O'Reilly Auto Parts 2011 Annual Report Download - page 47

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The table below outlines the calculations of the fixed charge coverage ratio and adjusted debt to adjusted EBITDAR ratio covenants,
as defined in the Credit Agreement governing the Revolving Credit Facility, for the twelve months ended December 31, 2011 and
2010 (dollars in thousands):
GAAP net income $507,673 $ 419,373
Add: Interest expense 28,165 39,273
Rent expense 230,897 226,879
Provision for income taxes 308,100 270,000
Depreciation expense 164,579 154,812
Amortization expense 1,301 6,630
Non-cash share based compensation 20,579 14,947
Gain on settlement of note receivable - (11,639)
Write-off of asset-based revolving credit facility debt issuance costs 21,626 -
Legacy CSK DOJ investigation charge - 20,900
Non-GAAP adjusted net income (EBITDAR) $1,282,920 $ 1,141,175
Interest expense $28,165 $ 39,273
Capitalized interest 4,666 5,133
Rent expense 230,897 226,879
Total fixed charges $263,728 $ 271,285
Fixed charge coverage ratio 4.86 4.21
GAAP debt $797,574 $ 358,704
Stand-by letters of credit 59,917 71,206
Discount on senior notes 3,683 -
Six-times rent expense 1,385,382 1,361,274
Non-GAAP adjusted debt $2,246,556 $ 1,791,184
Adjusted debt to adjusted EBITDAR ratio 1.75 1.57
Year Ended
December 31, 2011
Year Ended
December 31, 2010
The fixed charge coverage ratio and adjusted debt to adjusted EBITDAR ratio discussed and presented in the table above are not
derived in accordance with U.S. GAAP. We do not, nor do we suggest investors should, consider such non-GAAP financial measures
in isolation from, or as a substitute for, GAAP financial information. We believe that the presentation of our fixed charge coverage
ratio and adjusted debt to adjusted EBITDAR provides meaningful supplemental information to both management and investors that
reflects the required covenants under our credit agreement. We include these items in judging our performance and believe this non-
GAAP information is useful to investors as well. Material limitations of these non-GAAP measures are that such measures do not
reflect actual GAAP amounts. We compensate for such limitations by presenting, in the table above, the accompanying reconciliation
to the most directly comparable GAAP measures.
OFF-BALANCE SHEET ARRANGEMENTS
Off-balance sheet arrangements are transactions, agreements, or other contractual arrangements with an unconsolidated entity for
which we have an obligation to the entity that is not recorded in our consolidated financial statements. We have utilized various off
balance sheet financial instruments from time to time as sources of cash when such instruments provided a cost-effective alternative to
our existing sources of cash. We do not believe, however, that we are dependent on the availability of these instruments to fund our
working capital requirements or our growth plans.
On December 29, 2000, we entered into a sale-leaseback transaction with an unrelated party. Under the terms of the transaction, we
sold 90 properties, including land, buildings and improvements, which generated $52 million of cash. The lease, which is being
accounted for as an operating lease, provides for an initial lease term of 21 years and may be extended for one initial ten-year period
and two additional successive periods of five years each. The resulting gain of $5 million has been deferred and is being amortized
over the initial lease term. Net rent expense during the initial term is approximately $5 million annually.
In August 2001, we entered into a sale-leaseback with O’Reilly-Wooten, 2001 LLP (an entity owned by certain of our affiliates). The
transaction involved the sale and leaseback of nine O’Reilly Auto Parts stores and generated approximately $6 million of cash. The
transaction did not result in a material gain or loss. The lease, which has been accounted for as an operating lease, calls for an initial
term of 15 years with three five-year renewal options.
We issue stand-by letters of credit provided by a $200 million sub limit under the Revolving Credit Facility that reduce our available
borrowings under the Revolving Credit Facility. Those 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
FORM 10-K