provision for taxes on income                        |   | 83,860                      |      | 74,835 |   |
|                                                 |   |                        |      |   |   |
| Net income                                           |   | $                           | 145,893   |   | $ | 130,193 |   |
|                                                 |   |                        |      |   |   |
| Net income per common share – Basic (Note  6)   |   | $                           | 0.85      |   | $ | 0.75 |   |
|                                                 |   |                        |      |   |   |
| Average shares – Basic (Note 6)                 |   | 172,207                     |      | 172,614 |   |
|                                                 |   |                        |      |   |   |
| Net income per common share – Diluted (Note  6) |   | $                           | 0.84      |   | $ | 0.75 |   |
|                                                 |   |                        |      |   |   |
| Average shares – Diluted (Note 6)               |   | 173,319                     |      | 173,489 |   |
|                                                 |   |                        |      |   |   |
| Dividends per common share                           |   | $                           | 0.16      |   | $ | 0.14 |   |

 

See notes to consolidated condensedfinancial statements.

 

4

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**FAMILY DOLLAR STORES,INC., AND SUBSIDIARIES**

 

**CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS**

**(Unaudited)**

 
|                                                                               |   | **First Half  Ended**       |    |
|------------------------------------------------------------------------------------|--------|-----------------------------|---------|
| **(In thousands)**                                                                 |   | **February 28,  2004** |    | **March 1,  2003** |   |
| Cash flows  from operating activities:                                             |   |                        |    |   |   |
| Net income                                                                         |   | $                           | 145,893 |   | $ | 130,193 |   |
| Adjustments  to reconcile net income to net cash provided by operating activities: |   |                        |    |   |   |
| Depreciation  and amortization                                                     |   | 48,444                      |    | 43,132 |   |
| Deferred  income taxes                                                             |   | 1,566                       |    | (4,682 | ) |
| Loss on  disposition of property and equipment                                     |   | 2,490                       |    | 1,773 |   |
| Changes in  operating assets and liabilities:                                      |   |                        |    |   |   |
| Merchandise  inventories                                                           |   | 31,210                      |    | 38,615 |   |
| Income tax  refund receivable                                                      |   | —                      |    | 6,469 |   |
| Prepayments  and other current assets                                              |   | (1,246                      | )       | (3,284 | ) |
| Other  assets                                                                      |   | (1,939                      | )       | (1,061 | ) |
| Accounts  payable and accrued liabilities                                          |   | 19,136                      |    | (40,464 | ) |
| Income  taxes payable                                                              |   | 15,735                      |    | 20,145 |   |
|                                                                               |   | 261,289                     |    | 190,836 |   |
| Cash flows  from investing activities:                                             |   |                        |    |   |   |
| Capital  expenditures                                                              |   | (68,354                     | )       | (81,423 | ) |
| Proceeds  from dispositions of property and equipment                              |   | 541                         |    | 206 |   |
|                                                                               |   | (67,813                     | )       | (81,217 | ) |
| Cash flows  from financing activities:                                             |   |                        |    |   |   |
| Net  purchases of stock for treasury                                               |   | (33,426                     | )       | (52,644 | ) |
| Exercise  of employee stock options                                                |   | 13,856                      |    | 12,050 |   |
| Payment of  dividends                                                              |   | (25,850                     | )       | (22,446 | ) |
|                                                                               |   | (45,420                     | )       | (63,040 | ) |
|                                                                               |   |                        |    |   |   |
| Net change  in cash and cash equivalents                                           |   | 148,056                     |    | 46,579 |   |
|                                                                               |   |                        |    |   |   |
| Cash and  cash equivalents at beginning of period                                  |   | 206,731                     |    | 220,265 |   |
|                                                                               |   |                        |    |   |   |
| Cash and  cash equivalents at end of period                                        |   | $                           | 354,787 |   | $ | 266,844 |   |
|                                                                               |   |                        |    |   |   |
| Supplemental  disclosure of cash flow information:                                 |   |                        |    |   |   |
| Cash paid  during the period for:                                                  |   |                        |    |   |   |
| Interest                                                                           |   | $                           | —  |   | $ | — |   |
| Income  taxes                                                                      |   | 62,969                      |    | 49,785 |   |

 

See notes to consolidated condensedfinancial statements.

 

5

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## **FAMILYDOLLAR STORES, INC., AND SUBSIDIARIES**

## ** **

## **NOTES TOCONSOLIDATED CONDENSED FINANCIAL STATEMENTS**

## ** **

1.         In the opinion of the Company, theaccompanying unaudited consolidated condensed financial statements contain alladjustments (consisting of only normal recurring accruals) necessary to presentfairly the financial position as of February 28, 2004, and the results ofoperations for the quarter and first half ended February 28, 2004 andMarch 1, 2003, and the cash flows for the first half endedFebruary 28, 2004, and March 1, 2003.  For further information, refer to the consolidated financialstatements and footnotes included in the Company’s annual report on Form 10-Kfor the year ended August 30, 2003.

