Advance Auto Parts 2005 Annual Report Download - page 58

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the Years Ended December 31, 2005, January 1, 2005 and January 3, 2004 (in thousands, except per share data)
obligation included in other long-term liabilities in
the accompanying consolidated balance sheets,
recorded and the funded status of the plan as of
December 31, 2005 and January 1, 2005:
2005 2004
Change in benefit obligation:
Benefit obligation at beginning
of the year......................................... $ 14,625 $ 22,750
Service cost........................................... —2
Interest cost........................................... 802 1,004
Benefits paid......................................... (1,513) (1,239)
Plan amendment ................................... —(7,557)
Actuarial gain ....................................... (203) (335)
Benefit obligation at end of the year.... 13,711 14,625
Change in plan assets:
Fair value of plan assets at beginning
of the year......................................... ——
Employer contributions......................... 1,513 1,239
Participant contributions....................... 2,336 2,485
Benefits paid......................................... (3,849) (3,724)
Fair value of plan assets at end of year... ——
Reconciliation of funded status:
Funded status ........................................ (13,711) (14,625)
Unrecognized transition obligation....... ——
Unrecognized prior service cost ........... (6,531) (7,112)
Unrecognized actuarial loss.................. 3,929 4,371
Accrued postretirement benefit cost ......... $(16,313) $(17,366)
Net periodic postretirement benefit cost is as follows:
2005 2004 2003
Service cost ......................................... $— $2$5
Interest cost ......................................... 802 1,004 1,485
Amortization of the transition
obligation ........................................ ——1
Amortization of the prior service cost... (581) (436) —
Amortization of recognized net losses .. 239 250 146
$ 460 $ 820 $1,637
The health care cost trend rate was assumed to be
12.5% for 2006, 11.5% for 2007, 10.0% for 2008,
9.5% for 2009, 8.5% for 2010, 8.0% for 2011 and
5.0% to 7.0% for 2012 and thereafter. If the health
care cost were increased 1% for all future years the
accumulated postretirement benefit obligation would
have increased by $472 as of December 31, 2005.
The effect of this change on the combined service
and interest cost would have been an increase of $72
for 2005. If the health care cost were decreased 1%
for all future years the accumulated postretirement
benefit obligation would have decreased by $450 as
of December 31, 2005. The effect of this change on
the combined service and interest cost would have
been a decrease of $76 for 2005.
The postretirement benefit obligation and net peri-
odic postretirement benefit cost was computed using
the following weighted average discount rates as
determined by the Company’s actuaries for each
applicable year:
2005 2004
Postretirement benefit obligation ................ 5.50% 5.75%
Net periodic
postretirement benefit cost ..................... 5.75% 6.25%
The Company expects plan contributions to com-
pletely offset benefits paid. The following table sum-
marizes the Company’s expected benefit payments
(net of retiree contributions) to be paid for each of the
following fiscal years:
Amount
2006 ................................................................................... $1,033
2007 ................................................................................... 1,163
2008 ................................................................................... 1,209
2009 ................................................................................... 1,268
2010 ................................................................................... 1,283
2011–2015 ......................................................................... 6,174
The Company reserves the right to change or ter-
minate the benefits or contributions at any time. The
Company also continues to evaluate ways in which it
can better manage these benefits and control costs.
Any changes in the plan or revisions to assumptions
that affect the amount of expected future benefits
may have a significant impact on the amount of the
reported obligation, annual expense and projected
benefit payments.
20. STOCK-BASED COMPENSATION:
During fiscal 2004, the Company established the
Advance Auto Parts, Inc. 2004 Long-Term Incentive
Plan, or the LTIP. The LTIP was created to enable the
Company to continue to attract and retain Team
Members of exceptional managerial talent upon
whom, in large measure, its sustained progress,
growth and profitability depends. The LTIP replaces
the Company’s previous senior executive stock option
plan and executive stock option plan. The stock
options that remained available for future grant under
these predecessor plans became available under the
LTIP and thus, no stock options will be available for
grant under those plans. The stock options authorized
to be granted are non-qualified stock options and ter-
minate on the seventh anniversary of the grant date.
Additionally, the stock options vest over a three-year
period in equal installments beginning on the first
anniversary grant date.
In addition to stock options, the Company also has
the ability to offer additional types of equity incen-
tives as allowed under the LTIP. Accordingly, during
fiscal 2004, the Company created the Advance Auto
Parts, Inc. Deferred Stock Unit Plan for Non-
Employee Directors and Selected Executives, or the
DSU Plan. The DSU Plan provides for the annual
grant of deferred stock units, or DSUs, to the
Company’s Board of Directors as allowed under the
LTIP. Each DSU is equivalent to one share of com-
mon stock of the Company. The DSUs are immedi-
ately vested upon issuance but are held on behalf of