Advance Auto Parts 2015 Annual Report Download - page 63

ADVANCE AUTO PARTS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
January 2, 2016, January 3, 2015 and December 28, 2013
(in thousands, except per share data)
F-9
1. Summary of Significant Accounting Policies:
Organization and Description of Business
Advance Auto Parts, Inc. (“Advance”) conducts all of its operations through its wholly owned subsidiary, Advance Stores
Company, Incorporated (“Stores”), and its subsidiaries (collectively, the “Company”), all of which are 100% owned. As of
January 2, 2016, the Company's operations are comprised of 5,171 stores and 122 branches, which operate in the United States,
Canada, Puerto Rico and the U.S. Virgin Islands primarily under the trade names “Advance Auto Parts,” "Carquest," "Autopart
International" and "Worldpac." As further described in Note 3, Acquisitions, the "Carquest" and "Worldpac" brands were
acquired on January 2, 2014 as part of the acquisition of General Parts International, Inc. ("GPI"). The Company serves both
do-it-for-me, or Commercial, and do-it-yourself, or DIY, customers and offers a broad selection of brand name, original
equipment manufacturer ("OEM") and proprietary automotive replacement parts, accessories, and maintenance items primarily
for domestic and imported cars and light trucks. The Company offers delivery service to its Commercial customers’ places of
business, including independent garages, service stations and auto dealers, utilizing a fleet of vehicles to deliver product from
its 4,745 store locations with delivery service. In addition, we served approximately 1,300 independently-owned Carquest
stores as of January 2, 2016.
Accounting Period
The Company’s fiscal year ends on the Saturday nearest the end of December. Fiscal years 2015 and 2013 each contained
52 weeks, while fiscal 2014 contained 53 weeks. The additional week of operations for fiscal 2014 was included in the
Company's fourth quarter. All references herein for the years 2015, 2014 and 2013 represent the fiscal years ended January 2,
2016, January 3, 2015 and December 28, 2013, respectively.
Principles of Consolidation
The consolidated financial statements include the accounts of Advance and its wholly owned subsidiaries. All
intercompany balances and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results
could differ materially from those estimates.
Cash, Cash Equivalents and Bank Overdrafts
Cash and cash equivalents consist of cash in banks and money market funds with original maturities of three months or
less. Included in cash equivalents are credit card and debit card receivables from banks, which generally settle in less than four
business days. Credit and debit card receivables included in Cash and cash equivalents as of January 2, 2016 and January 3,
2015 were $37,906 and $28,843, respectively. Bank overdrafts consist of outstanding checks not yet presented to a bank for
settlement, net of cash held in accounts with right of offset. Bank overdrafts of $18,584 and $22,015 are included in Other
current liabilities as of January 2, 2016 and January 3, 2015, respectively.
Receivables
Receivables, net consist primarily of receivables from Commercial customers and vendors. The Company grants credit to
certain Commercial customers who meet the Company’s pre-established credit requirements. The Company maintains
allowances for doubtful accounts for estimated losses resulting from the inability of the Company’s Commercial customers to
make required payments. The Company considers the following factors when determining if collection is reasonably assured:
customer creditworthiness, past transaction history with the customer, current economic and industry trends and changes in
customer payment terms. Concentrations of credit risk with respect to these receivables are limited because the Company’s