Napa Auto Parts 2002 Annual Report Download - page 23

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ments fluctuate based upon current interest rates and are
generally based upon LIBOR plus .55%. The lease facility con-
tains residual value guarantee provisions and guarantees
under events of default. Although management believes the
likelihood of funding to be remote, the maximum guarantee
obligation under the construction and lease facility is approxi-
mately $66 million at December 31, 2002. In addition, the
Company guaranteed borrowings of affiliates totaling approxi-
mately $61.4 million and $59.7 million at December 31, 2002
and 2001, respectively.
In August 1999, the Company completed the repurchase of 15
million shares authorized by the Board of Directors in 1994.
The Board authorized the repurchase of an additional 15 mil-
lion shares on April 19, 1999. Through December 31, 2002,
approximately 7.8 million shares have been repurchased
under this new authorization.
The following table shows the Company’s approximate obliga-
tions and commitments to make future payments under
contractual obligations as of December 31, 2002 (in thousands):
Period less Period 1-3 Period 4-5 Period over
Totalthan 1 year years years 5 years
Credit facilities $ 791,701 $116,905 $174,796 — $500,000
Operating leases 375,850 101,728 125,877 60,921 87,324
Total Contractual
Cash Obligations $1,167,551 $218,633 $300,673 $60,921 $587,324
The Company has certain commercial commitments related
to affiliate borrowing guarantees and residual values under
operating leases. The Company believes the likelihood of any
significant amounts being funded in connection with these
commitments to be remote. The following table shows the
Company’s approximate commercial commitments as of
December 31, 2002 (in thousands):
Total Period Period Period Period
Amounts less than 1-3 4-5 over
Committed 1 year years years 5 years
Guaranteed borrowings
of affiliates $ 61,350 $21,372 $6,903 $4,701 $28,374
Residual value
guarantee under
operating leases 52,800 — — — 52,800
Total Commercial
Commitments $114,150 $21,372 $6,903 $4,701 $81,174
The Company manages its exposure to changes in short-term
interest rates, particularly to reduce the impact on its floating-
rate term notes, by entering into interest rate swap agreements.
The Company has interest rate swaps with fair value of approxi-
mately $15.6 million and $31.6 million outstanding as of
December 31, 2002 and December 31, 2001, respectively. The
decrease in fair values since December 31, 2001 is primarily
due to normal settlement of monthly payments due on swaps
during the year ended December 31, 2002, as well as the early
termination of certain swaps, offset by increases in the fair value
of the liability on outstanding swaps during the period.
The following table shows the activity of the Company’s liability
for interest rate swap agreements for the period from December
31, 2001 to December 31, 2002 (in thousands):
Fair value of contracts outstanding at December 31, 2001 $31,570
Contracts realized or otherwise settled
during the period (cash paid) (35,580)
Other changes in fair values 19,653
Fair value of contracts outstanding at December 31, 2002 $15,643
This interest rate swap liability is included in other accrued
expenses in the Company’s consolidated balance sheet. Other
than interest rate swaps, the Company does not have any
other derivative instruments. The Company does not enter into
derivatives for speculative or trading purposes.
The Company’s exposure to future declines in interest rates
associated with fixed rate interest rate swap agreements has
been reduced significantly since December 31, 2001. At
December 31, 2001, the Company had fixed interest rate pay-
ment swap agreements outstanding in the notional amount of
approximately $600 million. At December 31, 2002, the
notional amount of these outstanding interest swap agree-
ments was approximately $100 million, comprised of two $50
million notional swaps with maturity dates of 2005 and 2008.
In addition, at December 31, 2002, approximately $500 mil-
lion of the Company’s total borrowings, which mature in
approximately six and nine years, are at fixed rates of interest.
A 1% adverse change in interest rates would not have a mate-
rial adverse impact on future earnings and cash flows of the
Company.