Napa Auto Parts 2014 Annual Report Download - page 35

The preparation of interim consolidated financial statements requires management to make estimates and
assumptions for the amounts reported in the interim condensed consolidated financial statements. Specifically,
the Company makes estimates and assumptions in its interim condensed consolidated financial statements for
inventory adjustments, the accrual of bad debts, customer sales returns and volume incentives earned, among
others. Inventory adjustments (including adjustments for a majority of inventories that are valued under the last-
in, first-out (LIFO) method) are accrued on an interim basis and adjusted in the fourth quarter based on the
annual book to physical inventory adjustment and LIFO valuation, which is performed each year-end. Reserves
for bad debts and customer sales returns are estimated and accrued on an interim basis based upon historical
experience. Volume incentives are estimated based upon cumulative and projected purchasing levels. The esti-
mates and assumptions for interim reporting may change upon final determination at year-end, and such changes
may be significant. The effect of these adjustments in 2014 and 2013 was not significant.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Although the Company does not face material risks related to interest rates and commodity prices, the
Company is exposed to changes in foreign currency rates with respect to foreign currency denominated operating
revenues and expenses.
Foreign Currency
The Company has translation gains or losses that result from translation of the results of operations of an
operating unit’s foreign functional currency into U.S. dollars for consolidated financial statement purposes. The
Company’s principal foreign currency exchange exposure is the Canadian dollar, the functional currency of our
Canadian operations, the Australian dollar, the functional currency of our Australasian operations and, to a lesser
extent, the Mexican peso, the functional currency of our Mexican operations. Foreign currency exchange
exposure, particularly in regard to the Canadian and Australian dollar and, to a lesser extent, the Mexican peso,
negatively impacted our results for the year ended December 31, 2014.
During 2014 and 2013, it was estimated that a 10% shift in exchange rates between those foreign functional
currencies and the U.S. dollar would have impacted translated net sales by approximately $258 million and
$255 million, respectively. A 15% shift in exchange rates between those functional currencies and the U.S. dollar
would have impacted translated net sales by approximately $388 million in 2014 and $382 million in 2013.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The information required by this Item 8 is set forth in a separate section of this report. See “Index to Con-
solidated Financial Statements and Financial Statement Schedules” beginning on page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
ITEM 9A. CONTROLS AND PROCEDURES.
Management’s conclusion regarding the effectiveness of disclosure controls and procedures
As of the end of the period covered by this report, an evaluation was performed under the supervision and
with the participation of the Company’s management, including the Chief Executive Officer (CEO) and Chief
Financial Officer (CFO), of the effectiveness of the Company’s disclosure controls and procedures, as such term
is defined in SEC Rule 13a-15(e). Based on that evaluation, the Company’s management, including the CEO and
CFO, concluded that the Company’s disclosure controls and procedures were effective, as of the end of the
period covered by this report, to provide reasonable assurance that information required to be disclosed in the
Company’s reports under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized
and reported within the time periods specified in the SEC’s rules and forms, and that such information is
accumulated and communicated to the Company’s management, including the CEO and CFO, as appropriate, to
allow timely decisions regarding required disclosure.
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