True Value 2010 Annual Report Download

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ANNUAL REPORT 2010

Table of contents

  • Page 1
    AnnmAl RepoRt 2010

  • Page 2
    ... an annual dividend check. It's also reflected in the financial benefits you enjoyed as a co-op member throughout 2010: 2010 TOTAl MEMbER bENEfITs Patronage Dividend/Cash Patronage Dividend/Notes, stock Promotional Discounts Dating & Anticipation Market spiffs/Racking Marketing/Promotional Credits...

  • Page 3
    ... marketing tools and an unmatched line of credit to adopt the return-oninvestment-proven DTV store format. We make True Value square feet of easy to do business with. THOUSAND DtV selling space 900 CLOSE TO We also deliver retailer satisfaction in the form of an annual was aDDeD in 2010 dividend...

  • Page 4
    ...1,600 retailers signed up and nearly 1,400 Ship-toStore locations. We provided a new local website application and online circulars, and utilized social media - all to attract the DIYer, drive store traffic and sales, as well as strengthen the True Value brand. • place: Supported DTV projects and...

  • Page 5
    ... first 12 months. The co-op is poised better than ever to extend attractive financing to retailers seeking the DTV model. The co-op also invests in brand building and DIY traffic-driving solutions like e-commerce and an enhanced True Value Rewards program. We're refining our inventory management and...

  • Page 6
    ... merchandising we saw in the model DTV store - True Value was providing the right products for the consumer in a customer-friendly, well-merchandised store." scott westlake Nuts and Bolts Hardware Overland Park, Kan. gary dickes, Prairie side True Value Frank BuTler, Business development consultant

  • Page 7
    ... package at 0 percent interest for 10 years. Guiding Dickes through initial store planning, retail consultant Rose Blair helped bring Prairie Side True Value to life. Together, Dickes, Blair and Butler studied the Kenosha market. Dickes saw the impact "window shopping" had on ANNUAL REPORT 2010 5

  • Page 8
    ... of serving true Value coMpanY the retailers and playing an loaneD More tHan important role in growing their business is what attracts, motivates and retains our associate base," said for new & reMoDeleD Lori Birkey, director of talent DtV stores in 2010 management." True Value's customer-focused...

  • Page 9
    ... its Spring and Fall Markets. True Value has partnered with organizations such as Habitat for Humanity, Special Olympics and the Chicago Park District, providing nearly 2,000 volunteer hours overall in the last two years. One way true value retailers succeed locally, both as business and community...

  • Page 10
    ... the right products for the project - that's what customers have come to expect from True Value. True Value retailers work hard to exceed those expectations. True Value is helping retailers enhance the in-store shopping experience with Destination True Value and the many other programs designed to...

  • Page 11
    ... the importance of advertising. They use True Value circulars coupled with local TV ads and are expanding their social media presence. Shapiro appears on a local radio show offering home-repair advice. And the products he plugs on-air are often requested by customers. 1,400 ANNUAL REPORT 2010 9

  • Page 12
    ...of True Value Home Center in Oakhurst, Calif., believes the site's additional assortments add value to his store. "It's another way for us to serve existing customers and attract new ones," Bryant said. "An online customer ordered a hard-to-find coffee filter that we don't stock, but the e-commerce...

  • Page 13
    ... the time and effort that went into making the store look good and to provide a great shopping experience. and, more importantly, we are seeing a boost in sales because of the new look." John Gilfillan, Gilfillan Hardware & Paint BEFORE AFTER POLLOCK PINES TRUE VALUE Pollock Pines, Calif. "it was...

  • Page 14
    ... is in line with the other stores that remodeled in 2008 and 2009, which outperformed non-DTV stores by more than 9 percent during their first 12 months. Despite the economy, A&K True Value saw a 2.5 percent sales increase in 2010, outperforming the local market. Koenig credits True Value for...

  • Page 15
    ...'t wait to get started," said Alan Koenig (left), pictured with his retail consultant, David Smith. Below, Koenig works with Danny Schoaf, a regional delivery driver, to unload merchandise. Schoaf, who has been with True Value for 13 years, is a critical part of the process ensuring A&K has on-time...

  • Page 16
    ... me accomplish my goal of building a hardware store customized for the specific needs of my community. From the initial research of assembling local demographic information to on-site project management, True Value associates were helpful throughout. The level of support and attention to detail made...