 

**The results of operations for the first half endedFebruary 28, 2004 are not necessarily indicative of the results to beexpected for the full year.**

** **

**The Company manages its business on the basis of onereportable segment.**

** **

2.             The Company considers all highly liquidinvestments with an original maturity of three months or less to be “cashequivalents.” The carrying amount of the Company’s cash equivalentsapproximates fair value due to the short maturities of these investments andconsists primarily of money market funds, U.S. government agency securities andtax-exempt notes and bonds.  The Companymaintains cash deposits with major banks, which from time to time may exceedfederally insured limits.  The Companyperiodically assesses the financial condition of the institutions and believesthat the risk of any loss is minimal.

 

3.             The preparation of the Company’s consolidatedcondensed financial statements, in conformity with accounting principlesgenerally accepted in the United States of America, requires management to makeestimates and assumptions.  Theseestimates and assumptions affect the reported amounts of assets andliabilities, the disclosure of contingent assets and liabilities at the date ofthe financial statements, and the reported amounts of revenues and expensesduring the reporting period.  Actualresults could differ from these estimates.

 

4.             The Company has unsecured revolving creditfacilities with banks for short-term borrowings of up to $200 million.  One hundred million dollars of thefacilities expires on May 27, 2004, and the remaining $100 million expires onMay 31, 2005.  The Company expects thatthe facilities expiring on May 27, 2004, will be extended.  Borrowings under these facilities are at avariable interest rate based on short-term market interest rates.  The Company may convert up to $100 millionof the facilities expiring on May 31, 2005, into a five-year term loan, at thebank’s variable prime rate.

 

6

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5.             The Company’s non-qualified stock option planprovides for the granting of options to key employees to purchase shares ofcommon stock at prices not less than the fair market value on the date ofgrant.  Options expire five years fromthe date of grant and are exercisable to the extent of 40% after the secondanniversary of the grant and an additional 30% at each of the following twoanniversary dates on a cumulative basis.

 

**The Company accounts for stock options granted toemployees using the intrinsic value method, under which no compensation expenseis recorded since the exercise price of the stock options is equal to themarket price of the underlying stock on the date of the grant.  Had compensation cost for the stock optionsissued been determined consistent with Statement of Financial Accounting StandardsNo. 123, “Accounting for Stock-Based Compensation,” net income and net incomeper share would have been reduced to the following pro forma amounts (inthousands, except per share amounts):**

 
|                                     |   | **Quarter  Ended**          |   | **First Half  Ended**   |   |
|------------------------------------------|--------|-----------------------------|--------|-------------------------|--------|
|                                     |   | **February 28,  2004** |   | **March 1,  2003** |   | **February 28,  2004** |   | **March 1,  2003** |   |
| Net income-as reported                   |   | $                           | 81,441 |                    | $      | 72,715 |   | $ | 145,893 |   | $ | 130,193 |   |
|                                     |   |                        |   |                    |   |   |   |   |   |
| Pro forma stock-based  compensation cost |   | (2,190                      | )      | (1,533                  | )      | $ | (4,111 | ) | $ | (2,911 | ) |
| Net income–pro forma                |   | $                           | 79,251 |                    | $      | 71,182 |   | 141,782 |   | 127,282 |   |
| Net income per share as  reported:       |   |                        |   |                    |   |   |   |   |   |
| Basic                                    |   | $                           | .47    |                    | $      | .42 |   | $ | .85 |   | $ | .75 |   |
| Diluted                                  |   | $                           | .47    |                    | $      | .42 |   | $ | .84 |   | $ | .75 |   |
|                                     |   |                        |   |                    |   |   |   |   |   |
| Net income per share–pro forma:     |   |                        |   |                    |   |   |   |   |   |
| Basic                                    |   | $                           | .46    |                    | $      | .41 |   | $ | .82 |   | $ | .74 |   |
| Diluted                                  |   | $                           | .46    |                    | $      | .41 |   | $ | .82 |   | $ | .73 |   |

 

**The assumptions used to calculate the fair value ofoptions granted are evaluated and revised, as necessary, to reflect marketconditions and experience.**

** **

**The following is a summary of transactions under theplan during the first half ended February 28, 2004 and March 1, 2003(in thousands, except per share amounts).**

** **
|                  |   | **First Half  Ended**               |   |
|-----------------------|--------|-------------------------------------|--------|
|                  |   | **February 28,  2004**         |   | **March 1,  2003** |   |
|                  |   | **Number of  shares  under option** |   | **Option  price  per share** |   | **Number of  shares  under option** |   | **Option  price  per share** |   |
| Outstanding-beginning |   | 5,001                               |   | $ 14.75-$ 39.00 |   | 4,411 |   | $ 11.38-$ 35.50 |   |
| Granted               |   | 1,850                               |   | $ 32.75-$ 44.00 |   | 1,620 |   | $ 24.75-$ 31.75 |   |
| Exercised             |   | (516                                | )      | $ 15.00-$ 30.50 |   | (564 | ) | $ 11.38-$ 23.75 |   |
| Cancelled             |   | (142                                | )      |   |   | (51 | ) |   |   |
| Outstanding-ending    |   | 6,193                               |   | $ 14.75-$ 44.00 |   | 5,416 |   | $ 12.75-$ 35.50 |   |
| Exercisable options   |   | 1,437                               |   | $ 14.75-$ 32.50 |   | 1,364 |   | $ 12.75-$ 25.50 |   |

 

6.             Basic net income per common share is computedby dividing net income by the weighted average number of shares outstandingduring each period.  Diluted net incomeper common share gives effect to all securities representing potential commonshares that were dilutive and outstanding during the period. In the calculationof diluted net income per common share, the denominator includes the number ofadditional common shares that would have been outstanding if the Company’soutstanding stock options had been exercised.

