O'Reilly Auto Parts 2009 Annual Report Download - page 47

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any covenant contained within the Credit Agreement, certain actions may be taken; these actions include, but are not limited to, the
summarized items below:
• termination of credit extensions;
• any outstanding principal amount plus accrued interest could become immediately payable;
• cash collateralization of all letter of credit obligations; and/or
• litigation from lenders.
Borrowings under the tranche A revolver bear interest, at our option, at a rate equal to either a base rate plus 1.25% per annum or
LIBOR plus 2.25% 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 2.5% per annum or LIBOR
plus 3.5% per annum, with each rate being subject to adjustment based upon certain excess availability thresholds. The 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 effective rate as in
effect from time to time plus 1.25%. Fees related to unused capacity under the ABL Credit Facility are assessed at a rate of 0.375% 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.
On July 24, 2008, October 14, 2008, November 24, 2008, and January 21, 2010, we entered into interest rate swap transactions with
BBT, BA, SunTrust and/or Barclays. We entered into these interest rate swap transactions to mitigate the risk associated with our
floating interest rate based on LIBOR on an aggregate of $500 million of our debt that is outstanding under our ABL Credit
Agreement, dated as of July 11, 2008. We are required to make certain monthly fixed rate payments calculated on the notional
amounts, while the applicable counter party is obligated to make certain monthly floating rate payments to us referencing the same
notional amount. The interest rate swap transactions effectively fix the annual interest rate payable on these notional amounts of our
debt, which exists under the Credit Agreement plus an applicable margin under the terms of the same credit facility. The interest rate
swap transactions have maturity dates ranging from August 1, 2010, through October 17, 2011. The interest rate swap transaction we
entered into with SunTrust on November 24, 2008, was for $50 million and matured on November 28, 2009, increasing our exposure
to changes in interest rates on a total notional amount of $400 million as of December 31, 2009. On January 21, 2010 we entered into
an interest rate swap transaction with Barclays in the amount of $50 million, reducing our exposure to changes in interest rates on a
total notional amount of $450 million as of that date.
Senior Exchangeable Notes
On July 11, 2008, we agreed to become a guarantor, on a subordinated basis, of the $100 million principal amount of 6 ¾%
Exchangeable Senior Notes due 2025 (the “Notes”) originally issued by CSK. The Notes are exchangeable, under certain
circumstances, into cash and shares of our common stock. The Notes bear interest at 6.75% per year until December 15, 2010, and
6.50% until maturity on December 15, 2025. Prior to their stated maturity, the Notes are exchangeable by the holders only under the
following circumstances (as more fully described in the indenture under which the Notes were issued):
• during any fiscal quarter (and only during that fiscal quarter) commencing after 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;
• if we have called the Notes for redemption; or
• upon the occurrence of specified corporate transactions, such as a change in control.
Upon exchange of the Notes, we will deliver cash equal to the lesser of the aggregate principal amount of Notes to be exchanged and
our total exchange obligation and, in the event our total exchange obligation exceeds the aggregate principal amount of Notes to be
exchanged, shares of our common stock in respect of that excess. The total exchange obligation reflects the exchange rate whereby
each $1,000 in principal amount of the Notes is exchangeable into an equivalent value of 25.9697 shares of our common stock and
$60.6061 in cash. The incremental net shares for the Notes exchange feature were included in the diluted earnings per share
calculation for the year ended December 31, 2009, however the 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.
The Noteholders may require us 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. We 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 after December 15,
2010, upon at least 35-calendar days notice. Our intention is to redeem the Notes in December of 2010, and we plan to fund the
redemption with available borrowings under our ABL Credit Facility.