Advance Auto Parts 2012 Annual Report Download - page 39

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Contractual Obligations
In addition to our Notes and revolving credit facility, we utilize operating leases as another source of financing. The
amounts payable under these operating leases are included in our schedule of contractual obligations. Our future contractual
obligations related to long-term debt, operating leases and other contractual obligations at December 29, 2012 were as follows:
Payments Due by Period
Contractual Obligations Total
Less than
1 Year 1 - 3 Years 3 - 5 Years
More Than
5 Years
(in thousands)
Long-term debt (1) $ 605,088 $ 627 $ 5,524 $ — $ 598,937
Interest payments 261,122 30,873 61,701 61,500 107,048
Operating leases (2) 2,338,483 328,716 570,541 502,783 936,443
Other long-term liabilities (3) 239,021 — — — —
Purchase obligations (4) 59,552 25,724 15,699 13,022 5,107
$ 3,443,714 $ 385,940 $ 653,465 $ 577,305 $ 1,647,535
Note: For additional information refer to Note 6, Long-term Debt; Note 14, Income Taxes; Note 15, Lease Commitments; Note 16,
Contingencies; and Note 17, Benefit Plans, in the Notes to Consolidated Financial Statements, included in Item 15. Exhibits, Financial
Statement Schedules, of this Annual Report on Form 10-K.
(1) Long-term debt primarily represents the principal amount of our 5.75% Notes and 4.50% Notes, which become due in
Fiscal 2020 and Fiscal 2022, respectively.
(2) We lease certain store locations, distribution centers, office space, equipment and vehicles. Our property leases
generally contain renewal and escalation clauses and other concessions. These provisions are considered in our
calculation of our minimum lease payments which are recognized as expense on a straight-line basis over the
applicable lease term. Any lease payments that are based upon an existing index or rate are included in our minimum
lease payment calculations.
(3) Primarily includes the long-term portion of deferred income taxes, self-insurance liabilities, unrecognized income tax
benefits, closed store liabilities and obligations for employee benefit plans for which no contractual payment schedule
exists and we expect the payments to occur beyond 12 months from December 29, 2012. Accordingly, the related
balances have not been reflected in the "Payments Due by Period" section of the table.
(4) Purchase obligations include agreements to purchase goods or services that are enforceable, legally binding and
specify all significant terms, including fixed or minimum quantities to be purchased; fixed, minimum or variable price
provisions; and the approximate timing of the transaction. Included in the table above is the lesser of the remaining
obligation or the cancelation penalty under the agreement. Our open purchase orders related to merchandise inventory
are based on current operational needs and are fulfilled by our vendors within a short period of time. We currently do
not have minimum purchase commitments under our vendor supply agreements nor are our open purchase orders
binding agreements. Accordingly, we have excluded open purchase orders from the above table.
Critical Accounting Policies
Our financial statements have been prepared in accordance with accounting policies generally accepted in the United
States of America. Our discussion and analysis of the financial condition and results of operations are based on these financial
statements. The preparation of these financial statements requires the application of accounting policies in addition to certain
estimates and judgments by our management. Our estimates and judgments are based on currently available information,
historical results and other assumptions we believe are reasonable. Actual results could differ materially from these estimates.
The preparation of our financial statements included the following significant estimates and exercise of judgment.
Vendor Incentives
We receive 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. Many of these incentives are under long-term
agreements (terms in excess of one year), while others are negotiated on an annual basis or less (short-term). Volume rebates
and cooperative advertising allowances not offsetting in SG&A are earned based on inventory purchases and initially recorded
as a reduction to inventory. These deferred amounts are included as a reduction to cost of sales as the inventory is sold.