Advance Auto Parts 2006 Annual Report Download - page 54

leased, require capital expenditures of approximately $0.2 million per store. Our remodeled stores generally require
capital expenditures of approximately $0.1 million per store, which reflects a forty percent reduction from 2006
levels. We believe that we can spend less in certain areas of our remodel program while continuing to benefit from
an increase in sales from the remodeled stores. In 2007, we anticipate that our capital expenditures will be
approximately $250.0 million to $270.0 million, inclusive of approximately $30.0 million for the construction of our
new Midwest distribution center scheduled to open in mid-2008.
Additionally, our new AAP stores require an inventory investment of approximately $0.2 million per store, net
of vendor payables. A portion of the inventory investment is held at a distribution facility. Pre-opening expenses,
consisting primarily of store set-up costs and training of new store team members, average approximately $0.02
million per store and are expensed when incurred.
Vendor Financing Program
Historically, we have negotiated extended payment terms from suppliers that help finance inventory growth,
and we believe that we will be able to continue financing much of our inventory growth through such extended
payment terms. In fiscal 2004, we entered into a short-term financing program with a bank for certain merchandise
purchases. In substance, the program allows us to borrow money from the bank to finance purchases from our
vendors. This program allows us to reduce further our working capital invested in current inventory levels and
finance future inventory growth. Our new revolving credit facility does not restrict availability under this program.
At December 30, 2006, $127.5 million was payable to the bank by us under this program.
Stock Repurchase Program
During the third quarter of fiscal 2005, our Board of Directors authorized a program to repurchase up to $300
million of our common stock plus related expenses. The program replaced the remaining portion of a previous
repurchase program. The program allows us to repurchase our common stock in the open market or in privately
negotiated transactions from time to time in accordance with the requirements of the Securities and Exchange
Commission. As of December 30, 2006, we had repurchased a total of 5.2 million shares of common stock under
the program, at an aggregate cost of $196.0 million, or an average price of $37.63 per share, excluding related
expenses. At December 30, 2006, we had $104.0 million, excluding related expenses, available for future stock
repurchases under the stock repurchase program.
During fiscal 2006, we retired 5.1 million shares of common stock which were previously repurchased under
the $300 million stock repurchase program.
During fiscal 2005, we retired 7.1 million shares of common stock, of which 0.1 million shares were
repurchased under the current stock repurchase plan, and 7.0 million shares were repurchased under our previous
program at an aggregate cost of $189.2 million, or an average price of $26.91 per share, excluding related expenses.
Deferred Compensation and Postretirement Plans
We maintain a non-qualified deferred compensation plan established for certain of our key team members. This
plan provides for a minimum and maximum deferral percentage of the team member base salary and bonus, as
determined by our Retirement Plan Committee. We fund the plan liability by remitting the team members’ deferrals
to a Rabbi Trust where these deferrals are invested in certain life insurance contracts. Accordingly, the cash
surrender value on these contracts is held in the Rabbi Trust to fund the deferred compensation liability. At
December 30, 2006, the liability related to this plan was $3.4 million, all of which is current.
We provide certain health care and life insurance benefits for eligible retired team members through our
postretirement plan. At December 30, 2006, our accrued benefit cost related to this plan was $10.5 million. The
plan has no assets and is funded on a cash basis as benefits are paid/incurred. The discount rate that we utilize for
determining our postretirement benefit obligation is actuarially determined. The discount rate utilized at December
30, 2006 and December 31, 2005 was 5.5% and 5.5%, respectively. We reserve the right to change or terminate the
benefits or contributions at any time. We also continue to evaluate ways in which we can better manage these
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