O'Reilly Auto Parts 2009 Annual Report Download - page 63

49
the need for a reserve for uncollectible amounts based on an evaluation of the Company’s vendors’ financial positions and
corresponding abilities to meet financial obligations. Management does not believe there is a reasonable likelihood that the Company
will be unable to collect the amounts receivable from vendors and the Company did not record a reserve for uncollectible amounts in
the consolidated financial statements at December 31, 2009 and 2008.
Debt Issuance Costs
Deferred debt issuance costs totaled $30,172,000 and $39,155,000, net of amortization, as of December 31, 2009 and 2008,
respectively, of which $8,553,000 and $8,648,000 were included in “Other current assets” as of December 31, 2009 and 2008,
respectively. The remainder was included in “Other assets” as of December 31, 2009 and 2008. Deferred debt issuance costs are
being amortized using the straight-line method over the term of the corresponding long-term debt issue and are included in interest
expense in our Consolidated Statements of Income.
Property and Equipment
Property and equipment are carried at cost. Depreciation is provided on a straight-line method over the estimated useful lives of the
assets. Leasehold improvements are amortized over the lesser of the lease term or the estimated economic life of the assets. The lease
term includes renewal options determined by management at lease inception for which failure to renew options would result in a
substantial economic penalty to the Company. Maintenance and repairs are charged to expense as incurred. Upon retirement or sale,
the cost and accumulated depreciation are eliminated and the gain or loss, if any, is included in the determination of net income as a
component of other income (expense). The Company reviews long-lived assets for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be fully recoverable.
Property and equipment consists of the following (in thousands):
Original
Useful Lives
December 31,
2009
December 31,
2008
Land $ 331,456 $ 281,814
Buildings and building improvements 15 – 39 years 766,446 638,976
Leasehold improvements 3 – 25 years 314,751 268,574
Furniture, fixtures and equipment 3 – 20 years 645,839 556,706
Vehicles 5 – 10 years 157,535 127,709
Construction in progress 137,213 65,753
2,353,240 1,939,532
Less: accumulated depreciation and amortization 626,861 489,639
Net property and equipment $ 1,726,379 $ 1,449,893
The gross value of capital lease assets included in the “Furniture, fixtures and equipment” amounts of the above table was $17,393,000
and $13,203,000 at December 31, 2009 and 2008, respectively. The gross value of capital lease assets included in the “Vehicles”
amount of the above table was $9,722,000 and $10,371,000 at December 31, 2009 and 2008, respectively. As of December 31, 2009
and 2008, the Company recorded accumulated amortization on all capital lease assets in the amount of $10,536,000 and $3,962,000,
respectively, all of which is included in accumulated depreciation and amortization in the above table.
The Company capitalizes interest costs as a component of construction in progress, based on the weighted-average rates paid for long-
term borrowings. Total interest costs capitalized for the years ended December 31, 2009, 2008 and 2007, were $6,715,000,
$2,318,000 and $2,554,000, respectively.
Goodwill and Other Intangible Assets
The accompanying consolidated balance sheets at December 31, 2009 and 2008, include goodwill and other intangible assets recorded
as the result of previous acquisitions. The Company assesses goodwill and indefinite-lived intangible assets for impairment annually
on December 31, rather than systematically amortizing goodwill against earnings. The Company reviews goodwill and indefinite-lived
intangible assets for impairment annually or when events or changes in circumstances indicate the carrying value of these assets might
exceed their current fair values. The goodwill impairment test compares the fair value of a reporting unit to its carrying amount,
including goodwill. The Company operates as one reporting unit, and its fair value exceeds its carrying value, including goodwill.
Therefore, the Company has determined that no impairment of goodwill existed at December 31, 2009 and 2008.