Advance Auto Parts 2013 Annual Report Download - page 73

ADVANCE AUTO PARTS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 28, 2013, December 29, 2012 and December 31, 2011
(in thousands, except per share data)
F-21
As of December 28, 2013, the Company had not borrowed any amounts under the 2013 Credit Agreement but subsequently
borrowed $700,000 under the term loan and $306,046 under the revolver in conjunction with the Company’s acquisition of GPI
on January 2, 2014. As of December 28, 2013, the Company had letters of credit outstanding of $87,260. The letters of credit
generally have a term of one year or less and primarily serve as collateral for the Company’s self-insurance policies. The
Company's debt availability as of December 28, 2013 was $545,382 based on the maximum amount of additional borrowings
allowed under the Company's leverage ratio.
The interest rate on borrowings under the revolving credit facility is based, at the Company’s option, on adjusted LIBOR,
plus a margin, or an alternate base rate, plus a margin. The current margin is 1.30% and 0.30% per annum for the adjusted
LIBOR and alternate base rate borrowings, respectively. A facility fee is charged on the total amount of the revolving credit
facility, payable in arrears. The current facility fee rate is 0.20% per annum and subject to change based on the Company’s
credit ratings. Under the terms of the 2013 Credit Agreement, the interest rate and facility fee are based on the Company’s
credit rating.
The interest rate on the term loan is based, at the Company’s option, on adjusted LIBOR, plus a margin, or an alternate
base rate, plus a margin. The current margin is 1.50% and 0.50% per annum for the adjusted LIBOR and alternate base rate
borrowings, respectively. Under the terms of the term loan, the interest rate is based on the Company’s credit rating and subject
to change based on the Company’s credit rating.
The 2013 Credit Agreement contains customary covenants restricting the ability of (a) subsidiaries of Advance Stores to,
among other things, create, incur or assume additional debt, (b) Advance Stores and its subsidiaries to, among other things ,(i)
incur liens, (ii) make loans and investments, (iii) guarantee obligations, and (iv) change the nature of its business conducted by
itself and its subsidiaries; (c) the Company, Advance Stores and their subsidiaries to, among other things (i) engage in certain
mergers, acquisitions, asset sales and liquidations, (ii) enter into certain hedging arrangements, (iii) enter into restrictive
agreements limiting its ability to incur liens on any of its property or assets, pay distributions, repay loans, or guarantee
indebtedness of its subsidiaries, (iv) engage in sale-leaseback transactions; and (d) the Company, among other things, to change
the holding company status of the Company. Advance Stores is required to comply with financial covenants with respect to a
maximum leverage ratio and a minimum coverage ratio. The 2013 Credit Agreement also provides for customary events of
default, including non-payment defaults, covenant defaults and cross-defaults to Advance Stores’ other material indebtedness.
The Company is also required to comply with financial covenants with respect to a maximum leverage ratio and a minimum
consolidated coverage ratio. The Company was in compliance with its covenants at December 28, 2013 with respect to the
2013 Credit Agreement and December 29, 2012 with respect to the 2011 Credit Agreement, respectively.
Senior Unsecured Notes
The Company issued 4.50% senior unsecured notes on December 3, 2013 at 99.69% of the principal amount of $450,000
which are due December 1, 2023 (the “2023 Notes”). The 2023 Notes bear interest at a rate of 4.50% per year payable semi-
annually in arrears on June 1 and December 1 of each year, beginning June 1, 2014. The net proceeds from the offering of these
notes were approximately $445,200, after deducting underwriting discounts and commissions and estimated offering expenses
payable by the Company. The net proceeds from the 2023 Notes were used in aggregate with borrowings under the Company’s
revolving credit facility and term loan and cash on-hand to fund the Company’s acquisition of GPI on January 2, 2014.
The Company previously issued 4.50% senior unsecured notes in January 2012 at 99.968% of the principal amount of
$300,000 which are due January 15, 2022 (the “2022 Notes”). The 2022 Notes bear interest at a rate of 4.50% per year payable
semi-annually in arrears on January 15 and July 15 of each year. The Company’s 5.75% senior unsecured notes were issued in
April 2010 at 99.587% of the principal amount of $300,000 and are due May 1, 2020 (the “2020 Notes” or collectively with the
2023 Notes and the 2022 Notes, “the Notes”). The 2020 Notes bear interest at a rate of 5.75% per year payable semi-annually
in arrears on May 1 and November 1 of each year. Advance served as the issuer of the Notes with certain of Advance’s
domestic subsidiaries currently serving as subsidiary guarantors. The terms of the Notes are governed by an indenture (as
amended, supplemented, waived or otherwise modified, the “Indenture”) among the Company, the subsidiary guarantors from
time to time party thereto and Wells Fargo Bank, National Association, as Trustee.