O'Reilly Auto Parts 2005 Annual Report Download - page 45

O’REILLY AUTOMOTIVE 2005 ANNUAL REPORT
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notes to consolidated financial statements (continued)
The Company issues stand-by letters of credit provided by a $50 million sublimit under the Credit Facility that reduce available borrowings. These
letters of credit are issued primarily to satisfy the requirements of workers compensation, general liability and other insurance policies. Substantially
all of the outstanding letters of credit have a one-year term from the date of issuance and have been issued to replace surety bonds that were previously
issued. Letters of credit totaling $29.3 million and $21.3 million were outstanding at December 31, 2005 and 2004, respectively.
On May 16, 2001, the Company completed a $100 million private placement of two series of unsecured senior notes (Senior Notes). The Series 2001-A
Senior Notes were issued for $75 million, are due May 16, 2006 and bear interest at 7.72% per year. The Series 2001-B Senior Notes were issued for
$25 million, are due May 16, 2008 and bear interest at 7.92% per year. The private placement agreement allows for a total of $200 million of Senior Notes
issuable in series. Proceeds from the transaction were used to reduce outstanding borrowings under the Company’s former revolving credit facility.
The Company leases certain computer equipment under a capitalized lease. The lease agreement has a term of 30 months, expiring in 2006. At
December 31, 2005, the monthly installment under this agreement was approximately $48,500. The present value of the future minimum lease payments
under these agreements totaled $285,000 and $858,000 at December 31, 2005 and 2004, respectively, which has been classified as current portion of
long-term debt in the accompanying consolidated financial statements. During 2005 and 2004, the Company did not purchase any assets under a
capitalized lease.
Principal maturities of long-term debt are as follows:
principal maturities
(amounts in thousands) of long-term debt
2006 $ 75,313
2007 31
2008 25,019
2009 16
2010 17
Thereafter 378
$100,774
note 7 – commitments
Lease Commitments
On June 26, 2003, we completed an amended and restated master agreement to our $50 million Synthetic Operating Lease Facility (the Facility or the
Synthetic Lease) with a group of financial institutions. The terms of the Facility provide for an initial lease period of five years, a residual value guarantee
of approximately $42.2 million at December 31, 2005, and purchase options on the properties. The Facility also contains a provision for an event of
default whereby the lessor, among other things, may require us to purchase any or all of the properties. One additional renewal period of five years
may be requested from the lessor, although the lessor is not obligated to grant such renewal. The amended and restated Facility has been accounted
for as an operating lease under SFAS No. 13 and related interpretations, including FASB Interpretation No. 46. Future minimum rental commitments
under the Facility have been included in the table of future minimum annual rental commitments below.
The Company also leases certain office space, retail stores, property and equipment under long-term, non-cancelable operating leases. Most of these
leases include renewal options and some include options to purchase and provisions for percentage rent based on sales. At December 31, 2005, future
minimum rental payments under all of the Company’s operating leases for each of the next five years and in the aggregate are as follows:
related non-related
(amounts in thousands) parties parties total
2006 $ 3,349 $ 38,902 $ 42,251
2007 3,351 35,359 38,710
2008 3,277 31,568 34,845
2009 2,480 27,564 30,044
2010 1,678 23,515 25,193
Thereafter 6,462 162,180 168,642
$20,597 $319,088 $339,685
Rental expense amounted to $43,047,000, $39,145,000 and $31,865,000 for the years ended December 31, 2005, 2004, and 2003, respectively. 2004 rental
expense includes an adjustment to correct lease accounting in the amount of $4,367,000 ($900,000 related to 2004.) See Note 1 – Leases for further details.
Other Commitments
The Company had construction commitments, which totaled approximately $57.5 million, at December 31, 2005.