O'Reilly Auto Parts 2015 Annual Report Download - page 41

FORM 10-K
33
The following table identifies the estimated payments of the Company's contractual obligations as of December 31, 2015 (in thousands):
Payments Due By Period
Contractual Obligations Total
Before
1 Year
Years
1 and 2
Years
3 and 4
Years 5
and Over
Long-term debt principal and interest payments (1) $ 1,783,581 $ 61,200 $ 122,400 $ 122,400 $ 1,477,581
Future minimum lease payments under operating leases (2) 2,132,524 259,815 483,758 398,658 990,293
Other obligations 600 600 — — —
Self-insurance reserves (3) 141,173 72,741 44,525 15,539 8,368
Construction commitments 62,640 62,640 — — —
Total contractual cash obligations $ 4,120,518 $ 456,996 $ 650,683 $ 536,597 $ 2,476,242
(1) Our Revolving Credit Facility, which has a maximum aggregate commitment of $600 million and matures in July 2018, bears interest (other than
swing line loans), at our option, at either the Base Rate or Eurodollar Rate (both as defined in the agreement) plus a margin, that will vary from
0.875% to 1.250% in the case of loans bearing interest at the Eurodollar Rate and 0.000% to 0.250% 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, subject to limited exceptions. 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 0.125% to 0.250% per annum based upon the better of the ratings assigned to our debt by Moody's Investor Service,
Inc. and Standard & Poor's Rating Services, subject to limited exceptions. Based on our current credit ratings, our margin for Base Rate loans was
0.000%, our margin for Eurodollar Rate loans was 0.875% and our facility fee was 0.125%. As of December 31, 2015, we had no outstanding
borrowings under our Revolving Credit Facility.
(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. See Note 6 "Leasing" to the Consolidated Financial Statements for further information on our operating
leases.
(3) We use various self-insurance mechanisms to provide for potential liabilities from workers' compensation, vehicle and general liability, and employee
health care benefits. The self-insurance reserves above are at the undiscounted obligation amount. The self-insurance reserves 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. See Note 10 "Commitments" to the Consolidated Financial Statements for
further information on our self-insurance reserves.
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 historically utilized various off-
balance sheet financial instruments, including sale-leaseback and synthetic lease transactions, but we have not entered into any such
transactions for over five years and do not plan to utilize off-balance sheet arrangements in the future to fund our working capital
requirements, operations or growth plans.
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
from the date of issuance. Letters of credit totaling $38 million and $48 million were outstanding at December 31, 2015 and 2014,
respectively.
Other than in connection with executing operating leases, we do not have any off-balance sheet financing that has, or is reasonably likely
to have, a material, current or future effect on our financial condition, cash flows, results of operations, liquidity, capital expenditures or
capital resources. See "Contractual Obligations" section of Item 7 of this annual report on Form 10-K and Note 6 "Leasing" to the
Consolidated Financial Statements for further information on our operating leases.
CRITICAL ACCOUNTING POLICIES AND 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 in establishing these
estimates. Management continues to review these critical accounting policies and estimates to ensure that the consolidated financial
statements are presented fairly in accordance with GAAP. However, actual results could differ from our assumptions and estimates and
such differences could be material.