O'Reilly Auto Parts 2011 Annual Report Download - page 46

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primarily to satisfy workers’ compensation, general liability and other insurance policies, in the amount of $60 million. As of
December 31, 2011, we had no outstanding borrowings under the Revolving Credit Facility.
Senior Notes:
4.875% Senior Notes due 2021:
On January 14, 2011, we issued $500 million aggregate principal amount of unsecured 4.875% Senior Notes due 2021 (―4.875%
Senior Notes due 2021‖) at a price to the public of 99.297% of their face value with United Missouri Bank, N.A. (―UMB‖) as trustee.
Interest on the 4.875% Senior Notes due 2021 is payable on January 14 and July 14 of each year, which began on July 14, 2011, and is
computed on the basis of a 360-day year. The net proceeds from the issuance of the 4.875% Senior Notes due 2021 were used to
repay all of the outstanding borrowings under our ABL Credit Facility and to pay fees and expenses related to the offering and costs
associated with terminating our existing interest rate swap contracts, with the remainder used for general corporate purposes.
4.625% Senior Notes due 2021:
On September 19, 2011, we issued $300 million aggregate principal amount of unsecured 4.625% Senior Notes due 2021 (―4.625%
Senior Notes due 2021‖) at a price to the public of 99.826% of their face value with UMB as trustee. Interest on the 4.625% Senior
Notes due 2021 is payable on March 15 and September 15 of each year beginning on March 15, 2012, and is computed on the basis of
a 360-day year. The net proceeds from the issuance of the 4.625% Senior Notes due 2021 were used to pay fees and expenses related
to the offering, with the remainder intended to be used to repay borrowings outstanding from time to time under the Revolving Credit
Facility and for general corporate purposes, including share repurchases.
The senior notes are guaranteed on a senior unsecured basis by each of our subsidiaries (―Subsidiary Guarantors‖) that incurs or
guarantees our obligations under our Revolving Credit Facility or certain of our other debt or any of our Subsidiary Guarantors. The
guarantees are full and unconditional and joint and several. Each of the Subsidiary Guarantors is wholly-owned, directly or indirectly,
by us and we have no independent assets or operations other than those of our subsidiaries. Our only direct or indirect subsidiaries
that would not be Subsidiary Guarantors would be minor subsidiaries. No minor subsidiaries exist today. Neither we, nor any of our
Subsidiary Guarantors, are subject to any material or significant restrictions on our ability to obtain funds from our subsidiaries by
dividend or loan or to transfer assets from such subsidiaries, except as provided by applicable law. Each of our senior notes is subject
to certain customary covenants, with which we complied as of December 31, 2011.
Debt covenants:
The indentures governing our senior notes contain covenants that limit our ability and the ability of certain of our subsidiaries to,
among other things: (i) create certain liens on assets to secure certain debt; (ii) enter into certain sale and leaseback transactions; and
(iii) merge or consolidate with another company or transfer all or substantially all of our or its property, in each case as set forth in the
indentures. These covenants are, however, subject to a number of important limitations and exceptions.
The Credit Agreement contains covenants, including limitations on total outstanding borrowings under the Revolving Credit Facility,
a minimum consolidated fixed charge coverage ratio of 2.0 times through December 31, 2012; 2.25 times through December 31, 2014;
2.5 times through maturity; and a maximum adjusted consolidated leverage ratio of 3.0 times through maturity. The consolidated
leverage ratio includes a calculation of adjusted earnings before interest, taxes, depreciation, amortization, rent and stock option
compensation expense (―EBITDAR‖) to adjusted debt. Adjusted debt includes outstanding debt, outstanding stand-by letters of credit,
six-times rent expense and excludes any premium or discount recorded in conjunction with the issuance of long-term debt. In the
event that we should default on any covenant contained within the Credit Agreement, certain actions may be taken against us,
including but not limited to possible termination of credit extensions, immediate payment of outstanding principal amount plus
accrued interest and litigation from our lenders. We had a fixed charge coverage ratio of 4.86 times and 4.21 times as of December
31, 2011 and 2010, respectively, and an adjusted debt to adjusted EBITDAR ratio of 1.75 times and 1.57 times as of December 31,
2011 and 2010, respectively, remaining in compliance with all covenants related to the borrowing arrangements. Under our current
financing policy, we have targeted an adjusted consolidated leverage ratio range of 2.0 times to 2.25 times.
FORM 10-K