Advance Auto Parts 2008 Annual Report Download - page 74

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ADVANCE AUTO PARTS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
January 3, 2009, December 29, 2007 and December 30, 2006
(in thousands, except per share data)
The accompanying notes to the consolidated financial statements
are an integral part of these statements.
F-20
5. Receivables, net:
Receivables consist of the following:
January 3, December 29,
2009 2007
Trade 17,843$ 14,782$
Vendor 81,265 71,403
Other 3,125 2,785
Total receivables 102,233 88,970
Less: Allowance for doubtful accounts (5,030) (3,987)
Receivables, ne
t
97,203$ 84,983$
6. Derivative Instruments and Hedging Activities:
Interest Rate Swaps
The Company seeks to manage and mitigate cash flow risk on its variable rate debt via interest rate swaps.
Current outstanding swaps have fixed the Company’s interest rate on an aggregate of $275,000 of hedged debt at
rates ranging from 4.01% to 4.98%. During fiscal 2007, the Company entered into an interest rate swap on an
aggregate of $50,000 of debt under its term loan. Additionally, during fiscal 2006, the Company entered into four
interest rate swap agreements on an aggregate of $225,000 of debt under its revolving credit facility. These four
swaps were entered in October 2006 in connection with the termination of its previous three interest rate swaps. All
of the Company’s interest rate swaps expire in October 2011.
The fair value of these interest rate swaps are determined based on a forward yield curve and the contracted
interest rates stated in the interest rate swap agreements. The fair value of the Company’s interest rate swaps at
January 3, 2009 and December 29, 2007, respectively, was an unrecognized loss of $21,979 and $7,645, which are
reflected in Accumulated other comprehensive income (loss). Any amounts received or paid under these hedges are
recorded in the statement of operations during the accounting period the interest on the hedged debt is paid. (Based
on the estimated current and future fair values of the hedge arrangements at January 3, 2009, the Company estimates
amounts currently included in Accumulated other comprehensive income (loss) pertaining to the interest rate swaps
that will be reclassified and recorded in the statement of earnings in the next 12 months will consist of a net loss of
$9,222.)
Forward Contracts
During fiscal 2008, the Company hedged approximately 70% of its diesel fuel consumption and has hedged
approximately 50% of the Company’s estimated diesel fuel consumption for fiscal 2009.
7. Fair Value Measurements:
As previously discussed, the Company adopted SFAS No. 157, which defines fair value, establishes a
framework for measuring fair value and expands disclosure requirements. SFAS No. 157 defines fair value as the
price that would be received to sell an asset, or paid to transfer a liability (an exit price), on the measurement date in
the principal or most advantageous market for the asset or liability in an orderly transaction between market
participants (with no compulsion to buy or sell).