O'Reilly Auto Parts 2009 Annual Report Download - page 46

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2008, and $283 million in 2007. The increase in cash used in investing activities in 2009 compared to 2008, was due to the purchase
of two distribution center facilities and land for an additional distribution center in our western markets to enhance the distribution
infrastructure, the conversion of 354 acquired CSK stores to O’Reilly systems. The increase in cash used in investing activities in
2008 compared to 2007 was principally due to an increase in capital expenditures and payments made in association with the
acquisition and in the integration of CSK, partially offset by decreased capital expenditures for new store construction. We opened
150, 150, and 190 net stores in 2009, 2008 and 2007, respectively.
In 2010, we plan to open 150 new stores, convert 888 acquired CSK stores to O’Reilly systems, open three new distribution centers in
the west, relocate and convert an existing acquired CSK distribution center to O’Reilly systems and convert an existing acquired CSK
distribution center to O’Reilly systems. The costs associated with the opening of a new store (including the cost of land acquisition,
improvements, fixtures, net inventory investment and computer equipment) are estimated to average approximately $1.3 million to
$1.5 million; however, such costs may be significantly reduced where we lease, rather than purchase, the store site. Capital costs
associated with the conversion of CSK stores include investments in store computer systems, signage, fixtures, interior and exterior
renovation, and delivery vehicles. The average estimated capital conversion cost per store is expected to be approximately $135,000.
Total capital expenditures in 2010 are expected to range from $400 million to $450 million.
Financing Activities
Net cash provided by financing activities was $121 million in 2009, $53 million in 2008 and $19 million in 2007. The increase in cash
provided by financing activities in 2009 was the result of a reduction in payments on long term debt in 2009 compared to 2008
primarily relating to the payment of outstanding principal balances on existing debt, debt issuance costs and prepayment costs in
association with the financing of the acquisition of CSK in 2008 and an increase in the net proceeds from the issuance of common
stock related to our stock option plans along with the increase in the associated tax benefit from the exercises partially offset by
reduced borrowings under our asset-based credit facility. The increase in cash provided by financing activities in 2008 was the result
of the proceeds from borrowings under our asset-based credit facility, which was partially offset 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 financing of the acquisition of CSK.
Sources of Liquidity
Our current business strategy requires capital to open new stores, convert acquired CSK stores, expand distribution infrastructure and
operate existing stores. The primary sources of our liquidity are funds generated from operations and borrowed under our ABL Credit
Facility. Decreased demand for our products or changes in customer buying patterns could negatively impact our ability to generate
funds from operations. Additionally, decreased demand or changes in buying patterns could impact our ability to meet the debt
covenants of our Credit Agreement and therefore negatively impact the funds available under our ABL Credit Facility. In 2010, we
plan to open 150 new stores and open three new distribution centers in our Western markets. We also plan to relocate an existing
acquired CSK distribution center in Northern California to a larger facility and plan to convert our acquired Phoenix distribution center
to O’Reilly systems. In addition, we plan to convert 888 acquired CSK stores to O’Reilly systems in 2010. We believe that cash
expected to be provided by operating activities and availability under our ABL Credit Facility will be sufficient to fund both our short-
term and long-term capital and liquidity needs for the foreseeable future. However, if our liquidity is insufficient, we may be forced to
limit our planned expansion in 2010. There can be no assurance that we will continue to generate cash flows at or above recent levels.
Credit Facility
On July 11, 2008, in connection with the acquisition of CSK, we entered into a Credit Agreement for a five-year $1.2 billion asset-
based revolving credit facility (“ABL Credit Facility”) arranged by Bank of America, N.A., which we used to refinance debt, fund the
cash portion of the acquisition, pay for other transaction-related expenses and provide liquidity for the combined Company going
forward. This facility replaced a previous unsecured, five-year syndicated revolving credit facility in the amount of $100 million.
The ABL Credit Facility is comprised of a $1.075 billion tranche A revolving credit facility and a $125.0 million first-in-last-out
revolving credit facility (FILO tranche). 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. As of December 31, 2009 and 2008, the amount of the borrowing
base available under the credit facility was $1.2 billion and $1.1 billion, respectively, of which we had outstanding borrowings of $679
million and $614 million, respectively. The available borrowings under the credit facility are also reduced by stand-by letters of credit
issued by us primarily to satisfy the requirements of workers compensation, general liability and other insurance policies. As of
December 31, 2009 and 2008, we had stand-by letters of credit outstanding in the amount of $72 million and $56 million, respectively,
and the aggregate availability for additional borrowings under the credit facility was $445 million and $454 million, respectively. As
part of the Credit Agreement, we have pledged substantially all of our assets as collateral and we are subject to an ongoing
consolidated leverage ratio covenant, with which we complied on December 31, 2009 and 2008. In the event that we should default on