O'Reilly Auto Parts 2011 Annual Report Download - page 48

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from the date of issuance. Letters of credit totaling $60 million and $71 million were outstanding at December 31, 2011 and 2010,
respectively.
CONTRACTUAL OBLIGATIONS
Our contractual obligations as of December 31, 2011, included commitments for short and long-term debt arrangements, interest
payments related to long-term debt, future payments under non-cancelable lease arrangements, self-insurance reserves and purchase
obligations for construction contract commitments, which are identified in the table below and are fully disclosed in Note 5 ―Long-
Term Debt‖ and Note 11 ―Commitments‖ to the Consolidated Financial Statements. We expect to fund these commitments primarily
with operating cash flows generated in the normal course of business or through borrowings under our Revolving Credit Facility.
Deferred income taxes and commitments with various vendors for the purchase of inventory are included in ―Other liabilities‖ on our
Consolidated Balance Sheets but are not reflected in the table below due to the absence of scheduled maturities, the nature of the
account or the commitment’s cancellation terms. Due to the absence of scheduled maturities, the timing of certain of these payments
cannot be determined, except for amounts estimated to be payable in 2012, which are included in ―Current liabilities‖ on our
Consolidated Balance Sheets.
Contractual Obligations:
Long-term debt principal and interest payments
(1)
$ 797,727 $ 737 $ 477 $ 177 $ 796,336
Future minimum lease payments under capital leases
(2)
256 77 154 25 -
Future minimum lease payments under operating leases
(2)
1,650,698 226,381 400,661 297,947 725,709
Other obligations 3,000 600 1,200 1,200 -
Self-insurance reserves
(3)
116,096 53,155 32,009 15,736 15,196
Construction commitments 41,616 41,616 - - -
Total contractual cash obligations $ 2,609,393 $ 322,566 $ 434,501 $ 315,085 $ 1,537,241
(In thousands)
Payments Due By Period
Total
Before
1 Year
1 to 2
Years
3 to 4
Years
Years 5
and Over
(1) On January 14, 2011, we entered into a new credit agreement for a five-year $750 million Revolving Credit Facility, which matures in January of 2016. On
September 9, 2011, we amended the Credit Agreement, decreasing the aggregate commitments under the Revolving Credit Facility to $660 million,
extending the maturity date on the Credit Agreement to September of 2016 and reducing the facility fee and interest rate margins for borrowings under the
Revolving Credit Facility. Borrowings under the Revolving Credit Facility (other than swing line loans) bear interest, at our option, at either the Base Rate
or Eurodollar Rate (both as defined in the agreement) plus a margin, that will vary from 0.975% to 1.600% in the case of loans bearing interest at the
Eurodollar Rate and 0.000% to 0.600% in the case of loans bearing interest at the Base Rate, in each case based upon the better of the ratings assigned to our
debt by Moody’s Investor Service, Inc. and Standard & Poor’s Rating Services. Swing line loans made under the Revolving Credit Facility bear interest at
the Base Rate plus the applicable margin described above. In addition, we pay a facility fee on the aggregate amount of the commitments in an amount
equal to a percentage of such commitments, varying from 0.150% to 0.400% based upon the better of the ratings assigned to our debt by Moody’s Investor
Service, Inc. and Standard & Poor’s Rating Services. Based on our current credit ratings, our margin for Base Rate loans is 0.200%, our margin for
Eurodollar Rate loans is 1.200% and our facility fee is 0.175%.
(2) The minimum lease payments above do not include certain tax, insurance and maintenance costs, which are also required contractual obligations under our
operating leases but are generally not fixed and can fluctuate from year to year. These expenses historically average approximately 20% of the
corresponding lease payments.
(3) We use various self-insurance mechanisms to provide for potential liabilities from workers’ compensation, vehicle and general liability, and employee health
care benefits. These liabilities are recorded on our Consolidated Balance Sheets at our estimate of their net present value and do not have scheduled
maturities, however we can estimate the timing of future payments based upon historical patterns.
We record a reserve for potential liabilities related to uncertain tax positions, including estimated interest and penalties, which are
fully disclosed in Note 14 ―Income Taxes‖ to the Consolidated Financial Statements. These estimates are not included in the above
table because the timing related to the ultimate resolution or settlement of these positions cannot be determined. As of December 31,
2011, we recorded a liability of $53 million related to these uncertain tax positions on our Consolidated Balance Sheets, all of which
was included as a component of ―Other liabilities‖.
CRITICAL ACCOUNTING ESTIMATES
The preparation of our financial statements in accordance with GAAP requires the application of certain estimates and judgments by
management. Management bases its assumptions, estimates, and adjustments on historical experience, current trends and other factors
believed to be relevant at the time the consolidated financial statements are prepared. Management believes that the following policies
are critical due to the inherent uncertainty of these matters and the complex and subjective judgments required to establish these
estimates. Management continues to review these critical accounting policies and estimates to ensure that the consolidated financial
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FORM 10-K