True Value 2007 Annual Report Download - page 42

2007 FINANCIAL REPORT | 21
N O T E S T O
CONSOLIDATED FINANCIAL STATEMENTS
($ in thousands)
Mortgage Transaction
On December 29, 2005, True Value entered into a $21,600 mort-
gage transaction on its Manchester, New Hampshire, distribution
center (the “Mortgage”). The balance at December 29, 2007 is
$20,504. The Mortgage is a 20-year fully amortizing loan at a
fixed rate of 6.74% with a maturity date of January 1, 2026.
Subordinated Promissory and Subordinated Promissory
Installment Notes
Subordinated promissory notes are issued from time to time for
partial payment of the annual patronage dividend. Subordi-
nated promissory notes are subordinated to indebtedness to
banking institutions, trade creditors and other indebtedness of
True Value as specified by its board of directors. Prior experi-
ence indicates that the maturities of a significant portion of the
notes due within one year are often extended at the option of
the member, for a three-year period, at interest rates estab-
lished by True Value and substantially equivalent to competitive
market rates of comparable instruments. In both 2007 and 2006,
approximately 85% of notes scheduled to mature in those years
were extended for an additional three years. True Value antici-
pates that this practice of extending notes, based on historical
results, will continue.
Subordinated promissory installment notes are issued in pay-
ment of the redemption of qualified Class B common stock
upon termination of membership in the cooperative (see Note 6,
“Members’ Equity – Capital Stock Redemption”).
Subordinated promissory and subordinated promissory install-
ment notes consisted of the following as of:
December 29, December 30,
($ in thousands) 2007 2006
Subordinated promissory notes at
interest rates from 6.00% to 8.00%,
maturing from 2006 to 2011 $ 48,562 $ 48,186
Accrued dividend notes liability 8,857 2,862
Subordinated promissory installment
notes at interest rates of 4.36% to
5.68% maturing from 2007 to 2011 13,995 17,216
Accrued stock redemption liability 1,521 1,295
72,935 69,559
Less amounts due within one year (26,652) (22,724)
$ 46,283 $ 46,835
Accrued dividend notes liability are subordinated promissory
notes that are issued as part of the settlement of the patronage
dividend for that fiscal year. For fiscal 2007, the subordinated
promissory notes that were issued with the distribution of the
patronage dividend in 2008, bear an interest rate of 5.00% and
mature in 2012. For fiscal 2006, the subordinated promissory
notes that were issued with the distribution of the patronage divi-
dend in 2007, bear an interest rate of 7.00% and mature in 2011.
The scheduled amount due within one year for both years was
classified in Current maturities of long-term debt, notes and
capital lease obligations.
Amounts shown below as scheduled repayments are the stated
note amounts. As it has historically done, True Value will continue
to seek members’ consent in 2008 to extend the subordinated
promissory note due dates at market competitive interest rates.
Principal payment schedule for long-term debt:
($ in thousands) 2008 2009 2010 2011 2012 Thereafter
Bank Facility (1) $ – $ – $ – $ 27,700 $ – $ –
Real Estate Mortgage 606 648 693 741 793 17,023
Subordinated promissory and subordinated
promissory installment notes 26,652 16,985 16,108 4,090 9,100 –
Capital lease obligations 1,306 1,277 1,366 1,352 927 73
Total $ 28,564 $ 18,910 $ 18,167 $ 33,883 $ 10,820 $ 17,096
(1) Borrowings under the Bank Facility fluctuate as a result of the seasonal needs of the business. There are no required payments until the maturity of the Bank Facility
in November 2011.