Napa Auto Parts 2002 Annual Report Download - page 34

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notes to consolidated financial statements, continued
Within the Company’s four reportable segments, the Company
identified reporting units as defined in SFAS No. 142. The report-
ing units' goodwill was tested for impairment during the first
quarter of 2002 as required by SFAS No. 142 based on the
expected present value of future cash flows approach. As a result
of this valuation process as well as the application of the remain-
ing provisions of SFAS No. 142, the Company recorded a
transitional impairment loss of approximately $395.1 million
($2.27 basic loss per share and $2.26 diluted loss per share) as
of January 1, 2002. This write-off was reported as a cumulative
effect of a change in accounting principle in the Company's con-
solidated statement of income as of January 1, 2002. No tax
benefits were recorded in connection with this goodwill impair-
ment. For the year ended December 31, 2002, additions to
goodwill of approximately $14.7 million relate to a balance sheet
reclassification and additional consideration for earnouts on prior
acquisitions. The Company also assessed the finite-lived, identifi-
able intangible assets for impairment under the undiscounted
cash flows approach and concluded there was no impairment.
The changes in the carrying amount of goodwill during the period by reportable segment, as well as other identifiable intangible assets,
are summarized as follows (in thousands):
Goodwill
Electrical/ Identifiable
Office Electronic Intangible
Automotive Industrial Products Materials Assets Total
Balance as of January 1, 2002 $ 221,752 $ 50,304 $ 8,297 $ 155,611 $ 6,114 $ 442,078
Goodwill and intangible assets acquired during the year 13,266 31 400 — 956 14,653
Amortization during the year — — — — (2,421) (2,421)
Other impairment charges — (515) — — — (515)
Transitional impairment losses (213,401) (19,512) (6,566) (155,611) — (395,090)
Balance as of December 31, 2002 $ 21,617 $ 30,308 $ 2,131 $ — $ 4,649 $ 58,705
Prior to the adoption of SFAS No. 142, the Company amortized goodwill over estimated useful lives ranging from 10 years to 40 years.
Had the Company accounted for goodwill consistent with the provisions of SFAS No. 142 in prior years, the Company’s income would
have been affected as follows, in thousands, except per share data:
Year ended December 31, 2002 2001 2000
Reported income before the cumulative effect of an change in accounting principle $367,500 $297,147 $ 385,323
Add back: Goodwill amortization —11,912 11,422
Adjusted income before the cumulative effect of a change in accounting principle $367,500 $309,059 $ 396,745
Basic income per common share before the cumulative effect of a change in accounting principle:
As reported $2.11 $1.72 $ 2.20
Add back: Goodwill amortization —0.07 0.07
As adjusted $2.11 $1.79 $ 2.27
Diluted income per common share before the cumulative effect of a change in accounting principle:
As reported $2.10 $1.71 $ 2.20
Add back: Goodwill amortization —0.07 0.07
As adjusted $2.10 $1.78 $ 2.27
3. Facility Consolidation, Impairment and Other Charges
Prior to December 31, 2001, the Company’s management approved a plan to close and consolidate certain facilities, terminate certain
employees, and exit certain other activities. The Company also determined certain assets were impaired. Following is a summary of the
charges and the related accruals for continuing liabilities associated with the plan (in thousands):
Liability at Liability at
Paid in December 31, Paid in December 31,
TotalNon-cash 2001 2001 2002 2002
Impairment charges $ 49,400 $(49,400) $ — $ — $ — $ —
Facility consolidation expenses 17,900 (6,900) (300) 10,700 (4,800) 5,900
Severance expenses 6,700 — (100) 6,600 (4,800) 1,800
Inventory-related exit costs 17,400 (17,400) — — — —
Other 16,400 (15,800) — 600 (300) 300
$107,800 $(89,500) $(400) $17,900 $(9,900) $8,000