 

On October 9, 2002, the Company announced that the Board ofDirectors authorized the purchase of up to 5 million shares of its outstandingcommon stock from time to time as market conditions warrant.  During the year ended August 30, 2003,the Company purchased in the open market 2.2 million shares at a cost of $65.9million.  No shares were purchased inthe first quarter ended November 29, 2003,

 

7

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and 956,000shares were purchased at a cost of $33.5 million in the second quarter endedFebruary 28,2004.

** **

The followingtable sets forth the computation of basic and diluted net income per commonshare (In thousands, except per share amounts):

 
|                                                |   | **Quarter  Ended**          |    |
|-----------------------------------------------------|--------|-----------------------------|---------|
|                                                |   | **February 28,  2004** |    | **March 1,  2003** |   |
| Basic Net Income Per Share:                         |   |                        |    |   |   |
|                                                |   |                        |    |   |   |
| Net Income                                          |   | $                           | 81,441  |   | $ | 72,715 |   |
|                                                |   |                        |    |   |   |
| Weighted Average Number of Shares  Outstanding      |   | 172,061                     |    | 172,151 |   |
|                                                |   |                        |    |   |   |
| Net Income Per Common Share – Basic            |   | $                           | .47     |   | $ | .42 |   |
|                                                |   |                        |    |   |   |
| Diluted Net Income Per Share:                       |   |                        |    |   |   |
|                                                |   |                        |    |   |   |
| Net Income                                          |   | $                           | 81,441  |   | $ | 72,715 |   |
|                                                |   |                        |    |   |   |
| Weighted Average Number of Shares  Outstanding      |   | $                           | 172,061 |   | 172,151 |   |
|                                                |   |                        |    |   |   |
| Effect of Dilutive Securities – Stock  Options |   | 942                         |    | 886 |   |
| Average Shares – Diluted                       |   | 173,003                     |    | 173,037 |   |
|                                                |   |                        |    |   |   |
| Net Income Per Common Share – Diluted          |   | $                           | .47     |   | $ | .42 |   |

 
|                                                |   | **First Half  Ended**       |    |
|-----------------------------------------------------|--------|-----------------------------|---------|
|                                                |   | **February 28,  2004** |    | **March 1,  2003** |   |
| Basic Net Income Per Share:                         |   |                        |    |   |   |
|                                                |   |                        |    |   |   |
| Net Income                                          |   | $                           | 145,893 |   | $ | 130,193 |   |
|                                                |   |                        |    |   |   |
| Weighted Average Number of Shares  Outstanding      |   | 172,207                     |    | 172,614 |   |
|                                                |   |                        |    |   |   |
| Net Income Per Common Share – Basic            |   | $                           | .85     |   | $ | .75 |   |
|                                                |   |                        |    |   |   |
| Diluted Net Income Per Share:                       |   |                        |    |   |   |
|                                                |   |                        |    |   |   |
| Net Income                                          |   | $                           | 145,893 |   | $ | 130,193 |   |
|                                                |   |                        |    |   |   |
| Weighted Average Number of Shares  Outstanding      |   | 172,207                     |    | 172,614 |   |
|                                                |   |                        |    |   |   |
| Effect of Dilutive Securities – Stock  Options |   | 1,112                       |    | 875 |   |
| Average Shares – Diluted                       |   | 173,319                     |    | 173,489 |   |
|                                                |   |                        |    |   |   |
| Net Income Per Common Share – Diluted          |   | $                           | .84     |   | $ | .75 |   |

 

8

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**7.**             On January 30, 2001, Janice Morgan andBarbara Richardson, two individuals who have held the position of Store Managerfor subsidiaries of the Company, filed a Complaint against the Company in theUnited States District Court for the Northern District of Alabama.  The Complaint has been amended to add asplaintiffs five more individuals who had held the position of Store Manager forsubsidiaries of the Company. Thereafter, pursuant to the Court’s ruling, notice of the pendency ofthe lawsuit was sent to approximately 13,000 current and former Store Managersholding the position on or after July 1, 1999.  Based on currently available information, approximately 2,550 ofthose have filed consent forms and joined the lawsuit as plaintiffs, includingapproximately 2,300 former Store Managers and approximately 250 currentemployees.  The case is proceeding as acollective action under the Fair Labor Standards Act (“FLSA”).  The Complaint alleges that the Companyviolated the FLSA by classifying the plaintiffs and other similarly situatedcurrent and former Store Managers as “exempt” employees who are not entitled toovertime compensation.  Plaintiffs seekto recover unpaid overtime compensation, prejudgment interest, liquidateddamages, an award of attorneys’ fees, costs and expenses, and such other reliefas the Court may deem proper.  Thelawsuit is near the conclusion of the discovery phase and the Company isvigorously defending this action.  Thetrial is currently expected to commence in the second half of 2004.  In general, the Company believes that theStore Managers are “exempt” employees under the FLSA and have been properlycompensated, that this action should not proceed as a collective action andthat the Company has meritorious defenses that should enable it to ultimatelyprevail.  However, the outcome of anylitigation is inherently uncertain.  TheCompany bears the burden of proof at trial of establishing its entitlement tothe exemption from the overtime requirements of the FLSA, and no assurances canbe given that the Company will be successful in defending this action.  The nature of this action and its presentprocedural posture mean that future rulings by the Court on both substantiveand procedural motions and issues may significantly impact the course andoutcome of these proceedings.  Thus,those rulings may greatly affect the Company’s effort to establish the exemptstatus of the plaintiff Store Managers. Resolution of this matter could have a material adverse effect on theCompany’s financial position or results of operation.

