O'Reilly Auto Parts 2012 Annual Report Download - page 44

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FORM 10-k
34
Liquidity and related ratios:
The following table highlights our liquidity and related ratios as of December 31, 2012 and 2011 (dollars in millions):
December 31, Percentage
Liquidity and Related Ratios 2012 2011 Change
Current assets $ 2,733 $ 2,608 4.8 %
Quick assets (1) 429 565 (24.1)%
Current liabilities 2,273 1,580 43.9 %
Working capital (2) 460 1,028 (55.3)%
Total debt 1,096 798 37.3 %
Total equity 2,108 2,845 (25.9)%
Current ratio (3) 1.20:1 1.65:1 (27.3)%
Quick ratio (4) 0.20:1 0.39:1 (48.7)%
Debt to equity (5) 0.52:1 0.28:1 85.7 %
(1) Quick assets include cash, cash equivalents and receivables.
(2) Working capital is calculated as current assets less current liabilities.
(3) Current ratio is calculated as current assets divided by current liabilities.
(4) Quick ratio is calculated as current assets, less inventories, divided by current liabilities.
(5) Debt to equity is calculated as total debt divided by shareholders’ equity.
Current liabilities increased 44%, total debt increased 37% and total equity decreased 26% from 2011 to 2012. The increase in current
liabilities was primarily due to the increase in accounts payable as a result of the impact of our enhanced vendor financing program
and the additional vendor participation during the year. Our accounts payable to inventory ratio was 84.7% as of December 31, 2012,
as compared to 64.4% one year prior. The increase in total debt was attributable to the issuance of our unsecured $300 million
3.800% Senior Notes during 2012. The decrease in total equity resulted from the impact of repurchase activity under our share
repurchase program on additional paid-in-capital and retained earnings, partially offset by an increase in retained earnings from strong
net income for the year and an increase in additional paid-in-capital from the proceeds of stock option exercises, and related tax
benefits, executed under our director and employee share-based compensation plans.
The following table identifies cash provided by/(used in) our operating, investing and financing activities for the years ended
December 30, 2012, 2011 and 2010 (in thousands):
For the Year Ended December 31,
Liquidity 2012 2011 2010
Total cash provided by (used in):
Operating activities $ 1,251,555 $ 1,118,991 $ 703,687
Investing activities (317,407) (319,653) (351,277)
Financing activities (1,047,572) (467,507) (349,624)
(Decrease) increase in cash and cash equivalents $ (113,424) $ 331,831 $ 2,786
Capital expenditures $ 300,719 $ 328,319 $ 365,419
Free cash flow (a) 950,836 790,672 338,268
(a) Calculated as net cash provided by operating activities, less capital expenditures for the period.
Operating activities:
The increase in cash provided by operating activities in 2012 compared to 2011 was primarily due to the increase in net income for the
year (adjusted for the effect of non-cash depreciation and amortization charges and the one-time, non-cash charge to write off the
balance of debt issuance costs in conjunction with the retirement of our ABL Credit Facility in January of 2011), decreases in net
inventory investment and other assets and increases in income taxes payable (adjusted for the effect of non-cash change in deferred
income taxes and the excess tax benefit from stock options exercised) and other current liabilities. Net inventory investment reflects
our investment in inventory, net of the amount of accounts payable to vendors. Our net inventory investment continues to decrease as
a result of the impact of our enhanced vendor financing programs. Our vendor financing programs enable us to reduce overall supply
chain costs and negotiate extended payment terms with our vendors. Our accounts payable to inventory ratio was 84.7% and 64.4% at
December 31, 2012 and 2011, respectively. The decrease in other assets was primarily the result of the timing of payments from
vendors for receivables due to the Company under various programs. The increase in income taxes payable, adjusted for the non-cash
impacts discussed above, was primarily the result of the prepayment of income taxes during 2011. The increase in other current