Advance Auto Parts 2004 Annual Report Download - page 47

Advance฀Auto฀Parts,฀Inc.฀and฀Subsidiaries
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income฀ tax฀ reporting฀ purposes.฀ Net฀ deferred฀ income฀ tax฀
balances฀are฀comprised฀of฀the฀following:
January฀1,฀
2005
January฀3,฀
2004
Deferred฀income฀tax฀assets฀....................... $฀ 40,009 $฀ 38,441
Valuation฀allowance฀.................................. (1,029) (793)
Deferred฀income฀tax฀liabilities฀................. (108,277) (100,989)
Net฀deferred฀income฀tax฀liabilities฀........... $฀ (69,297) $฀ (63,341)
฀ At฀January฀1,฀2005฀and฀January฀3,฀2004,฀the฀Company฀
has฀ cumulative฀ net฀ deferred฀ income฀ tax฀ liabilities฀ of฀
$69,297฀ and฀ $63,341,฀ respectively.฀ The฀ gross฀ deferred฀
income฀ tax฀ assets฀ also฀ include฀ state฀ net฀ operating฀ loss฀฀
carryforwards,฀or฀NOLs,฀and฀state฀tax฀credit฀carryforwards฀
of฀ approximately฀ $3,720฀ and฀ $6,695,฀ respectively.฀ These฀
NOLs฀ and฀ state฀ tax฀ credit฀ carryforwards฀ may฀ be฀ used฀ to฀
reduce฀ future฀ taxable฀ income฀ and฀ expire฀ periodically฀
through฀ fiscal฀ year฀ 2024.฀ The฀ Company฀ believes฀ it฀ will฀
realize฀ these฀ tax฀ benefits฀ through฀ a฀ combination฀ of฀ the฀
reversal฀of฀temporary฀differences,฀projected฀future฀taxable฀
income฀ during฀ the฀ NOL฀ carryforward฀ periods฀ and฀ avail-
able฀tax฀planning฀strategies.฀Due฀to฀uncertainties฀related฀to฀
the฀ realization฀of฀certain฀ deferred฀tax฀assets฀for฀NOLs฀in฀
various฀ jurisdictions,฀ the฀ Company฀ recorded฀ a฀ valuation฀
allowance฀of฀$1,029฀as฀of฀January฀1,฀2005฀and฀$793฀as฀of฀
January฀3,฀2004.฀The฀amount฀of฀deferred฀income฀tax฀assets฀
realizable,฀however,฀could฀change฀in฀the฀near฀future฀if฀esti-
mates฀of฀future฀taxable฀income฀are฀changed.
฀ Temporary฀ differences฀ which฀ give฀ rise฀ to฀ significant฀
deferred฀income฀tax฀assets฀(liabilities)฀are฀as฀follows:
January฀1,฀
2005
January฀3,฀
2004
Current฀deferred฀income฀tax฀liabilities
฀ Inventory฀differences฀............................ $(57,127) $(51,604)
฀ ฀Accrued฀medical฀and฀workers’฀฀
฀ compensation฀.....................................฀ 13,701 6,755
฀ ฀Accrued฀expenses฀not฀currently฀฀
฀ deductible฀for฀tax฀............................... 15,194 17,466
฀ Net฀operating฀loss฀carryforwards฀......... 2,152 3,567
฀ Tax฀credit฀carryforwards฀....................... 419 —
฀ ฀Total฀current฀deferred฀income฀฀
฀ tax฀liabilities฀...................................... $(25,661) $(23,816)
Long-term฀deferred฀income฀tax฀liabilities
฀ Property฀and฀equipment฀........................ (52,605) (47,318)
฀ Postretirement฀benefit฀obligation฀.......... 6,975 6,931
฀ Net฀operating฀loss฀carryforwards฀......... 1,568 3,128
฀ Tax฀credit฀carryforwards฀....................... —594
฀ Valuation฀allowance฀.............................. (1,029) (793)
฀ Other,฀net฀............................................... 1,455 (2,067)
฀ ฀Total฀long-term฀deferred฀income฀฀
฀ tax฀liabilities฀...................................... $(43,636) $(39,525)
฀ These฀ amounts฀ are฀ recorded฀ in฀ other฀ current฀ assets,฀
other฀ current฀ liabilities,฀ other฀ assets฀ and฀ other฀ long-term฀
liabilities฀ in฀ the฀ accompanying฀ consolidated฀ balance฀
sheets,฀as฀appropriate.