 

**The Company is involved innumerous other legal proceedings and claims, incidental to our business. Whilethe ultimate outcome cannot be determined, the Company currently believes thatthe proceedings and claims, both individually and in the aggregate, should nothave a material adverse effect on the Company’s financial position or resultsof operations.  However, the outcome ofany litigation is inherently uncertain and, if decided adversely to theCompany, the Company may be subject to liability that could have a materialadverse effect on the Company’s financial position or results of operations.**

 

9

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## **MANAGEMENT’SDISCUSSION AND ANALYSIS**

## **OFFINANCIAL CONDITION AND RESULTS OF OPERATIONS**

## ** **

**This discussion summarizes the significant factorsaffecting the consolidated results of operations and financial condition of theCompany for periods ended February 28, 2004 and March 1, 2003.  This discussion should be read inconjunction with the Consolidated Condensed Financial Statements and Notes toConsolidated Condensed Financial Statements included in this quarterlyreport.  For further information, referto the Consolidated Financial Statements and Notes to Consolidated FinancialStatements included in the Company’s annual report on Form 10-K for the yearended August 30, 2003.**

** **

**Liquidity and CapitalResources**

** **

**At February 28, 2004, the Company had workingcapital of $649.1 million with cash and cash equivalents of approximately$354.8 million and no outstanding borrowings. Changes in working capital and cash and cash equivalents during thefirst half of fiscal 2004 and fiscal 2003 were primarily the result ofearnings, capital expenditures and repurchases of the Company’s CommonStock.  The Company’s inventories at theend of the second quarter this year included more basic consumable merchandisein the stores resulting in per store inventories being approximately 4% abovethe inventory level as at the end of the second quarter last year.  Fall apparel inventories at the end of thesecond quarter this year were about 20% below such inventories on a per storebasis at the end of the second quarter last year.  Continued improvement in planning and allocation processes haveenabled the Company to increase inventory turnover by reducing quantities ofapparel and other seasonal merchandise while maintaining adequate inventorylevels to support sales.  Cash and cashequivalents at the end of the first half of fiscal 2004 were also favorablyimpacted by increased accounts payable leverage (accounts payable as apercentage of merchandise inventory) resulting from improved inventory turnovercompared to the end of the first half of fiscal 2003.**

** **

**Capital expenditures for the first half endedFebruary 28, 2004, were approximately $68.4 million, and are currentlyexpected to be approximately $250 million for fiscal 2004.  The majority of planned capital expendituresfor fiscal 2004 is related to the Company’s new store expansion includingconstruction of an increased number of stores; existing store expansion,relocation and renovation; the start of construction of an eighth full-servicedistribution center and expenditures related to store-focused technologyinfrastructure.  The new store expansionand eighth distribution center will require additional investment inmerchandise inventories.  In fiscal2004, the Company’s original plan was to open approximately 565 stores andclose approximately 60 stores for a net addition of approximately 505 stores,compared with the opening of 475 stores and closing of 64 stores for a netaddition of 411 stores in fiscal 2003. Approximately 30 fewer stores than planned were opened during the sixmonths ended February 28, 2004. The Company’s focus on urban markets has contributed to the strong salesperformance of new stores, but the lead times for the opening of urban storescontinue to be less predictable.  As aconsequence, the Company now expects to open approximately 525 to 565stores.  While urban markets continue tobe a focus, the Company plans to allocate some additional resources to smalland mid-sized towns, where new stores can often be opened more quickly andpredictably.  Operating results in smalland mid-sized towns have been improving as the Company has raised storestandards and improved merchandise quality. The Company also currently plans to expand or relocate approximately 125stores and renovate approximately 115**

 

10

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**stores in fiscal 2004, compared with the expansionor relocation of 103 stores and renovation of 42 stores in fiscal 2003.  In the first half of fiscal 2004, theCompany opened 196 stores, closed 48 stores, expanded or relocated 51 storesand renovated 31 stores.  The Companyoccupies most of its stores under operating leases.  Store opening, closing, expansion, relocation, and renovationplans, as well as overall capital expenditure plans, are continuously reviewedand are subject to change.**

** **

**The Company has unsecured revolving creditfacilities with banks for short-term borrowings of up to $200 million.  One hundred million dollars of thefacilities expires on May 27, 2004, and the remaining $100 million expires onMay 31, 2005.  The Company expects thatthe facilities expiring on May 27, 2004, will be extended.  The Company had no borrowings against thesefacilities during the first half ended February 28, 2004.  Cash flow from current operations isexpected to be sufficient to meet planned liquidity and capital resource needs,including store expansion and other capital spending programs and anyrepurchase of the Company’s Common Stock. In addition, the Company has available revolving credit facilities asdiscussed above.**

