True Value 2009 Annual Report Download - page 35

Notes To Consolidated Financial Statements
($ in thousands)
20 True Value Company
the lenders, these terms and conditions include, among other
things, compliance with quarterly financial covenants, limitations
on additional third-party debt, the granting of certain liens and
guarantees, investments, transactions with related parties and
acquisitions and periodic financial reporting requirements. Sub-
stantially all of True Value’s assets, excluding property, plant &
equipment, are pledged as security for the Bank Facility. Manage-
ment believes it is in compliance with these requirements and is
in compliance with all terms and conditions of the Bank Facility.
MORTGAGE TRANSACTION
True Value has a mortgage on its Manchester, New Hampshire,
distribution center (the “Mortgage”) with a balance at January 2,
2010 of $19,250. The Mortgage is a 20-year fully amortizing loan
at a fixed rate of 6.74% with a maturity date of January 1, 2026.
SUBORDINATED PROMISSORY AND SUBORDINATED
PROMISSORY INSTALLMENT NOTES
Subordinated promissory notes are issued from time to time
for partial payment of the annual patronage dividend. Subor-
dinated promissory notes are subordinated to indebtedness
to banking institutions, trade creditors and other indebtedness
of True Value as specified by its board of directors. Historically,
True Value has offered the members who own the subordinated
promissory notes with a scheduled maturity in December of the
current year the option to extend the maturity of their notes at
a new rate and term. For 2009, and in light of the current eco-
nomic conditions, True Value has chosen to offer its members
improved liquidity on their investment in the co-op and offered
members the option to extend the term of their notes maturing in
December for an additional six months at a rate of 5.0%. Whereas
in 2008, True Value offered members the option to extend the
term of their notes maturing in December for an additional three-
year period at a rate of 5.0%. In 2009 and 2008, approximately
85% and 81%, respectively, accepted the offers. True Value’s
Principal payment schedule for long-term debt:
($ in thousands) 2010 2011 2012 2013 2014 Thereafter
Bank Facility (1) $ – $ – $ – $ – $ – $ –
Real Estate Mortgage 693 741 793 848 907 15,268
Subordinated promissory and subordinated
promissory installment notes 28,059 20,360 10,941 1,244 148 36,707
Capital lease obligations 1,669 1,703 1,180 185 31 8
Total $ 30,421 $ 22,804 $ 12,914 $ 2,277 $ 1,086 $ 51,983
(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. It is management’s intention to refinance the Bank Facility prior to its maturity.
management makes no assertion that these high renewal rates
will continue in the future or that management will continue to
offer note renewal options.
Subordinated promissory installment notes are issued in payment
of the redemption of qualified Class B common stock upon termi-
nation 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:
January 2, January 3,
($ in thousands) 2010 2009
Subordinated promissory notes at
interest rates from 4.50% to 8.00%,
maturing from 2009 to 2015 $ 65,536 $ 53,818
Accrued dividend notes liability 20,754 16,520
Subordinated promissory installment
notes at interest rates of 2.72% to
5.68% maturing from 2009 to 2013 10,431 10,053
Accrued stock redemption liability 738 1,596
97,459 81,987
Less amounts due within one year (28,059) (18,095)
$ 69,400 $ 63,892
Accrued dividend notes liability is subordinated promissory notes
that are issued as part of the settlement of the patronage dividend
for that fiscal year. For fiscal 2009, the subordinated promissory
notes that were issued with the distribution of the patronage
dividend in 2010, bear an interest rate of 5.0% and mature in
2017. For fiscal 2008, the subordinated promissory notes that
were issued with the distribution of the patronage dividend in
2009, bear an interest rate of 5.0% and mature in 2015.
The scheduled amount due within one year for both years was
classified in Current maturities of long-term debt, notes and
capital lease obligations.