Napa Auto Parts 2004 Annual Report Download - page 20

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management’s discussion and analysis of financial condition and results of operations
(continued)
were primarily used to repay certain variable rate borrowings
with interest at LIBOR plus .50%, reset every six months. These
Notes were paid with cash generated from the operations of the
Company.
On October 31, 2003, the Company obtained a $350 million
unsecured revolving line of credit with a consortium of financial
institutions which matures in October 2008 and bears interest at
LIBOR plus .30% (2.70% at December 31, 2004). At December
31, 2004, no amounts were outstanding under the line of credit.
At December 31, 2003, $50 million was outstanding under the
line of credit.
At December 31, 2004, the Company had unsecured Senior
Notes outstanding under a $500 million financing arrangement
as follows: $250 million, Series A, 5.86% fixed, due 2008; and
$250 million, Series B, 6.23% fixed, due 2011 and approximately
$1 million in other borrowings.
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,
2004, the Company was in compliance with all such covenants.
Due to the requirements in certain states, the Company also had
unused letters of credit of $47.5 million and $38.5 million outstand-
ingat December 31, 2004 and 2003, respectively. The weighted
average interest rate on the Company’s outstanding borrowings
was approximately 6.05% and 4.92% at December 31, 2004 and
2003, respectively. Total interest expense for all borrowings was
$37.3 million and $51.5 million in 2004 and 2003, respectively.
Construction and Lease Facility
The Company also has an $85 million construction and lease
facility. Properties acquired by the lessor are constructed and
then leased to the Company under operating lease agreements.
The total amount advanced and outstanding under this facility
at December 31, 2004 was approximately $84 million. Since the
resulting leases are operating leases, no debt obligation is
recorded on the Company’s consolidated balance sheet. This
construction and lease facility expires in 2008. Lease payments
fluctuate based upon current interest rates and are generally
based upon LIBOR plus .60%. The lease facility contains 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 was approximately $84 million at
December 31, 2004.
Contractual and Other Obligations
The following table shows the Company’s approximate obligations
and commitments, excluding interest due on credit facilities, to
make future payments under contractual obligations as of
December 31, 2004:
Purchase orders or contracts for the purchase of inventory and
other goods and services are not included in our estimates. We
are not able to determine the aggregate amount of such purchase
orders that represent contractual obligations, as purchase orders
may represent authorizations to purchase rather than binding
agreements. Our purchase orders are based on our current dis-
tribution needs and are fulfilled by our vendors within short time
horizons. The Company does not have significant agreements
for the purchase of inventory or other goods specifying minimum
quantities or set prices that exceed our expected requirements.
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, 2004:
In addition, the Company sponsors a defined benefit pension plan
that may obligate us to make contributions to the plan from time
to time. Contributions in 2004 were $63 million. We expect to make
a cash contribution to our qualified defined benefit plan in 2005,
and contributions required for 2006 and future years will depend
on a number of unpredictable factors including the market per-
formance of the plan's assets and future changes in interest rates
that affect the actuarial measurement of the plan’s obligations.
Interest Rate Swaps
The Company manages its exposure to changes in short-term
interest rates, particularly to reduce the impact on its floating-rate
interest payments, by entering into interest rate swap agreements.
We have interest rate swaps with fair values of approximately
$5.6 million and $11.6 million outstanding as of December 31,
2004 and December 31, 2003, respectively. The decrease in fair
values since December 31, 2003 is primarily due to normal
settlement of monthly payments due on swaps during the year
ended December 31, 2004, as well the early termination of
certain swaps and reductions 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 from December 31, 2003 to
December 31, 2004 (in thousands):
Fair value of contracts outstanding at December 31, 2003 $ 11,586
Contracts realized or otherwise settled
during the period (cash paid) (6,867)
Other changes in fair values 873
Fair value of contracts outstanding at December 31, 2004 $ 5,592
PAYMENT DUE BY PERIOD
Period less Period 1-3 Period 4-5 Period over
(in thousands) Total than 1 year years years 5 years
Credit facilities $ 500,968 $ 968 $ 250,000 $ — $ 250,000
Capital leases 31,144 3,210 10,432 6,631 10,871
Operating leases 422,758 116,544 192,792 46,667 66,755
Total contractual
cash obligations $ 954,870 $ 120,722 $ 453,224 $ 53,298 $ 327,626
PAYMENT DUE BY PERIOD
Tot a l Pe r io dPeriod Period Period
Amounts less than 1-3 4-5 over
(in thousands) Committed 1 year years years 5 years
Guaranteed borrowings
of affiliates $ 169,029 $ 30,352 $ 24,453 $ 16,302 $ 97,922
Residual value
guarantee under
operating leases 72,640 — — 72,640 —
Tota l commercial
commitments $ 241,669 $ 30,352 $ 24,453 $ 88,942 $ 97,922