Napa Auto Parts 2008 Annual Report Download - page 34

notes to consolidated nancial statements (continued)
december 31, 2008
1. summary of signicant accounting policies (continued)
debt was estimated by calculating the present value of anticipated
cash flows. e discount rate used was an estimated borrowing rate
for similar debt instruments with like maturities.
Shipping and Handling Costs
Shipping and handling costs are classified as selling, administrative and
other expenses in the accompanying consolidated statements of income
and totaled approximately $140,000,000 in the years ended December 31,
2008 and 2007, and $130,000,000 in the year ended December 31, 2006.
Advertising Costs
Advertising costs are expensed as incurred and totaled $42,800,000,
$44,700,000, and $49,700,000 in the years ended December 31,
2008, 2007, and 2006, respectively.
Accounting for Legal Costs
e Company’s legal costs expected to be incurred in connection
with loss contingencies are expensed as such costs are incurred.
Stock Compensation
e Company maintains various Long-Term Incentive Plans, which
provide for the granting of stock options, stock appreciation rights,
restricted stock, restricted stock units, performance awards, dividend
equivalents, and other share-based awards.
Effective January 1, 2006, the Company adopted SFAS No. 123(R),
Share-Based Payment (SFAS No. 123(R)), choosing the “modified
prospective” method. Compensation cost recognized for the years
ended December 31, 2008, 2007 and 2006, includes: (a) compensation
cost for all share-based payments granted prior to, but not yet vested
as of January 1, 2006, based on the grant date fair value estimated in
accordance with the original provisions of SFAS No. 123, Accounting
for Stock-Based Compensation (SFAS No. 123); and (b) compensa-
tion cost for all share-based payments granted subsequent to January
1, 2006, based on the grant date fair value estimated with the provi-
sions of SFAS No. 123(R). Results for prior periods have not been
restated. Most options may be exercised not earlier than twelve
months nor later than ten years from the date of grant.
Net Income per Common Share
Basic net income per common share is computed by dividing net
income by the weighted average number of common shares out-
standing during the year. e computation of diluted net income
per common share includes the dilutive effect of stock options,
stock appreciation rights and non-vested restricted stock awards.
Options to purchase approximately 4.4 million, 1.6 million and 2.1
million shares of common stock ranging from $42-$49 per share
were outstanding at December 31, 2008, 2007 and 2006, respective-
ly. ese options were not included in the computation of diluted
net income per common share because the options’ exercise price
was greater than the average market price of common stock.
Reclassifications
Certain prior period amounts have been reclassified to conform
to the current year presentation.
Recently Issued Accounting Pronouncements
On September 15, 2006, the Financial Accounting Standards Board
(FASB) issued SFAS No. 157, Fair Value Measurements (SFAS No.
157). SFAS No. 157 defines fair value, establishes a framework for
measuring fair value in accordance with accounting principles gener-
ally accepted in the United States, and expands disclosures about fair
value measurements. SFAS No. 157 does not expand the use of fair
value in any new circumstances. e provisions of SFAS No. 157,
as issued, are effective for the fiscal years beginning after November
15, 2007. In February 2008, the FASB issued FASB Staff position
157-2 that deferred for one year the effective date of SFAS No. 157
for all non-financial assets and non-financial liabilities, except those
that are recognized or disclosed at fair value in the financial state-
ments on a recurring basis (that is, at least annually). As of January
1, 2008, the Company adopted SFAS No. 157 for all financial assets
and liabilities and for non-financial assets and liabilities recognized
or disclosed at fair value on a recurring basis. e Company deter-
mined that the adoption did not have a significant impact on the
consolidated financial statements. Additionally, the Company does
not expect the adoption of SFAS No. 157 for non-financial assets
and liabilities, effective January 1, 2009, will have a significant impact
on the Company’s consolidated financial statements.
In December 2007, the FASB issued SFAS No. 141 (Revised 2007),
Business Combinations (SFAS No. 141(R)). SFAS No. 141(R) will
change the accounting for business combinations. Under SFAS No.
141(R), an acquiring entity will be required to recognize all the as-
sets acquired and liabilities assumed in a transaction at the acquisi-
tion-date fair value with limited exceptions. SFAS No. 141(R) will
change the accounting treatment and disclosure for certain specific
items in a business combination. SFAS No. 141(R) applies prospec-
tively to business combinations for which the acquisition date is on
or after the beginning of the first annual reporting period beginning
on or after December 15, 2008. SFAS No. 141(R) will have an
impact on accounting for business combinations once adopted, but
the effect is dependent upon acquisitions at that time.
In December 2007, the FASB issued SFAS No. 160, Noncontrolling
Interests in Consolidated Financial Statements—An Amendment of
ARB No. 51 (SFAS No. 160). SFAS No. 160 establishes new
accounting and reporting standards for the non-controlling interest in
a subsidiary and for the deconsolidation of a subsidiary. SFAS No. 160
is effective for fiscal years beginning on or after December 15, 2008.
e Company does not expect that SFAS No. 160 will have a signifi-
cant impact on the Company’s consolidated financial statements.
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