Family Dollar 2009 Annual Report Download - page 53

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3. Investment Securities:
The Company accounts for its investment securities in accordance with SFAS No. 115, “Accounting for Certain
Investments in Debt and Equity Securities.” All of the Company’s investment securities are currently classified
as available-for-sale due to the fact that the Company does not intend to hold the securities to maturity and does
not purchase the securities for the purpose of selling them to make a profit on short-term differences in price.
Available-for-sale securities are carried at estimated fair value, with unrealized gains and losses, if any, reported
as a component of shareholders’ equity.
The Company’s investments consisted of the following available-for-sale securities at the end of fiscal 2009 and
fiscal 2008 (in thousands):
August 29, 2009 Amortized Cost
Gross
Unrealized
Holding
Gains
Gross
Unrealized
Holding
Losses Fair Value
Auction Rate Securities .............................. $181,800 — 15,255(1) $166,545
Equity Securities .................................... 1,979 822 — 2,801
(1) The gross unrealized holding losses for fiscal 2009 were in a continuous unrealized loss position for 12
months or longer.
August 30, 2008 Amortized Cost
Gross
Unrealized
Holding
Gains
Gross
Unrealized
Holding
Losses Fair Value
Auction Rate Securities .............................. $229,950 — 7,846(1) $222,104
(1) The gross unrealized holding losses for fiscal 2008 were in a continuous unrealized loss position for less
than 12 months.
The Company’s auction rate securities have contractual maturities ranging from 16 years to 47 years. Proceeds
from sales of investment securities available-for-sale during fiscal 2009 were $43.2 million compared to $1.0
billion in fiscal 2008 and $2.3 billion in fiscal 2007. The decrease in proceeds from the sale of investment
securities over the past three fiscal years is due to the failure of the auction rate securities market beginning in
fiscal 2008. No material gains or losses were realized on those sales for fiscal 2009, fiscal 2008 and fiscal 2007.
The Company also holds investments in mutual funds in connection with a deferred compensation plan for
certain key management employees. These investments are classified as trading securities and are included, at
fair value, in other assets on the Consolidated Balance Sheet. The Company records an offsetting deferred
compensation liability in accrued liabilities. Changes in the fair value of the investments are reflected in SG&A
on the Consolidated Income Statement as an increase/decrease in deferred compensation expense with an
offsetting increase/decrease in investment income. The fair value of the deferred compensation plan assets was
$7.7 million as of the end of fiscal 2009 and $7.0 million as of the end of fiscal 2008. See Note 8 below for more
information on the deferred compensation plan.
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