O'Reilly Auto Parts 2010 Annual Report Download - page 48

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At December 31, 2010, borrowings under the tranche A revolver bore interest, at our option, at a rate equal to either a base rate plus
1.00% per annum or LIBOR plus 2.00% per annum, with each rate being subject to adjustment based upon certain excess availability
thresholds. The base rate was equal to the higher of the prime lending rate established by BA from time to time and the federal funds
effective rate as in effect from time to time plus 0.50%. Fees related to unused capacity under the Credit Facility were assessed at a
rate of 0.50% of the remaining available borrowings under the facility, subject to adjustment based upon remaining unused capacity.
In addition, we paid customary commitment fees, letter of credit fees, underwriting fees and other administrative fees in respect of the
Credit Facility. All outstanding borrowings under the Credit Facility were repaid in conjunction with the issuance of our 2011 4.875%
Senior Notes on January 14, 2011, as further discussed below.
On January 14, 2011, we entered into a new credit agreement for a five-year $750 million unsecured revolving credit facility (the
“Revolver”) arranged by BA and Barclays, which matures in January of 2016. The Revolver includes a $200 million sub-limit for the
issuance of letters of credit and a $75 million sub-limit for swing line borrowings. Our ability to draw under the revolving facility is
conditioned upon, among other things, our ability to certify that the representations and warranties contained in the credit agreement
are true, correct and complete in all material respects and that no event of default has occurred or would result from the proposed
extension of credit. Borrowings under the Revolver (other than swing line loans) bear interest, at our option, at either the Base Rate or
Eurodollar Rate (both as defined in the agreement) plus a margin, that will vary from 1.325% to 2.500% in the case of loans bearing
interest at the Eurodollar Rate and 0.325% to 1.500% in the case of loans bearing interest at the Base Rate, in each case based upon
the ratings assigned to our debt by Moody’s Investor Service, Inc. and Standard & Poor’s Rating Services. Swing line loans made
under the Revolver bear interest at the Base Rate plus the applicable margin described above. In addition, we will pay a facility fee on
the aggregate amount of the commitments in an amount equal to a percentage of such commitments, varying from 0.175% to 0.500%
based upon the ratings assigned to our debt by Moody’s Investor Service, Inc. and Standard & Poor’s Rating Services. The Revolver
replaced the secured Credit Facility we entered into on July 11, 2008.
6¾% Exchangeable Senior Notes:
On July 11, 2008, we executed the Third Supplemental Indenture (the “Third Supplemental Indenture”) to the 6¾% Exchangeable
Senior Notes due 2025 (the “Notes”), in which we agreed to become a guarantor, on a subordinated basis, of the $100 million
principal amount of the Notes originally issued by CSK pursuant to an Indenture dated as of December 19, 2005, as amended and
supplemented by the First Supplemental Indenture dated as of December 30, 2005, and the Second Supplemental Indenture, dated as
of July 27, 2006, by and between CSK Auto Corporation, CSK Auto, Inc. and The Bank of New York Mellon Trust Company, N.A.,
as trustee. On December 31, 2008, and effective as of July 11, 2008, we entered into the Fourth Supplemental Indenture in order to
correct the definition of Exchange Rate in the Third Supplemental Indenture.
The Notes were exchangeable, under certain circumstances, into cash and shares of our common stock. The Notes bore interest at
6.75% per year until December 15, 2010, and 6.50% until maturity on December 15, 2025. Prior to their stated maturity, these Notes
were exchangeable by the holder only under the following circumstances (as more fully described in the indenture under which the
Notes were issued):
•during any fiscal quarter (and only during that fiscal quarter) commencing after July 11, 2008, if the last reported sale price of
our common stock was greater than or equal to 130% of the applicable exchange price of $36.17 for at least 20 trading days
in the period of 30 consecutive trading days ending on the last trading day of the preceding fiscal quarter;
•if the Notes had been called for redemption by us; or
•upon the occurrence of specified corporate transactions, such as a change in control.
On July 1, 2010, the Notes became exchangeable at the option of the holders and remained exchangeable through September 30, 2010,
the last trading day of our third quarter, as provided for in the indentures governing the Notes. The Notes became exchangeable as our
common stock closed at or above 130% of the Exchange Price (as defined in the indentures governing the Notes) for 20 trading days
within the 30 consecutive trading day period ending on June 30, 2010. As a result, during the exchange period commencing July 1,
2010, and continuing through and including September 30, 2010, for each $1,000 principal amount of the Notes held, holders of the
Notes could, if they elected, surrender their Notes for exchange. If the Notes were exchanged, we would deliver cash equal to the
lesser of the aggregate principal amount of Notes to be exchanged and our total exchange obligation and, in the event our total
exchange obligation exceeded the aggregate principal amount of Notes to be exchanged, shares of our common stock in respect of that
excess. The total exchange obligation reflects the exchange rate whereby each $1,000 in principal amount of the Notes is
exchangeable into an equivalent value of approximately 25.97 shares of our common stock and approximately $60.61 in cash. On
September 28, 2010, certain holders of the Notes delivered notice to the exchange agent to exercise their right to exchange $11 million
of the principal amount of the Notes. The Cash Settlement Averaging Period (as defined in the indentures governing the Notes) ended
on October 27, 2010, and on October 29, 2010, we delivered $11 million in cash, which represented the principal amount of the Notes
exchanged and the value of partial shares, and 92,855 shares of our common stock to the exchange agent in settlement of the exchange
obligation. Concurrently, we retired the $11 million principal amount of the exchanged Notes. On October 1, 2010, the Notes again
became exchangeable at the option of the holders and remained exchangeable through December 31, 2010.
