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Family Dollar provides update on stock option review

Mar '07
Family Dollar Stores Inc announced that the Company has determined that it did not properly account for the issuance of certain stock options granted during the period from fiscal 1995 to fiscal 2006 and plans to record a charge in the amount of approximately $10.5 million, for the year ended August 26, 2006 (fiscal 2006).

The Company's accounting determinations are based on its review of the principal factual findings made by the Special Committee appointed by the Board of Directors to review the Company's stock option grant practices and presented to the Company's Board of Directors and management.

As the impact of the resulting accounting adjustments attributable to any prior reporting periods was not material to any of such periods, the Company will not restate previously issued financial statements. Rather, the Company plans to record a pretax cumulative charge in the amount of approximately $10.5 million, or approximately $0.04 per diluted share after taxes, for fiscal 2006.

Approximately $7.9 million of the $10.5 million charge relates to the annual grants made in fiscal years 1995 to 2004 to all stock option participants, with the remaining charge arising from grants made to newly hired employees (approximately $1.3 million) and interest expense arising as a result of certain related tax adjustments.

Annual stock option grants were made to employees as part of the Company's annual compensation review process, which generally occurred over a number of weeks. The Company's available documentation of the annual grant process was incomplete in most years.

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