Harris Teeter 2007 Annual Report Download - page 27

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23
Impairment of Long-lived Assets and Closed Store Obligations
The Company assesses its long-lived assets for possible impairment whenever events or changes in
circumstances indicate the carrying value of an asset may not be recoverable. Recoverability is measured by a
comparison of the carrying amount to the net non-discounted cash flows expected to be generated by the asset.
An impairment loss is recognized for any excess of net book value over the estimated fair value of the asset
impaired. The fair value is estimated based on expected future cash flows.
The value of property and equipment associated with closed stores and facilities is adjusted to reflect
recoverable values based on the Company’s prior history of disposing of similar assets and current economic
conditions. Management continually reviews its fair value estimates and records impairment charges for assets
held for sale when management determines, based on new information which it believes to be reliable, that such
charges are appropriate.
The results of impairment tests are subject to management’s estimates and assumptions of projected
cash flows and operating results. The Company believes that, based on current conditions, materially different
reported results are not likely to result from long-lived asset impairments. However, a change in assumptions
or market conditions could result in a change in estimated future cash flows and the likelihood of materially
different reported results.
The Company records liabilities for closed stores that are under long-term lease agreements. The liability
represents an estimate of the present value of the remaining non-cancelable lease payments after the anticipated
closing date, net of estimated subtenant income. The closed store liabilities usually are paid over the lease
terms associated with the closed stores, unless settled earlier. Harris Teeter management estimates the subtenant
income and future cash flows based on its historical experience and knowledge of (1) the market in which the
store is located, (2) the results of its previous efforts to dispose of similar assets and (3) the current economic
conditions. The actual cost of disposition for these leases is affected by specific real estate markets, inflation
rates and general economic conditions and may differ significantly from those assumed and estimated.
Store closings generally are completed within one year after the decision to close. Adjustments to closed
store liabilities primarily relate to changes in subtenants and actual costs differing from original estimates.
Adjustments are made for changes in estimates in the period in which the change becomes known. Any excess
store closing liability remaining upon settlement of the obligation is reversed to income in the period that such
settlement is determined. The Company constantly reviews the relevant, significant factors used in its estimates
and makes adjustments where the facts and circumstances dictate.
Retirement Plans and Post-Retirement Benefit Plans
The Company maintains certain retirement benefit plans for substantially all domestic full-time employees
and supplemental retirement benefit plans for certain selected directors and officers of the Company and its
subsidiaries. Employees in foreign subsidiaries participate to varying degrees in local pension plans, which,
in the aggregate, are not significant. The qualified pension plan is a non-contributory, funded defined benefit
plan, while the non-qualified supplemental retirement benefit plans are unfunded, defined benefit plans. The
Company’s current funding policy for its qualified pension plan is to contribute annually the amount required by
regulatory authorities to meet minimum funding requirements and an amount to increase the funding ratios over
future years to a level determined by its actuaries to be effective in reducing the volatility of contributions.
The Company has certain deferred compensation arrangements which allow or allowed in prior years its
directors, officers and selected key management personnel to forego the receipt of earned compensation for
specified periods of time. The Company may also, from time to time, make discretionary annual contributions
into the Director Deferral Plan on behalf of its outside directors. These plans are unfunded, except for a
directors’ compensation deferral plan and a flexible deferral plan for executives which utilize a rabbi trust to