O'Reilly Auto Parts 2009 Annual Report Download - page 70

56
locations which would be merged with existing O’Reilly locations due to overlapping market coverage; it was determined that the
remaining CSK store base would be evaluated by quantitative analysis of financial and market factors in addition to evaluations of the
potential for further development of commercial business in those markets. From the initial assessment through June 30, 2009, and as
contemplated in its initial exit plan, the Company completed a detailed review of custom demographic reports, which included do-it-
yourself customer forecasting, wholesale sales potential and strength and quantity of competitors in the respective markets on a store-
by-store basis. Along with the demographic reports, the Company evaluated historical store financial results, store lease obligations,
store floor plans, and locations previously identified by former CSK management as projected closures. This detailed assessment
resulted in the identification of an additional 18 CSK locations for closure, five of which were closed by the end of 2009. The
employee separation costs include anticipated payments, as required under various pre-existing employment arrangements with CSK
employees at the time of acquisition, relating to the planned involuntarily termination of employees performing overlapping or
duplicative functions. Administrative and distribution facility exit liabilities include costs to close a distribution center in Mendota
Heights, Minnesota, which overlapped an existing O’Reilly distribution center and costs to close small distribution facilities located in
Washington and California, which will not be utilized under O’Reilly’s distribution model. In addition, the administrative and
distribution exit liabilities include costs to exit certain administrative office space at CSK’s headquarters in Phoenix, Arizona, as
functions performed at these locations will be transitioned to the Company’s Springfield, Missouri, headquarters location. As of June
30, 2009, the Company had finalized all exit plans.
The CSK senior credit facility and term loan facility required repayment upon merger or acquisition and the entire amounts outstanding
under both facilities were repaid by the Company on the July 11, 2008, acquisition date. The excess of the final purchase price over
the estimated fair values of tangible and identifiable intangible assets acquired and liabilities assumed was recorded as goodwill.
Goodwill in the amount of $694,987,000 was recorded in the final purchase price allocations and is not amortizable for tax purposes.
Unaudited Pro Forma Financial Information
The following pro forma financial information presents the combined historical results of the combined Company as if the acquisition
had occurred as of the beginning of the respective period (in thousands, except per share data):
Pro Forma Results of
Operations for the Year
Ended December 31, 2008
Sales $ 4,494,475
Net income $ 176,385
Net income per common share $ 1.32
Net income per common share-assuming dilution $ 1.31
Weighted-average common shares outstanding 134,023
Adjusted weighted-average common shares outstanding
– assuming dilution 134,910
This pro forma information is not intended to represent or be indicative of actual results had the acquisition occurred as of the
beginning of the period, nor is it necessarily indicative of future results and does not reflect potential synergies, integration costs, or
other such costs or savings. Certain pro forma adjustments have been made to net income to give effect to: estimated charges to
conform CSK’s method of accounting for inventory to LIFO, adjustments to selling, general and administrative expenses to remove the
amortization on eliminated CSK historical identifiable intangible assets and deferred liabilities, expenses to amortize the value of
identified intangibles acquired in the acquisition (primarily trade names, trademarks and leases), rent and depreciation adjustments to
reflect O’Reilly’s purchase of properties under its synthetic lease facility, adjustments to interest expense to reflect the elimination of
preexisting O’Reilly and CSK debt, estimated interest expense on O’Reilly’s new asset-based credit facility and other minor
adjustments. The pro forma information presented above for the year ended December 31, 2008, includes certain acquisition related
charges, net of tax, incurred in 2008 of $4,402,000, $2,552,000, and $5,727,000 for debt prepayment costs, interim facility
commitment fees, and the acceleration of CSK’s stock options and restricted stock as a result of the change in control, respectively.
NOTE 3 – GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill is reviewed annually on December 31 for impairment or more frequently if events or changes in business conditions indicate
that impairment may exist. Goodwill is not amortizable for financial statement purposes. During the year ended December 31, 2009,
the Company recorded goodwill of approximately $23,805,000, primarily due to changes in purchase price allocation in connection
with the acquisition of CSK, which was finalized on June 30, 2009, (see Note 2). For the years ended December 31, 2009, 2008 and