Napa Auto Parts 2010 Annual Report Download - page 23

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Table of Contents
Net Cash Provided by Operating Activities:
The Company continues to generate cash and net cash provided by operating activities totaled $679 million in 2010. This reflects a
20% decrease from 2009, as working capital as a source of cash was $129 million less in 2010 relative to 2009 and pension
contributions in 2010 increased by $35 million from 2009. These items were partially offset by a $76 million increase in net income. Net
cash provided by operating activities of $845 million in 2009 represents a 59% increase from 2008 and primarily relates to the
$368 million net decrease in cash used for working capital requirements, including accounts receivable, inventory and accounts payable,
net of the $76 million decrease in net income from 2008.
Net Cash Used in Investing Activities:
Net cash flow used in investing activities was $172 million in 2010 compared to $264 million in 2009, a decrease of 35%. Cash
used for acquisitions of businesses in 2010 was $44 million less than in 2009, while capital expenditures increased by $16 million for
the year. The decrease in investing activities was primarily due to a $73 million purchase of properties under a construction and lease
agreement in 2009. This transaction also explains the increase in investing activities in 2009 from 2008, net of a $36 million decrease in
capital expenditures in 2009 from 2008. Cash used for acquisitions of businesses in 2009 was relatively consistent with 2008.
Net Cash Used in Financing Activities:
The Company used $321 million of cash in financing activities in 2010, a 3% decrease from the $330 million used in financing
activities in 2009. Cash used in financing activities in 2009 was down 30% from the $473 million used in 2008. For the three years
presented, net cash used in financing activities was primarily for dividends paid to shareholders and repurchases of the Company’s
common stock. The Company paid dividends to shareholders of $258 million, $254 million and $252 million during 2010, 2009 and
2008, respectively. The Company expects this trend of increasing dividends to continue in the foreseeable future. During 2010, 2009 and
2008, the Company repurchased $75 million, $26 million and $273 million, respectively, of the Company’s common stock. We expect
to remain active in our share repurchase program, but the amount and value of shares repurchased will vary annually.
Notes and Other Borrowings
The Company maintains a $350 million unsecured revolving line of credit with a consortium of financial institutions, which
matures in December 2012 and bears interest at LIBOR plus .30% (0.56% at December 31, 2010). At December 31, 2010 and 2009, no
amounts were outstanding under the line of credit. Due to the workers’ compensation and insurance reserve requirements in certain states,
the Company also had unused letters of credit of approximately $50 million outstanding at December 31, 2010 and 2009.
At December 31, 2010, the Company had unsecured Senior Notes outstanding under a $500 million financing arrangement as
follows: $250 million, Series B, 6.23% fixed, due 2011; and $250 million senior unsecured note, 4.67% fixed, due 2013. These
borrowings contain covenants related to a maximum debt-to-capitalization ratio and certain limitations on additional borrowings. At
December 31, 2010, the Company was in compliance with all such covenants. The weighted average interest rate on the Company’s
outstanding borrowings was approximately 5.45% at December 31, 2010 and 2009. Total interest expense, net of interest income, for all
borrowings was $26.6 million, $27.1 million and $29.8 million in 2010, 2009 and 2008, respectively.
Contractual and Other Obligations
In October 2007, the Company entered into a sale-leaseback transaction with a financial institution. In connection with the
transaction, the Company sold certain automotive retail store properties and immediately leased the properties back over a lease term of
twenty years. The lease was classified as an operating lease. Net proceeds from the transaction amounted to approximately $56 million.
The Company realized a net gain of approximately $20 million, which was deferred and is being amortized over the lease term.
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