  • Page 17

  • Page 18
    ... President, Marketing fred Kirst, Vice President, Specialty Businesses BottoM (left to right): Mark flowers, Vice President, Retail Growth Mike clark, Senior Vice President, Chief Merchandising Officer Barbara wagner, Vice President, Corporate Treasurer and Chief Risk Officer 16 TRUE VALUE COMPANY

  • Page 19
    ... ritter and Maryann Paluscio Ritters True Value, Mechanicsburg, Pa. doug and Joellen Mingle Roaring spring True Value, Roaring spring, Pa. ron samore Vermont Outlet True Value, los Angeles Design: Ruth: edelman Integrated Marketing editorial: true Value Company/edelman photography: James Schnepf...

  • Page 20
    8600 W. Bryn Mawr Ave. Chicago, IL 60631-3505 773.695.5000 www.truevaluecompany.com ©2011 True Value Company

  • Page 21
    financial RepoRt 2010

  • Page 22
    ... its members and their retail businesses, true Value's management expanded its level of support through enhanced programs, new retail tools and cash flow assistance. a variety of consumer facing initiatives were developed or launched in 2010, including e-commerce, on-line circulars, a store-specific...

  • Page 23
    ... a significant level of attrition in this quartile of current members, the financial impact would be insignificant. Historically, the majority of true Value's terminated stores have been from this member quartile. in 2011, management expects both retail and wholesale comp store sales to increase...

  • Page 24
    ... the 2010 patronage dividend. in both 2010 and 2009, true Value had no year-end outstanding borrowings on the bank line. comp Store Sales: Warehouse revenue Vendor-direct revenue paint manufacturing revenue net comp Store Sales Change in participating members: terminated members: Warehouse revenue...

  • Page 25
    ... 0.3%, resulting from continuing members' sales increases at retail. this is supported by the members' comparable store sales at retail, reported from over 1,500 true Value core hardware members, being up 0.3% on true Value-related SKUs as well. $ Gross Margin (Decrease) fixed costs as a result of...

  • Page 26
    ... and home improvement industry. Second, true Value members also lowered their product purchases as they conserved their cash flow by bringing down inventory levels in order to preserve cash during the economic recession. this is supported by the members' comparable store sales at retail, reported...

  • Page 27
    ...the business. the spring and early fall are the most active periods for true Value and require the highest levels of working capital. although year-end account balances fluctuate from year to year, the low point for accounts receivable, inventory and accounts payable is generally during the month of...

  • Page 28
    ... $30,799 for 2010, 2009 and 2008, respectively. in particular, true Value utilized cash to pay patronage dividends, debt and drafts payable, as well as to redeem class a and class B common stock. true Value's net working capital at January 1, 2011, January 2, 2010 and January 3, 2009, was $171,118...

  • Page 29
    ... to determine true Value's net periodic pension cost for all plans were as follows for the years ended: January 1, January 2, January 3, 2011 2010 2009 Measurement Date Weighted average assumptions: Discount rate expected return on assets Rate of compensation increase 1/2/2010 1/3/2009 12/29...

  • Page 30
    RePoRt of indePendent auditoRs tO the BOard Of directOrs and memBers Of true value cOmpany: in our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, cash flows and members' equity present fairly, in all material respects, the financial ...

  • Page 31
    ... management or other employees who have a significant role in true Value's internal control over financial reporting. tRUe ValUe coMpanY lyle G. Heidemann President and Chief Executive Officer Date: March 14, 2011 David a. Shadduck Senior Vice President and Chief Financial Officer 10 true Value...

  • Page 32
    ... of our Board of Directors. true Value's management, based on their assessment, has concluded that, as of January 1, 2011, true Value's internal control over financial reporting was effective. tRUe ValUe coMpanY lyle G. Heidemann President and Chief Executive Officer Date: March 14, 2011 David...

  • Page 33
    ... maturities Deferred gain on sale leaseback pension other long-term liabilities Redeemable nonqualified class B nonvoting common stock, $100 par value; 162,413 and 170,621 shares issued and fully paid total long-term liabilities and deferred credits total liabilities and deferred credits 95,635 30...

  • Page 34
    ... January 2, January 3, For the Years Ended 2011 2010 2009 net revenue cost of revenue Gross margin operating expenses: logistics and manufacturing expenses Selling, general and administrative expenses other income, net operating income interest expense to members third-party interest expense...

  • Page 35
    ... for investing activities financing activities: payment of patronage dividend payment of notes, long-term debt and lease obligations Decrease in drafts payable increase/(decrease) in revolving credit facility, net payment of debt issuance costs proceeds from sale of Redeemable class a common stock...

  • Page 36
    ... class a common stock amounts are net of unpaid subscription amounts of $0 relating to no issued shares at January 1, 2011, January 2, 2010 and at January 3, 2009; $8 relating to 840 issued shares at December 29, 2007. the accompanying notes are an integral part of the consolidated financial...

