O'Reilly Auto Parts 2008 Annual Report Download - page 54

PG.52 O’REILLY AUTOMOTIVE 2008 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
EITF No. 00-19, Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in a Company’s Own Stock, provides guidance
for distinguishing between permanent equity, temporary equity, and assets and liabilities. e embedded exchange feature in the Notes provides
for the issuance of common shares to the extent the Company’s exchange obligation exceeds the debt principal. e share exchange feature
and the embedded put options and call options in the debt instrument meet the requirements of EITF No. 00-19 to be accounted for as equity
instruments. As such, the share exchange feature and the embedded options have not been accounted for as derivatives. Incremental net shares
for the Notes exchange feature were not included in the diluted earnings per share calculation for the year ended December 31, 2008, as the
impact would have been antidilutive.
e Notes are exchangeable, under certain circumstances, into cash and shares of the Company’s common stock. e Notes bear interest
at 6.75% per year until December 15, 2010, and 6.5% until maturity on December 15, 2025. Prior to their stated maturity, the Notes are
exchangeable by the holders only under certain circumstances. Prior to their stated maturity, these Notes are exchangeable by the holder only
under the following circumstances (as more fully described in the indenture under which the Notes were issued):
• During any scal quarter (and only during that scal quarter) commencing aer July 11, 2008, if the last reported sale price of our common
stock is greater than or equal to 130% of the applicable exchange price of $36.17 for at least 20 trading days in the period of 30 consecutive
trading days ending on the last trading day of the preceding scal quarter;
• If the Notes have been called for redemption by the Company; or
• Upon the occurrence of specied corporate transactions, such as a change in control.
If the 6¾% Notes are exchanged, the Company will deliver cash equal to the lesser of the aggregate principal amount of notes to be exchanged and
the Company’s total exchange obligation and, in the event the Company’s total exchange obligation exceeds the aggregate principal amount of notes
to be exchanged, shares of the Company’s common stock in respect of that excess. e total exchange obligation reects the exchange rate whereby
each $1,000 in principal amount of the notes is exchangeable into an equivalent value of 25.97 shares of our common stock and $60.61 in cash.
e noteholders may require the Company to repurchase some or all of the notes for cash at a repurchase price equal to 100% of the principal
amount of the notes being repurchased, plus any accrued and unpaid interest on December 15, 2010; December 15, 2015; or December 15,
2020, or on any date following a fundamental change as described in the indenture. e Company may redeem some or all of the notes for
cash at a redemption price of 100% of the principal amount plus any accrued and unpaid interest on or aer December 15, 2010, upon at least
35-calendar days notice.
e Company leases certain equipment under capital lease agreements. e lease agreements have terms ranging from 36 to 60 months,
expiring on dates ranging from July 2009 to September 2013. Future minimum lease payments under capital leases totaled approximately
$13,962,000 and $469,000 at December 31, 2008 and 2007, respectively, which have been classied as long-term debt in the accompanying
consolidated nancial statements. e Company assumed capital lease liabilities totaling $13,022,000 in its acquisition of CSK; in addition the
Company acquired additional equipment under capital leases in the amount of $4,847,000 during the period ended December 31, 2008. e
Company did not acquire any equipment under capital leases during the period ended December 31, 2007. e Company acquired $943,000 of
assets under the capital lease during the periods ended December 31, 2006.
e Company assumed certain building capital leases, which have lease agreements with terms ranging from 48 to 300 months, expiring on
dates ranging from October 2010 to April 2015. e present value of future minimum lease payments under building capital leases totaled
approximately $1,930,000 at December 31, 2008, which has been classied as long-term debt in the accompanying consolidated nancial
statements. e Company assumed building capital lease liabilities totalling $2,190,000 in its acquisition of CSK.
Principal maturities of long-term debt and capital lease obligations are as follows:
(In thousands)
2009 $ 8,131
2010 3,614
2011 1,912
2012 835
2013 614,533
ereaer 103,670
$ 732,695