Napa Auto Parts 2007 Annual Report Download - page 25

23
Quarterly Results of Operations
e 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 certain
estimates in its interim consolidated financial statements for the
accrual of bad debts, inventory adjustments and discounts and
volume incentives earned. Bad debts are accrued based on a
percentage of sales, and volume incentives are estimated based
upon cumulative and projected purchasing levels. Inventory
adjustments are accrued on an interim basis and adjusted in the
fourth quarter based on the annual October 31 book-to-physical
inventory adjustment. e methodology and practices used in
deriving estimates for interim reporting typically result in adjust-
ments upon accurate determination at year-end. e effect of
these adjustments in 2007 and 2006 was not significant.
e following is a summary of the quarterly results of operations
for the years ended December 31, 2007 and 2006:
ree Months Ended
March 31, June 30, Sept. 30, Dec. 31,
(in thousands except per share data)
2007
Net Sales $ 2,648,843 $ 2,769,527 $ 2,797,556 $ 2,627,269
Gross Profit* 789,944 824,585 824,488 778,206
Net Income 121,553 130,121 128,580 126,085
Earnings
Per Share:
Basic .71 .76 .76 .76
Diluted .71 .76 .76 .75
2006
Net Sales $ 2,553,552 $ 2,661,805 $ 2,699,641 $ 2,542,944
Gross Profit* 760,477 782,182 787,295 774,541
Net Income 113,925 120,680 121,333 119,467
Earnings
Per Share:
Basic .66 .70 .71 .70
Diluted .66 .70 .71 .70
* e Company reclassified certain warehousing, distribution
and handling costs from operating expenses to cost of goods
sold, resulting in a reduction to gross profit for the periods
presented. ese costs amount to $42 million, $45 million,
$46 million and $43 million in the first, second, third and
fourth quarters of fiscal 2007, respectively, and $43 million,
$43 million, $44 million and $41 million in the first, second,
third and fourth quarters of fiscal 2006, respectively. e
reclassification had no effect on net sales, net income, basic
earnings per share or diluted earnings per share.
We recorded the quarterly earnings per share amounts as if each
quarter was a discrete period. As a result, the sum of the basic
and diluted earnings per share by quarter will not necessarily
total the annual basic and diluted earnings per share.
Forward-Looking Statements
Some statements in this report, as well as in other materials we
file with the SEC or otherwise release to the public and in materials
that we make available on our website, constitute forward-
looking statements that are subject to the safe harbor provisions
of the Private Securities Litigation Reform Act of 1995. Senior
officers may also make verbal statements to analysts, investors,
the media and others that are forward-looking. Forward-looking
statements may relate, for example, to future operations, prospects,
strategies, financial condition, economic performance (including
growth and earnings), industry conditions and demand for our
products and services. e Company cautions that its forward-
looking statements involve risks and uncertainties, and while we
believe that our expectations for the future are reasonable in view
of currently available information, you are cautioned not to place
undue reliance on our forward-looking statements. Actual results
or events may differ materially from those indicated as a result
of various important factors. Such factors include, but are not
limited to, changes in general economic conditions, the growth
rate of the market for the Company’s products and services, the
ability to maintain favorable supplier arrangements and rela-
tionships, competitive product and pricing pressures, including
internet related initiatives, the effectiveness of the Company’s
promotional, marketing and advertising programs, changes in
laws and regulations, including changes in accounting and taxa-
tion guidance, the uncertainties of litigation, as well as other risks
and uncertainties discussed from time to time in the Company’s
filings with the SEC.
Forward-looking statements are only as of the date they are
made, and the Company undertakes no duty to update its
forward-looking statements except as required by law. You are
advised, however, to review any further disclosures we make on
related subjects in our Form 10-Q, Form 8-K and other reports
to the SEC.