Advance Auto Parts 2006 Annual Report Download - page 81

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ADVANCE AUTO PARTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
December 30, 2006, December 31, 2005 and January 1, 2005
(in thousands, except per share data)
or SFAS No. 133, by allowing fair value remeasurement of hybrid instruments that contain an embedded derivative
that otherwise would require bifurcation. SFAS No. 155 also eliminates the guidance in SFAS No. 133
Implementation Issue No. D1, “Application of Statement 133 to Beneficial Interests in Securitized Financial
Assets,” which provides such beneficial interests are not subject to SFAS No. 133. SFAS No. 155 amends SFAS
No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities - a
Replacement of FASB Statement No. 125,” by eliminating the restriction on passive derivative instruments that a
qualifying special-purpose entity may hold. SFAS No. 155 is effective for financial instruments acquired or issued
after the beginning of our fiscal year 2007. The Company does not expect the adoption of SFAS No. 155 to have a
material impact on its financial condition, results of operations or cash flows.
3. Acquisitions:
On September 14, 2005, the Company acquired Autopart International, Inc., or AI. The acquisition, which
included 61 stores throughout New England and New York, a distribution center and AI’s wholesale distribution
business, complements the Company’s growing presence in the Northeast. AI serves the growing commercial
market in addition to warehouse distributors and jobbers.
The acquisition has been accounted for under the provisions of SFAS No. 141, “Business Combinations”, or
SFAS No. 141. The total purchase price of $87,626 primarily consisted of $74,940 paid upon closing and an
additional $12,500 of contingent consideration paid in March 2006 based upon AI satisfying certain earnings before
interest, taxes, depreciation and amortization targets through December 31, 2005. Furthermore, an additional
$12,500 is payable upon the achievement of certain merchandise cost reduction synergies through fiscal 2008. In
accordance with SFAS No. 141, this additional payment does not represent contingent consideration and will be
reflected in the statement of operations when considered probable and estimable. The Company recognized $3,114
in cost of goods sold due to such synergies for the year ended December 30, 2006.
During the third quarter of fiscal 2006, the Company finalized the allocation of the purchase price to the assets
acquired and liabilities assumed. The Company allocated $29,000 to intangible assets based on a valuation study. A
portion of these intangible assets are subject to amortization and are being amortized over their estimated useful
lives ranging from 5 to 10 years using straight-line methods. Remaining adjustments to the fair value of assets and
liabilities acquired primarily included inventory and deferred income taxes. Accordingly, the Company’s initial
goodwill balance was adjusted down to $17,625 as a result of these adjustments, all of which is deductible for tax
purposes. The following table summarizes the final allocation of amounts assigned to assets acquired and liabilities
assumed as of the date of acquisition:
F-18