True Value 2010 Annual Report Download - page 46

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ in thousands)
Financial Report 2010 25
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 stock; for members with loss allocation
accounts, the Class B nonvoting common stock is offset to satisfy
members’ remaining allocation of the 1999 loss. Non-cash operat-
ing and financing activities relating to the issuance of patronage
dividends were as follows for the years ended:
January 1, January 2, January 3,
($ in thousands) 2011 2010 2009
Distribution of annual
patronage dividend:
Patronage dividend
payable in cash $ 23,391 $ 23,520 $ 17,509
Issuance of subordinated
promissory notes 24,082 20,754 16,520
Issuance of Redeemable
Class B nonvoting
common stock 9,198 12,533 21,523
Reduction of Loss
allocation accounts 437 457 611
Total $ 57,108 $ 57,264 $ 56,163
True Value may set off its obligation to make payments to mem-
bers for redeemable stock, notes, interest or declared and unpaid
dividends against any obligation owed by the member to True
Value. True Value classifies stock redemption requests that had
not fully completed the redemption process in Liabilities. True
Value exercised its set-off rights on stock redemptions in 2010
and 2009 of $11,047 and $8,684, respectively, against obligation
owed by the member to True Value for loss allocation accounts,
amounts related to the 2001 loss and accounts receivables of
$3,277 and $2,861. The remaining amount due to members was
partially satisfied with subordinated promissory installment notes
of $6,023 and $5,598 in 2010 and 2009, respectively.
True Value exercised its set-off rights with member accounts
receivable when True Value member notes and interest came due.
True Value in 2010, 2009 and 2008 set off $2,899, $2,599 and $573,
respectively, of notes and interest payments due to members
against amounts due from members for accounts receivable.
tax purposes. The deferred tax effect of the net operating loss
carryforward was decreased in 2010 by $558. This decrease is
attributable to a $393 decrease primarily in other deferred tax
assets and liabilities and by a $165 decrease attributable to
amounts to be charged against members’ loss allocation accounts.
Total deferred tax assets, net of deferred tax liabilities, have a
full valuation allowance because True Value has concluded that,
based on the weight of available evidence; it is more likely than
not that the deferred tax assets will not be fully realized due to
True Value’s minimal taxable earnings after the distribution of
the patronage dividend to the members. Deferred tax assets
will only be realized to the extent that net future earnings, after
the distribution of the patronage dividend to the members,
are retained and after accumulated net operating losses are
exhausted by True Value.
The significant components of True Value’s deferred tax assets
and liabilities were as follows for fiscal years:
January 1, January 2,
($ in thousands) 2011 2010
Deferred tax assets:
Net operating loss carryforwards $ 3,496 $ 4,054
AMT credit carryforward 692 737
Nonqualified notices of allocation 6,652 6,927
Vacation pay 2,409 2,405
Deferred gain 13,456 14,510
Severance and restructuring costs 1,255 1,223
Book depreciation in excess of
tax depreciation 2,200 996
Rent expense 1,321 1,844
Inventory capitalization 509 738
Bad debt expense 2,444 2,457
Other 5,885 5,793
Total deferred tax assets 40,319 41,684
Valuation allowance for
deferred tax assets (36,148) (38,266)
Net deferred tax assets 4,171 3,418
Deferred tax liabilities:
Tax depreciation in excess
of book depreciation – –
Contributions to fund
retirement plans 4,171 3,418
Net deferred taxes $ – $ –