Advance Auto Parts 2004 Annual Report Download - page 41

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Advance฀Auto฀Parts,฀Inc.฀and฀Subsidiaries
39
4.฀Closed฀Store฀and฀Restructuring฀Liabilities
฀ The฀Company฀continually฀reviews฀the฀operating฀performance฀of฀its฀existing฀store฀locations฀and฀closes฀certain฀locations฀
identified฀as฀under฀performing.฀Closing฀an฀underperforming฀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.฀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฀recorded฀through฀purchase฀accounting฀that฀reflect฀costs฀
of฀the฀plan฀to฀integrate฀the฀acquired฀operations฀into฀the฀Company’s฀business.฀These฀integration฀plans฀relate฀to฀the฀opera-
tions฀acquired฀in฀the฀fiscal฀1998฀merger฀with฀Western฀Auto฀Supply฀Company,฀or฀Western,฀and฀the฀fiscal฀2001฀acquisition฀
of฀Discount.฀The฀following฀table฀presents฀a฀summary฀of฀the฀activity฀for฀both฀of฀these฀liabilities:
Severance Relocation
Other฀฀
Exit฀Costs Total
Closed฀Store฀Liabilities,฀December฀29,฀2001฀..................................................................................... $฀ ฀ ฀ ฀฀— $฀ ฀— $฀฀฀9,643 $฀ 9,643
New฀provisions฀.................................................................................................................................. — — 3,808 3,808
Change฀in฀estimates฀.......................................................................................................................... — — 725 725
Reserves฀utilized฀............................................................................................................................... — — (5,284) (5,284)
Closed฀Store฀Liabilities,฀December฀28,฀2002฀.................................................................................... — — 8,892 8,892
New฀Provisions฀.................................................................................................................................. — — 1,190 1,190
Change฀in฀estimates฀.......................................................................................................................... — — 1,522 1,522
Reserves฀utilized฀............................................................................................................................... — — (5,197) (5,197)
Closed฀Store฀Liabilities,฀January฀3,฀2004฀.......................................................................................... — — 6,407 6,407
New฀Provisions฀.................................................................................................................................. — — 1,141 1,141
Change฀in฀estimates฀.......................................................................................................................... — — 580 580
Reserves฀utilized฀............................................................................................................................... — — (3,541) (3,541)
Closed฀Store฀Liabilities,฀January฀1,฀2005฀........................................................................................... $฀ ฀ ฀ ฀฀— $฀ ฀— $฀฀฀4,587 $฀4,587
Restructuring฀Liabilities,฀December฀29,฀2001฀................................................................................... 8,455 611 4,903 13,969
Purchase฀accounting฀adjustments฀..................................................................................................... (3,129) (219) (1,039) (4,387)
Reserves฀utilized฀............................................................................................................................... (3,674) (367) (1,238) (5,279)
Restructuring฀Liabilities,฀December฀28,฀2002฀................................................................................... 1,652 25 2,626 4,303
Change฀in฀estimates฀.......................................................................................................................... — — (1,178) (1,178)
Reserves฀utilized฀............................................................................................................................... (1,598) (25) (452) (2,075)
Restructuring฀Liabilities,฀January฀3,฀2004฀......................................................................................... 54 — 996 1,050
Change฀in฀estimates฀.......................................................................................................................... — — (86) (86)
Reserves฀utilized฀............................................................................................................................... (54) — (486) (540)
Restructuring฀Liabilities,฀January฀1,฀2005฀.......................................................................................... $฀ ฀ ฀ ฀฀— $฀ ฀— $฀ ฀ ฀฀424 $฀ 424
Total฀Closed฀Store฀and฀Restructuring฀Liabilities฀at฀January฀1,฀2005฀.................................................. $฀ ฀ ฀ ฀฀— $฀ ฀— $฀ ฀ ฀฀5,011 $฀ 5,011
฀ New฀ provisions฀ established฀ for฀ closed฀ store฀ liabilities฀
include฀the฀present฀value฀of฀the฀remaining฀lease฀obligations฀
and฀ management’s฀ estimate฀ of฀ future฀ costs฀ of฀ insurance,฀
property฀ tax฀ and฀ common฀ area฀ maintenance฀ reduced฀ by฀
the฀present฀value฀of฀estimated฀revenues฀from฀subleases฀and฀
lease฀ buyouts฀ and฀ are฀ established฀ by฀ a฀ charge฀ to฀ selling,฀
general฀and฀administrative฀costs฀in฀the฀accompanying฀con-
solidated฀statements฀of฀operations฀at฀the฀time฀the฀facilities฀
actually฀close.฀The฀Company฀currently฀uses฀discount฀rates฀
ranging฀from฀4.5%฀to฀7.8%฀for฀estimating฀these฀liabilities.
฀ From฀time฀to฀time฀these฀estimates฀require฀revisions฀that฀
affect฀ the฀ amount฀ of฀ the฀ recorded฀ liability.฀ The฀ above฀
change฀in฀estimates฀relate฀primarily฀to฀changes฀in฀assump-
tions฀ associated฀ with฀ the฀ revenue฀ from฀ subleases.฀ The฀
effect฀of฀changes฀in฀estimates฀for฀the฀closed฀store฀liabilities฀
is฀netted฀with฀new฀provisions฀and฀included฀in฀selling,฀gen-
eral฀ and฀ administrative฀ expenses฀ in฀ the฀ accompanying฀
consolidated฀statements฀of฀operations.