Family Dollar 2011 Annual Report Download - page 33

During fiscal 2011, we borrowed $46.0 million under the credit facilities at a weighted-average interest rate
of 1.3%. As of August 27, 2011, and August 28, 2010, we had no outstanding borrowings under the credit
facilities. The credit facilities contain certain restrictive financial covenants, which include a consolidated debt to
consolidated total capitalization ratio, a fixed charge coverage ratio, and a priority debt to consolidated net worth
ratio. As of August 27, 2011, we were in compliance with all such covenants.
Long-Term Debt
On January 28, 2011, we issued $300 million of 5.00% unsecured senior notes due February 1, 2021 (the
“2021 Notes”), through a public offering. Our proceeds were approximately $298.5 million, net of an issuance
discount of $1.5 million. In addition, we incurred issuance costs of approximately $3.3 million. Both the discount
and issuance costs are being amortized to interest expense over the term of the 2021 Notes. Interest on the 2021
Notes is payable semi-annually in arrears on the 1st day of February and August of each year, commencing on
August 1, 2011. The 2021 Notes rank pari passu in right of payment with our other unsecured senior
indebtedness and will be senior in right of payment to any subordinated indebtedness. We may redeem the 2021
Notes in whole at any time or in part from time to time, at our option, subject to a make-whole premium. In
addition, upon the occurrence of certain change of control triggering events, we may be required to repurchase
the 2021 Notes, at a price equal to 101% of their principal amount, plus accrued and unpaid interest to the date of
repurchase. The proceeds of the issuance were used to fund our share repurchase program and for general
corporate purposes.
On September 27, 2005, we obtained $250 million through a private placement of unsecured senior notes
due September 27, 2015 (the “2015 Notes”), to a group of institutional accredited investors. The 2015 Notes
were issued in two tranches at par and rank pari passu in right of payment with our other unsecured senior
indebtedness. The first tranche has an aggregate principal amount of $169 million, is payable in a single
installment on September 27, 2015, and bears interest at a rate of 5.41% per annum from the date of issuance.
The second tranche has an aggregate principal amount of $81 million, matures on September 27, 2015, with
amortization commencing on September 27, 2011, and bears interest at a rate of 5.24% per annum from the date
of issuance. The second tranche has a required principal payment of $16.2 million on September 27, 2011, and
on each September 27 thereafter to and including September 27, 2015. Interest on the 2015 Notes is payable
semi-annually in arrears on the 27th day of March and September of each year. The 2015 Notes contain certain
restrictive financial covenants, which include a consolidated debt to consolidated total capitalization ratio, a fixed
charge coverage ratio, and a priority debt to consolidated net worth ratio. As of August 27, 2011, we were in
compliance with all such covenants.
On November 17, 2010, we amended the 2015 Notes to remove the subsidiary co-borrower and all
subsidiary guarantors.
Other Considerations
Our merchandise inventories at the end of fiscal 2011 were 12.3% higher than at the end of fiscal
2010. Inventory per store at the end of fiscal 2011 was approximately 9% higher than inventory per store at the
end of fiscal 2010. The increases were due primarily to the expansion of our assortment of consumable
merchandise.
Capital expenditures for fiscal 2011 were $345.3 million, compared with $212.4 million in fiscal 2010, and
$155.4 million in fiscal 2009. The increase in capital expenditures during fiscal 2011, as compared to fiscal 2010,
was due primarily to the investments we made to drive revenue growth, including our comprehensive store
renovation program, other improvements and upgrades to existing stores, purchases of new and existing stores,
and supply chain projects (including the start of construction of the 10th distribution center). In fiscal 2011, we
purchased 44 stores, including existing stores from our landlords and the construction of new stores, compared to
20 existing stores purchased from our landlords in fiscal 2010. During fiscal 2011, we opened 300 new stores,
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