Advance Auto Parts 2006 Annual Report Download - page 60

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Item 7A. Quantitative and Qualitative Disclosures about Market Risks.
We are exposed to cash flow risk due to changes in interest rates with respect to our long-term debt. Our long-
term debt currently consists of borrowings under a revolving credit facility and is primarily vulnerable to
movements in the LIBOR rate. While we cannot predict the impact interest rate movements will have on our debt,
exposure to rate changes is managed through the use of hedging activities. At December 30, 2006 approximately
$225 million of our bank debt was fixed in accordance with the interest rate swaps described below.
Our future exposure to interest rate risk is mitigated as a result of entering into four new interest rate swap
agreements in October 2006 on an aggregate of $225 million of debt under our revolving credit facility. These
interest rate swaps replaced the previously outstanding swaps settled as a result of our refinancing in October 2006.
The first swap fixed our LIBOR rate at 4.9675% on $75 million of debt for a term of 60 months, expiring in
October 2011. The second swap fixed our LIBOR rate at 4.9680% on $50 million of debt for a term of 60 months,
expiring in October 2011. The third swap fixed our LIBOR rate at 4.9800% on $50 million of debt for a term of 60
months, expiring in October 2011. The fourth swap fixed our LIBOR rate at 4.9650% on $50 million of debt for a
term of 60 months, expiring in October 2011.
The table below presents principal cash flows and related weighted average interest rates on our long-term debt
outstanding at December 30, 2006, by expected maturity dates. Additionally, the table includes the notional amounts
of our hedged debt and the impact of the anticipated average pay and receive rates of our interest rate swaps through
their maturity dates. Expected maturity dates approximate contract terms. Weighted average variable rates are
based on implied forward rates in the yield curve at December 30, 2006. Implied forward rates should not be
considered a predictor of actual future interest rates.
Fair
Fiscal Fiscal Fiscal Fiscal Fiscal Market
2007 2008 2009 2010 2011 Thereafter Total Liability
Long-term debt: (dollars in thousands)
Variable rate -$ -$ -$ -$ 476,800$-$ 476,800$ 476,800$
Weighted average
interest rate 5.8% 5.6% 5.6% 5.7% 5.8% - 5.7% -
Interest rate swap:
Variable to fixed
(1)
225,000$ 225,000$ 225,000$ 225,000$ 225,000$ - - 252$
Weighted average pay rate - 0.1% 0.1% 0.0% - - 0.0% -
Weighted average receive rate 0.1% - - 0.0% 0.1% - 0.0% -
(1) Amounts presented may not be outstanding for the entire year.
Item 8. Financial Statements and Supplementary Data.
See financial statements included in Item 15 “Exhibits, Financial Statement Schedules” of this annual report.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
Item 9A. Controls and Procedures.
Disclosure Controls and Procedures. Disclosure controls and procedures are our controls and other procedures that
are designed to ensure that information required to be disclosed by us in our reports that we file or submit under the
Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in
the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures
designed to ensure that information required to be disclosed by us in our reports that we file or submit under the
Securities Exchange Act of 1934 is accumulated and communicated to our management, including our principal
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