Napa Auto Parts 2010 Annual Report Download - page 53

Table of Contents


years ended prior to 2002. The Company is currently under audit in the United States and Canada. Some audits may conclude in the next
12 months and the unrecognized tax benefits recorded in relation to the audits may differ from actual settlement amounts. It is not possible
to estimate the effect, if any, of the amount of such change during the next twelve months to previously recorded uncertain tax positions in
connection with the audits. However, the Company does not anticipate total unrecognized tax benefits will significantly change during the
year due to the settlement of audits and the expiration of statutes of limitations.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
  

Balance at beginning of year  $ 30,453 $28,329
Additions based on tax positions related to the current year  5,648 5,822
Additions for tax positions of prior years  993 1,068
Reductions for tax positions for prior years  — (190)
Reduction for lapse in statute of limitations  (2,779) (4,193)
Settlements  (993) (383)
Balance at end of year  $ 33,322 $ 30,453
The amount of gross tax effected unrecognized tax benefits, including interest and penalties, as of December 31, 2010 and 2009 was
approximately $50,216,000 and $41,013,000, respectively, of which approximately $18,189,000 and $15,129,000, respectively, if
recognized, would affect the effective tax rate. During the years ended December 31, 2010, 2009, and 2008, the Company paid interest
and penalties of approximately $272,000, $363,000, and $815,000, respectively. The Company had approximately $10,791,000 and
$7,691,000 of accrued interest and penalties at December 31, 2010 and 2009, respectively. The Company recognizes potential interest
and penalties related to unrecognized tax benefits as a component of income tax expense.
 
The Company’s defined benefit pension plans cover most of its employees in the U.S. and Canada. The plan covering
U.S. employees is noncontributory and benefits are based on the employees’ compensation during the highest five of their last ten years of
credited service. The Canadian plan is contributory and benefits are based on career average compensation. The Company’s funding
policy is to contribute an amount equal to the minimum required contribution under ERISA. The Company may increase its contribution
above the minimum if appropriate to its tax and cash position and the plans’ funded position.
In 2008, the U.S. defined benefit plan was amended to prohibit employees hired on or after March 1, 2008 from participating in the
plan. The plan was also amended to freeze credited service for participants who do not meet certain age and length of service requirements
as of December 31, 2008. However, the plan continues to reflect future pay increases for all participants.
In April 2009, the Company recorded a $4,298,000 non-cash curtailment adjustment in connection with a reorganization, which
reduced the expected years of future service of employees covered by the U.S. defined benefit pension plan. Curtailment accounting is
required if an event eliminates, for a significant number of employees, the accrual of defined benefits for some or all of their future
service.
The Company also sponsors supplemental retirement plans covering employees in the U.S. and Canada and other postretirement
benefit plans in the U.S. The Company uses a measurement date of December 31st for its pension and other postretirement benefit plans.
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