O'Reilly Auto Parts 2011 Annual Report Download - page 45

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net of the amount of accounts payable to vendors. Our net inventory investment significantly decreased as a result of the impact of
our enhanced vendor financing programs as well as our ongoing efforts to remove excess inventory from our systems. Our vendor
financing programs enable us to reduce overall supply chain costs and negotiate extended payment terms with our vendors. Our
accounts payable to inventory ratio was 64.4% and 44.3% at December 31, 2011 and 2010, respectively. Our efforts to remove excess
inventory from our systems resulted in a decrease in total inventory of $37 million during the year, despite the fact that we opened 170
new stores during the year. The increase in cash provided by operating activities in 2010 compared to 2009 was primarily due to an
increase in net income (adjusted for the effect of non-cash depreciation and amortization charges and deferred income taxes), a
significant decrease in net inventory investment and an increase in other liabilities as compared to the same period in 2009. The
decrease in net inventory investment in 2010 as compared to 2009 was the result of the significant investments in 2009 to improve the
inventory availability in the acquired CSK stores. The increase in other liabilities was principally due to the accrual of the CSK DOJ
investigation charge during 2010, which was paid in 2011.
Investing activities:
The decrease in cash used in investing activities in 2011 compared to 2010 is primarily the result of decreased capital expenditures.
Total capital expenditures were $328 million in 2011, $365 million in 2010 and $415 million in 2009. During 2010, we completed the
comprehensive expansion of our distribution system in the CSK markets and the conversion of the CSK stores to the O’Reilly POS,
resulting in reduced levels of conversion related capital expenditures during 2011. The decrease in cash used in investing activities in
2010 compared to 2009 was principally due to a decrease in capital expenditures associated with the integration of CSK and an
increase in payments received on notes receivable. Capital expenditures related to the acquisition of CSK included the purchase of
properties for distribution centers (―DC‖s) and costs associated with the conversion of CSK stores to the O’Reilly Brand. Although
we opened four new DCs in 2010, a significant portion of the capital expenditures for these DCs occurred in 2009 as we acquired
property and began construction of the facilities. The increase in payments received on notes receivable was due to the one-time
nonrecurring payment received to settle a note receivable acquired in the CSK acquisition.
We opened 170 net, new stores in 2011, 149 net, new stores in 2010 and 150 net, new stores in 2009. We plan to open 180 net, new
stores in 2012. The costs associated with the opening of a new store (including the cost of land acquisition, improvements, fixtures,
vehicles, net inventory investment and computer equipment) are estimated to average approximately $1.3 million to $1.5 million;
however, such costs may be significantly reduced where we lease, rather than purchase, the store site.
Financing activities:
The increase in net cash used in financing activities during 2011 compared to 2010 is primarily attributable to the impact of
repurchases of our common stock during 2011 in accordance with our Board-approved share repurchase program, which was partially
offset by an increase in net long term borrowings in 2011 as compared to net repayments under our facilities during 2010. The net
borrowings in 2011 are the result of proceeds from the issuance of our 4.875% Senior Notes due 2021 and our 4.625% Senior Notes
due 2021 in January and September of 2011, respectively, partially offset by the repayment and termination of our previous ABL
Credit Facility and the payment of debt issuance costs related to the issuance of our senior notes and the establishment of our new
unsecured Revolving Credit Facility. The net repayments under our facilities in 2010 were the result of our focus on using available
cash on hand to reduce the level of outstanding borrowings under our secured ABL Credit Facility. Net cash used in financing
activities in 2010 compared to net cash provided by financing activities in 2009 is driven by the increase in net repayments of
outstanding borrowings on our long-term debt.
Credit facilities:
On July 11, 2008, we entered into a credit agreement for a five-year asset-based revolving credit facility, which was scheduled to
mature in July of 2013. At December 31, 2010, we had outstanding borrowings of $356 million under the ABL Credit Facility, of
which $106 million were not covered under an interest rate swap contract. All outstanding borrowings under the ABL Credit Facility
were repaid, and all related interest rate swap transaction contracts were terminated on January 14, 2011, and the ABL Credit Facility
was retired concurrent with the issuance of our 4.875% Senior Notes due 2021, as further described below. In conjunction with the
retirement of our ABL Credit Facility, we recognized a one-time non-cash charge to write off the balance of debt issuance costs
related to the ABL Credit Facility in the amount of $22 million and a one-time charge related to the termination of our interest rate
swap contracts in the amount of $4 million, which are included in ―Other income (expense)‖ on the accompanying Consolidated
Statements of Income for the year ended December 31, 2011.
On January 14, 2011, we entered into a new credit agreement for a five-year $750 million unsecured Revolving Credit Facility
arranged by BA and Barclays Capital, which was scheduled to mature in January of 2016. During 2011, we amended the unsecured
Revolving Credit Facility, which decreased the facility to $660 million and reduced the fees and interest rate margins for borrowings
under the Revolving Credit Facility. The amendment also extended the maturity of the Revolving Credit Facility to September of
2016. In conjunction with the amendment to the Revolving Credit Facility, we recognized a one-time charge related to the
modification to the credit facility in the amount of $0.3 million, which is included in ―Other income (expense)‖ on the accompanying
Consolidated Statements of Income for the year ended December 31, 2011. The Revolving Credit Facility includes a $200 million
sub-limit for the issuance of letters of credit and a $75 million sub-limit for swing line borrowings. As described in the credit
agreement governing the Revolving Credit Facility, we may, from time to time subject to certain conditions, increase the aggregate
commitments under the Revolving Credit Facility by up to $200 million. As of December 31, 2011, we had stand-by letters of credit,
FORM 10-K