Napa Auto Parts 2004 Annual Report Download - page 33

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cash flows in periods after adoption. While the Company cannot
estimate what those amounts will be in the future (because they
depend on, among other things, when employees exercise stock
options), the amount of operating cash flows recognized in prior
periods for such excess tax deductions were $6,072,000,
$1,254,000, and $4,468,000 in 2004, 2003 and 2002, 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 purchase
method of accounting be used for all business combinations.
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 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 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 consolidated
statement of income as of January 1, 2002. No tax benefits were
recorded in connection with this goodwill impairment.
The Company performed an annual goodwill impairment test
during the fourth quarter of 2004 and 2003, utilizing the present
value of future cash flows approach to determine any potential
goodwill impairment. The Company determined that goodwill
was not impaired and, therefore, no impairment was recognized
for the years ended December 31, 2004 and 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, 2004 and 2003.
The changes in the carrying amount of goodwill during the
years ended December 31, 2004 and 2003 by reportable segment,
as well as other identifiable intangible assets, are summarized
as follows:
Goodwill
Identifiable
Intangible
(in thousands) Automotive Industrial Office Products Assets Total
Balance as of January 1, 2003 $ 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
Amortization during the year — — — (356) (356)
Balance as of December 31, 2004 $ 21,617 $ 31,170 $ 2,131 $ 2,754 $ 57,672
3. Facility Consolidation, Impairment and Other Charges
In the fourth quarter of 2001, the Company’s management
approved a plan to close and consolidate certain Company-
operated facilities, terminate certain employees, and exit certain
other activities. The Company also determined that certain assets
were impaired. During 2001, the Company recorded a charge
of $107.8 million ($64.4 million, net of tax), of which $89.5 million
were non-cash charges related to the plan. At December 31, 2004
and 2003, the Company had an accrual of $2.3 million and $3.3
million, respectively, recorded in accrued expenses relating to
lease obligations still outstanding on closed facilities.