O'Reilly Auto Parts 2009 Annual Report Download - page 76

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62
The following is a summary of closure reserves for stores, administrative office and distribution facilities and reserves for employee
separation costs at December 31, 2009, and 2008 (in thousands):
Store Closure
Liabilities
Administrative Office
and Distribution
Facilities Closure
Liabilities
Employee
Separation
Liabilities
Balance at January 1, 2008: $ 1,841 $ -- $ --
Recorded CSK liabilities assumed, as of July 11, 2008 3,650 -- --
Planned CSK exit activities 4,141 4,127 27,613
Additions and accretion 695 -- --
Payments
CSK exit activities (1,723) -- (2,534)
Other exit activities (868) -- --
Revisions to estimates (362) -- --
Balance at December 31, 2008: 7,374 4,127 25,079
Planned CSK exit activities 10,646 4,739 (996)
Additions and accretion 995 291 --
Payments
CSK exit activities (2,810) (1,375) (22,003)
Other exit activities (949) -- --
Revisions to estimates 521 (129) --
Balance at December 31, 2009: $ 15,777 $ 7,653 $ 2,080
NOTE 8 – DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
As discussed in Note 4 on each of July 24, 2008, October 14, 2008, and November 24, 2008, the Company entered into interest rate
swap transactions with BBT, BA and SunTrust to mitigate cash flow risk associated with the floating interest rate based on the one
month LIBOR rate on an aggregate of $450 million of the debt outstanding under the ABL Credit Agreement, dated as of July 11,
2008. The interest rate swap transaction we entered into with SunTrust on November 24, 2008, was for $50 million and matured on
November 28, 2009, bringing out total notional amount to $400 million as of December 31, 2009, thus increasing our exposure to
changes in interest rates. The swap transactions have been designated as cash flow hedges with interest payments designed to offset
the interest payments for borrowings under the ABL Credit Agreement that correspond to notional amounts of the swaps. The fair
value of the Company’s outstanding hedges are recorded as a liability in the accompanying Consolidated Balance Sheets at December
31, 2009 and 2008. Changes in fair market value are recorded in other comprehensive income (loss), and any changes resulting from
ineffectiveness of the hedge transactions would be recorded in current earnings. The Company’s hedging instruments have been
deemed to be highly effective as of December 31, 2009. The fair value of the swap transactions for the years ended December 31,
2009 and 2008, were a payable of $13.1 million ($8.0 million net of tax) and $18.9 million ($11.5 million net of tax), respectively.
The net amount is included as a component of “Accumulated other comprehensive loss”.
The table below represents the amount recorded on the Company’s Consolidated Balance Sheets as being a payable to counterparties
at December 31 (in thousands):
Derivative designated as hedging instrument
Liabilities
Location
2009
2008
Interest Rate Swap Contracts Other Current Liabilities $ 4,140 $ 18,874
Interest Rate Swap Contracts Other Liabilities $ 8,913 --