  • Page 37
    ...has a program to provide interest free loans to members to open new stores or make store expansions in the Destination true Value ("DtV") format. the loans are for a period of 10 years and are generally repaid through the members' non class B common stock portion of the annual patronage dividend, as...

  • Page 38
    ... loan period to seven years. the loans are generally repaid through the members' non class B common stock portion of the annual patronage dividend, as well as any maturing promissory notes and promissory note interest due to the members. true Value discounts the loan amount using market rates at the...

  • Page 39
    ... sHaRe infoRmation true Value's Redeemable class a voting common stock is owned by members. true Value's Redeemable class B nonvoting common stock outstanding was issued to members in partial payment of neW accounting PRonouncements in January 2010, the financial accounting Standards Board issued...

  • Page 40
    ...Value's annual Report disclosures. no other accounting standards issued in 2010 were applicable to true Value's consolidated financial Statements. 3. prOperty, plant & equipment property, plant & equipment consisted of the following at: January 1, January 2, ($ in thousands) 2011 2010 Buildings...

  • Page 41
    ... their notes at a new rate for an additional three years. commencing in December 2009, true Value offered its members improved liquidity on their investment in the co-op and offered members the option to extend the term of their maturing notes for an additional six months. in 2010, notes maturing in...

  • Page 42
    ... for the years ended January 1, 2011, January 2, 2010 and January 3, 2009, respectively. Retail HeadQuaRteRs lease amendment true Value executed a fifth amendment to its existing operating lease for its Retail Headquarters, located in chicago, illinois, on September 14, 2009. the effective date of...

  • Page 43
    ... common stock"). the By-laws provide true Value the right to allow a member to meet the stock ownership requirements for true Value's Redeemable class B nonvoting common stock by the issuance of Redeemable class B nonvoting common stock in payment of the year-end patronage dividend. the shares...

  • Page 44
    ... to receive patronage dividend distributions from true Value on the basis of gross margins of merchandise purchased by each member. in accordance with true Value's By-laws and Retail Member agreement, the annual patronage dividend, as authorized by the board of directors, is paid to members out of...

  • Page 45
    ... year ended January 1, 2011, were $57,108. true Value's By-laws and the internal Revenue Service (the "iRS") require that the payment of at least 20% of patronage dividends be in cash. Historically, true Value has paid approximately 30% of the patronage dividend in cash. However, in 2010, true Value...

  • Page 46
    ... of true Value's deferred tax assets and liabilities were as follows for fiscal years: January 1, January 2, 10. supplemental cash flOw infOrmatiOn the annual patronage dividend is satisfied through cash payments and issuance of subordinated promissory notes and Redeemable class B nonvoting common...

  • Page 47
    ... or ten years and are generally repaid through the members' non class B common stock portion of the annual patronage dividend. the amount of the loans issued during 2010, 2009 and 2008 were $8,310, $4,703 and $2,877, respectively. true Value also had non-cash financing and investing activities by...

  • Page 48
    ... to determine true Value's net periodic pension cost for all plans were as follows for the years ended: January 1, January 2, January 3, 2011 2010 2009 Measurement Date Weighted average assumptions: Discount rate expected return on assets Rate of compensation increase 1/2/2010 1/3/2009 12/29...

  • Page 49
    ... following tables set forth by level, within the fair value hierarchy, the plan's investments at fair value as of January 1, 2011 and January 2, 2010. inVestment funds: Shares of mutual funds are valued based on quoted prices of the fund in active markets and classified within level 1 of the fair...

  • Page 50
    ...average expected future service under the plan during 2010 was approximately 8.2 years. the assumptions used to determine true Value's pension obligations for all plans were as follows for the years ended: January 1, January 2, 2011 2010 Weighted average assumptions: Discount rate 4.67% lump sum...

  • Page 51
    ... 2010, 2009 and 2008, respectively, for the 401k plan. 12. segment infOrmatiOn true Value is principally engaged as a wholesaler of hardware and related products and is a manufacturer of paint products. true Value identifies segments based on management responsibility and the nature of the business...

  • Page 52
    ... sales to total true Value merchandising sales ratio, true Value's distribution warehousing costs to gross sales ratio, and ratios relating to certain assets and liabilities, respectively. 13. suBsequent events true Value has determined as of March 14, 2011, the date the financial statements...

  • Page 53
    8600 W. Bryn Mawr Ave. Chicago, IL 60631-3505 773.695.5000 www.truevaluecompany.com © 2011 True Value Company