True Value 2008 Annual Report Download - page 49

notes to consolidated financial statements
28 :: T RUE VALUE COMPA NY
As of December 29, 2007, the pension plans had unrecognized
actuarial losses of $13,483. The major source of actuarial losses
under the plan are related to the decline in interest rates over
the last several years and lower than expected asset returns
during the same period. Deviations from expected returns on
assets are rolled into unrecognized actuarial losses over a three-
year period. Actuarial losses are amortized using the minimum
amortization methodology as described in FASB Statement
No. 87, ”Employers’ Accounting for Pensions” (“FAS 87”). At
January 3, 2009, unrecognized actuarial losses increased $15,326
to $28,809. Major sources of this change that occurred during
2008 include less than expected asset returns during 2008 of
$24,890 as a result of the significant decline in the equity markets.
Partially offsetting these increases were decreases resulting from
an increase in the discount rate during 2008 of $750, actuarial
gains of $4,536, actuarial losses recognized under FASB Statement
No. 88, “Employers Accounting for Settlements and Curtailments
of Defined Benefit Pension Plans and for Termination Benefits”
settlement accounting of $2,862, amortization of actuarial losses
recognized under FAS 87 of $204, and miscellaneous census
items of $1,212.
One of True Value’s pension plans is the supplemental retirement
plan (”SRP”), which is an unfunded unqualified defined benefit
plan. The SRP had an ABO of $3,642 and $4,490 as of January 3,
2009 and December 29, 2007, respectively. Since the SRP is an
unfunded plan, there were no plan assets at January 3, 2009 and
December 29, 2007.
In December 2006, True Value adopted FASB Statement No. 158,
“Employers’ Accounting for Defined Benefit Pension and Other
Postretirement Plans an amendment of FASB Statements
No. 87, 88, 106, and 132(R)” (“FAS 158”). FAS 158 requires that
an employer with a defined benefit plan to recognize the funded
status of the benefit plan; recognize as a component of Other
comprehensive income, the gains or losses and prior service
costs or credits that are not recognized as components of net
periodic benefit costs; and measure defined benefit plan assets
and obligations as of the date of the employer’s fiscal year end.
At December 30, 2006, the primary effect of this adoption was to
net the prepaid pension expense amount of $4,157 against the
previously recorded minimum liability of $10,878 to arrive at the
net unfunded accumulated benefit obligation of $6,721, as well
as record a portion of the resulting liability as current.
At January 3, 2009, True Value recorded in the Pension line of
the Consolidated Balance Sheet a net unfunded ABO of $24,627
for all True Value administered pension plans. The unrecognized
actuarial loss for both plans of $28,809 was recorded as a reduction
of Members’ equity in Accumulated other comprehensive loss.
The amount of Accumulated other comprehensive income that
is expected to be recognized into expense during 2009 resulting
from recognition of deferred actuarial losses from amortization
and settlements is $772.
The components of net periodic pension cost for True Value admin-
istered pension plans were as follows for the years ended:
January 3, December 29, December 30,
($ in thousands) 2009 2007 2006
Components of net periodic
pension cost:
Service cost $ 225 $ 758 $ 5,563
Interest cost 4,091 4,447 4,119
Expected return on assets (5,189) (5,276) (5,062)
Amortization of prior service
cost/(benefit) – – (175)
Amortization of actuarial loss 204 1,230 1,709
Curtailment gain – – (3,620)
Settlement loss 2,862 1,309 1,919
Net pension cost $ 2,193 $ 2,468 $ 4,453
The assumptions used to determine True Value’s net periodic
pension cost for all plans were as follows for the years ended:
January 3, December 29, December 30,
2009 2007 2006
Measurement Date 12/29/2007 12/30/2006 12/31/2005
Weighted average assumptions:
Discount rate 6.00% 5.75% 5.25%
Expected return on assets 8.00% 8.00% 8.00%
Rate of compensation increase 3.50% 3.50% 3.50%
($ in thousands)