True Value 2008 Annual Report Download - page 40

notes to consolidated financial statements
2008 FINAN CIA L REP OR T :: 19
and local or non-U.S. income tax jurisdiction for years 2002 and
prior. True Value is still subject to state audits in seven states for
our tax year 2003 and remains open to audit for most jurisdic-
tions for years 2004 through current.
In September 2006, the FASB issued Statement of Financial
Accounting Standards (“SFAS”) No. 157, “Fair Value Measure-
ments.” SFAS No. 157 establishes a framework for measuring the
fair value of assets and liabilities, which is intended to provide
increased consistency in how fair value determinations are made
under various existing accounting standards that permit or require
fair measures. SFAS No. 157 is effective for fiscal years beginning
after November 15, 2007, and interim periods within those fis-
cal years. In February 2008, the FASB issued FASB Staff Position
(“FSP”) 157-2, ”Effective Date of FASB Statement No.157,” which
delayed the effective date of SFAS 157 until fiscal years begin-
ning after November 15, 2008, and interim periods within those
fiscal years, for all nonfinancial assets and nonfinancial liabilities,
except for items that are recognized or disclosed at fair value in
the financial statements on a recurring basis (at least annually).
True Value adopted SFAS 157 on December 30, 2007 and utilized
the one year deferral for nonfinancial assets and nonfinancial lia-
bilities that was granted by FSP FAS 157-2. The adoption of SFAS
No.157 did not have a material impact on True Value’s financial
statements. True Value plans to adopt FSP FAS 157-2 in fiscal
year 2009 which will be applied prospectively.
2. INVENTORIES
Inventories consisted of the following at:
January 3, December 29,
($ in thousands) 2009 2007
Manufacturing inventories:
Raw materials $ 2,210 $ 1,733
Work-in-process and finished goods 17,696 17,508
Manufacturing inventory reserves (2,753) (2,120)
17,153 17,121
Merchandise inventories:
Warehouse inventory 301,548 309,311
Merchandise inventory reserves (14,899) (12,498)
286,649 296,813
$ 303,802 $ 313,934
The amount of warehouse, general and administrative costs
included in ending inventory was $19,575 and $20,649 at January 3,
2009 and December 29, 2007, respectively. Warehouse, general
and administrative costs incurred for 2008 and 2007, were $92,349
and $94,075, respectively.
3. PROPERTY, PLANT & EQUIPMENT
Property, Plant & Equipment consisted of the following at:
January 3, December 29,
($ in thousands) 2009 2007
Buildings and improvements $ 70,604 $ 68,482
Machinery and warehouse equipment 73,180 72,569
Office and computer equipment,
and software 134,639 136,512
Transportation equipment 19,365 19,747
297,788 297,310
Less: accumulated depreciation (231,126) (229,337)
66,662 67,973
Land 2,340 2,340
$ 69,002 $ 70,313
Depreciation expense for 2008, 2007 and 2006 was $12,717,
$12,993 and $12,669, respectively.
4. DEBT ARRANGEMENTS
Long-term debt consisted of the following at:
January 3, December 29,
($ in thousands) 2009 2007
Bank Facility $ 34,300 $ 27,700
Real estate mortgage 19,898 20,504
Capital lease obligations 5,026 6,301
Total third-party debt 59,224 54,505
Subordinated promissory and subordinated
promissory installment notes 81,987 72,628
141,211 127,133
Less amounts due within one year (29,327) (28,257)
$ 111,884 $ 98,876
The weighted average of stated interest rates on total debt was
5.3% and 6.4% as of January 3, 2009 and December 29, 2007,
respectively.
At January 3, 2009, True Value had $34,300 in Bank Facility
borrowings, of which $25,000 was included in Long-term debt
including notes and capital lease obligations, less current
maturities. At December 29, 2007, True Value had $27,700 in Bank
Facility borrowings in which the entire amount was included in
Long-term debt including notes and capital lease obligations, less
current maturities. Based on True Value’s projection of seasonal
working capital needs, the amount of the Bank Facility classified as
long-term debt represents the expected lowest level of borrowings
during the next 12 months for each year.
($ in thousands)