The Noteholders had the option to require us to repurchase some or all of the Notes for cash at a repurchase price equal to 100% of the
principal amount of the Notes being repurchased, plus any accrued and unpaid interest on December 15, 2010; December 15, 2015; or
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December 15, 2020, or on any date following a fundamental change as described in the indenture. We had the option to 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. On November 15, 2010, we announced our intention to redeem the Notes
on December 21, 2010, at a redemption price of 100% of the principal amount thereof, plus any accrued and unpaid interest up to, but
not including, the redemption date.
On or prior to December 17, 2010, the remaining holders of the Notes delivered notice to the exchange agent to exercise their right to
exchange the $89 million remaining principal amount of the Notes. The Cash Settlement Averaging Period (as defined in the
indentures governing the Notes) ended on December 16, 2010, and on December 21, 2010, we delivered $89 million in cash, which
represented the principal amount of the Notes exchanged and the value of partial shares, and 939,312 shares of our common stock to
the exchange agent in settlement of the exchange obligation. Concurrently, we retired the $89 million principal amount of the
exchanged Notes.
4.875% Senior Notes due 2021:
On January 14, 2011, we issued $500 million aggregate principal amount of unsecured 4.875% Senior Notes at a price to the public of
99.297% of their face value in the public market, of which certain of our subsidiaries are the guarantors, and UMB is trustee. The
2011 4.875% Senior Notes bear interest at 4.875% which is payable on January 14 and July 14 of each year, beginning on July 14,
2011. The 2011 4.875% Senior Notes mature on January 14, 2021. Proceeds from the issuance of the 2011 4.875% Senior Notes
were used to repay all outstanding borrowings under our previous secured Credit Facility, to pay fees associated with the issuance and
for general corporate purposes.
Prior to October 14, 2020, the 2011 4.875% Senior Notes are redeemable, in whole, at any time, or in part, from time to time, at our
option upon not less than 30 nor more than 60 days’ notice at a redemption price, plus any accrued and unpaid interest to, but not
including, the redemption date, equal to the greater of:
• 100% of the principal amount thereof; or
• the sum of the present values of the remaining scheduled payments of principal and interest thereon discounted to the
redemption date on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at the applicable
Treasury Yield (as defined in the indenture governing the 2011 4.875% Senior Notes) plus 25 basis points.
On or after October 14, 2020, the 2011 4.875% Senior Notes are redeemable, in whole at any time or in part from time to time, at our
option upon not less than 30 nor more than 60 days’ notice at a redemption price equal to 100% of the principal amount thereof plus
accrued and unpaid interest to, but not including, the redemption date. In addition, if we undergo a Change of Control Triggering
Event (as defined in the indenture governing the 2011 4.875% Senior Notes), holders of the 2011 4.875% Senior Notes may require us
to repurchase all or a portion of their notes at a price equal to 101% of the principal amount of the 2011 4.875% Senior Notes being
repurchased, plus accrued and unpaid interest, if any, to but not including the repurchase date.
Debt covenants:
The indenture governing the 2011 4.875% Senior Notes contains covenants that limit our ability and the ability of certain of our
subsidiaries to, among other things: (i) create certain liens on assets to secure certain debt; (ii) enter into certain sale and leaseback
transactions; and (iii) merge or consolidate with another company or transfer all or substantially all of our or its property, in each case
as set forth in the indenture. These covenants are, however, subject to a number of important limitations and exceptions.
The new Revolver contains certain positive and negative debt covenants. These covenants include limitations on total outstanding
borrowings under the Revolver, a minimum fixed charge coverage ratio of 2.00 times from the closing through December 31, 2012,
2.25 times through December 31, 2014, and 2.50 times through maturity and a maximum adjusted consolidated leverage ratio of 3.00
times from the closing through maturity. Our consolidated leverage ratio includes a calculation of earnings before interest, taxes,
depreciation, amortization, rent and stock option compensation expense (“EBITDAR”) to adjusted debt. Adjusted debt includes
outstanding debt, outstanding standby letters of credit, six times capitalized rent and excludes any premium or discount recorded in
conjunction with the issuance of long-term debt. As of January 14, 2011, we were in compliance with all covenants related to our
borrowing arrangements and expect to remain in compliance with those covenants in the future.
FORM 10-K