Advance Auto Parts 2014 Annual Report Download - page 81

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-34
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, but not limited to, 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 other subsidiaries also have been named as
a defendant in many asbestos-related lawsuits. The automotive products at issue in these lawsuits are primarily brake parts. The
plaintiffs have alleged that these products contained asbestos and were manufactured, distributed and/or sold by the various
defendants. Many of the cases pending against the Company or its subsidiaries are in the early stages of litigation. The damages
claimed against the defendants in some of these proceedings are substantial. Additionally, many of the suppliers and
manufacturers of asbestos and asbestos-containing products have dissolved or declared bankruptcy, which will limit plaintiffs’
ability to recover monetary damages from those entities. Although the Company and its subsidiaries diligently defend against
these claims, the Company may enter into discussions regarding settlement of these and other lawsuits, and may enter into
settlement agreements, if it believes settlement is in the best interests of the Company’s shareholders. The Company believes
that many of these claims are at least partially covered by insurance. Based on discovery to date, the Company does not believe
the cases currently pending will have a material adverse effect on the Company’s operating results, financial position or
liquidity. However, if the Company and/or a subsidiary were to incur an adverse verdict in one or more of these claims and was
ordered to pay substantial damages that were not covered by insurance, these claims could have a material adverse effect on its
operating results, financial position and liquidity. Historically, our asbestos claims have been inconsistent in fact patterns
alleged and number and have been immaterial. Furthermore, the outcome of such legal matters is uncertain and the Company's
liability, if any, could vary widely. As a result, we are unable to estimate a possible range of loss with respect to unasserted
asbestos claims that may be filed against the Company or any subsidiary in the future. If the number of claims filed against the
Company or any of its subsidiaries alleging injury as a result of exposure to asbestos-containing products increases
substantially, the costs associated with concluding these claims, including damages resulting from any adverse verdicts, could
have a material adverse effect on its operating results, financial position or liquidity in future periods.
The Company is involved in various types of legal proceedings arising from claims of employment discrimination or other
types of employment matters as a result of claims by current and former Team Members. The damages claimed against the
Company in some of these proceedings are substantial. Because of the uncertainty of the outcome of such legal matters and
because the Company’s liability, if any, could vary widely, including the size of any damages awarded if plaintiffs are
successful in litigation or any negotiated settlement, the Company cannot reasonably estimate the possible loss or range of loss
which may arise. The Company is also involved in various other claims and legal proceedings arising in the normal course of
business. Although the final outcome of these legal matters cannot be determined, based on the facts presently known, it is
management’s opinion that the final outcome of such claims and lawsuits will not have a material adverse effect on the
Company’s financial position, results of operations or liquidity.
18. Benefit Plans:
401(k) Plan
The Company maintains a defined contribution benefit plan, which covers substantially all Team Members after one year
of service and who have attained the age of 21. The plan allows for Team Member salary deferrals, which are matched at the
Company’s discretion. During 2014, GPI also maintained its existing defined contribution plan which allowed for GPI Team
Member salary deferrals and discretionary fixed and profit sharing contributions by the Company. The GPI plan was merged
into the Advance Auto Part plan at the beginning of fiscal 2015. Company contributions to these plans were $15,208, $10,850
and $10,255 in 2014, 2013 and 2012, respectively.