** **

**On October 9, 2002, the Companyannounced that the Board of Directors authorized the purchase of up to 5million shares of its outstanding Common Stock from time to time as marketconditions warrant.  During the yearended August 30, 2003, the Company purchased in the open market, 2.2million shares at a cost of $65.9 million. No shares were purchased in the first quarter ended November 29,2003 and 956,000 shares were purchased at a cost of $33.5 million in the secondquarter ended February 28, 2004.**

** **

**The following table shows the Company’sobligations and commitments as of February 28, 2004, to make futurepayments under contractual obligations (in thousands):**

** **
|                               |   | **Payments  Due During One Year Fiscal Period Ending** |    |
|------------------------------------|--------|--------------------------------------------------------|---------|
| **Contractual Obligations**        |   | **Total**                                              |    | **February  2005** |   | **February  2006** |   | **February  2007** |   | **February  2008** |   | **February  2009** |   | **Thereafter** |   |
| Merchandise letters of credit      |   | $                                                      | 43,185  |   | $ | 43,185 |   | $ |   |   | $ |   |   | $ |   |   | $ |   |   | $ |   |   |
| Operating leases                   |   | 832,364                                                |    | 202,090 |   | 173,661 |   | 141,347 |   | 105,463 |   | 71,839 |   | 137,964 |   |
| Construction obligations           |   | 64,301                                                 |    | 64,301 |   |   |   |   |   |   |   |   |   |   |   |
| Total Contractual Cash Obligations |   | $                                                      | 939,850 |   | $ | 309,576 |   | $ | 173,661 |   | $ | 141,347 |   | $ | 105,463 |   | $ | 71,839 |   | $ | 137,964 |   |

 

The following table shows the Company’s othercommercial commitments as of February 28, 2004 (in thousands):

 
| **Other Commercial Commitments** |   | **Total  Amounts  Committed** |       |
|----------------------------------|--------|-------------------------------|------------|
|                             |   |                          | ** ** |
| Standby letters of credit        |   | $                             | 60,600     |   |
| Surety bonds                     |   | 6,149                         |       |
| Total Commercial Commitments     |   | $                             | 66,749     |   |

 

**A substantial portion of the outstanding amount ofstandby letters of credit and surety bonds (which are primarily renewed on anannual basis) are used as surety for future premium and deductible payments tothe Company’s workers compensation and general liability insurancecarrier.  The Company accrues for thesefuture payment liabilities as described in the “Critical Accounting Policies”section of this discussion.**

 

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## **Resultsof Operations**

## ** **

## **Net sales**

## ** **

## **Net sales increased 11.7% in the quarter endedFebruary 28, 2004, as compared with the quarter ended March 1, 2003,and increased 12.0% in the first half ended February 28, 2004 as comparedwith the first half ended March 1, 2003. The sales increases were attributable to increased sales in existingstores and sales from new stores opened as part of the Company’s storeexpansion program.  In the quarter endedFebruary 28, 2004, sales of consumables continued to perform well;however, sales of seasonal merchandise and apparel were below the Company’splan.  Sales in existing stores onlyincreased 0.7% in the December reporting period.  When consumers began to focus again on basic consumablemerchandise in January and February, as opposed to the focus on seasonalgoods in December, sales in existing stores increased 3.0% in theJanuary reporting period and 4.3% in the February reporting period.**

## ** **

**Sales in existing stores increased 2.2% in thequarter ended February 28, 2004, above the comparable period in fiscal 2003,with sales of hardlines merchandise increasing approximately 3.2%, and sales ofsoftlines merchandise decreasing approximately 1.2%.  In the second quarter of fiscal 2004, the customer count, asmeasured by the number of register transactions in existing stores increased1.0% and the average transaction increased approximately 1.0% to $9.52.  Sales in existing stores increased 2.4% inthe first half ended February 28, 2004, above the comparable period in fiscal2003, with sales of hardlines merchandise increasing approximately 3.1% andsales of softlines merchandise decreasing approximately 0.1%.  In the first half of fiscal 2004, thecustomer count increased approximately 1.6% and the average transaction increasedapproximately 0.7% to $9.13.  Hardlinesas a percentage of total sales increased to approximately 77.8% in the secondquarter of fiscal 2004 compared to approximately 77.1% in the second quarter offiscal 2003, and increased to approximately 77.6% in the first half of fiscal2004 compared to approximately 77.1% in the first half of fiscal 2003.  Softlines as a percentage of sales decreasedto 22.2% in the second quarter of fiscal 2004 (with hanging apparel and shoesrepresenting 11.1%, basic apparel 4.4% and domestics 6.7%) compared to 22.9% inthe second quarter of fiscal 2003 (with hanging apparel and shoes representing11.3%, basic apparel 4.8% and domestics 6.8%). Softlines as a percentage of sales decreased to 22.4% in the first halfof fiscal 2004 (with hanging apparel and shoes representing 11.4%, basicapparel 4.3% and domestics 6.7%) compared to 22.9% in the first half of fiscal2003 (with hanging apparel and shoes representing 11.6%, basic apparel 4.6% anddomestics 6.7%).  The Company’s currentplan is for sales in existing stores in the second half of fiscal 2004 toincrease in the 3% to 5% range.**

