Advance Auto Parts 2003 Annual Report Download - page 44

The Company also maintains a profit sharing plan covering
Western team members that was frozen prior to the Western
Merger on November 2, 1998. This plan covered all full-
time team members who had completed one year of service
and had attained the age of 21 on the first day of each
month. All team members covered under this plan were
included in the Company’s plan on January 3, 2004.
Deferred Compensation
During third quarter of fiscal 2003, the Company estab-
lished an unqualified deferred compensation plan for
certain team members. The Company has accounted for
the unqualified deferred compensation plan in accordance
with EITF 97-14, “Accounting for Deferred Compensation
Arrangements Where Amounts Earned Are Held in a Rabbi
Trust and Invested.” The liability related to the former
Discount deferred compensation plan, which was terminated
in May 2002, was merged into the new plan. This plan
provides for a minimum and maximum deferral percentage
of the team member base salary and bonus, as determined
by the Retirement Plan Committee. The Company estab-
lishes and maintains a deferred compensation liability for
this plan. The Company funds this liability by remitting the
team members deferral to a Rabbi Trust. All gains and losses
are held in the Rabbi Trust to fund the deferred compensation
liability. At January 3, 2004 and December 28, 2002 these
liabilities were $1,011 and $863, respectively.
The Company maintains an unfunded deferred compen-
sation plan established for certain key team members of
Western prior to the fiscal 1998 Western merger. The
Company assumed the plan liability of $15,253 through the
Western merger. The plan was frozen at the date of the
Western merger. As of January 3, 2004 and December 28,
2002, $2,409 and $2,998, respectively, was accrued for
these plans with the current portion included in accrued
expenses and the long-term portion in other long-term
liabilities in the accompanying consolidated balance sheets.
Postretirement Plan
The Company provides certain health care and life
insurance benefits for eligible retired team members. Team
members retiring from the Company with 20 consecutive
years of service after age 40 are eligible for these benefits,
subject to deductibles, co-payment provisions and other
limitations. Effective December 2002, the Company amended
its postretirement plan to only include benefits for team
members who are eligible at January 1, 2005. This negative
plan amendment also resulted in a curtailment gain of
$2,939, which is being amortized over 12 years consistent
with the provisions of SFAS 106, “Employers Accounting
for Postretirement Benefits Other Than Pensions.”
The estimated cost of retiree health and life insurance
benefits is recognized over the years that the team members
render service as required by SFAS No. 106, “Employers
Accounting for Postretirement Benefits Other Than Pensions.”
The initial accumulated liability, measured as of January 1,
1995, the date the Company adopted SFAS No. 106, is
being recognized over a 20-year amortization period.
Other financial information related to the plans was
determined by the Company’s independent actuaries as of
January 3, 2004, December 28, 2002 and December 29,
2001, respectively. The following provides a reconciliation
of the accrued benefit obligation included in other long-
term liabilities in the accompanying consolidated balance
sheets, recorded and the funded status of the plan:
2003 2002
Change in benefit obligation:
Benefit obligation at beginning
of the year................................................. $ 23,002 $ 17,360
Service cost................................................... 5473
Interest cost................................................... 1,485 1,239
Benefits paid................................................. (3,336) (2,471)
Curtailment gain........................................... —(2,939)
Actuarial loss (gain) ..................................... 1,594 9,340
Benefit obligation at end of the year............ 22,750 23,002
Change in plan assets:
Fair value of plan assets at
beginning of the year................................ ——
Employer contributions ................................ 3,336 2,471
Participant contributions............................... 1,779 1,700
Benefits paid................................................. (5,115) (4,171)
Fair value of plan assets at end of year........ ——
Reconciliation of funded status:
Funded status................................................ (22,750) (23,002)
Unrecognized transition obligation .............. 910
Unrecognized actuarial (gain) loss............... 5,362 3,915
Accrued postretirement benefit cost............. $(17,379) $(19,077)
Net periodic postretirement benefit cost is as follows:
2003 2002 2001
Service cost................................................ $5$ 473 $ 326
Interest cost................................................ 1,485 1,239 1,584
Amortization of the transition obligation ... 158 58
Amortization of recognized net gains ........ 146 (89) —
$1,637 $1,681 $1,968
The postretirement benefit obligation was computed
using the following discount rates as determined by the
Company’s actuaries as January 1 for each applicable year.
2003 2002
Discount rate ............................................................... 6.25% 6.75%
The health care cost trend rate was assumed to be 15.0%
for 2003, 14.0% for 2004, 12.5% for 2005, 11.5% for 2006,
10.0% for 2007, 9.5% for 2008 and 5.0% to 8.5% for 2009
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
January 3, 2004, December 28, 2002 and December 29, 2001
(in thousands, except per share data)
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