Family Dollar 2013 Annual Report Download - page 49

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FAMILY DOLLAR STORES, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Description of Business and Summary of Significant Accounting Policies:
Description of business
The Company operates a chain of more than 7,900 general merchandise retail discount stores in 46 contiguous
states, providing consumers with a selection of competitively priced merchandise in convenient neighborhood
stores. The Company’s products include health and beauty aids, packaged food and refrigerated products, home
cleaning supplies, housewares, stationery, seasonal goods, apparel and domestics. In the typical Family Dollar
store, the majority of the products are priced at $10 or less, with many of the products priced at $1 or less. The
Company manages its business on the basis of one operating segment.
Principles of consolidation
The consolidated financial statements include the accounts of the Company and its subsidiaries, all of which are
wholly- owned. All intercompany balances and transactions have been eliminated.
Fiscal year
The Company’s fiscal year generally ends on the Saturday closest to August 31 of each year, which results in an
extra week every six years. Fiscal 2013 was a 53-week year, whereas fiscal 2012 and fiscal 2011 were 52-week
years.
Use of estimates
The preparation of the Company’s consolidated financial statements, in conformity with accounting principles
generally accepted in the United States of America, requires management to make estimates and
assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure
of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from these estimates.
Cash equivalents
The Company considers all highly liquid investments with an original maturity of three months or less to be cash
equivalents. The carrying amount of the Company’s cash equivalents approximates fair value due to the short
maturities of these investments and consists primarily of money market funds and other overnight
investments. The Company maintains cash deposits with major banks, which from time to time may exceed
federally insured limits. The Company periodically assesses the financial condition of the institutions and
believes that the risk of any loss is remote. Payments due from banks for third-party credit card, debit card and
electronic benefit transactions are generally processed within 24-72 hours and are classified as cash equivalents.
The Company maintains zero balance cash disbursement accounts with certain banks. Outstanding checks in
excess of funds on deposit with respect to these banks, referred to as cash overdrafts, are classified as Accounts
Payable on the Consolidated Balance Sheets, and totaled $100.5 million at the end of fiscal 2013. Cash overdrafts
totaled $28.8 million at the end of fiscal 2012. Changes in these overdraft amounts are recorded as financing
activities on the Consolidated Statements of Cash Flows.
The Company’s wholly-owned captive insurance subsidiary maintains balances in cash and cash equivalents that
are used in connection with the Company’s retained workers’ compensation, general liability and automobile
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