** **

**Hardlines merchandise includes primarily householdchemical and paper products, health and beauty aids, candy, snack and otherfood, electronics, housewares and giftware, toys, school supplies, hardware andautomotive supplies.  Softlinesmerchandise includes men’s, women’s, boy’s, girl’s and infant’s clothing andaccessories, shoes, and domestic items such as blankets, sheets and towels.**

** **

**The average number of stores open during the first halfof fiscal 2004 was 9.0% more than during the first half of fiscal 2003.  The Company had 5,175 stores in operation atFebruary 28, 2004, as compared with 4,753 stores in operation atMarch 1, 2003, representing an increase of approximately 8.9%.**

 

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## **Cost of Sales**

## ** **

**Cost of sales increased 10.8% in the quarter endedFebruary 28, 2004, as compared with the quarter ended March 1, 2003,and increased 11.2% in the first half ended February 28, 2004, as comparedto the first half ended March 1, 2003. These increases primarily reflected the additional sales volume betweenyears.  Cost of sales, as a percentageof net sales, was 66.2% in the quarter ended February 28, 2004, comparedwith 66.8% in the quarter ended March 1, 2003, and was 65.8% in the firsthalf ended February 28, 2004 compared with 66.2% in the first half endedMarch 1, 2003.  The decreases inthe cost of sales percentages for the second quarter and first half of fiscal2004 were due primarily to improved initial margins on merchandise throughbetter sourcing of goods and the continued favorable impact of supply chaininitiatives.  This improvement was mostsignificant for non-basic items, which represent a higher percentage of salesin the second quarter than in any other quarter.  This resulted in a greater improvement in the cost of salespercentage in the second quarter than in the first quarter of fiscal 2004.  Markdowns as a percentage of sales were alsolower in the second quarter this year compared to the second quarter last yearas a result of purchasing seasonal goods on a conservative basis and betterallocation of those goods to the stores. In the first quarter of fiscal 2004 the improved initial margin onmerchandise was offset slightly by increased markdowns.  A change in the treatment of certain vendorallowances in conformity with a recent accounting pronouncement alsocontributed to the decrease in the first and second quarters cost of sales thisyear as a percent to sales.  This changein accounting will continue to favorably impact the cost of sales as percent tosales in the third quarter of fiscal 2004. The Company’s plan is for the cost of sales percentages to be slightlylower for the second half of fiscal 2004 compared to the second half of fiscal2003, primarily due to continuing improvements in initial margins onmerchandise and the favorable impact of supply chain initiatives.**

** **

**Selling, general and administrative expenses**

** **

**Selling, general and administrative expensesincreased 14.0% in the quarter ended February 28, 2004, as compared withthe quarter ended March 1 2003, and increased 13.8% in the first halfended February 28,2004, as compared with the first half endedMarch 1, 2003.  The increases inthese expenses were due primarily to additional costs arising from thecontinued growth in the number of stores in operation.  Selling, general and administrativeexpenses, as a percentage of net sales, were 24.6% in the quarter ended February 28,2004, as compared with 24.1% in the quarter ended March 1, 2003, and were25.5% in the first half ended February 28, 2004, as compared with 25.1% inthe first half ended March 1, 2003. The increase in the percentages for the quarter and first half endedFebruary 28, 2004 were due primarily to below plan sales and continuedincreases in insurance costs, primarily workers’ compensation and health carecosts.  The change in the treatment ofcertain vendor allowances mentioned previously also contributed to thisincrease. This change in accounting will continue to negatively impact theselling, general and administrative expenses as a percent to sales in the thirdquarter of fiscal 2004.  The Company’splan is for selling, general and administrative expenses for the second half offiscal 2004 as a percentage of sales to be at approximately the same level ascompared to the percentage for the second half of fiscal 2003.**

** **

**Provision for taxes on income**

** **

**The effective tax rate was 36.5% for the quartersand first halves ended February 28, 2004 and March 1, 2003.  For fiscal year 2004, the Company’s plan isfor the effective tax rate to remain at approximately the same level as therate in fiscal 2003.**

 

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**Critical Accounting Policies**

** **

**Management believes the following accountingprinciples are critical because they involve significant judgments,assumptions, and estimates used in the preparation of the Company’sconsolidated financial statements.**

** **

**Merchandise Inventories:**

** **

**Inventories are valued using the retail method,based on retail prices less markon percentages, which approximates the lower offirst-in, first-out (FIFO) cost or market. The Company records adjustments to inventory through cost of goods sold whenretail price reductions, or markdowns, are taken against on-handinventory.  In addition, managementmakes estimates and judgments regarding, among other things, initial markups,markdowns, future demand for specific product categories and market conditions,all of which can significantly impact inventory valuation.  If actual demand or market conditions aredifferent than those projected by management, additional markdowns may benecessary.  This risk is generallyhigher for seasonal merchandise than for non-seasonal goods.  The Company also provides for estimatedinventory losses for damaged, lost or stolen inventory for the period from thephysical inventory to the financial statement date.  These estimates are based on historical experience and otherfactors.**

