Advance Auto Parts 2004 Annual Report Download - page 45

Advance฀Auto฀Parts,฀Inc.฀and฀Subsidiaries
43
฀ The฀interest฀rates฀on฀the฀ tranche฀A฀and฀ B฀ term฀loans,฀
the฀ delayed฀ term฀ loan฀ and฀ the฀ revolver฀ are฀ based,฀ at฀ the฀
Company’s฀option,฀on฀an฀adjusted฀LIBOR฀rate,฀plus฀a฀mar-
gin,฀ or฀ an฀ alternate฀ base฀ rate,฀ plus฀ a฀ margin.฀ The฀ initial฀
margin฀for฀the฀tranche฀A฀term฀loan฀and฀revolver฀is฀1.50%฀
and฀ 0.50%฀ per฀annum฀for฀ the฀adjusted฀LIBOR฀ and฀ alter-
nate฀base฀rate฀borrowings,฀respectively.฀The฀initial฀margin฀
for฀the฀ tranche฀ B฀loan฀and฀ the฀delayed฀ draw฀term฀loan฀is฀฀
1.75%฀and฀0.75%฀per฀annum฀for฀the฀adjusted฀LIBOR฀and฀
alternative฀base฀rate฀borrowings,฀respectively.฀Additionally,฀
a฀ commitment฀ fee฀ of฀ 0.375%฀ per฀ annum฀ will฀ be฀ charged฀
on฀ the฀ unused฀ portion฀ of฀ the฀ tranche฀ A฀ term฀ loan฀ and฀
revolver,฀ payable฀ in฀ arrears.฀ A฀ commitment฀ fee฀ of฀ 1.75%฀
per฀ annum฀ will฀ be฀ charged฀ on฀ the฀ unused฀ portion฀ of฀ the฀
delayed฀draw฀term฀loan,฀payable฀in฀arrears.
฀ Borrowings฀under฀the฀senior฀credit฀facility฀are฀required฀
to฀be฀prepaid,฀subject฀to฀certain฀exceptions,฀with฀(1)฀50%฀
of฀ the฀ Excess฀ Cash฀ Flow฀ (as฀ defined฀ in฀ the฀ senior฀ credit฀
facility)฀ unless฀ the฀ Company’s฀ Senior฀ Leverage฀ Ratio฀ (as฀
defined฀in฀the฀senior฀credit฀facility)฀at฀the฀end฀of฀any฀fiscal฀
year฀ is฀ less฀ than฀ or฀ equal฀ to฀ 1.00฀ to฀ 1.00,฀ in฀ which฀ case฀
25%฀ of฀ Excess฀ Cash฀ Flow฀ for฀ such฀ fiscal฀ year฀ will฀ be฀
required฀to฀be฀repaid,฀(2)฀100%฀of฀the฀net฀cash฀proceeds฀of฀
all฀ asset฀ sales฀ or฀ other฀ dispositions฀ of฀ property฀ by฀ the฀
Company฀and฀its฀subsidiaries,฀subject฀to฀certain฀exceptions฀
(including฀exceptions฀for฀reinvestment฀of฀certain฀asset฀sale฀
proceeds฀ within฀ 270฀ days฀ of฀ such฀ sale฀ and฀ certain฀ sale-
leaseback฀transactions),฀and฀(3)฀100%฀of฀the฀net฀proceeds฀
of฀certain฀issuances฀of฀debt฀or฀equity฀by฀the฀Company฀and฀
its฀subsidiaries.
฀ Voluntary฀prepayments฀and฀voluntary฀reductions฀of฀the฀
unutilized฀portion฀of฀the฀revolver฀are฀permitted฀in฀whole฀or฀
in฀ part,฀ at฀ the฀ Company’s฀ option,฀ in฀ minimum฀ principal฀
amounts฀specified฀in฀the฀senior฀credit฀facility,฀without฀pre-
mium฀or฀penalty,฀subject฀to฀reimbursement฀of฀the฀lenders’฀
redeployment฀costs฀in฀the฀case฀of฀a฀prepayment฀of฀adjusted฀
LIBOR฀borrowings฀other฀than฀on฀the฀last฀day฀of฀the฀rele-
vant฀interest฀period.฀Voluntary฀prepayments฀will฀(1)฀gener-
ally฀ be฀ allocated฀ among฀ the฀ facilities฀ on฀ a฀ pro฀ rata฀ basis฀
(based฀ on฀ the฀ then฀ outstanding฀ principal฀ amount฀ of฀ the฀
loans฀under฀each฀facility)฀and฀(2)฀within฀each฀such฀facility,฀
be฀ applied฀ to฀ the฀ installments฀ under฀ the฀ amortization฀
schedule฀within฀the฀following฀12฀months฀under฀such฀facil-
ity฀ until฀ eliminated.฀ All฀ remaining฀ amounts฀ of฀ prepay-
ments฀will฀be฀applied฀pro฀rata฀to฀the฀remaining฀amortization฀
payments฀under฀such฀facility.฀The฀senior฀credit฀facility฀also฀
provides฀ for฀ customary฀ events฀ of฀ default,฀ including฀ non-
payment฀ defaults,฀ covenant฀ defaults฀ and฀ cross-defaults฀ to฀
the฀Company’s฀other฀material฀indebtedness.
