O'Reilly Auto Parts 2007 Annual Report Download - page 39

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Notes to Consolidated Financial Statements (continued)
Midwest are included in the consolidated statements of income from the date of acquisition. The purchase price was allocated 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 48 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 21 of its O’Reilly Auto Parts stores under fifteen-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 $3,446,000,
$3,413,000 and $3,380,000 in 2007, 2006 and 2005, respectively.
NOTE 6 — LONG-TERM DEBT
On July 29, 2005, the Company entered into an 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 0.375%
to 0.750% (5.25% at December 31, 2007) and expires in July 2010. There were no outstanding borrowings under the Credit Facility at
December 31, 2007. Outstanding borrowings under the Credit Facility at December 31, 2006 totaled $9.7 million.
The Company issues stand-by letters of credit provided by a $50 million sub limit under the Credit Facility that reduce 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. Accordingly, the Company’s aggregate availability for additional borrowings under the Credit Facility was $71.4 million and $57.4
million at December 31, 2007 and 2006, respectively. The Company is subject to a commitment fee ranging from 0.075% to 0.175% (.075% at
December 31, 2007) for unused borrowings under the Credit Facility.
On May 15, 2006, the Company entered into a private placement agreement that allows for the issuance of an aggregate of $300 million in
unsecured senior notes, issuable in series. On May 15, 2006, the Company completed the private placement of $75 million of the first series of
Senior Notes (the “Series 2006-A Senior Notes”) under the Private Placement Agreement. The $75 million of Series 2006-A Senior Notes are
due May 15, 2016 and bear interest at 5.39% per year. Proceeds from the Series 2006-A Senior Notes private placement transaction were used
to repay certain existing debt of the Company, including $75 million of 7.72% Series 2001-A Senior Notes due May 15, 2006.
On May 16, 2001, the Company completed a $100 million private placement of two series of unsecured senior notes (Senior Notes). The Series
2001-A Senior Notes were issued for $75 million and were repaid on May 15, 2006 from the proceeds from the issuance of the Series 2006-A Senior
Notes discussed above. The Series 2001-B Senior Notes were issued for $25 million, are due May 16, 2008 and bear interest at 7.92% per year.
The Company leases certain computer equipment under a capital lease agreement. The lease agreement has a term of 36 months, expiring in
2009. At December 31, 2007, the monthly installment under this agreement was approximately $28,000. The present value of the future minimum
lease payments under capital leases totaled approximately $469,000 and $779,000 at December 31, 2007 and 2006 respectively, which have been
classified as long-term debt in the accompanying consolidated financial statements. The Company did not acquire any equipment under capital