Advance Auto Parts 2004 Annual Report Download - page 26

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•฀ ฀a฀$22.8฀million฀increase฀in฀inventory฀growth;฀and
•฀ ฀a฀$77.9฀million฀decrease฀in฀cash฀flow฀from฀accounts฀pay-
able,฀excluding฀the฀impact฀of฀our฀vendor฀financing฀pro-
gram฀which฀began฀in฀fiscal฀2004.
฀ For฀fiscal฀2003,฀net฀cash฀provided฀by฀operating฀activities฀
increased฀ $112.9฀ million฀ to฀ $355.9฀ million.฀ Significant฀
components฀of฀this฀increase฀consisted฀of:
•฀ ฀a฀$59.9฀ million฀increase฀ in฀ earnings฀primarily฀due฀to฀ a฀
reduction฀in฀merger฀and฀integration฀expenses฀and฀increased฀
operating฀margins;฀and
•฀ ฀a฀$47.3฀million฀loss฀on฀extinguishment฀of฀debt฀in฀fiscal฀
2003฀ compared฀ to฀ a฀ $16.8฀ million฀ loss฀ on฀ extinguish-
ment฀of฀debt฀in฀fiscal฀2002.
Investing฀Activities
฀ For฀ fiscal฀ 2004,฀ net฀ cash฀ used฀ in฀ investing฀ activities฀
increased฀ by฀ $81.3฀ million฀ to฀ $166.8฀ million.฀ The฀ pri-
mary฀ increase฀ in฀ cash฀ used฀ in฀ investing฀ activities฀ relates฀฀
to฀an฀increase฀in฀capital฀expenditures฀of฀$50.0฀million฀for฀
the฀construction฀and฀preparation฀of฀our฀northeastern฀distri-
bution฀center.
฀ For฀ fiscal฀ 2003,฀ net฀ cash฀ used฀ in฀ investing฀ activities฀
increased฀ by฀ $7.5฀ million฀ to฀ $85.5฀ million.฀ Significant฀
components฀of฀this฀increase฀consisted฀of:
•฀ ฀a฀ $17.7฀ million฀ reduction฀ in฀ proceeds฀ received฀ on฀ the฀
disposal฀of฀assets;฀and
•฀ ฀a฀ decrease฀ in฀ cash฀ used฀ for฀ acquisition฀ purposes฀ com-
pared฀ to฀ 2002฀ when฀$13.2฀million฀was฀used฀to฀ acquire฀
certain฀assets฀of฀Trak฀Auto฀Parts,฀Inc.
Financing฀Activities
฀ For฀ fiscal฀ 2004,฀ net฀ cash฀ used฀ in฀ financing฀ activities฀
decreased฀ by฀ $220.7฀ million฀ to฀ $52.1฀ million,฀ primarily฀
due฀to฀a฀cash฀outflow฀of฀$406.4฀million฀during฀fiscal฀2003฀
for฀the฀early฀redemption฀of฀our฀senior฀discount฀debentures฀
and฀ senior฀ subordinated฀ notes.฀ Cash฀ used฀ for฀ financing฀
activities฀in฀fiscal฀2004฀consisted฀primarily฀of:
•฀ ฀$146.4฀million฀used฀to฀repurchase฀shares฀of฀our฀common฀
stock฀under฀our฀stock฀repurchase฀program;
•฀ ฀a฀ $56.9฀ million฀ cash฀ inflow฀ associated฀ with฀ inventory฀
purchased฀under฀our฀vendor฀financing฀program;
•฀ ฀a฀$25.0฀million฀increase฀in฀net฀borrowings฀as฀a฀result฀
of฀$105.0฀million฀in฀principal฀prepayments฀on฀our฀previ-
ous฀senior฀credit฀facility฀prior฀to฀scheduled฀maturity,฀off-
set฀ by฀ borrowings฀ from฀ our฀ amended฀ senior฀ credit฀
facility;฀and
•฀ ฀$20.5฀million฀in฀proceeds฀from฀team฀member฀exercises฀
of฀stock฀options.
