Advance Auto Parts 2007 Annual Report Download - page 68

ADVANCE AUTO PARTS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 29, 2007, December 30, 2006 and December 31, 2005
(in thousands, except per share data)
1. Organization and Description of Business:
Advance Auto Parts, Inc. (“Advance”) conducts all of its operations through its wholly owned subsidiary,
Advance Stores Company, Incorporated (“Stores”) and its subsidiaries (collectively, the “Company”). The
Company operates 3,153 stores within the United States, Puerto Rico and the Virgin Islands. The Company operates
3,123 stores throughout 40 states in the Northeastern, Southeastern and Midwestern regions of the United States.
These stores operate under the “Advance Auto Parts” trade name except for certain stores in the State of Florida
which operate under the “Advance Discount Auto Parts” trade name. These stores offer a broad selection of brand
name and proprietary automotive replacement parts, accessories and maintenance items for domestic and imported
cars and light trucks. In addition, the Company operates 30 stores under the “Western Auto” and “Advance Auto
Parts” trade names, located in Puerto Rico and the Virgin Islands. Autopart International, an independently run
subsidiary of Stores, operates 108 stores under the “Autopart International” trade name throughout the Northeastern
region of the United States.
2. Summary of Significant Accounting Policies:
Accounting Period
The Company's fiscal year ends on the Saturday nearest the end of December, which results in an extra week
every several years (the next 53 week fiscal year is 2008). All fiscal years presented include 52 weeks of operations.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries.
All intercompany balances and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the
United States of America requires management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from
those estimates.
Cash, Cash Equivalents and Bank Overdrafts
Cash and cash equivalents consist of cash in banks and money market funds with original maturities of three
months or less. Bank overdrafts consist of outstanding checks not yet presented to a bank for settlement, net of cash
held in accounts with right of offset.
Vendor Incentives
The Company receives incentives in the form of reductions to amounts owed and/or payments from vendors
related to cooperative advertising allowances, volume rebates and other promotional considerations. The Company
accounts for vendor incentives in accordance with Emerging Issues Task Force, or EITF, No. 02-16, “Accounting by
a Customer (Including a Reseller) for Certain Consideration Received from a Vendor.” Many of the incentives are
under long-term agreements (terms in excess of one year), while others are negotiated on an annual basis.
Cooperative advertising allowances and volume rebates are earned based on inventory purchases and initially
recorded as a reduction to inventory. The deferred amounts are included as a reduction to cost of sales as the
inventory is sold since these payments do not represent reimbursements for specific, incremental and identifiable
costs. Total deferred vendor incentives in inventory is $39,118 and $35,393 at December 29, 2007 and December
30, 2006, respectively.
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