Advance Auto Parts 2004 Annual Report Download - page 40

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the฀grant-date฀fair฀value฀of฀the฀award฀(with฀limited฀excep-
tions).฀That฀cost฀will฀be฀recognized฀over฀the฀period฀during฀
which฀ an฀ employee฀ is฀ required฀ to฀ provide฀ service฀ in฀
exchange฀ for฀ the฀ award฀ (usually฀ the฀ vesting฀ period).฀ The฀
grant-date฀fair฀value฀of฀employee฀share฀options฀and฀similar฀
instruments฀will฀be฀estimated฀using฀option-pricing฀models.฀
If฀an฀equity฀award฀is฀modified฀after฀the฀grant฀date,฀incre-
mental฀compensation฀cost฀will฀be฀recognized฀in฀an฀amount฀
equal฀to฀the฀excess฀of฀the฀fair฀value฀of฀the฀modified฀award฀
over฀the฀fair฀value฀of฀the฀original฀award฀immediately฀before฀
the฀modification.
฀ The฀Company฀is฀required฀to฀apply฀SFAS฀No.฀123R฀to฀all฀
awards฀granted,฀modified฀or฀settled฀as฀of฀the฀beginning฀of฀
the฀ first฀ interim฀ or฀ annual฀ reporting฀ period฀ that฀ begins฀
after฀ June฀ 15,฀ 2005.฀ The฀ statement฀ also฀ requires฀ the฀
Company฀ to฀ use฀ either฀ the฀ modified-prospective฀ method฀฀
or฀ modified-retrospective฀ method.฀ Under฀ the฀ modified-
prospective฀ method,฀ the฀ Company฀ must฀ recognize฀ com-
pensation฀ cost฀ for฀ all฀ awards฀ subsequent฀ to฀ adopting฀ the฀
standard฀and฀for฀the฀unvested฀portion฀of฀previously฀granted฀
awards฀ outstanding฀ upon฀ adoption.฀ Under฀ the฀ modified-
retrospective฀method,฀the฀Company฀must฀restate฀its฀previ-
ously฀issued฀financial฀statements฀to฀recognize฀the฀amounts฀
it฀previously฀calculated฀and฀reported฀on฀a฀pro฀forma฀basis,฀
as฀ if฀ the฀ prior฀ standard฀ had฀ been฀ adopted.฀ Under฀ both฀
methods,฀ the฀ statement฀ permits฀ the฀ use฀ of฀ either฀ the฀
straight-line฀or฀an฀accelerated฀method฀to฀amortize฀the฀cost฀
as฀ an฀ expense฀ for฀ awards฀ with฀ graded฀ vesting.฀ The฀ stan-
dard฀permits฀and฀encourages฀early฀adoption.
฀ The฀Company฀has฀commenced฀its฀analysis฀of฀the฀impact฀
of฀ SFAS฀ No.฀ 123R,฀ but฀ has฀ not฀ yet฀ decided:฀ (1)฀ whether฀฀
to฀ elect฀ early฀ adoption,฀ (2)฀ the฀ early฀ adoption฀ date,฀ if฀
elected,฀(3)฀the฀use฀of฀the฀modified-prospective฀or฀modified-
retrospective฀method,฀and฀(4)฀the฀election฀to฀use฀ straight-
line฀or฀an฀accelerated฀method.฀Accordingly,฀the฀Company฀
has฀not฀determined฀the฀impact฀ that฀the฀ adoption฀of฀SFAS฀
No.฀123R฀will฀have฀on฀the฀financial฀position฀or฀results฀of฀
operations.
Reclassifications
฀ Certain฀ items฀ in฀ the฀ fiscal฀ 2003฀ financial฀ statements฀
have฀ been฀ reclassified฀ to฀ conform฀ with฀ the฀ fiscal฀ 2004฀฀
presentation.
3.฀Discontinued฀Operations
฀ On฀ December฀ 19,฀ 2003,฀ the฀ Company฀ discontinued฀฀
the฀ supply฀ of฀ merchandise฀ to฀ its฀ Wholesale฀ Distribution฀
Network,฀ or฀ Wholesale.฀ Wholesale฀ consisted฀ of฀ indepen-
dently฀owned฀and฀operated฀dealer฀locations,฀for฀which฀the฀
Company฀ supplied฀ merchandise฀ inventory.฀ This฀ compo-
nent฀of฀the฀Company’s฀business฀operated฀in฀the฀Company’s฀
previously฀reported฀wholesale฀segment.฀The฀Company฀has฀
accounted฀for฀the฀discontinuance฀of฀the฀wholesale฀segment฀
in฀ accordance฀ with฀ SFAS฀ No.฀ 144,฀ “Accounting฀ for฀ the฀
Impairment฀ or฀ Disposal฀ of฀ Long-Lived฀ Assets.”฀ The฀
Company฀has฀classified฀these฀operating฀results฀as฀discon-
tinued฀operations฀in฀the฀accompanying฀consolidated฀state-
ments฀of฀operations฀ for฀the฀fiscal฀ years฀ended฀January฀3,฀
2004฀and฀December฀28,฀2002.฀For฀the฀fiscal฀years฀ended฀
January฀ 3,฀2004฀ and฀December฀28,฀ 2002,฀ Wholesale฀had฀
revenues฀of฀$52,486฀and฀$83,743,฀respectively.฀At฀January฀3,฀
2004,฀Wholesale฀assets฀were฀not฀significant฀to฀the฀accom-
panying฀ consolidated฀ balance฀ sheets.฀ For฀ the฀ fiscal฀ year฀
ended฀January฀1,฀2005,฀the฀operating฀results฀related฀to฀the฀
discontinued฀wholesale฀business฀were฀minimal฀as฀a฀result฀
of฀recognizing฀an฀estimate฀of฀exit฀costs฀in฀fiscal฀2003.
฀ 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฀and฀
$3,272฀ of฀ allocated฀ and฀ team฀ member฀ benefit฀ expenses฀฀
for฀fiscal฀2003฀and฀2002,฀respectively,฀that฀remain฀a฀com-
ponent฀ 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฀is฀reported฀in฀discontinued฀
operations฀on฀the฀accompanying฀statements฀of฀operations.฀
These฀amounts฀were฀$484฀and฀$1,126฀for฀fiscal฀2003฀and฀
2002,฀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
Notes฀to฀Consolidated฀Financial฀Statements฀(continued)
For฀the฀Years฀Ended฀January฀1,฀2005,฀January฀3,฀2004,฀and฀December฀28,฀2002฀(in฀thousands,฀except฀per฀share฀data)