Napa Auto Parts 2003 Annual Report Download - page 30

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
3. FACILITY CONSOLIDATION, IMPAIRMENT AND OTHER CHARGES
Prior to December 31, 2001, the Company’s management approved a plan to close and consolidate certain facilities, terminate
certain employees, and exit certain other activities. The Company also determined certain assets were impaired. Following is a
summary of the charges recorded in the year ended December 31, 2001, and subsequent activity related to accruals for contin-
uing liabilities associated with the plan (in thousands):
Liability at
Paid in Paid in Paid in December 31,
Total Non-cash 2001 2002 2003 2003
Impairment charges $ 49,400 $ (49,400) $ — $ — $ — $ —
Facility consolidation expenses 17,900 (6,900) (300) (4,800) (2,600) 3,300
Severance expenses 6,700 — (100) (4,800) (1,800) —
Inventory-related exit costs 17,400 (17,400) — — — —
Other 16,400 (15,800) — (300) (300) —
$107,800 $ (89,500) $ (400) $ (9,900) $ (4,700) $ 3,300
(In Thousands) December 31 2003 2002
Unsecured revolving line of credit,
$350,000,000, Libor plus .40%,
due October 2008 $50,050 $108,964
Unsecured term notes:
November 30, 2001, Series A Senior
Notes, $250,000,000, 5.86% fixed,
due November 30, 2008 250,000 250,000
November 30, 2001, Series B Senior
Notes, $250,000,000, 6.23% fixed,
due November 30, 2011 250,000 250,000
November 21, 2003, Libor plus .50%,
due February 2010 125,000 171,367
Other borrowings 2,583 11,370
677,633 791,701
Current portion of long-term debt and
other borrowings 52,525 116,905
$625,108 $674,796
Impairment charges are primarily comprised of two sepa-
rate technology projects: (1) an abandoned software
system implementation of the Company’s office products
segment totaling approximately $30,000,000, and (2) an
impaired technology-related venture of the Company’s
automotive segment totaling approximately $15,000,000
for which the Company projected the undiscounted cash
flows to be less than the carrying amount of the related
investment. Facility consolidation expenses relate to facility
consolidations in each of the Company’s business segments.
In 2001, the Company identified certain distribution,
branch and retail facilities that were to be closed prior to
December 31, 2002. The Company appropriately accrued
the estimated lease obligation from the planned exit date
through the end of the contractual lease term, net of esti-
mated sublease income. The facility consolidations did not
result in any material decline in net sales, as all such closed
facilities have been served by other Company-operated
facilities.
Severance expenses include charges for employees who
have been involuntarily terminated in connection with the
Company’s facility consolidation. All terminations occurred
prior to December 31, 2002. Inventory-related exit costs
relate to inventory considered by the Company to be
impaired as a result of the facility consolidations described
above and related inventory rationalization and optimiza-
tion programs. All inventory-related exit costs have been
classified as cost of goods sold in the accompanying
consolidated statement of income. Other charges have
been classified as a component of selling, administrative
and other expenses.
4. CREDIT FACILITIES
The principal amount of the Company’s borrowings subject
to variable rates before interest rate swap agreements
totaled approximately $177,268,000 and $287,666,000 at
December 31, 2003 and 2002, respectively. The weighted
average interest rate on the Company’s outstanding
borrowings was approximately 4.92% and 4.76% at
December 31, 2003 and 2002, respectively.
On November 21, 2003, the Company completed a
$125,000,000 financing with a consortium of financial
institutions and insurance companies (the “Notes”) that
matures in February 2010 and bears interest at Libor plus
.50% (1.73% at December 31, 2003), reset every six months.
The proceeds of the Notes were primarily used to repay
certain variable rate borrowings.
On October 31, 2003, the Company obtained a $350,000,000
unsecured revolving line of credit with a consortium of
financial institutions that matures in October 2008 and
bears interest at Libor plus .40% (1.47% at December 31,
2003). At December 31, 2003, $50,050,000 was outstanding
under the line of credit.
Certain borrowings contain covenants related to a maximum
debt-to-equity ratio, a minimum fixed-charge coverage ratio,
and certain limitations on additional borrowings. At
December 31, 2003, the Company was in compliance with
all such covenants. Total interest expense for all borrowings
was $51,538,000 in 2003, $59,640,000 in 2002 and
$59,416,000 in 2001.
Amounts outstanding under the Company’s credit facilities
consist of the following: