Advance Auto Parts 2010 Annual Report Download - page 71

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ADVANCE AUTO PARTS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
January 1, 2011, January 2, 2010 and January 3, 2009
(in thousands, except per share data)
.
F-17
The Company also establishes reserves for potentially excess and obsolete inventories based on (i) current
inventory levels, (ii) the historical analysis of product sales and (iii) current market conditions. The Company
provides reserves when less than full credit is expected from a vendor or when liquidating product will result in
retail prices below recorded costs. At the end of Fiscal 2008, the Company reviewed its inventory productivity and
changed its inventory management approach for slow moving inventory. As a result, the Company increased its
reserve for excess and obsolete inventories by $34,084, and a LIFO and warehousing cost impact of $3,400. With
this change in inventory management approach, the Company has been more effectively managing its slow moving
inventory and intends to continue utilizing vendor return privileges when necessary. During Fiscal 2009, the
Company utilized substantially all of the reserve established in Fiscal 2008 for its change in approach for slow
moving inventory.
The following table presents changes in the Company’s inventory reserves for years ended January 1, 2011,
January 2, 2010 and January 3, 2009:
January 1, January 2, January 3,
2011 2010 2009
Inventory reserves, beginning of period 28,486$ 62,898$ 35,565$
Additions to inventory reserves 70,510 63,133 113,605
Reserves utilized (80,846) (97,545) (86,272)
Inventory reserves, end of period 18,150$ 28,486$ 62,898$
4. Goodwill and Intangible Assets:
Goodwill
The following table reflects the carrying amount of goodwill pertaining to the Company’s two segments, and the
changes in goodwill carrying amounts, for the years ended January 1, 2011 and January 2, 2010, respectively:
AAP Segment AI Segment Total
Balance at January 3, 2009 16,093$ 18,510$ 34,603$
Fiscal 2009 activity - (216) (216)
Balance at January 2, 2010 16,093 18,294 34,387
Fiscal 2010 activity - - -
Balance at January 1, 2011 16,093$ 18,294$ 34,387$
AI recorded a reduction of $216 in Fiscal 2009 in connection with a previous acquisition of a small retail chain.