Family Dollar Stores, Inc. is one of the fastest growing discount store chains in the United States. During the last ten years, nearly 3,000 new stores have been added to the chain, of which over 2,000 were added in the last five years. The merchandising concept that drives this growth offers customers good values in low cost, basic merchandise for family and home needs. Our merchandise is sold at everyday low prices in a no frills, low overhead, self-service environment. Most merchandise is priced under $10.00.
Stores are located in a contiguous 43-state area ranging northeast to Maine, southeast to Florida, as far northwest as North Dakota and southwest to Arizona. Family Dollar stores generally range in size from 7,500 to 9,500 square feet, and most are operated in leased facilities. The relatively small size permits the Company to open new stores in rural areas and small towns, as well as in large urban neighborhoods. Within these markets, the stores are located in shopping centers or as freestanding buildings or in urban storefronts convenient to the Company’s value-conscious customer base

http://www.familydollar.com

Today, more Americans are looking for value and convenience, and our stores are well-positioned to meet that need, said Howard R. Levine, Chairman and Chief Executive Officer. Our investments in key consumable areas are providing customers with great values on the basic items they need every day, and our small, neighborhood stores are very convenient for customers in this environment of rising gasoline prices. 

Net income per diluted share in the third quarter of fiscal 2008 ended May 31, 2008, increased 15.0% to $0.46 compared with $0.40 per diluted share in the third quarter of fiscal 2007 ended June 2, 2007. Net income for the third quarter of fiscal 2008 increased 7.1% to $64.7 million, compared with $60.4 million for the third quarter of fiscal 2007. 

Commenting on the financial results, Mr. Levine said, We have made significant investments in our business to enable us to manage better in these uncertain times, and we are seeing tangible benefits. In addition, our intense focus on controlling expenses and mitigating inventory risk has resulted in net income growth and an improvement in inventory productivity, despite flat comparable store sales. I am pleased with the progress we have made and appreciate the hard-work of all our Family Dollar Associates. 
Third Quarter Results 
As previously reported, net sales for the third quarter of fiscal 2008 were $1.702 billion, or 2.9% above sales of $1.655 billion for the third quarter of fiscal 2007. Sales in comparable stores increased 0.1%. An increase in the average customer transaction offset lower customer traffic, as measured by the number of register transactions. 
Gross profit, as a percentage of sales, was 34.6% in the third quarter of fiscal 2008 compared to 34.9% in the third quarter of fiscal 2007. The decline in gross profit, as a percentage of sales, during the quarter was a result of the effect of stronger sales of lower-margin consumable merchandise, which was partially offset by lower merchandise markdowns. 
Selling, general and administrative (SG&A) expenses increased 0.8% to $487.8 million compared to $484.1 million in the third quarter of fiscal 2007. As a percentage of sales, SG&A expenses were 28.7% in the third quarter of fiscal 2008 compared with 29.3% in the third quarter of fiscal 2007. The decrease in SG&A expenses, as a percentage of sales, was primarily a result of lower insurance expense and lower professional fees. Most other expenses were de-leveraged during the quarter as a result of the low comparable store sales increase. 
Year-to-Date Results 
As previously reported, sales for the first three quarters of fiscal 2008 were $5.22 billion, or 0.3% above sales of $5.20 billion for the first three quarters of fiscal 2007. As a reminder, the first three quarters of fiscal 2008 included one less week of sales compared with the first three quarters of fiscal 2007. Sales in comparable stores (for the comparable 39-week period in both years) decreased 0.3%. The decrease in comparable store sales during the 39-week period was a result of lower customer traffic, as measured by the number of register transactions. The average customer transaction increased slightly during the period. During the first three quarters of fiscal 2008, the Company opened 165 new stores and closed 50 stores. 
Gross profit, as a percentage of sales, was 33.8% in the first three quarters of fiscal 2008 compared to 34.3% in the first three quarters of fiscal 2007. Higher seasonal markdowns and stronger sales of lower-margin consumable merchandise contributed to lower gross profit, as a percentage of sales, in the first three quarters of fiscal 2008. In addition, lower comparable store sales during the first three quarters of fiscal 2008 as compared with the first three quarters of fiscal 2007 resulted in the de-leveraging of many costs, including inventory shrinkage. 
SG&A expenses, as a percentage of sales, were 28.4% in the first three quarters of fiscal 2008 compared with 28.0% in the first three quarters of fiscal 2007. The increase in SG&A expenses, as a percentage of sales, was primarily a result of lower comparable store sales performance and higher occupancy costs. The effect of these factors more than offset lower insurance expense and lower professional fees. 
The Company's inventories at May 31, 2008, were $1.005 billion, or 0.3% below inventories of $1.008 billion at June 2, 2007. Average inventory per store (excluding in-transit inventory) at the end of the third quarter was approximately 3% lower than the average inventory per store at the end of the third quarter of fiscal 2007. 
At May 31, 2008, the Company had approximately $233.9 million ($240.0 at par) in tax exempt auction rate securities (ARS) that were subject to failed auctions. The Company's ARS portfolio primarily consists of AAA rated bonds that are collateralized by student loans guaranteed by the federal government. While the auction failures limit the Company's ability to currently liquidate these investments at par, the Company believes that operating cash flows and existing credit facilities will provide sufficient liquidity for the Company's ongoing operations and growth initiatives. 
During the first three quarters of fiscal 2008, capital expenditures were $108.9 million compared with $85.9 million in the first three quarters of fiscal 2007. Capital expenditures for fiscal 2008 are expected to be between $140 million and $150 million. 
During the first three quarters of fiscal 2008, the Company repurchased approximately 3.7 million shares of its common stock for a total cost of $97.7 million. As of May 31, 2008, the Company had authorization to purchase up to an additional $133.0 million of its common stock.