฀ The฀senior฀credit฀facility฀is฀guaranteed฀by฀the฀Company฀
and฀by฀each฀of฀its฀existing฀domestic฀subsidiaries฀and฀will฀
be฀ guaranteed฀ by฀ all฀ future฀ domestic฀ subsidiaries.฀ The฀
facility฀ is฀ secured฀ by฀ a฀ first฀ priority฀ lien฀ on฀ substantially฀
all,฀ subject฀ to฀ certain฀ exceptions,฀ of฀ the฀ Advance฀ Stores’฀
properties฀ and฀ assets฀ and฀ the฀ properties฀ and฀ assets฀ of฀ its฀
existing฀domestic฀subsidiaries฀and฀will฀ be฀ secured฀by฀the฀
properties฀ and฀ assets฀ of฀ its฀ future฀ domestic฀ subsidiaries.฀
The฀senior฀credit฀facility฀contains฀covenants฀restricting฀the฀฀
ability฀of฀the฀Company฀and฀its฀subsidiaries฀to,฀among฀other฀฀
things,฀(1)฀declare฀dividends฀or฀redeem฀or฀repurchase฀capi-
tal฀ stock,฀ (2)฀ prepay,฀ redeem฀ or฀ purchase฀ debt,฀ (3)฀ incur฀
liens฀ or฀ engage฀ in฀ sale-leaseback฀ transactions,฀ (4)฀ make฀
loans฀and฀investments,฀(5)฀incur฀additional฀debt฀(including฀
hedging฀ arrangements),฀ (6)฀ engage฀ in฀ certain฀ mergers,฀
acquisitions฀and฀asset฀sales,฀(7)฀engage฀in฀transactions฀with฀
affiliates,฀(8)฀change฀the฀nature฀of฀the฀Company’s฀business฀
and฀ the฀ business฀ conducted฀ by฀ its฀ subsidiaries฀ and฀ (9)฀
change฀the฀ holding฀company฀status฀of฀ the฀Company.฀ The฀
Company฀ is฀ required฀ to฀ comply฀ with฀ financial฀ covenants฀
with฀ respect฀ to฀ a฀ maximum฀ leverage฀ ratio,฀ a฀ minimum฀
interest฀coverage฀ratio,฀a฀minimum฀current฀assets฀to฀funded฀
senior฀ debt฀ ratio,฀ a฀ maximum฀ senior฀ leverage฀ ratio฀ and฀
maximum฀limits฀on฀capital฀expenditures.
฀ During฀fiscal฀2003,฀the฀Company฀completed฀the฀redemp-
tion฀of฀its฀outstanding฀senior฀subordinated฀notes฀and฀senior฀
discount฀ debentures.฀ Incremental฀ facilities฀ were฀ added฀ to฀
fund฀the฀redemption฀in฀the฀form฀of฀a฀tranche฀A-1฀term฀loan฀
facility฀ of฀ $75,000฀ and฀ tranche฀ C-1฀ term฀ loan฀ facility฀ of฀
$275,000.฀In฀conjunction฀with฀this฀redemption฀and฀overall฀
partial฀ repayment฀ of฀ $54,433,฀ the฀ Company฀ wrote฀ off฀
deferred฀financing฀costs.฀The฀write-off฀of฀these฀costs฀com-
bined฀with฀the฀accretion฀of฀the฀discounts฀and฀related฀pre-
miums฀ paid฀on฀ the฀repurchase฀ of฀the฀senior฀subordinated฀
notes฀and฀senior฀discount฀debentures฀resulted฀in฀a฀loss฀on฀
extinguishment฀ of฀ debt฀ of฀ $46,887฀ in฀ the฀ accompanying฀
consolidated฀ statements฀ of฀ operations฀ for฀ the฀ year฀ ended฀
January฀3,฀2004.
฀ During฀ the฀ remainder฀ of฀ fiscal฀ 2003,฀ the฀ Company฀
repaid฀ $236,089฀ of฀ its฀ term฀ loans฀ under฀ the฀ senior฀ credit฀
facility.฀ In฀ conjunction฀ with฀ this฀ partial฀ repayment,฀ the฀
Company฀wrote฀off฀additional฀deferred฀financing฀costs฀in฀
the฀amount฀of฀$401,฀which฀is฀classified฀as฀a฀loss฀on฀extin-
guishment฀of฀debt฀in฀the฀accompanying฀consolidated฀state-
ments฀ of฀ operations฀ for฀ the฀ year฀ ended฀ January฀ 3,฀ 2004.฀
Additionally,฀in฀December฀2003,฀the฀Company฀refinanced฀
the฀ remaining฀ portion฀ of฀ its฀ tranche฀ A,฀ A-1,฀ C฀ and฀ C-1฀฀
term฀loan฀facilities฀under฀the฀previous฀senior฀credit฀facility฀
by฀ amending฀ and฀ restating฀ the฀ credit฀ facility฀ to฀ add฀ a฀฀