Dollar General 2005 Annual Report Download - page 42

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38
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Beginning in fiscal year 2003, the Company began
investing in auction rate securities, which are debt instru-
ments having longer-dated (in some cases, many years)
legal maturities, but with interest rates that are generally
reset every 28-35 days under an auction system. Because
auction rate securities are frequently re-priced, they trade
in the market like short-term investments. As available-
for-sale securities, these investments are carried at fair
value, which approximates cost given that the average
duration of such securities held by the Company is less
than 40 days. Despite the liquid nature of these invest-
ments, the Company categorizes them as short-term
investments instead of cash and cash equivalents due to
the underlying legal maturities of such securities.
However, they have been classified as current assets as
they are generally available to support the Company’s
current operations.
In fiscal year 2005, the Company’s South Carolina-
based wholly owned captive insurance subsidiary, Ashley
River Insurance Company (“ARIC”), had investments in U.S.
Government securities, short and long-term corporate
obligations, and asset backed obligations. These invest-
ments are held pursuant to South Carolina regulatory
requirements to maintain 30% of ARIC’s liability for
insurance losses in the form of certain specified types of
assets and as such, these investments are not available for
general corporate purposes. At February 3, 2006, these
investments included the following amounts reflected in
the Company’s consolidated balance sheet: cash and cash
equivalents of $17.6 million, short-term investments of
$8.9 million and long-term investments included in other
assets of $16.9 million.
The Company’s investment in the secured promissory
notes issued by the third-party entity from which the
Company leases its DC in South Boston,Virginia, as
discussed in Note 7, has been classified as a held-to-
maturity security. Historical cost information pertaining
to investments in mutual funds by participants in the
Company’s supplemental retirement and compensation
deferral plans classified as trading securities is not readily
available to the Company.
On February 3, 2006 and January 28, 2005, held-to-maturity, available-for-sale and trading securities consisted of the
following (in thousands):
Gross Unrealized Estimated
February 3, 2006 Cost Gains Losses Fair Value
Held-to-maturity securities
Bank and corporate debt $ 59,196 $ – $ 55 $ 59,141
U.S. Government securities 7,590 – 12 7,578
Asset-backed securities 3,847 5 6 3,846
Other debt securities 47,151 2,319 – 49,470
117,784 2,324 73 120,035
Available-for-sale securities
Equity securities 16,300 – – 16,300
Trading securities
Equity securities 14,873 – – 14,873
Total debt and equity securities $148,957 $2,324 $73 $151,208