True Value 2010 Annual Report Download - page 47

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ in thousands)
26 True Value Company
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. Commencing in Decem-
ber 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. 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. In 2010, 2009 and 2008, True
Value extended subordinated promissory notes, at the option
of the member in the amounts of $17,631, $10,246 and $14,464,
respectively.
True Value had non-cash financing activities related to True
Value’s programs to provide interest free or low interest bearing
loans to members to open new stores, make store expansions or
remodel stores. The loans are for periods of five 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 entering into capital leases in the amount of $236, $1,168 and
$37 for 2010, 2009 and 2008, respectively. True Value’s capital
leases in 2010 primarily related to the acquisition of warehouse
and computer equipment, 2009 primarily related to warehouse
equipment and in 2008 primarily related to warehouse office
equipment.
Cash paid for interest during 2010, 2009 and 2008 totaled $7,294,
$7,283 and $9,925, respectively. Cash paid for state income taxes
during 2010, 2009 and 2008 totaled $42, $58 and $57, respectively.
11. Benefit plans
True Value had sponsored two noncontributory defined benefit
retirement plans. Effective with the fiscal year ended 2006, these
plans were amended to cease offering the plan to new partici-
pants and to freeze the benefit and service accruals except for
vesting purposes after such date, except with respect to certain
participants covered by certain collective bargaining agree-
ments. The plans for the certain participants covered by certain
collective bargaining agreements were similarly amended at later
dates between year-end 2006 and September 30, 2008. As of
September 30, 2008 all True Value-sponsored plans were frozen.
January 1, January 2,
($ in thousands) 2011 2010
Change in projected benefit obligation:
Projected benefit obligation at
beginning of year $ 71,379 $ 67,342
Service cost – –
Interest cost 3,716 4,141
Benefit payments (296) (251)
Actuarial losses 1,569 5,784
Settlements (6,535) (5,637)
Projected benefit obligation at end of year 69,833 71,379
Change in plan assets:
Fair value of plan assets at
beginning of year 52,977 42,715
Actual return on assets 6,100 8,919
Employer contributions 5,467 7,231
Benefit payments (296) (251)
Settlements (6,535) (5,637)
Fair value of plan assets at end of year 57,713 52,977
Reconciliation of funded status:
Unfunded status at end of fiscal year (12,120) (18,402)
Actuarial (gain)/loss:
Prior year balance 27,062 28,809
Current year amortization (1,748) (863)
Current year settlement impact (2,138) (2,427)
(Gain)/Loss arising during current period (512) 1,543
Actuarial loss 22,664 27,062
Net amount recognized $ 10,544 $ 8,660
The Accumulated Benefit Obligation (“ABO”) for True Value
administered pension plans was $69,833 and $71,379 at January 1,
2011 and January 2, 2010, respectively.
As of January 2, 2010, the pension plans had unrecognized actu-
arial losses of $27,062. The major source of actuarial losses under
the plans are related to the lower than expected asset returns
that have not yet been recognized, including the significant
decline in the equity market in 2008. 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 ASC
715-30, “Defined Benefit Plans – Pensions”. At January 1, 2011,