Advance Auto Parts 2015 Annual Report Download - page 47

34
interest to the repurchase date. The Notes are currently fully and unconditionally guaranteed, jointly and severally, on an
unsubordinated and unsecured basis by each of the subsidiary guarantors. We will be permitted to release guarantees without
the consent of holders of the Notes under the circumstances described in the Indenture: (i) upon the release of the guarantee of
our other debt that resulted in the affected subsidiary becoming a guarantor of this debt; (ii) upon the sale or other disposition of
all or substantially all of the stock or assets of the subsidiary guarantor; or (iii) upon our exercise of our legal or covenant
defeasance option.
The Indenture contains customary provisions for events of default including for: (i) failure to pay principal or interest when
due and payable; (ii) failure to comply with covenants or agreements in the Indenture or the Notes and failure to cure or obtain
a waiver of such default upon notice; (iii) a default under any debt for money borrowed by us or any of our subsidiaries that
results in acceleration of the maturity of such debt, or failure to pay any such debt within any applicable grace period after final
stated maturity, in an aggregate amount greater than $25.0 million without such debt having been discharged or acceleration
having been rescinded or annulled within 10 days after receipt by us of notice of the default by the Trustee or holders of not
less than 25% in aggregate principal amount of the Notes then outstanding; and (iv) events of bankruptcy, insolvency or
reorganization affecting us and certain of our subsidiaries. In the case of an event of default, the principal amount of the Notes
plus accrued and unpaid interest may be accelerated. The Indenture also contains covenants limiting the ability of us and our
subsidiaries to incur debt secured by liens and to enter into sale and lease-back transactions.
As of January 2, 2016, we had a credit rating from Standard & Poor’s of BBB- and from Moody’s Investor Service of
Baa2. The current outlooks by Standard & Poor’s and Moody’s are both stable. The current pricing grid used to determine our
borrowing rate under our revolving credit facility is based on our credit ratings. If these credit ratings decline, our interest rate
on outstanding balances may increase and our access to additional financing on favorable terms may become more limited. In
addition, it could reduce the attractiveness of our vendor payment program, where certain of our vendors finance payment
obligations from us with designated third party financial institutions, which could result in increased working capital
requirements. Conversely, if these credit ratings improve, our interest rate may decrease.
Off-Balance-Sheet Arrangements
We guarantee loans made by banks to various of our independent store customers totaling $29.7 million as of January 2,
2016. These loans are collateralized by security agreements on merchandise inventory and other assets of the borrowers. We
believe the likelihood of performance under these guarantees is remote and that the fair value of these guarantees is very
minimal. As of January 2, 2016, we had no other off-balance-sheet arrangements as defined in Regulation S-K Item 303 of the
SEC regulations. We include other off-balance-sheet arrangements in our Contractual Obligations table including operating
lease payments, interest payments on our Notes and revolving credit facility and letters of credit outstanding.
Contractual Obligations
In addition to our Notes and revolving credit facility, we utilize operating leases as another source of financing. The
amounts payable under these operating leases are included in our schedule of contractual obligations. Our future contractual
obligations related to long-term debt, operating leases and other contractual obligations as of January 2, 2016 were as follows:
Payments Due by Period
Contractual Obligations Total
Less than
1 Year 1 - 3 Years 3 - 5 Years
More Than
5 Years
(in thousands)
Long-term debt (1) $ 1,213,759 $ 598 $ 80,000 $ 379,377 $ 753,784
Interest payments 342,444 54,141 109,875 97,499 80,929
Operating leases (2) 3,250,507 491,602 830,492 678,742 1,249,671
Other long-term liabilities (3) 663,279 — — — —
Purchase obligations (4) 43,629 23,805 9,664 3,870 6,290
$ 5,513,618 $ 570,146 $ 1,030,031 $ 1,159,488 $ 2,090,674
Note: For additional information refer to Note 7, Long-term Debt; Note 13, Income Taxes; Note 14, Lease Commitments; Note
15, Contingencies; and Note 16, Benefit Plans, in the Notes to Consolidated Financial Statements, included in Item 15.
Exhibits, Financial Statement Schedules, of this Annual Report on Form 10-K.