Family Dollar 2013 Annual Report Download - page 56

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The following table summarizes the change in the fair value of the Company’s ARS portfolio measured using
Level 3 inputs during fiscal 2013 and fiscal 2012:
Years Ended
(in thousands) August 31, 2013 August 25, 2012
Beginning Balance ........................................ $23,720 $107,458
Net unrealized gain/(loss) included in other comprehensive
income ........................................... (543) 7,187
Sales ............................................... (200) (90,925)
Ending Balance .......................................... $22,977 $ 23,720
The transfers out of Level 3 during fiscal 2012 resulted from issuer call notices (at par). The Company treated the
call notices as quoted prices in an inactive market (Level 2 inputs).
Additional Fair Value Disclosures
The estimated fair value of the Company’s current and long-term debt was $546.4 million as of August 31, 2013,
and $576.4 million as of August 25, 2012. The Company has both public notes and private placement notes. The
fair value for the public notes is determined using Level 1 inputs as quoted prices in active markets for identical
assets or liabilities are available. The fair value of the portion of the debt that is private placement notes is
determined through the use of a discounted cash flow analysis using Level 3 inputs as there are no quoted prices
in active markets for these notes. The discount rate used in the analysis was based on borrowing rates available to
the Company for debt of the same remaining maturities, issued in the same private placement debt market. The
fair value of the Company’s current and long-term debt was greater than the carrying value of the debt by
$29.9 million as of August 31, 2013, and $43.9 million as of August 25, 2012. See Note 6 for more information
on the Company’s long-term debt.
3. Investment 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 2013 and
fiscal 2012 (in thousands):
August 31, 2013 Amortized Cost
Gross
Unrealized
Holding
Gains
Gross
Unrealized
Holding
Losses
Fair
Value
Auction rate securities ................................ $25,650 $ — $2,673(1) $22,977
Short-term bond mutual fund .......................... $ 4,000 — — 4,000
Municipal debt securities ............................. $54,954 101 — 55,055
August 25, 2012 Amortized Cost
Gross
Unrealized
Holding
Gains
Gross
Unrealized
Holding
Losses
Fair
Value
Auction rate securities ................................ $25,850 $ — $2,130(1) $23,720
Short-term bond mutual fund .......................... $ 5,000 — — 5,000
Equity securities .................................... $ 1,979 — 708 1,271
Municipal debt securities ............................. $55,036 267 — 55,303
(1) The gross unrealized holding losses for fiscal 2013 and fiscal 2012 were in a continuous unrealized loss
position for 12 months or longer.
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