** **

**Property and Equipment:**

** **

**Property and equipment is statedat cost.  Depreciation for financialreporting purposes is being provided principally by the straight-line methodover the estimated useful lives of the related assets.  The valuation and classification of theseassets and the assignment of useful depreciable lives involves significantjudgments and the use of estimates.  TheCompany generally assigns no salvage value to property and equipment.  Property and equipment is reviewed forimpairment whenever events or changes in circumstances indicate that thecarrying amount of an asset may not be recoverable.  Historically, impairment losses on fixed assets have not beenmaterial to the Company’s financial position and results of operations.**

** **

**Insurance Liabilities:**

** **

**The Company is primarilyself-insured for health care, property loss, workers’ compensation and generalliability costs.  These costs aresignificant primarily due to the large number of the Company’s retail locationsand employees.  The Company’sself-insurance liabilities are based on the total estimated costs of claimsfiled and estimates of claims incurred but not reported, less amounts paidagainst such claims, and are not discounted. Management reviews current and historical claims data in developing itsestimates.  The Company also usesinformation provided by outside actuaries with respect to workers’ compensationand general liability claims.  If theunderlying facts and circumstances of the claims change or the historical trendis not indicative of future trends, then the Company may be required to recordadditional expense or a reduction to expense which could be material to thereported financial condition and results of operations.**

** **

## **Forward-LookingStatements**

## ** **

**Certain statements contained herein and elsewhere inthis Form 10-Q which are not historical facts are forward-looking statementsmade pursuant to the safe harbor provisions of the Private SecuritiesLitigation Reform Act of 1995. These forward-looking statements address theCompany’s plans and activities or events, which the Company expects, will ormay occur in the future such as future capital**

 

14

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**expenditures, store openings, closings, renovations,expansions and relocations, additional distribution facilities, sales, cost ofsales, expenses, the outcome of legal proceedings and other aspects of theCompany’s business and operations.  Anumber of important factors could cause actual results to differ materially fromthose 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 andpricing pressures, general economic conditions, the impact of acts of war orterrorism, changes in consumer demand and product mix, unusual weather that maytemporarily impact sales, inflation, merchandise supply constraints, generaltransportation delays or interruptions, dependence on imports, changes incurrency exchange rates, trade restrictions, tariffs, quotas, and freightrates, availability of real estate, costs and delays associated with building,opening and operating new distribution facilities and stores, costs andpotential problems associated with the implementation of new systems andtechnology, including supply chain systems and electronic commerce, changes inenergy prices and the impact on consumer spending and the Company’s costs,legal proceedings and claims, changes in health care and other insurance costsand the effects of legislation and regulations on wage levels and entitlementprograms.  Consequently, all of theforward-looking statements made are qualified by these and other factors, risksand uncertainties.  Readers arecautioned not to place undue reliance on these forward-looking statements,which speak only as of the date of this Form 10-Q. The Company does notundertake to publicly update or revise its forward-looking statements even ifexperience or future changes make it clear that projected results expressed orimplied in such statements will not be realized.**

** **

**Item4.****            Controls and Procedures**

 

**Based on an evaluation by management of the Company(with the participation of the Company’s Chief Executive Officer and ChiefFinancial Officer), as of the end of the period covered by this report, theCompany’s Chief Executive Officer and Chief Financial Officer have concludedthat the Company’s disclosure controls and procedures (as defined in Rules13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended,(the “Exchange Act”)) are effective to provide reasonable assurance thatinformation required to be disclosed by the Company in reports that the Companyfiles or submits under the Exchange Act is recorded, processed, summarized andreported within the time periods specified in Securities and ExchangeCommission rules and forms.  Consistentwith the suggestion of the Securities and Exchange Commission, the Company hasformed a Disclosure Committee consisting of key Company personnel designed toreview the accuracy and completeness of all disclosures made by theCompany.  There was no change in theCompany’s internal control over financial reporting during the fiscal quarterto which this report relates that has materially affected, or is reasonablylikely to materially affect, the Company’s internal control over financialreporting.**

 

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**PART II****- OTHERINFORMATION**

 

**Item 1**.            LegalProceedings 

** **

**The information contained in Note 7 to theConsolidated Condensed Financial Statements contained in Part I, Item 1 of theForm 10-Q is incorporated herein by this reference.**

