Napa Auto Parts 2009 Annual Report Download - page 52

Table of Contents


The amount of gross tax effected unrecognized tax benefits as of December 31, 2009 and 2008 was approximately $41,013,000 and
$36,429,000, respectively, of which approximately $15,129,000 and $14,417,000, respectively, if recognized, would affect the effective
tax rate. During the years ended December 31, 2009, 2008, and 2007, the Company paid interest and penalties of approximately
$363,000, $815,000, and $600,000, respectively. The Company had approximately $7,691,000 and $5,004,000 of accrued interest and
penalties at December 31, 2009 and 2008, 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
services.
The Company also sponsors unfunded 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.
In July 2009, the Company announced changes to the U.S. postretirement benefit plan. Effective January 1, 2010, future retirees
will no longer receive employer-provided medical benefits and current pre-65 retirees will no longer receive employer-provided post-65
medical benefits (beyond an access-only arrangement).
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 
   
 

Benefit obligation at beginning of year  $1,387,669  $ 28,640
Service cost  53,311  880
Interest cost  90,300  1,614
Plan participants’ contributions  3,216  3,782
Plan amendments  (66,349)  —
Actuarial (gain) loss  51,042  1,282
Exchange rate loss (gain)  (24,446)  —
Gross benefits paid  (44,713)  (7,664)
Less federal subsidy  N/A  784
Curtailments  —  —
Benefit obligation at end of year  $ 1,450,030  $29,318
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