O'Reilly Auto Parts 2010 Annual Report Download - page 63

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Consolidated Statements of Cash Flows
(In thousands)
Years ended December 31,
2010 2009 2008
Operating activities
Net income $ 419,373 $ 307,498 $ 186,232
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization on property and equipment 159,730 142,912 107,345
Amortization of intangibles 1,712 5,267 5,653
Amortization of premium on exchangeable notes (707) (750) (352 )
Amortization of debt issuance costs 8,559 8,508 4,084
Excess tax benefit from stock options exercised (18,587) (10,215) (2,184 )
Deferred income taxes 99,257 50,381 11,031
Gain on settlement of note receivable (11,639) - -
Stock option compensation expense 14,947 13,451 7,991
Other share based compensation expense 2,026 7,962 5,563
Other 6,893 8,739 8,226
Changes in operating assets and liabilities:
Accounts receivable (21,748) (9,714) (7,437 )
Inventory (110,271) (339,742) (142,333 )
Accounts payable 82,574 79,824 50,410
Income taxes payable 15,346 6,505 26,677
Accrued payroll 9,939 (16,830) (602
)
Accrued benefits and withholdings 8,930 6,018 13,874
Other 37,353 25,386 24,364
Net cash provided by operating activities 703,687 285,200 298,542
Investing activities
Cash component of acquisition price of CSK Automotive, Inc., net of cash
acquired - - (33,767 )
Purchases of property and equipment (365,419) (414,779) (341,679 )
Proceeds from sale of property and equipment 2,124 4,288 1,246
Payments received on notes receivable 17,364 5,819 5,342
Other (5,346) (5,989) 1,261
Net cash used in investing activities (351,277) (410,661) (367,597 )
Financing activities
Proceeds from borrowings on asset-based revolving credit facility 548,700 664,550 925,256
Payments on asset-based revolving credit facility (871,500) (599,950) (311,056 )
Payment of debt issuance costs - - (43,239 )
Principal payments on debt and capital leases (108,527) (13,648) (534,944 )
Debt prepayment costs - - (7,157 )
Issuance cost of equity exchanged in CSK acquisition - - (1,218 )
Excess tax benefit from stock options exercised 18,587 10,215 2,184
Net proceeds from issuance of common stock 63,116 59,508 22,995
Other - 420 (20 )
Net cash (used in)/provided by financing activities (349,624) 121,095 52,801
Net increase/(decrease) in cash and cash equivalents 2,786 (4,366) (16,254 )
Cash and cash equivalents at beginning of year 26,935 31,301 47,555
Cash and cash equivalents at end of year $ 29,721 $ 26,935 $ 31,301
Supplemental disclosures of cash flow information:
Income taxes paid $ 154,146 $ 130,720 $ 74,227
Interest paid, net of capitalized interest 31,211 36,881 17,824
Property and equipment acquired through issuance of capital lease obligations - 8,337 4,847
Issuance of common stock to acquire CSK - - 459,308
Fair value of converted CSK stock options and restricted stock - - 7,736
See accompanying Notes to consolidated financial statements.
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NOTE 1—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of business:
O'Reilly Automotive, Inc. (“O’Reilly” or the “Company”) is a specialty retailer and supplier of automotive aftermarket parts. The
Company’s stores carry an extensive product line, including new and remanufactured automotive hard parts, maintenance items and
various automotive accessories. The Company owns and operates 3,570 stores in 38 states which are located primarily in the Western,
Midwestern and Southeastern regions of the United States and caters to both the do-it-yourself (“DIY”) customer and the professional
service provider. The Company’s distribution system provides stores with same-day or overnight access to an extensive inventory of
hard to find items not typically stocked by other auto parts retailers.
On December 29, 2010, the Company completed a corporate reorganization creating a holding company structure (the
“Reorganization”). The Reorganization was implemented through an agreement and plan of merger under Section 351.448 of The
General Corporation Law of the State of Missouri, which did not require a vote of the shareholders. As a result of the Reorganization,
the previous parent company and registrant, O’Reilly Automotive, Inc. (“Old O’Reilly”) was renamed O’Reilly Automotive Stores,
Inc. and is now a wholly-owned subsidiary of the new parent company and registrant, which was renamed O’Reilly Automotive, Inc.
Segment Reporting:
The Company is managed and operated by a single management team reporting to the chief operating decision maker. Generally,
O'Reilly stores have similar characteristics including the nature of the products and services, the type and class of customers and the
methods used to distribute products and provide service to its customers and, as a whole, make up a single operating segment. The
Company does not prepare discrete financial information with respect to product lines or geographic locations and as such has one
reportable segment.
Reclassification:
Certain prior period amounts have been reclassified to conform to current period presentation. These reclassifications had no effect on
reported totals for assets, liabilities, shareholders’ equity, cash flows or net income.
Principles of consolidation:
The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant inter-
company balances and transactions have been eliminated in consolidation. On July 11, 2008, the Company completed the acquisition
of CSK Auto Corporation (“CSK”), one of the largest specialty retailers of auto parts and accessories in the Western United States.
The results of CSK’s operations have been included in the Company’s consolidated financial statements since the acquisition date.
Revenue recognition:
Over-the-counter retail sales are recorded when the customer takes possession of the merchandise. Sales to professional service
providers, also referred to as “commercial sales,” are recorded upon same-day delivery of the merchandise to the customer, generally
at the customer’s place of business. Wholesale sales to other retailers, also referred to as “jobber sales,” are recorded upon shipment
of the merchandise from a regional DC with same-day delivery to the jobber customer's location. Internet retail sales are recorded
when the merchandise is shipped or when the merchandise is picked up in a store. All sales are recorded net of estimated allowances,
discounts and taxes.
Use of estimates:
The preparation of the consolidated financial statements, in conformity with accounting principles generally accepted in the United
States (“GAAP”), requires management to make estimates and assumptions that affect the amounts reported in the consolidated
financial statements and accompanying notes. Actual results could materially differ from those estimates.
Cash equivalents:
Cash equivalents include investments with maturities of 90 days or less at the day of purchase.
Accounts receivable:
The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of the Company’s
customers to make required payments. The Company considers the following factors when determining if collection is reasonably
assured: customer creditworthiness, past transaction history with the customer, current economic and industry trends and changes in
customer payment terms. Included as a component of accounts receivable are amounts due to the Company from employees. These
amounts consist primarily of purchases of merchandise on employee accounts. Accounts receivable due from employees was
approximately $2.2 million and $1.2 million at December 31, 2010 and 2009, respectively.
FORM 10-K