** **

**Item 2**.            Changes inSecurities, Use of Proceeds and Issuer Purchases of Equity Securities

** **

**Shares of Common Stock repurchased by the Company during the quarterended February 28, 2004 were as follows:**

** **
| **Period**                |   | **Total  Number of  Shares  Purchased** |       | **Average  Price  Paid per  Share** |       | **Total  Number of  Shares  Purchased as  Part of Publicly  Announced  Plans or  Programs** |       | **Maximum  Number  of Shares  that May Yet Be  Purchased Under  the Plans or  Programs** |       |
|---------------------------|--------|-----------------------------------------|------------|-------------------------------------|------------|---------------------------------------------------------------------------------------------|------------|------------------------------------------------------------------------------------------|------------|
|                      |   |                                    | ** ** |                                | ** ** |                                                                                        | ** ** |                                                                                     | ** ** |
| December  11/30/03-1/3/04 |   | 411,000                                 |       | $                                   | 34.80      |                                                                                        | 2,613,200  |                                                                                     | 2,386,800  |   |
|                      |   |                                    |       |                                |       |                                                                                        |       |                                                                                     |       |
| January  1/4/04-1/31/04   |   | 361,300                                 |       | $                                   | 34.42      |                                                                                        | 2,974,500  |                                                                                     | 2,025,500  |   |
|                      |   |                                    |       |                                |       |                                                                                        |       |                                                                                     |       |
| February  2/1/04-2/28/04  |   | 183,700                                 |       | $                                   | 36.56      |                                                                                        | 3,158,200  |                                                                                     | 1,841,800  |   |
|                      |   |                                    |       |                                |       |                                                                                        |       |                                                                                     |       |
| Total                     |   | 956,000                                 |       | $                                   | 34.99      |                                                                                        | 3,158,200  |                                                                                     | 1,841,800  |   |

 

**On October 9, 2002, the Company announced thatthe Board of Directors authorized the purchase of up to 5 million shares of itsoutstanding Common Stock from time to time as market conditions warrant.  During the year ended August 30, 2003,the Company purchased 2.2 million shares. All shares have been purchased in open market transactions.  No shares were purchased during the quarterended November 29, 2003. Shares purchased under the share repurchaseauthorization are held in treasury and currently a portion of such shares arereissued under the Family Dollar 2000 Outside Directors Plan.  There is no expiration date governing theperiod during which the Company can make share repurchases.  There are no other repurchase programs underwhich the Company is authorized to repurchase outstanding shares.**

** **

**Item4**.            Submissionof Matters to a Vote of Security Holders

 

**At the Annual Meeting ofStockholders of the Company held January 15, 2004, stockholders voted to:**

 

**(a)**           Elect to the Board of Directors of theCompany the seven nominees named in the Proxy Statement for the Annual Meetingas follows:

 

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| **Nominee**            |   | **Shares  Voting For** |   | **Shares Withholding  Authority to Vote** |   |
|------------------------|--------|------------------------|--------|-------------------------------------------|--------|
| Howard R. Levine       |   | 145,546,699            |   | 4,652,781                                 |   |
| George R. Mahoney, Jr. |   | 149,032,790            |   | 1,166,690                                 |   |
| Mark R. Bernstein      |   | 147,161,238            |   | 3,038,242                                 |   |
| Sharon Allred Decker   |   | 148,078,899            |   | 2,120,581                                 |   |
| Edward C. Dolby        |   | 148,964,890            |   | 1,234,590                                 |   |
| Glenn A. Eisenberg     |   | 148,064,024            |   | 2,135,456                                 |   |
| James G. Martin        |   | 148,014,200            |   | 2,185,280                                 |   |

** **

**(b)**           Approve the Family Dollar 2000 OutsideDirectors Plan as amended and, restated, with 132,015,914 shares voted for,2,985,591 against and 940,927 shares abstaining.

** **

**(c)**           Ratify the action of the Audit Committee ofthe Board of Directors in appointing PricewaterhouseCoopers LLP as independentaccountants to audit the consolidated financial statements of the Company andits subsidiaries for the year ending August 28, 2004, with 144,852,214shares voted for, 4,603,183 shares against and 744,083 shares abstaining.

** **

** **

**There were no broker non-votes onthe matters presented and no abstentions with respect to the election to theBoard of Directors.**

** **

** **

**Item 6.**            Exhibits and Reports on Form8-K

** **

**(a)**           Exhibits filed herewith:

** **

**31.1**         Certification pursuant to Section 302 ofthe Sarbanes-Oxley Act of Chief Executive Officer

** **

**31.2**         Certification pursuant to Section 302 ofthe Sarbanes-Oxley Act of Chief Financial Officer

** **

**32.1**         Certification pursuant to Section 906 ofthe Sarbanes-Oxley Act of Chief Executive Officer

** **

**32.2**         Certification pursuant to Section 906 ofthe Sarbanes-Oxley Act of Chief Financial Officer

** **

**(b)**           Reports on Form 8-K:

** **

**1.**     Form 8-K dated December 18, 2003 with newsrelease dated December 18, 2003, reporting sales and earnings for thefirst quarter ended November 29, 2003, and other matters relating to theCompany’s operations and financial condition.

 

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**SIGNATURES**

 

 

Pursuant to the requirements of theSecurities Exchange Act of 1934, the registrant has duly caused this report tobe signed on its behalf by the undersigned thereunto duly authorized.

 

 
|                     | FAMILY DOLLAR STORES, INC. |   |
|--------------------------|----------------------------|--------|
|                     | (Registrant)               |   |
|                     |                       |
|                     |                       |
| Date: April 8, 2004 |                       |   | /s/ R. James Kelly |
|                     |                       |   | R. JAMES KELLY |
|                     |                       |   | Vice Chairman |
|                     |                       |   |   |
|                     |                       |   |   |
| Date: April 8, 2004 |                       |   | /s/ C. Martin Sowers |
|                     |                       |   | C. MARTIN SOWERS |
|                     |                       |   | Senior Vice President-Finance |
|                          |                            |        |  |  |

 

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