Employee Benefits

9 Months Ended

Sep. 28, 2013

5. Employee Benefits

Most of our hourly employees participate in noncontributory defined benefit pension plans. These include a plan that is administered solely by us (the “hourly pension plan”) and union-administered multiemployer plans. Our funding policy for the hourly pension plan is based on actuarial calculations and the applicable requirements of federal law. Benefits under the majority of plans for hourly employees (including multiemployer plans) are primarily related to years of service. We believe that our portion of each multiemployer pension plan is immaterial to our financial statements and that we represent an immaterial portion of the total contributions and future obligations of these plans.

Net periodic pension cost for our pension plans included the following (in thousands):

	Third Quarter
	Period from June 30, 2013 to September 28, 2013			Period from July 1, 2012 to September 29, 2012

Service cost	$	548		$	469
Interest cost on projected benefit obligation		1,188			1,221
Expected return on plan assets		(1,306	)		(1,224	)
Amortization of unrecognized loss		718			519
Net periodic pension cost	$	1,148		$	985

	Nine Months Ended
	Period from December 30, 2012 to September 28, 2013			Period from January 1, 2012 to September 29, 2012

Service cost	$	1,644		$	1,407
Interest cost on projected benefit obligation		3,563			3,663
Expected return on plan assets		(3,918	)		(3,672	)
Amortization of unrecognized loss		2,154			1,557
Net periodic pension cost	$	3,443		$	2,955

The Company’s minimum required contribution for plan year 2012 was $3.2 million. In an effort to preserve additional cash for operations, we applied for a waiver from the IRS for our 2012 minimum required contribution. The Company believes that the waiver will be granted. We have not made $2.1 million of the required 2012 contributions related to the 2012 minimum required contribution. Assuming the requested waiver is granted, our minimum required contribution for 2012 will be amortized over the following five years, increasing our future minimum required contributions. We currently are required to make three quarterly cash contributions during fiscal 2013 of $0.8 million related to our 2013 minimum required contribution.

During the second quarter of fiscal 2013, we contributed certain qualifying employer real property to our hourly pension plan. The properties, including certain land and buildings, are located in Charleston, S.C. and Buffalo, N.Y., and have been valued by independent appraisals at approximately $6.8 million. The contribution was recorded by the hourly pension plan at the fair value of $6.8 million. We are leasing back the contributed properties for an initial term of twenty years with two five-year extension options and continue to use the properties in our distribution operations. Each lease provides us a right of first refusal on any subsequent sale by the hourly pension plan and a repurchase option. The hourly pension plan engaged an independent fiduciary who evaluated the transaction on behalf of the hourly pension plan, negotiated the terms of the property contribution and the leases, and also manages the properties on behalf of the hourly pension plan. We have designated the property contribution to the 2013 plan year and we believe it is sufficient to cover our 2013 required minimum contribution. In the event the waiver for 2012 is not granted, we believe the contribution will be sufficient to cover both the 2012 and 2013 funding requirements discussed above.

We determined that the contribution of the properties does not meet the accounting definition of a plan asset within the scope of relevant accounting guidance. Accordingly, the contributed properties are not considered a contribution for financial reporting purposes and, as a result, are not included in plan assets and have no impact on the net pension liability recorded on our Consolidated Balance Sheets. We continue to depreciate the carrying value of the properties in our financial statements, and no gain or loss was recognized at the contribution date for financial reporting purposes. Rent payments will be made on a monthly basis and will be recorded as contributions to the hourly pension plan, of which $0.3 million has been recorded as of September 28, 2013. These rental payments will reduce our unfunded obligation to the hourly pension plan.