O'Reilly Auto Parts 2010 Annual Report Download - page 74

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January 14, 2011, and the facility was retired concurrent with the issuance of the Company’s 2011 4.875% Senior Notes as further
described below.
At December 31, 2010, borrowings under the tranche A revolver bore interest, at the Company’s 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 is 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%, subject to adjustment based upon remaining available
borrowings. Fees related to unused capacity under the Credit Facility are 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, the Company paid customary
commitment fees, letter of credit fees, underwriting fees and other administrative fees in respect to the Credit Facility. At December
31, 2010, the Company had borrowings of $106 million under its Credit Facility, which were not covered under an interest rate swap
agreement, with interest rates ranging from 2.31% to 4.25%. At December 31, 2009, the Company had borrowings of $278.8 million
under its Credit Facility, which were not covered under an interest rate swap agreement, with interest rates ranging from 2.50% to
4.50%.
On each of July 24, 2008, October 14, 2008, and January 21, 2010, the Company entered into interest rate swap transactions with
Branch Banking and Trust Company (“BBT”), BA, SunTrust Bank (“SunTrust”), and/or Barclays Capital (“Barclays”). The
Company entered into these interest rate swap transactions to mitigate the risk associated with its floating interest rate based on
LIBOR on an aggregate of $450 million of its debt that is outstanding under its Credit Facility, dated as of July 11, 2008. The interest
rate swap transaction that the Company entered into with BBT on October 14, 2008, for $25 million and was scheduled to mature on
October 17, 2010, was terminated at the Company’s request on September 16, 2010, (see Note 8). The interest rate swap transaction
that the Company entered into with BBT on July 24, 2008, for $100 million matured on August 1, 2010; the interest rate swap
transactions the Company entered into with BBT, BA and/or SunTrust on October 14, 2008, totaling $75 million, matured on October
17, 2010, bringing the total notional amount of swapped debt to $250 million as of December 31, 2010. The Company is required to
make certain monthly fixed rate payments calculated on the notional amounts, while the applicable counter party is obligated to make
certain monthly floating rate payments to the Company referencing the same notional amount. The interest rate swap transactions
effectively fix the annual interest rate payable on these notional amounts of the Company’s debt, which may exist under the Credit
Facility plus an applicable margin under the terms of the Credit Facility. At December 31, 2010, the interest rate swap transactions
had maturity dates ranging from January 31, 2011, through October 17, 2011.
The counterparties, transaction dates, effective dates, applicable notional amounts, effective index rates and maturity dates of each of
the interest rate swap transactions which existed as of December 31, 2010, are included in the table below:
Counterparty
Transaction
Date
Effective
Date
Notional
Amount
(in thousands)
Effective
index rate
Spread at
December 31,
2010
Effective Interest
Rate at
December 31,
2010
Maturity
date
SunTrust 07/24/2008 08/01/2008
75,000 3.83% 2.00% 5.83% 08/01/2011
BA 07/24/2008 08/01/2008
75,000 3.83% 2.00% 5.83% 08/01/2011
BA 10/14/2008 10/17/2008
50,000 3.56% 2.00% 5.56% 10/17/2011
Barclays 01/21/2010 01/22/2010 50,000 0.53% 2.00% 2.53% 01/31/2011
$250,000
All of the interest rate swap transactions that existed as of December 31, 2010, for a total notional amount of $250 million, were
terminated at the Company’s request on January 14, 2011, concurrent with the retirement of the Credit Facility and the issuance of its
2011 4.875% Senior Notes as further described below.
Capital lease agreements:
The Company leases certain equipment under capital lease agreements. The lease agreements have terms ranging from 63 to 180
months, expiring on dates ranging from October of 2013 to March of 2017. The present value of the future minimum lease payments
under equipment capital leases totaled approximately $1.9 million and $10.5 million at December 31, 2010 and 2009, respectively,
which have been classified as long-term debt in the accompanying consolidated financial statements. The Company acquired
equipment under capital leases in the amount of $8.3 million during the year ended December 31, 2009. The Company did not
acquire any additional equipment under capital leases during the year ended December 31, 2010.
The Company assumed certain building capital leases in the CSK acquisition. During the year ended December 31, 2010, the
Company purchased all properties under these capital leases with the exception of one location, which will expire in April of 2015.
The present value of future minimum lease payments under building capital leases totaled approximately $0.8 million at December 31,
2010 and 2009, which are classified as long-term debt in the accompanying consolidated financial statements. The Company did not
acquire any additional buildings under capital leases during the periods ended December 31, 2010 and 2009.
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As of December 31, 2010, principal maturities of long-term debt and capital lease obligations are as follows (in thousands):
2011 $ 1,431
2012 669
2013 356,291
2014 130
2015 89
Thereafter 94
Total $ 358,704
New Financing Plan, Subsequent Event:
On January 11, 2011, the Company announced a multi-faceted financing plan, which included the offering of $500 million of
unsecured notes and the entrance into a five-year $750 million unsecured revolving credit facility, which are further described below.
4.875% Senior Notes due 2021:
On January 14, 2011, the Company issued $500 million aggregate principal amount of unsecured 4.875% Senior Notes due 2021 in
the public market, of which certain of the Company’s subsidiaries are the guarantors (“Subsidiary Guarantors”), and UMB is trustee.
The 2011 4.875% Senior Notes were issued at 99.297% of their face value and mature on January 14, 2021. Interest on the 2011
4.875% Senior Notes accrues at a rate of 4.875% per annum and is payable semiannually on January 14 and July 14 of each year
beginning on July 14, 2011. Interest is computed on the basis of a 360-day year.
The proceeds from the 2011 4.875% Senior Notes’ issuance were used to repay all of the Company’s outstanding borrowings under its
Credit Facility and to pay fees and expenses related to the offering of the 2011 4.875% Senior Notes, with the remainder used 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 the
Company’s 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 the
Company’s 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 the Company undergoes 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 the Company to repurchase all or a portion of their 2011 4.875% Senior 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.
The 2011 4.875% Senior Notes are subject to certain customary, positive and negative covenants, with which the Company complied
as of January 14, 2011. The 2011 4.875% Senior Notes are guaranteed by certain of the Company’s subsidiaries on a senior
unsecured basis. The guarantees are full and unconditional and joint and several. Each of the Subsidiary Guarantors are wholly-
owned, directly or indirectly, by the Company and the Company has no independent assets or operations other than those of its
subsidiaries. The only direct or indirect subsidiaries of the Company that are not Subsidiary Guarantors are minor subsidiaries.
Neither the Company nor any of its Subsidiary Guarantors has any material or significant restrictions on the Company’s ability to
obtain funds from its subsidiaries by dividend or loan or to transfer assets from such subsidiaries, except as provided by applicable
law.
Unsecured revolving credit facility:
On January 14, 2011, the Company 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. Borrowings under the Revolver (other
than swing line loans) bear interest, at the Company’s 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 2.50% in the case of loans bearing interest at the Eurodollar Rate and 0.325%
to 1.50% in the case of loans bearing interest at the Base Rate, in each case based upon the ratings assigned to the Company’s debt by
Moody’s Investor Service, Inc. (“Moody’s”) and Standard & Poor’s Rating Services (“S&P”). Swing line loans made under the
Revolver bear interest at the Base Rate plus the applicable margin described above. In addition, the Company pays 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 0.50%
FORM 10-K