Advance Auto Parts 2012 Annual Report Download - page 62

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F-17
for estimated shrink are established based on the results of physical inventories conducted by the Company with the assistance
of an independent third party in substantially all of the Company's stores over the course of the year, other targeted inventory
counts in its stores, results from recent cycle counts in its distribution facilities and historical and current loss trends.
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 has return rights with many
of its vendors and the majority of excess inventory is returned to its vendors for full credit. In certain situations, the Company
establishes reserves when less than full credit is expected from a vendor or when liquidating product will result in retail prices
below recorded costs.
The following table presents changes in the Company's inventory reserves for years ended December 29, 2012,
December 31, 2011 and January 1, 2011:
December 29,
2012
December 31,
2011
January 1,
2011
Inventory reserves, beginning of period $ 30,786 $ 18,150 $ 28,486
Additions to inventory reserves 72,852 90,128 70,510
Reserves utilized (72,220)(77,492)(80,846)
Inventory reserves, end of period $ 31,418 $ 30,786 $ 18,150
4. Goodwill and Intangible Assets:
Goodwill
The Company has goodwill recorded in both the Advance Auto Parts ("AAP") and Autopart International ("AI") segments.
The following table reflects the carrying amount of goodwill pertaining to the Company's two segments and the changes in
goodwill carrying amounts.
AAP Segment AI Segment Total
Balance at January 1, 2011 $ 16,093 $ 18,294 $ 34,387
Fiscal 2011 activity 42,002 — 42,002
Balance at December 31, 2011 $ 58,095 $ 18,294 $ 76,389
Fiscal 2012 activity — — —
Balance at December 29, 2012 $ 58,095 $ 18,294 $ 76,389
During the third and fourth quarters of Fiscal 2011, the Company acquired two small technology companies that will help
expand the Company's e-commerce offerings to its DIY and Commercial customers. These web-based offerings allow the
Company's DIY customers to more easily manage the maintenance of their vehicles and the Company's Commercial customers
to grow their business through superior diagnostic and repair lookup functionality. None of the goodwill added in FY 2011 is
expected to be deductible for income tax purposes. In addition to goodwill, the Company also recorded increases to intangible
assets of $7,750 and contingent consideration of $27,776, which are disclosed in the intangible asset and fair value
measurement tables, respectively.
ADVANCE AUTO PARTS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 29, 2012, December 31, 2011 and January 1, 2011
(in thousands, except per share data)