Advance Auto Parts 2011 Annual Report Download - page 85

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-31
estimate of future costs of insurance, property tax and common area maintenance (reduced by the present value of
estimated revenues from subleases and lease buyouts). New provisions are established by a charge to SG&A in the
accompanying consolidated statements of operations at the time the facilities actually close. The Company utilizes
its reserve for closed store expenses primarily as payments are made under the respective lease obligations.
A summary of the Company’s closed store liabilities, which are recorded in Accrued expenses (current portion)
and Other long-term liabilities (long-term portion) in the accompanying consolidated balance sheet, are presented in
the following table:
Lease
Obligations
Severance and
Other Exit Total
For the fifty-two weeks ended January 2, 2010:
Closed Store Liabilities, January 3, 2009 5,067$ -$ 5,067$
Reserves established 20,739 777 21,516
Change in estimates (365) - (365)
Reserves utilized (5,070) (777) (5,847)
Closed Store Liabilities, January 2, 2010 20,371$ -$ 20,371$
For the fifty-two weeks ended January 1, 2011:
Closed Store Liabilities, January 2, 2010 20,371$ -$ 20,371$
Reserves established 1,756 - 1,756
Change in estimates (340) - (340)
Reserves utilized (5,047) - (5,047)
Closed Store Liabilities, January 1, 2011 16,740$ -$ 16,740$
The Company recognized impairment charges of $317 and $4,936 during Fiscal 2010 and 2009, respectively.
These charges primarily consisted of the impairment of certain store assets contained in leased store locations of the
AAP segment identified as part of the store divestiture plan. The Company evaluates the recoverability of its long-
lived assets whenever events or changes in circumstances indicate that the carrying amount of an asset might not be
recoverable and exceeds its fair value. Accordingly, the Company determined that the carrying amounts of the assets
were considered to not be recoverable based on the stores’ closure and/or projected inability to produce sufficient
cash flows.
The impairment was determined based on the excess of the assets’ carrying value as compared to their fair value
as determined by the income approach. Under this approach, the Company utilized internal cash flow projections
over the life of the underlying lease agreements discounted based on a risk-free rate of return. Impairment charges
are included in SG&A of the accompanying consolidated statements of operations.
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,