O'Reilly Auto Parts 2007 Annual Report Download - page 25

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Management’s Discussion and Analysis
of Financial Condition and Results of Operations (continued)
We issue stand-by letters of credit provided by a $50 million sub limit under the Credit Facility that reduce our available borrowings. These letters
of credit are issued primarily to satisfy the requirements of workers compensation, general liability and other insurance policies. Substantially all
of the outstanding letters of credit have a one-year term from the date of issuance and have been issued to replace surety bonds that were previously
issued. Letters of credit totaling $28.6 million and $32.9 million were outstanding at December 31, 2007 and 2006, respectively.
CONTRACTUAL OBLIGATIONS
We have other liabilities reflected in our balance sheet, including deferred income taxes and self-insurance accruals. The payment obligations
associated with these liabilities are not reflected in the financial commitments table due to the absence of scheduled maturities. Therefore, the
timing of these payments cannot be determined, except for amounts estimated to be payable in 2008 that are included in current liabilities. In
addition, we have commitments with various vendors for the purchase of inventory as of December 31, 2007. The financial commitments table
excludes these commitments because they are cancelable by their terms.
Our contractual obligations, including commitments for future payments under non-cancelable lease arrangements, short and long-term debt
arrangements, interest payments related to long-term debt and purchase obligations for construction contract commitments, are summarized
below and are fully disclosed in Notes 6 and 7 to the consolidated financial statements.
Payments Due By Period
Before 1-3 3-5 Over 5
(In thousands) Total 1 Year Years Years Years
CONTRACTUAL OBLIGATIONS:
Long-term debt $ 100,469 $ 25,320 $ 149 $ -- $ 75,000
Interest payments related to long-term debt 35,165 4,845 8,086 8,085 14,149
Operating leases 502,583 51,765 90,619 74,896 285,303
Purchase obligations 96,251 96,251 -- -- --
Total contractual cash obligations $ 734,468 $ 178,181 $ 98,854 $ 82,981 $ 374,452
We believe that our existing cash and cash equivalents, cash expected to be provided by operating activities, available bank credit facilities and
trade credit will be sufficient to fund both our short-term and long-term capital needs for the foreseeable future.
INFLATION AND SEASONALITY
We attempt to mitigate the effects of merchandise cost increases principally by taking advantage of vendor incentive programs, economies of
scale resulting from increased volume of purchases and selective forward buying. As a result, we do not believe that our operations have been
materially affected by inflation. Our business is somewhat seasonal, primarily as a result of the impact of weather conditions on customer buying
patterns. Store sales and profits have historically been higher in the second and third quarters (April through September) of each year than in
the first and fourth quarters.
QUARTERLY RESULTS
The following table sets forth certain quarterly unaudited operating data for fiscal 2007 and 2006. The unaudited quarterly information includes
all adjustments which management considers necessary for a fair presentation of the information shown.
The unaudited operating data presented below should be read in conjunction with our consolidated financial statements and related notes
included elsewhere in this annual report, and the other financial information included therein.
(In thousands, except per share data) Fiscal 2007
First Second Third Fourth
Quarter Quarter Quarter Quarter
Sales $ 613,145 $ 643,108 $ 661,778 $ 604,288
Gross profit 269,281 287,185 293,701 270,293
Operating income 77,192 81,558 82,716 63,685
Net income 48,407 51,899 53,087 40,595
Basic net income per common share 0.42 0.45 0.46 0.35
Net income per common share – assuming dilution 0.42 0.45 0.46 0.35