Advance Auto Parts 2003 Annual Report Download - page 35

The discontinued wholesale segment, excluding certain
allocated and team member benefit expenses, represented the
entire results of operations previously reported in that segment.
These excluded expenses represented $2,361, $3,272 and
$5,490 of allocated and team member benefit expenses for fis-
cal 2003, 2002 and 2001, respectively, that remain a compo-
nent of income from continuing operations and have therefore
been excluded from discontinued operations. The Company
has allocated corporate interest expenses incurred under the
Company’s senior credit facility and subordinated notes. The
allocated interest complies with the provisions of EITF 87-
24, “Allocation of Interest to Discontinued Operations,” and
are reported in discontinued operations on the accompanying
statements of operations. These amounts were $484, $1,126
and $1,665 for fiscal 2003, 2002 and 2001, respectively. The
loss on the discontinued operations of Wholesale for fiscal
2003 included $2,693 of exit costs as follows:
Severance costs............................................................................ $1,183
Warranty allowances ................................................................... 1,656
Other............................................................................................ (146)
Total exit costs............................................................................. $2,693
4—Acquisitions
Discount Acquisition
On November 28, 2001, the Company acquired 100% of
the outstanding common stock of Discount Auto Parts, Inc.
(“Discount”). Discount’s shareholders received $7.50 per
share in cash plus 0.2577 shares of Advance common stock
for each share of Discount common stock. The Company
issued 4,310 shares of Advance common stock to the former
Discount shareholders, which represented 13.2% of the
Company’s total shares outstanding immediately following
the acquisition.
Discount was the fifth largest specialty retailer of auto-
motive parts, accessories and maintenance items in the
United States with 671 stores in six states, including the
leading market position in Florida, with 437 stores. The
Discount acquisition further solidified the Company’s
leading market position throughout the Southeast.
In accordance with SFAS No. 141, the acquisition was
accounted for under the purchase method of accounting and
was effective for accounting purposes on December 2,
2001. Accordingly, the results of operations of Discount for
the period from December 2, 2001 are included in the
accompanying consolidated financial statements. The
purchase price of $481,688 was allocated to the assets
acquired and liabilities assumed based upon estimates of
fair values. Negative goodwill of $58,763, resulting from
excess fair value over the purchase price, was allocated
proportionately as a reduction to certain non-current assets,
primarily property and equipment.
For the fiscal years ended January 3, 2004, December 28,
2002 and December 29, 2001, the Company incurred
$10,417, $35,532 and $4,854, respectively, of merger and
integration and merger related restructuring expenses.
These expenses represent merger and integration costs
associated with integrating the Discount operations.
Trak Acquisition
On July 23, 2002, the Company announced that it had
received bankruptcy court approval to acquire certain assets
of Trak Auto Corporation, or Trak, including the leases on
55 stores in Virginia, Washington, D.C. and Maryland. On
September 20, 2002, the Company agreed to acquire two
additional Trak stores. The acquisition has been accounted
for under the purchase method of accounting and, accord-
ingly, each store’s results of operations has been included in
the Company’s financial records from the date each store
was transferred to the Company. Negative goodwill of
$1,687, resulting from excess fair value over the purchase
price, was allocated proportionately as a reduction to
certain non-current assets. As of December 28, 2002, the
Company had taken ownership and converted all 57 stores,
assumed the respective lease obligations and had paid
$12,465 for inventory and fixtures.
Carport Acquisition
On April 23, 2001, the Company completed its acquisition
of Carport Auto Parts, Inc., or Carport. The acquisition
included a net 30 retail stores located in Alabama and
Mississippi, and substantially all of the assets used in Carport’s
operations. The acquisition has been accounted for under
the purchase method of accounting and, accordingly, Carport’s
results of operations have been included in the Company’s
consolidated statement of operations since the acquisition date.
The purchase price of $21,533 has been allocated to the
assets acquired and the liabilities assumed based on their
fair values at the date of acquisition. This allocation resulted
in the recognition of $3,695 in goodwill, of which $444 was
amortized during fiscal 2001.
5—Closed Store and Restructuring Liabilities
The Company continually reviews the operating perform-
ance of its existing store locations and closes certain locations
identified as under performing. Closing an under performing
location does not result in the elimination of the operations
and associated cash flows from the Company’s ongoing
operations as the Company transfers those operations to
another location in the local market. Accordingly, the
Company maintains closed store liabilities that include
liabilities for these exit activities and liabilities assumed
through past acquisitions that are similar in nature but
recorded by the acquired companies prior to acquisition.
The Company also maintains restructuring liabilities
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Advance Auto Parts, Inc. and Subsidiaries