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SEC Filings

8-K
ADVANCE AUTO PARTS INC filed this Form 8-K on 11/30/2001
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            NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET

                  (amounts in thousand, except per share data)


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<S>                                                                               <C>
Components of purchase price:
Cash to Discount shareholders (see note (1) above) ............................   $128,479
Advance Auto Parts common stock to Discount shareholders (4,309,970 shares
   valued at $24.60 per share)(a) .............................................    106,025
Prepayment penalties associated with the extinguishment of
   Discount's existing long-term debt (see note (1) above) ....................      6,300
Accrual for Advance Auto Parts' obligation to purchase continuing insurance
   coverage for Discount's directors and officers for pre-merger time
   periods  as required by the merger agreement (see note (6) below) ..........        700

Fair value of outstanding options to purchase 1,115,182 shares of Discount
   common stock that will be converted to options to purchase 574,765 shares of
   Advance Auto Parts common stock, valued at $1.92
   per option (b) .............................................................      1,104
Estimated acquisition related costs ...........................................      6,325
                                                                                  --------
     Total purchase price .....................................................    248,933
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(a)  Assumes a $13.84 per share value for Discount common stock (inclusive of
     $7.50 in cash) based on the historical trading value of Discount's common
     stock on and around the announcement date of the merger.

(b)  The fair value of the options to purchase shares of Advance Auto Parts
     common stock was determined using the Black-Scholes option-pricing model
     with the following assumptions: (i) risk-free interest rate of 3.92%; (ii)
     an expected life of two years; (iii) a volatility factor of .40; (iv) a
     fair value of Advance Auto Parts common stock of $24.60; and (v) expected
     dividend yield of zero.


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Derivation of book value:
   Historical book value of Discount's net assets ................................. (326,324)
   Adjustments to recognize (assets) liabilities in purchase
     accounting:
        Reserve for severance payments related to change in control
          agreements ..............................................................   13,500
        Purchase accounting adjustment to conform Discount's accrual
          for self-insured liabilities, based on an estimated case-by-case
          basis and amounts incurred but not reported to Advance Auto Parts'
          policy of utilizing actuarially developed accruals for such
          liabilities (See note (6) below) ........................................    1,000
        Purchase accounting adjustment to increase Discount's warranty accrual
          on pre-acquisition sales of certain Discount merchandise to conform
          with Advance Auto Parts' merchandise return policies
          (See note (6) below) ....................................................    3,000
        Purchase accounting adjustment to accrue for the settlement of
          certain consulting agreements as required by the merger
          agreement (See note (6) below) ..........................................    1,500
        Deferred tax impact of pro forma adjustments (See note (9)
          below) ..................................................................  (16,608)
   Adjustments to reflect fair market value of net assets acquired:
        Elimination of net book value of goodwill and deferred
          financing costs acquired (See note (4) below) ...........................    4,200
        Elimination of deferred gain related to a sale-leaseback
          transaction previously consummated by Discount (See note (7)
          below) ..................................................................   (5,900)
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