Harris Teeter 2009 Annual Report Download - page 30

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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 estimates and assumptions of projected
cash flows, 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 an amount in excess of
the contributions required by regulatory authorities to meet minimum funding requirements, as determined by
its actuaries to be effective in increasing the funding ratios and reducing the volatility of future 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. The Company
utilizes a rabbi trust to hold assets set aside to pay the respective liabilities of these plans. For further disclosures
regarding the Company’s pension and deferred compensation plans, see the Note entitled “Employee Benefit
Plans” of the Notes to Consolidated Financial Statements in Item 8 hereof.
The Company maintains a post-retirement healthcare plan for retirees whose sum of age and years of service
equal at least 75 at retirement. The plan continues coverage from early retirement date until the earlier date of eligibility
for Medicare or any other employer’s medical plan. The Company requires that the retiree pay the estimated full cost
of the coverage. The Company also provides a $5,000 post-retirement mortality benefit to a small number of retirees
under a prior plan. The obligations and expenses associated with each of these benefit plans are not material.
The determination of the Company’s obligation and expense for pension, deferred compensation and
other post-retirement benefits is dependent on certain assumptions selected by management and used by the
Company and its actuaries in calculating such amounts. The more significant of those assumptions applicable to
the qualified pension plan include the discount rate, the expected long-term rate of return on plan assets, the rates
of increase in future compensation and the rates of future employee turnover. Those assumptions also apply to
determinations of the obligations and expense of the following plans, except as noted: (1) supplemental pension
– no funded assets to be measured, and (2) deferred compensation arrangement and post-retirement mortality
benefit – no funded assets to be measured and no dependency on future rates of compensation or turnover.