Advance Auto Parts 2009 Annual Report Download - page 87

ADVANCE AUTO PARTS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
January 2, 2010, January 3, 2009 and December 29, 2007
(in thousands, except per share data)
.
F-34
17. Contingencies:
In the case of all known contingencies, the Company accrues for an obligation, including estimated legal costs,
when it is probable and the amount is reasonably estimable. As facts concerning contingencies become known to the
Company, the Company reassesses its position with respect to accrued liabilities and other potential exposures.
Estimates that are particularly sensitive to future change include legal matters, which are subject to change as events
evolve, and as additional information becomes available during the administrative and litigation process.
The Company’s Western Auto subsidiary, together with other defendants including automobile manufacturers,
automotive parts manufacturers and other retailers, has been named as a defendant in lawsuits alleging injury as a
result of exposure to asbestos-containing products. The Company and some of its subsidiaries also have been named
as defendants in many of these lawsuits. The plaintiffs have alleged that these products were manufactured,
distributed and/or sold by the various defendants. To date, these products have included brake and clutch parts and
roofing materials. Many of the cases pending against the Company or its subsidiaries are in the early stages of
litigation. The damages claimed against the defendants in some of these proceedings are substantial. Additionally,
some of the automotive parts manufacturers named as defendants in these lawsuits have declared bankruptcy, which
will limit plaintiffs’ ability to recover monetary damages from those defendants. Although the Company diligently
defends against these claims, the Company may enter into discussions regarding settlement of these and other
lawsuits, and may enter into settlement agreements, if it believes settlement is in the best interests of the Company’s
shareholders. The Company believes that most of these claims are at least partially covered by insurance. Based on
discovery to date, the Company does not believe the cases currently pending will have a material adverse effect on
the Company’s operating results, financial position or liquidity. However, if the Company was to incur an adverse
verdict in one or more of these claims and was ordered to pay damages that were not covered by insurance, these
claims could have a material adverse affect on its operating results, financial position and liquidity. If the number of
claims filed against the Company or any of its subsidiaries alleging injury as a result of exposure to asbestos-
containing products increases substantially, the costs associated with concluding these claims, including damages
resulting from any adverse verdicts, could have a material adverse effect on its operating results, financial position
or liquidity in future periods.
The Company is involved in various types of legal proceedings arising from claims of employment
discrimination or other types of employment matters as a result of claims by current and former employees. The
damages claimed against the Company in some of these proceedings are substantial. Because of the uncertainty of
the outcome of such legal matters and because the Company’s liability, if any, could vary widely, including the size
of any damages awarded if plaintiffs are successful in litigation or any negotiated settlement, the Company cannot
reasonably estimate the possible loss or range of loss which may arise. The Company is also involved in various
other claims and legal proceedings arising in the normal course of business. Although the final outcome of these
legal matters cannot be determined, based on the facts presently known, it is management’s opinion that the final
outcome of such claims and lawsuits will not have a material adverse effect on the Company’s financial position,
results of operations or liquidity.
The Company has entered into employment agreements with certain Team Members that provide severance pay
benefits under certain circumstances, including termination of employment of the Team Member by the Company.
The maximum contingent liability under these employment agreements is approximately $12,872 and $11,850 at
January 2, 2010 and January 3, 2009, respectively, for which no amount has been accrued.
18. Benefit Plans:
401(k) Plan
The Company maintains a defined contribution Team Member benefit plan, which covers substantially all Team
Members after one year of service and who have attained the age of 21. The plan allows for Team Member salary
deferrals, which are matched at the Company’s discretion. Company contributions were $9,277, $9,117 and $8,234
in Fiscal 2009, 2008 and 2007, respectively.