O'Reilly Auto Parts 2008 Annual Report Download - page 29

O’REILLY AUTOMOTIVE 2008 ANNUAL REPORT PG.27
MAN AGEMENT ’S DISCUS SION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Our plan for the integration of the CSK acquisition and our continuing store expansion program will require signicant capital expenditures
and working capital investments in 2009. Total capital expenditures in 2009 are expected to range from $420 million to $470 million. e CSK
integration plan will require capital expenditures for the planned addition of facilities to enhance distribution infrastructure and the conversion
of acquired stores to the O’Reilly brand. Costs associated with the conversion of CSK stores include investments in store computer systems,
signage, xtures, interior and exterior renovation, and delivery vehicles. e estimated conversion cost per store is expected to be approximately
$135,000. Additionally, our 2009 growth plans call for approximately 150 new stores and the addition of a distribution center in Greensboro,
North Carolina. e costs associated with the opening of a new store (including the cost of land acquisition, improvements, xtures, net
inventory investment and computer equipment) are estimated to average approximately $1.3 million to $1.5 million; however, such costs may be
signicantly reduced where we lease, rather than purchase, the store site. We plan to nance our expansion program through cash expected to
be provided from operating activities and available borrowings under our ABL Credit Facility.
Net cash provided by nancing activities was $52.8 million in 2008, $18.6 million in 2007 and $37.8 million in 2006. e increase in cash
provided by nancing activities in 2008 is primarily the result of the proceeds from borrowings under our asset-based credit facility partially
oset by the payment of outstanding principal balances on existing debt and debt assumed in the CSK acquisition, debt issuance costs and
prepayment costs in association with the nancing of the acquisition of CSK. e decrease in cash provided by nancing activities in 2007
versus 2006 is due to net repayments of long-term debt.
On July 11, 2008, in connection with the acquisition of CSK, we entered into a Credit Agreement for a ve-year $1.2 billion asset-based
revolving credit facility (“ABL Credit Facility”) arranged by Bank of America, N.A., which we used to renance debt, fund the cash portion
of the acquisition, pay for other transaction-related expenses and provide liquidity for the combined Company going forward. is facility
replaced a previous unsecured, ve-year syndicated revolving credit facility in the amount of $100 million.
e ABL Credit Facility is comprised of a $1.075 billion tranche A revolving credit facility and a $125.0 million rst-in-last-out revolving credit
facility (FILO tranche). As part of the ABL Credit Agreement, the Company has pledged virtually all of its assets as collateral and is subject to
an ongoing consolidated leverage ratio covenant. On the date of the transaction, the amount of the borrowing base available, as described in the
ABL Credit Agreement, under the ABL Credit Facility was $1.05 billion of which we borrowed $588 million. We used borrowings under the
ABL Credit Facility to repay certain existing debt of CSK, repay our $75 million 2006-A Senior Notes and purchase all of the properties that had
been leased under our synthetic lease facility. We believe that cash expected to be provided by operating activities and our ABL Credit Facility
will be sucient to fund both our short-term and long-term capital and liquidity needs for the foreseeable future. At December 31, 2008, our
borrowing base was $1.124 billion, of which we had borrowed $614.2 million.
Borrowings under the tranche A revolver bear interest, at our option, at a rate equal to either a base rate plus 1.50% per annum or LIBOR plus
2.5% per annum, with each rate being subject to adjustment based upon certain excess availability thresholds. Borrowings under the FILO
tranche bear interest, at our option, at a rate equal to either a base rate plus 2.75% per annum or LIBOR plus 3.75% per annum, with each rate
being subject to adjustment based upon certain excess availability thresholds. e base rate is equal to the higher of the prime lending rate
established by Bank of America from time to time and the federal funds eective rate as in eect from time to time plus 0.50%. Fees related to
unused capacity under the ABL Credit Facility are assessed at a rate of 0.5% of the remaining available borrowings under the facility, subject to
adjustment based upon remaining unused capacity. In addition, we paid customary commitment fees, letter of credit fees, underwriting fees and
other administrative fees in respect of the credit facility.