O'Reilly Auto Parts 2005 Annual Report Download - page 44

O’REILLY AUTOMOTIVE 2005 ANNUAL REPORT
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notes to consolidated financial statements (continued)
year ended december 31,
as originally
reported pro forma
(in thousands) 2003 adjustment 2003
Product sales $1,511,816 $ - $1,511,816
Cost of goods sold, including
warehouse and distribution expense 873,481 (823) 872,658
Operating, selling, general and administrative expenses 473,060 - 473,060
Operating income 165,275 823 166,098
Other expense, net (5,233) - (5,233)
Income before income taxes 160,042 823 160,865
Provision for income taxes 59,955 311 60,266
Net income $ 100,087 $ 512 $ 100,599
Basic income per share $ 0.93 $ 0.00 $ 0.93
Net income per share – assuming dilution $ 0.92 $ 0.00 $ 0.92
Weighted-average common
shares outstanding 107,816 107,816 107,816
Weighted-average common
shares outstanding–assuming dilution 109,060 109,060 109,060
note 3 – acquisition
On May 31, 2005, the Company purchased all of the outstanding stock of W.E. Lahr Company and its subsidiary, Midwest Auto Parts Distributors,
Inc. and combined affiliates (“Midwest”) for approximately $63 million cash, net of cash acquired, including acquisition costs. Midwest was a specialty
retailer, which supplied automotive aftermarket parts in Minnesota, Montana, North Dakota, South Dakota, Wisconsin and Wyoming. The acquisition
was accounted for using the purchase method of accounting, and accordingly, the results of operations of Midwest are included in the consolidated
statements of income from the date of acquisition. The purchase price was allocated preliminarily to assets acquired and liabilities assumed based on
their estimated fair values on the date of acquisition with the excess allocated to goodwill. The acquisition of Midwest was not material for pro forma
presentation requirements.
note 4 – stock split
On May 20, 2005, the Company’s Board of Directors declared a two-for-one stock split that was effected in the form of a 100% stock dividend payable
to all shareholders of record as of May 31, 2005. The stock dividend was paid on June 15, 2005. Accordingly, this stock split has been recognized by
reclassifying $559,000, the par value of the additional shares resulting from the split, from retained earnings to common stock.
All share and per share information included in the accompanying consolidated financial statements has been restated to reflect the retroactive effect
of the stock split for all periods presented.
note 5 – related parties
The Company leases certain land and buildings related to forty-nine of its O'Reilly Auto Parts stores under six-year operating lease agreements with
O'Reilly Investment Company and O'Reilly Real Estate Company, partnerships in which certain shareholders and directors of the Company are partners.
Generally, these lease agreements provide for renewal options for an additional six years at the option of the Company and the lease agreements are
periodically modified to further extend the lease term for specific stores under the agreement. Additionally, the Company leases certain land and buildings
related to twenty-one of its O’Reilly Auto Parts stores under 15-year operating lease agreements with O’Reilly-Wooten 2000 LLC, which is owned by certain
shareholders and directors of the Company. Generally, these lease agreements provide for renewal options for two additional five-year terms at the option
of the Company (see Note 7). Rent payments under these operating leases totaled $3,380,000, $3,374,000 and $3,238,000 in 2005, 2004 and 2003, respectively.
note 6 – long-term debt
On July 29, 2005, the Company amended the unsecured, five-year syndicated credit facility (Credit Facility) in the amount of $100 million led by Wells
Fargo Bank as the Administrative Agent, replacing a three-year $150 million syndicated credit facility. The Credit Facility is guaranteed by all of the
Company’s subsidiaries and may be increased to a total of $200 million, subject to the availability of such additional credit from either existing banks within
the Credit Facility or other banks. The Credit Facility bears interest at LIBOR plus a spread ranging from 0.50% to 1.0% (4.86% at December 31, 2005)
and expires in July 2010. At December 31, 2005 and 2004, the Company had no outstanding balance with the Credit Facility. The Company’s aggregate
availability for additional borrowings under the Credit Facility was $70.7 million and $128.7 million at December 31, 2005 and 2004, respectively.