Advance Auto Parts 2006 Annual Report Download - page 90

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)
December 30, December 31,
2006 2005
Deferred income tax assets 52,873$ 42,167$
Valuation allowance (1,174) (1,104)
Deferred income tax liabilities (119,361) (113,150)
Net deferred income tax liabilities (67,662)$ (72,087)$
At December 30, 2006 and December 31, 2005, the Company has cumulative net deferred income tax liabilities
of $67,662 and $72,087, respectively. The gross deferred income tax assets also include state net operating loss
carryforwards, or NOLs, of approximately $1,752 and $1,579, respectively. These NOLs may be used to reduce
future taxable income and expire periodically through fiscal year 2024. Due to uncertainties related to the realization
of certain deferred tax assets for NOLs in various jurisdictions, the Company recorded a valuation allowance of
$1,174 as of December 30, 2006 and $1,104 as of December 31, 2005. The amount of deferred income tax assets
realizable, however, could change in the near future if estimates of future taxable income are changed.
Temporary differences which give rise to significant deferred income tax assets (liabilities) are as follows:
December 30, December 31,
2006 2005
Current deferred income tax liabilities
Inventory differences (79,071)$ (68,250)$
Accrued medical and workers compensation 22,114 16,134
Accrued expenses not currently deductible for tax 15,213 16,661
Net operating loss carryforwards 130 326
Total current deferred income tax assets (liabilities) (41,614)$ (35,129)$
Long-term deferred income tax liabilities
Property and equipment (40,194) (44,900)
Postretirement benefit obligation 4,423 6,649
Share-based compensation 7,671 -
Net operating loss carryforwards 1,622 1,253
Valuation allowance (1,174) (1,104)
Other, net 1,604 1,144
Total long-term deferred income tax assets (liabilities) (26,048)$ (36,958)$
These amounts are recorded in other current liabilities 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 various 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, results of operations or liquidity.
15. Lease Commitments:
The Company leases certain store locations, distribution centers, office space, equipment and vehicles. 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 factors 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
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