฀ For฀ fiscal฀ 2003,฀ net฀ cash฀ used฀ in฀ financing฀ activities฀
increased฀by฀$103.6฀million฀to฀$272.8฀million.฀Significant฀
components฀of฀this฀increase฀consisted฀of:
•฀ ฀a฀ $70.9฀ million฀ increase฀ in฀ net฀ borrowings,฀ which฀ is฀
reflective฀ of฀ the฀ redemption฀ of฀ our฀ senior฀ discount฀
debentures฀and฀senior฀subordinated฀notes฀using฀proceeds฀
from฀our฀senior฀credit฀facility;
•฀ ฀$88.7฀million฀ in฀proceeds฀from฀an฀ equity฀ offering฀ dur-
ing฀fiscal฀2002;
•฀ ฀a฀$64.1฀million฀cash฀inflow฀from฀the฀fluctuation฀of฀bank฀
overdrafts฀from฀fiscal฀2002;฀and
•฀ ฀$38.3฀ million฀ paid฀ in฀ debt-related฀ costs฀ in฀ connection฀
with฀the฀above฀redemption.
Management’s฀Discussion฀and฀Analysis฀of฀Financial฀Condition฀and฀Results฀of฀Operations฀(continued)
Contractual฀Obligations
฀ Our฀future฀contractual฀obligations฀related฀to฀long-term฀debt฀and฀operating฀leases฀at฀January฀1,฀2005฀were฀as฀follows:
Contractual฀Obligations(1) Total
Fiscal฀
2005
Fiscal฀
2006
Fiscal฀
2007
Fiscal฀
2008
Fiscal฀
2009 Thereafter
(in฀thousands)
Long-term฀debt฀............................................ $฀ 470,000 $฀ 31,700 $฀ 24,525 $฀ 40,200 $฀ 63,375 $฀ 52,700 $257,500
Operating฀leases฀.......................................... $1,322,000 $188,355 $167,618 $152,057 $134,357 $113,551 $566,062
$1,792,000 $220,055 $192,143 $192,257 $197,732 $166,251 $823,562
Other฀long-term฀liabilities(2)฀........................ $฀ 80,222 $฀ — $฀ — $฀ — $฀ — $฀ — $฀ ฀ ฀ ฀ ฀—
(1)฀We฀currently฀do฀not฀have฀minimum฀purchase฀commitments฀under฀our฀vendor฀supply฀agreements.
(2)฀Primarily฀includes฀employee฀benefits฀accruals,฀restructuring฀and฀closed฀store฀liabilities฀and฀deferred฀income฀taxes฀for฀which฀no฀contractual฀payment฀schedule฀exists.
Long-Term฀Debt
Senior฀Credit฀Facility
฀ On฀November฀3,฀2004,฀we฀entered฀into฀a฀new฀amended฀
and฀ restated฀ $670฀ million฀ senior฀ credit฀ facility.฀ The฀ new฀
senior฀facility฀provides฀for฀a฀$200.0฀million฀tranche฀A฀term฀
loan฀ and฀ a฀ $170.0฀ million฀ tranche฀ B฀ term฀ loan.฀ Proceeds฀
from฀these฀term฀loans฀were฀used฀to฀refinance฀our฀tranche฀
D฀and฀E฀term฀loans฀and฀revolver฀under฀our฀previous฀facil-
ity.฀Additionally,฀the฀new฀senior฀credit฀facility฀provides฀for฀
a฀ $100.0฀ million฀ delayed฀ draw฀ term฀ loan,฀ which฀ is฀ avail-
able฀exclusively฀for฀stock฀buybacks฀under฀our฀stock฀repur-
chase฀program,฀and฀a฀$200.0฀million฀revolving฀facility,฀or฀
the฀ revolver฀(which฀provides฀for฀the฀ issuance฀of฀letters฀of฀