O'Reilly Auto Parts 2009 Annual Report Download - page 49

35
CONTRACTUAL OBLIGATIONS
Deferred income taxes, self-insurance accruals, interest payments on our variable rate long-term debt and commitments with various
vendors for the purchase of inventory are included in “Other liabilities” on our consolidated balance sheets and are not reflected in the
table below due to the absence of scheduled maturities, the nature of the account or the commitment’s cancellation terms. Due to the
absence of scheduled maturities, the timing of certain of these payments cannot be determined, except for amounts estimated to be
payable in 2010, which are included in “Current liabilities” on our consolidated balance sheets.
Our contractual obligations at December 31, 2009, included commitments for future payments under noncancelable lease
arrangements, short and long-term debt arrangements, interest payments related to long-term debt, fixed payments related to interest
rate swaps and purchase obligations for construction contract commitments, which are summarized in the table below and are fully
disclosed in Note 4 “Long-Term Debt” and Note 6 “Commitments” to the consolidated financial statements. We expect to fund these
commitments primarily with operating cash flows generated in the normal course of business, through borrowings under our ABL
Credit Facility or through future borrowings.
Payments Due By Period
Total Before 1
Year
1 to 2 Years 3 to 4 Years Years 5 and
Over
(In thousands)
Contractual Obligations:
Long-term debt $ 778,800 $ 100,000 $ -- $ 678,800 $ --
Payments under interest rate swap
agreements 16,646 11,900 4,746 -- --
Interest rate payments under 6¾%
Exchangeable Senior Notes 103,954 6,739 13,000 13,000 71,215
Future minimum lease payments under
capital leases 12,327 6,455 4,343 1,202 327
Future minimum lease payments under
operating leases 1,501,522 214,087 377,053 278,242 632,140
Other obligations 4,200 600 1,200 1,200 1,200
Purchase obligations 102,556 102,556 -- -- --
Total contractual cash obligations $ 2,520,005 $ 442,337 $ 400,342 $ 972,444 $ 704,882
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.
CRITICAL ACCOUNTING ESTIMATES
The preparation of our financial statements in accordance with accounting policies generally accepted in the United States (“GAAP”)
requires the application of certain estimates and judgments by management. Management bases its assumptions, estimates, and
adjustments on historical experience, current trends and other factors believed to be relevant at the time the consolidated financial
statements are prepared. Management believes that the following policies are critical due to the inherent uncertainty of these matters
and the complex and subjective judgments required to establish these estimates. Management continues to review these critical
accounting policies and estimates to ensure that the consolidated financial statements are presented fairly in accordance with GAAP.
However, actual results could differ from our assumptions and estimates and such differences could be material.
• Vendor concessions
– We receive concessions from our vendors through a variety of programs and arrangements, including co-
operative advertising, allowances for warranties, merchandise allowances and volume purchase rebates. Co-operative advertising
allowances that are incremental to our advertising program, specific to a product or event and identifiable for accounting purposes,
are reported as a reduction of advertising expense in the period in which the advertising occurred. All other material vendor
concessions are recognized as a reduction to the cost of inventory. Amounts receivable from vendors also include amounts due to
us relating to vendor purchases and product returns. Management regularly reviews amounts receivable from vendors and
assesses the need for a reserve for uncollectible amounts based on our evaluation of our vendors’ financial position and
corresponding ability to meet their financial obligations. Based on our historical results and current assessment, we have not
recorded a reserve for uncollectible amounts in our consolidated financial statements, and we do not believe there is a reasonable
likelihood that our ability to collect these amounts will differ from our expectations. The eventual ability of our vendors to pay us
the obliged amounts could differ from our assumptions and estimates, and we may be exposed to losses or gains that could be
material.