Advance Auto Parts 2013 Annual Report Download - page 69

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ADVANCE AUTO PARTS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 28, 2013, December 29, 2012 and December 31, 2011
(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 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 28, 2013,
December 29, 2012 and December 31, 2011:
December 28,
2013
December 29,
2012
December 31,
2011
Inventory reserves, beginning of period $ 31,418 $ 30,786 $ 18,150
Additions to inventory reserves 65,466 72,852 90,128
Reserves utilized (59,361)(72,220)(77,492)
Inventory reserves, end of period $ 37,523 $ 31,418 $ 30,786
4. Acquisitions:
On December 31, 2012, the Company acquired B.W.P. Distributors, Inc. (“BWP”) in an all-cash transaction. BWP,
formerly a privately-held company, supplied, marketed and distributed automotive aftermarket parts and products principally to
commercial customers. Prior to the acquisition, BWP operated or supplied 216 locations in the Northeastern United States. The
Company believes this acquisition will enable the Company to continue its expansion in the competitive Northeast, which is a
strategic growth area for the Company due to the large population and overall size of the market, and to gain valuable
information to apply to its existing operations as a result of BWP’s expertise in Commercial. The amount of acquired goodwill
reflects this strategic importance to the Company.
Concurrent with the closing of the acquisition, the Company transferred one distribution center and BWP’s rights to
distribute to 92 independently owned locations to an affiliate of General Parts International, Inc. (“GPI”), a privately held auto
supply company. As a result, the Company began operating the 124 BWP company-owned stores and two remaining BWP
distribution centers as of the closing date. The Company has included the financial results of BWP in its consolidated financial
statements commencing December 31, 2012 (Fiscal 2013). Pro forma results of operations related to the acquisition of BWP are
not presented as BWP’s results are not material to the Company’s consolidated statements of operations.
Under the terms of the agreement, the Company acquired the net assets in exchange for a purchase price of $187,109.
Following the closing of the acquisition, the Company sold certain of the acquired assets for $16,798 related to the transfer of
operations to GPI.