Napa Auto Parts 2002 Annual Report Download - page 35

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Impairment charges are primarily comprised of two separate
technology projects: (1) an abandoned software system imple-
mentation of the Company’s office products segment totaling
approximately $30,000,000, and (2) an impaired technology-
related venture of the Company’s automotive segment totaling
approximately $15,000,000 for which the Company projected the
undiscounted cash flows to be less than the carrying amount of
the related investment. Facility consolidation expenses relate to
facility consolidations in each of the Company’s business seg-
ments. In 2001, the Company identified certain distribution,
branch and retail facilities that were to be closed prior to
December 31, 2002. The Company appropriately accrued the
estimated lease obligation from the planned exit date through the
end of the contractual lease term, net of estimated sublease
income. The facility consolidations did not result in any material
decline in net sales, as all such closed facilities have been served
by other Company-operated facilities.
Severance expenses include charges for employees who have
been involuntarily terminated in connection with the Company’s
facility consolidation. All terminations occurred prior to December
31, 2002. Inventory-related exit costs relate to inventory consid-
ered by the Company to be impaired as a result of the facility
consolidations described above and related inventory rationaliza-
tion and optimization programs. All inventory-related exit costs
have been classified as cost of goods sold in the accompanying
consolidated statement of income. Other charges have been
classified as a component of selling, administrative and other
expenses.
4. Credit Facilities
The principal amount of the Company’s borrowings subject to vari-
able rates before interest rate swap agreements totaled
approximately $287,666,000 and $378,892,000 at December
31, 2002 and 2001, respectively. The weighted average interest
rate on the Company’s outstanding borrowings was approximately
4.76% and 5.30% at December 31, 2002 and 2001, respectively.
On November 30, 2001, the Company completed a
$500,000,000 financing with a consortium of financial institutions
and insurance companies (the “Notes”). The proceeds of the Notes
were primarily used to repay certain variable rate borrowings.
Certain borrowings contain covenants related to a maximum debt-
to-equity ratio, a minimum fixed-charge coverage ratio, and
certain limitations on additional borrowings. At December 31,
2002, the Company was in compliance with all such covenants.
Total interest expense for all borrowings was $59,640,000 in
2002, $59,416,000 in 2001 and $63,496,000 in 2000.
Amounts outstanding under the Company’s credit facilities con-
sist of the following:
(In Thousands) December 31 2002 2001
U.S. dollar denominated borrowings:
Unsecured revolving line of credit,
$200,000,000, Libor plus .55%,
due December 2003 $100,000 $ 7,000
Unsecured term notes:
November 30, 2001, Series A Senior
Notes, $250,000,000, 5.86% fixed,
due November 30, 2008 250,000 250,000
November 30, 2001, Series B Senior
Notes, $250,000,000, 6.23% fixed,
due November 30, 2011 250,000 250,000
December 1, 1998, Libor plus .55%,
due February 2004 171,367 231,367
July 1, 1998, Libor plus .25%,
due July 2005 —50,000
October 1, 1998, Libor plus .25%,
due October 2008 —50,000
Other borrowings 11,370 27,375
Canadian dollar (CND) denominated borrowings
translated into U.S. dollars:
Line of credit, CND$65,000,000, secured by
accounts receivable, Banker’s Acceptance
rate plus .27%, cancelable on 30 days
notice or due March 2003 —18,846
Unsecured revolving lines of credit,
CND$25,000,000, Banker’s Acceptance
rate plus .55%, due October 2002 —8,041
Unsecured revolving lines of credit,
CND$100,000,000, Banker’s Acceptance
rate plus .55%, due May 2003 8,964 141
791,701 892,770
Current portion of long-term debt and
other borrowings 116,905 57,190
$674,796 $835,580
Approximate maturities under the Company’s credit facilities are
as follows (in thousands):
2003 $116,905
2004 171,770
2005 3,026
2006 —
2007 —
Subsequent to 2007 500,000
$791,701
5. Shareholders’ Equity
The Company has a Shareholder Protection Rights Agreement
which includes the distribution of rights to common shareholders
under certain defined circumstances. The rights entitle the holder,
upon occurrence of certain events, to purchase additional stock
of the Company. The rights will be exercisable only if a person,
group or company acquires 20% or more of the Company’s com-
mon stock or commences a tender offer that would result in
ownership of 20% or more of the common stock. The Company is
entitled to redeem each right for one cent.