Advance Auto Parts 2014 Annual Report Download - page 65

ADVANCE AUTO PARTS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
January 3, 2015, December 28, 2013 and December 29, 2012
(in thousands, except per share data)
F-18
closing items) consisting of $1,307,991 in cash to GPI's shareholders, the repayment of $694,301 of GPI debt and $78,512 in
make-whole fees and transaction-related expenses paid by the Company on GPI's behalf. The Company funded the purchase
price with cash on-hand, $700,000 from a term loan and $306,046 from a revolving credit facility. Refer to Note 8, Long-Term
Debt, for a more detailed description of this debt. The Company recognized $26,970 of acquisition-related costs during 2013,
which was included in SG&A expenses and interest expense. The Company recognized no acquisition-related costs during
Fiscal 2014, as all of these costs were recognized during Fiscal 2013. The Company has included the financial results of GPI in
its consolidated financial statements commencing January 2, 2014. GPI contributed sales of $3,040,493 and net income of
$58,535 during 2014. The net income reflects amortization related to the acquired intangible assets and integration expenses.
The Company placed $200,881 of the total purchase price in escrow to secure indemnification obligations of the sellers
relating to the accuracy of representations and warranties and the satisfaction of covenants. Half of the escrow funds will be
disbursed to the Sellers on July 2, 2015 and the remaining amounts distributed on January 2, 2017, after deducting for any
claims indemnified from escrow. At the acquisition date, the Company recognized a net indemnification asset of $4,283 with
respect to liabilities for which it intends to make a claim from escrow. According to the agreement, the Company will be
indemnified, for the escrow term of three years, against losses incurred relating to taxes owed by GPI for periods prior to June
30, 2013.
Purchase Price Allocation
The following table summarizes the consideration paid for GPI and the amounts of the assets acquired and liabilities
assumed as of the acquisition date:
Total Consideration $ 2,080,804
Recognized amounts of identifiable assets
acquired and liabilities assumed
Cash and cash equivalents $ 25,176
Receivables 255,997
Inventory 1,159,886
Other current assets 118,871
Property, plant and equipment 162,545
Intangible assets 756,571
Other assets 1,741
Accounts payable (704,006)
Accrued and other current liabilities (136,784)
Long-term liabilities (356,584)
Total identifiable net assets 1,283,413
Goodwill 797,391
Total acquired net assets $ 2,080,804
The Company completed the valuation of the assets acquired and liabilities assumed in the third quarter of 2014. Due to
the nature of GPI's business, the assets acquired and liabilities assumed as part of this acquisition are similar in nature to those
of the Company. The goodwill of $797,391 arising from the acquisition consists largely of the anticipated synergies and
economies of scale from the combined companies and the overall strategic importance of GPI to the Company. The goodwill
attributable to the acquisition will not be amortizable or deductible for tax purposes. For additional information regarding
goodwill and intangible assets acquired, see Note 6, Goodwill and Intangible Assets.