Advance Auto Parts 2005 Annual Report Download - page 49

7. RECEIVABLES:
Receivables consist of the following:
December 31, January 1,
2005 2005
Trade ................................................... $13,733 $ 34,654
Vendor................................................. 63,161 60,097
Installment .......................................... 5,622 7,506
Insurance recovery.............................. 13,629 5,877
Other ................................................... 3,230 1,938
Total receivables ................................. 99,375 110,072
Less: Allowance
for doubtful accounts ..................... (4,686) (8,103)
Receivables, net .................................. $94,689 $101,969
In August 2005, the Company began using a new
third party provider to process its private label credit
card transactions related to its commercial business.
In conjunction with this transition, the Company sold
the credit card portfolio for proceeds totaling
$33,904. Accordingly, the Company’s previously
recorded receivable balance recognized under SFAS
No. 140, “Accounting for Transfers and Servicing of
Financial Assets,” of $34,684 and the corresponding
allowance for doubtful accounts of $2,580 were
reduced to zero. Additionally, the Company repaid its
borrowings previously secured by these trade receiv-
ables; the overall impact was a benefit of $1,800
recorded as a reduction of bad debt expense.
8. INVENTORIES, NET:
Inventories are stated at the lower of cost or market,
cost being determined using the last-in, first-out
(“LIFO”) method for approximately 93% and 92% of
inventories at December 31, 2005 and January 1,
2005, respectively. Under the LIFO method, the
Company’s cost of sales reflects the costs of the most
currently purchased inventories while the inventory
The following table presents a summary of the activity for both of these liabilities:
Severance Relocation Other Exit Costs Total
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
New provisions ......................................................................... — — 2,345 2,345
Change in estimates.................................................................. — — 465 465
Reserves utilized ...................................................................... — — (3,890) (3,890)
Closed Store Liabilities, December 31, 2005........................ $ — $ — $ 3,507 $ 3,507
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
Change in estimates.................................................................. — — 132 132
Reserves utilized ...................................................................... — — (249) (249)
Restructuring Liabilities, December 31, 2005 ..................... $ — $ — $ 307 $ 307
Total Closed Store and
Restructuring Liabilities at December 31, 2005 ............. $ — $ — $ 3,814 $ 3,814
New provisions established for closed store liabilities include the present value of the remaining lease obliga-
tions 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 consolidated 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 assumptions 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,
general and administrative expenses in the accompanying consolidated statements of operations.
Changes in estimates associated with restructuring liabilities resulted in adjustments to the carrying value of
property and equipment, net on the accompanying consolidated balance sheets and did not affect the Company’s
consolidated statement of operations. The closed store and restructuring liabilities are recorded in accrued expenses
(current portion) and other long-term liabilities (long-term portion) in the accompanying consolidated balance sheets.
Advance Auto Parts I Annual Report 2005 I 47