Fred's, Inc. (NASDAQ: FRED) today reported financial results for the second quarter and six months ended July 28, 2012. For the second quarter ended July 28, 2012, Fred's net income increased to $6.1 million compared with net income of $5.1 million in the year-earlier period, with earnings per diluted share rising 31% to $0.17 from $0.13 in the second quarter last year. Fred's net income for the first half of 2012 increased 13% to $16.5 million or $0.45 per diluted share from $14.6 million or $0.37 per diluted share for the first half of 2011. Second quarter 2012 net income reflected the impact of approximately $4.0 million or $0.11 per diluted share related to a state income tax settlement, as well as adjusting other tax-related assumptions and estimates. Fred's total sales for the second quarter of fiscal 2012 increased 4% to $470.8 million from $452.7 million for the same period last year. Comparable store sales for the quarter declined 1.0% compared with a decline of 0.4% in the second quarter last year. Fred's total sales for the first half of fiscal 2012 increased 4% to $971.3 million from $937.1 million for the same period last year. Comparable store sales for the first half of 2012 decreased 0.5% compared with a 0.4% increase for the same period last year. Commenting on the results, Bruce A. Efird, Chief Executive Officer, said, "The Company's positive performance in the second quarter reflected several unusual items. The 31% increase in earnings for the quarter included the positive impact of a complex state income tax settlement that added $0.11 to earnings per diluted share – clearly a benefit to the Company and its shareholders, but this benefit was reduced significantly by one-time adjustments related to the accelerated closing of 14 stores and added promotional markdowns for product transitioning. Results in our pharmacy department were strong as we achieved comparable prescription growth, gross margin improvement, and new acquisition growth. Several merchandising initiatives that we have rolled out this year also did well in the quarter, including those for bedding, bath, housewares, and financial services. Additionally, we continued to see excellent start-up performance in our newly opened stores.