฀ The฀Company฀currently฀has฀certain฀years฀that฀are฀open฀
to฀audit฀by฀the฀ Internal฀Revenue฀Service.฀In฀ addition,฀the฀
Company฀has฀certain฀years฀that฀are฀open฀for฀audit฀by฀vari-
ous฀ state฀ and฀ foreign฀ jurisdictions฀ for฀ income฀ taxes฀ and฀
sales,฀use฀and฀excise฀taxes.฀In฀management’s฀opinion,฀any฀
amounts฀ assessed฀ will฀ not฀ have฀ a฀ material฀ effect฀ on฀ the฀
Company’s฀financial฀position฀or฀results฀of฀operations.
15.฀Lease฀Commitments
฀ The฀Company฀leases฀certain฀store฀locations,฀distribution฀
centers,฀ office฀ space,฀ equipment฀ and฀ vehicles,฀ some฀ of฀
which฀ are฀ with฀ related฀ parties.฀ Initial฀ terms฀ for฀ facility฀
leases฀are฀typically฀10฀to฀15฀years,฀followed฀by฀additional฀
terms฀ containing฀ renewal฀ options฀ at฀ 5-year฀ intervals,฀ and฀
may฀ include฀ rent฀ escalation฀ clauses.฀ The฀ total฀ amount฀ of฀
the฀minimum฀rent฀is฀expensed฀on฀a฀straight-line฀basis฀over฀
the฀initial฀term฀of฀the฀lease฀unless฀external฀economic฀fac-
tors฀ exist฀ such฀ that฀ renewals฀ are฀ reasonably฀ assured,฀ in฀
which฀case฀the฀Company฀would฀include฀the฀renewal฀period฀
in฀ its฀ amortization฀ period.฀ In฀ addition฀ to฀ minimum฀ fixed฀
rentals,฀some฀leases฀provide฀for฀contingent฀facility฀rentals.฀
Contingent฀facility฀rentals฀are฀determined฀on฀the฀basis฀of฀a฀
percentage฀ of฀ sales฀ in฀ excess฀ of฀ stipulated฀ minimums฀ for฀
certain฀ store฀ facilities฀ as฀ defined฀ in฀ the฀ individual฀ lease฀
agreements.฀Most฀of฀the฀leases฀provide฀that฀the฀Company฀
pays฀ taxes,฀ maintenance,฀ insurance฀ and฀ certain฀ other฀
expenses฀ applicable฀ to฀ the฀ leased฀ premises฀ and฀ include฀
options฀to฀renew.฀Management฀expects฀that,฀in฀the฀normal฀
course฀ of฀ business,฀ leases฀ that฀ expire฀ will฀ be฀ renewed฀ or฀
replaced฀by฀other฀leases.
฀ At฀January฀1,฀2005,฀future฀minimum฀lease฀payments฀due฀
under฀ non-cancelable฀ operating฀ leases฀ with฀ lease฀ terms฀
ranging฀from฀one฀year฀through฀the฀year฀2024฀are฀as฀follows:
Other(a)
Related฀฀
Parties(a) Total
2005฀........................................ $฀ 185,576 $฀ 2,779 $฀ 188,355
2006฀........................................ 165,274 2,344 167,618
2007฀........................................ 150,037 2,020 152,057
2008฀........................................ 132,420 1,937 134,357
2009฀........................................ 111,898 1,653 113,551
Thereafter฀............................... 562,348 3,714 566,062
$1,307,553 $14,447 $1,322,000
(a)฀ ฀The฀Other฀and฀Related฀Parties฀columns฀include฀stores฀closed฀as฀a฀result฀of฀the฀
Company’s฀restructuring฀plans.