O'Reilly Auto Parts 2009 Annual Report Download - page 69

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55
The final purchase price allocations, adjusted from the preliminary purchase price allocation disclosed as of December 31, 2008, and
finalized on June 30, 2009, were as follows (in thousands):
Preliminary Purchase
Price Allocation as of
December 31, 2008
Final Purchase
Price Allocation as
of June 30, 2009
Inventory $ 546,052 $ 539,827
Other current assets 77,307 84,959
Property and equipment 126,670 124,208
Goodwill 670,508 694,987
Deferred income taxes 134,074 160,943
Other intangible assets 65,270 65,270
Other assets 9,241 6,270
Total assets acquired $ 1,629,122 $ 1,676,464
Senior credit facility $ 343,921 $ 343,921
Term loan facility 86,700 86,700
Capital lease obligations 15,212 16,486
Other current liabilities 467,773 501,470
6 ¾% senior exchangeable notes 103,920 103,920
Other liabilities 69,602 81,719
Total liabilities assumed $ 1,087,128 $ 1,134,216
Net assets acquired $ 541,994 $ 542,248
The adjustments to the preliminary purchase price allocation disclosed as of December 31, 2008, compared to the final purchase price
allocation completed as of June 30, 2009, related to information obtained subsequent to December 31, 2008, upon completion of the
purchase price allocation procedures the Company identified at the acquisition date. The adjustments primarily related to completion
of the Company’s review of CSK store locations, leases for stores to be closed and inventories to be liquidated, as well as the
evaluation of the timing and costs to be incurred under the Company’s indemnification obligations to certain former CSK officers in
ongoing U.S. Securities and Exchange Commission (“SEC”) and U.S. Department of Justice (“DOJ”) investigations. Material
adjustments arising from the finalization of these planned procedures and the receipt of updated information resulted in increases to
reserves for pre-acquisition legal matters of $21,814,000, exit activities, including store, distribution center and administrative office
closure reserves of $15,385,000, and inventory reserves of $6,225,000, offset by the related effects of deferred tax assets which
increased $26,869,000. The net impact of all adjustments between December 31, 2008, and June 30, 2009, increased goodwill by
$24,479,000.
Estimated fair values of intangible assets acquired as of the date of acquisition are as follows (in thousands):
Intangible assets
Weighted-Average
Useful Lives
(in years)
Trademarks and trade names $
13,000
1.4
Favorable property leases
52,270
10.7
Total intangible assets $
65,270
The estimated values of operating leases with unfavorable terms compared with current market conditions totaled approximately
$49,680,000. These liabilities have an estimated weighted-average useful life of approximately 7.7 years and are included in other
liabilities. Favorable and unfavorable lease assets and liabilities are being amortized to selling, general and administrative expense
over their expected lives, which approximates the period of time that the favorable or unfavorable lease terms will be in effect.
Trademarks and trade names have useful lives of one to three years and will be amortized to coincide with the anticipated conversion
of CSK store brands to the O’Reilly branded locations over that period.
The final allocation of the purchase price included $53,961,000 of accrued liabilities for estimated costs to exit certain activities of
CSK, including $14,828,000 of exit costs associated with the planned closure of 51 CSK stores, $3,650,000 of assumed liabilities
related to CSK’s existing closed stores for 127 locations that were closed prior to the Company’s acquisition of CSK, $26,617,000 of
employee separation costs, and $8,866,000 of exit costs associated with the planned closure of other administrative offices and certain
distribution facilities. The Company began to formulate its exit plans prior to the completion of the acquisition. Pursuant to these
plans, between the date of the acquisition and June 30, 2009, the Company reviewed all 1,342 acquired CSK stores to determine, from
a location, lease, and facility standpoint, which stores would be closed. During the initial assessment, 33 CSK stores were identified as