O'Reilly Auto Parts 2011 Annual Report Download - page 72

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NOTE 6—EXIT ACTIVITIES
The Company maintains reserves for closed stores and other properties that are no longer utilized in current operations, and had
previously maintained reserves for employee separation liabilities.
The following table identifies the closure reserves for stores, administrative office and distribution facilities, and reserves for
employee separation costs at December 31, 2011 and 2010 (in thousands):
Store
Closure
Liabilities
Administrative Office
and Distribution
Facilities Closure
Liabilities
Employee
Separation
Liabilities
Balance at January 1, 2010: $15,777 $ 7,653 $ 2,080
Additions and accretion 902 446 -
Payments (3,121) (2,330) (1,519)
Revisions to estimates 413 (161) 595
Balance at December 31, 2010: 13,971 5,608 1,156
Additions and accretion 695 314 -
Payments (3,634) (2,593) (912)
Revisions to estimates 280 215 (244)
Balance at December 31, 2011: $ 11,312 $ 3,544 $ -
Store, administrative office and distribution facilities closure liabilities:
The Company maintains reserves for closed stores and other properties that are no longer utilized in current operations. The Company
accrues for closed property operating lease liabilities using a credit-adjusted discount rate to calculate the present value of the
remaining non-cancelable lease payments, contractual occupancy costs and lease termination fees after the closing date, net of
estimated sublease income. The closed property lease liabilities are expected to be paid over the remaining lease terms, which
currently extend through April 23, 2023. The Company estimates sublease income and future cash flows based on the Company’s
experience and knowledge of the market in which the closed property is located, the Company’s previous efforts to dispose of similar
assets and existing economic conditions. Adjustments to closed property reserves are made to reflect changes in estimated sublease
income or actual contracted exit costs, which vary from original estimates, and are made for material changes in estimates in the
period in which the changes become known.
Revisions to estimates in closure reserves for stores and administrative office and distribution facilities include changes in the
estimates of sublease agreements, changes in assumptions of various store and office closure activities, changes in assumed leasing
arrangements and actual exit costs since the inception of the exit activities. Revisions to estimates and additions or accretions to
closure reserves for stores and administrative office and distribution facilities are included in ―Selling, general and administrative
expenses‖ on the accompanying Consolidated Statements of Income for the years ended December 31, 2011, 2010 and 2009.
The cumulative amount incurred in closure reserves for stores from the inception of the exit activity through December 31, 2011, was
$24.4 million. The cumulative amount incurred in administrative office and distribution facilities from the inception of the exit
activity through December 31, 2011, was $9.8 million. The balance of both these reserves is included in ―Other current liabilities‖
and ―Other liabilities‖ on the accompanying Consolidated Balance Sheets based upon the dates when the reserves are expected to be
settled.
Employee separation liabilities:
The Company had previously maintained a reserve for employee separation liabilities. Employee separation liabilities represented
costs for anticipated payments, including payments required under various pre-existing employment arrangements with acquired CSK
employees, which existed at the time of the acquisition, related to the planned involuntary termination of employees performing
overlapping or duplicative functions. The Company completed all restructuring activities related to these employee separation
liabilities during 2011, and the reserve had no remaining balance as of December 31, 2011.
Revisions to estimates for employee separation liabilities included changes in assumptions surrounding the timing required to
consolidate certain duplicative administration functions since the inception of the exit activities. Revisions to estimates and additions
or accretions to employee separation liabilities are included in ―Selling, general and administrative expenses‖ on the accompanying
Consolidated Statements of Income for the years ended December 31, 2011, 2010 and 2009.
The cumulative amount incurred for employee separation liabilities from the inception of the exit activity through December 31, 2011,
was $29.2 million. The reserve balance for employee separation liabilities was included in ―Accrued payroll‖ on the accompanying
Consolidated Balance Sheets at December 31, 2010.
FORM 10-K