Napa Auto Parts 2006 Annual Report Download - page 40

Notes to Consolidated Financial Statements
(continued)
38
7. Employee Benet Plans (continued)
The assumptions used to measure the pension and other postre-
tirement plan obligations for the plans at December 31, 2006 and
2005 were:
Other
Pension Postretirement
Benefits Benefits
2006 2005 2006 2005
Weighted-average
discount rate 6.00% 5.75% 5.75% 5.75%
Rate of increase
in future
compensation levels 3.75% 3.75% – –
A 9% annual rate of increase in the per capita cost of covered
health care benets was assumed on December 31, 2006. The
rate was assumed to decrease ratably to 5% on December 31,
2010 and thereafter.
Other
Pension Postretirement
Benefits Benefits
(in thousands) 2006 2005 2006 2005
Changes in plan assets
Fair value of plan assets
at beginning of year $ 1,114,980 $ 962,871 $ – $ –
Actual return on
plan assets 114,076 47,621 – –
Exchange rate
gain (loss) (441) 3,518 – –
Employer contributions 66,816 133,534 3,242 3,022
Plan participants’
contribution 2,709 2,446 1,173 3,867
Gross benefits paid (37,602) (35,010) (4,415) (6,889)
Fair value of plan
assets at end of year $ 1,260,538 $ 1,114,980 $ – $ –
The fair values of plan assets for the Company’s U.S. pension plans
included in the above were $1,139,298,000 and $1,005,525,000
at December 31, 2006 and 2005, respectively.
Following are the asset allocations for the Company’s funded
pension plans at December 31, 2006 and 2005, and the target
allocation for 2007, by asset category:
Target Percentage of Plan
Allocation Assets at December 31
Asset Category 2007 2006 2005
Equity securities 70% 67% 64%
Debt securities 30% 31% 34%
Real estate and other – 2% 2%
100% 100% 100%
At December 31, 2006 and 2005, the plan held 2,016,932 shares of
common stock of the Company with a market value of approximately
$95,663,000 and $88,584,000, respectively. Dividend payments
received by the plan on Company stock totaled approximately
$2,723,000 and $2,521,000 in 2006 and 2005, respectively. Fees
paid during the year for services rendered by parties-in-interest
were based on customary and reasonable rates for such services.
The Company’s benet plan committees in the U.S. and Canada
establish investment policies and strategies and regularly monitor
the performance of the funds. The pension plan strategy imple-
mented by the Company’s management is to achieve long-term
objectives and invest the pension assets in accordance with the
applicable pension legislation in the U.S. and Canada, as well as
duciary standards. The long-term primary objectives for the
pension plans are to provide for a reasonable amount of long-term
growth of capital, without undue exposure to risk, protect the
assets from erosion of purchasing power, and provide investment
results that meet or exceed the pension plans’ actuarially assumed
long term rates of return.
Based on the investment policy for the pension plans, as well as
an asset study that was performed based on the Company’s asset
allocations and future expectations, the Company’s expected rate
of return on plan assets for measuring 2007 pension expense
or income is 8.25% for the plans. The asset study forecasted
expected rates of return for the approximate duration of the
Company’s benet obligations, using capital market data and
historical relationships.