Napa Auto Parts 2003 Annual Report Download - page 29

vendors in accordance with EITF 02-16 in prior years,
approximately $90 million and $111 million would have
been reclassified from selling, administrative and other
expenses to cost of goods sold in the consolidated state-
ments of income for the years ended December 31, 2002
and 2001, respectively.
2. GOODWILL AND OTHER INTANGIBLE ASSETS
Effective January 1, 2002, the Company adopted SFAS No.
141 and SFAS No. 142. SFAS No. 141 requires that the pur-
chase method of accounting be used for all business combi-
nations. SFAS No. 142 requires that entities assess the fair
value of the net assets underlying all acquisition-related
goodwill on a reporting unit basis. When the fair value is
less than the related carrying value, entities are required
to reduce the amount of goodwill.
Within the Company’s four reportable segments, the
Company identified reporting units as defined in SFAS No.
142. The reporting units' goodwill was tested for impair-
ment 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 remaining 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 consoli-
dated statement of income as of January 1, 2002. No tax
benefits were recorded in connection with this goodwill
impairment. For the year ended December 31, 2002, addi-
tions to goodwill of approximately $14.7 million relate to a
balance sheet reclassification and additional consideration
for earnouts on prior acquisitions.
The Company performed an annual goodwill impairment
test during the fourth quarter of 2003. Similar to 2002, the
present value of future cash flows approach was utilized in
determining potential goodwill impairment. The Company
determined that goodwill was not impaired and, therefore,
no impairment was recognized during 2003. The Company
also assessed finite-lived, identifiable intangible assets for
impairment under an undiscounted cash flows approach
and concluded there was no impairment for the years
ended December 31, 2003 and 2002.
The changes in the carrying amount of goodwill during the
years ended December 31, 2003 and 2002 by reportable
segment, as well as other identifiable intangible assets, are
summarized as follows:
27
Goodwill
Electrical/ Identifiable
Office Electronic Intangible
(In Thousands) 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
Goodwill acquired during the year — 862 — — — 862
Amortization during the year — — — — (1,539) (1,539)
Balance as of December 31, 2003 $ 21,617 $ 31,170 $ 2,131 $ — $ 3,110 $ 58,028
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 the year ended December
31, 2001, the Company’s income would have been affected as
follows, in thousands, except per share data:
Year ended December 31, 2001
Reported income $ 297,147
Add back: Goodwill amortization 11,912
Adjusted income $ 309,059
Basic net income per common share:
As reported $ 1.72
Add back: Goodwill amortization 0.07
As adjusted $ 1.79
Diluted net income per common share:
As reported $ 1.71
Add back: Goodwill amortization 0.07
As adjusted $ 1.78