Napa Auto Parts 2008 Annual Report Download - page 36

notes to consolidated nancial statements (continued)
december 31, 2008
3. credit facilities (continued)
Approximate maturities under the Company’s credit facilities are as
follows (in thousands):
2009 $ –
2010 –
2011 250,000
2012 –
2013 250,000
$ 500,000
4. leased properties
In June 2003, the Company completed an amended and restated
master agreement to our $85,000,000 construction and lease agree-
ment (the Agreement). e lessor in the Agreement is an independent
third-party limited liability company, which has as its sole member
a publicly traded corporation. Properties acquired by the lessor are
constructed and/or then leased to the Company under operating
lease agreements. No additional properties are being added to this
Agreement, as the construction term has ended. e Company does
not believe the lessor is a variable interest entity, as defined in FASB
Interpretation No. 46(R), Consolidation of Variable Interest Entities, an
interpretation of ARB No. 51 (FIN No. 46). In addition, the Company
has verified that even if the lessor was determined to be a variable
interest entity, the Company would not have to consolidate the lessor
nor the assets and liabilities associated with properties leased to the
Company. is is because the assets leased under the Agreement do
not exceed 50% of the total fair value of the lessor’s assets, excluding
any assets that should be excluded from such calculation under FIN
No. 46, nor did the lessor finance 95% or more of the leased balance
with non-recourse debt, target equity or similar funding. e Agree-
ment has been accounted for as an operating lease under SFAS No.
13, Accounting for Leases (SFAS No. 13) and related interpretations.
Future minimum rental commitments under the Agreement have
been included in the table of future minimum payments below.
Rent expense related to the Agreement is recorded under selling,
administrative, and other expenses in our consolidated statements
of income and was $2,586,000, $4,877,000, and $4,797,000 for the
years ended December 31, 2008, 2007, and 2006, respectively.
In October 2007, the Company entered into a sale-leaseback transac-
tion with a financial institution. In connection with the transaction,
the Company sold certain automotive retail store properties and
immediately leased the properties back over a lease term of twenty
years. e lease was classified as an operating lease. Net proceeds from
the transaction amounted to approximately $56,000,000. e Com-
pany realized a net gain of approximately $20,000,000, which was
deferred and is being amortized over the lease term. e unamortized
portion of the deferred gain is included in other long-term liabilities in
the consolidated balance sheets at December 31, 2008 and 2007.
At December 31, 2008 and 2007, buildings include $11,550,000
and $15,400,000 with accumulated depreciation of $6,831,000 and
$8,336,000, respectively, for leases of distribution centers and stores
capitalized. Depreciation expense for capital leases was approxi-
mately $2,267,000, $2,509,000, and $4,585,000 in 2008, 2007,
and 2006, respectively.
Future minimum payments, by year and in the aggregate, under the
capital and noncancelable operating leases with initial or remaining
terms of one year or more consisted of the following at December
31, 2008 (in thousands):
Capital Leases Operating Leases
2009 $ 1,634 $ 120,622
2010 1,296 94,473
2011 1,021 55,007
2012 913 53,784
2013 815 38,806
ereafter 2,024 148,429
Total minimum lease payments 7,703 $ 511,121
Amounts representing interest 2,984
Present value of future
minimum lease payments $ 4,719
Rental expense for operating leases was approximately $159,562,000
in 2008, $153,273,000 in 2007, and $147,727,000 in 2006.
5. stock options and restricted stock awards
e Company maintains various Long-Term Incentive Plans, which
provide for the granting of stock options, stock appreciation rights
(SARs), restricted stock, restricted stock units (RSUs), performance
awards, dividend equivalents and other share-based awards. e
Company issues new shares upon option exercise under these plans.
Effective January 1, 2006, the Company adopted SFAS No. 123(R)
choosing the “modified prospective” method. Compensation cost
recognized for the years ended December 31, 2008, 2007 and 2006,
includes: (a) compensation cost for all share-based payments granted
prior to, but not yet vested as of January 1, 2006, based on the grant
date fair value estimated in accordance with the original provisions of
SFAS No. 123; and (b) compensation cost for all share-based pay-
ments granted subsequent to January 1, 2006, based on the grant date
fair value estimated with the provisions of SFAS No. 123(R). Most
options may be exercised not earlier than twelve months nor later than
ten years from the date of grant. e Company recognizes compensa-
tion expense based on the straight-line method for all award types,
including SAR’s, which are subject to graded vesting based on a service
condition. As of January 1, 2006, there was approximately $1.2 mil-
lion of unrecognized compensation cost for all awards granted prior
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