O'Reilly Auto Parts 2012 Annual Report Download - page 45

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liabilities was primarily the result of the payment, during 2011, for the one-time monetary penalty to the DOJ for the legacy CSK DOJ
investigation.
The increase in cash provided by operating activities in 2011 compared to 2010 was primarily due to strong net income for the year
(adjusted for the effect of non-cash depreciation and amortization charges, 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 and deferred income taxes) and a
significant decrease in net inventory investment, partially offset by a decrease in other current liabilities (driven by the payment of the
one-time penalty to the DOJ for the legacy CSK DOJ investigation). Our net inventory investment significantly decreased as a result
of the impact of our enhanced vendor financing programs as well as our ongoing efforts to remove excess inventory from our systems.
Our accounts payable to inventory ratio was 64.4% and 44.3% at December 31, 2011 and 2010, respectively. Our efforts to remove
excess inventory from our systems resulted in a decrease in total inventory of $37 million during the year, despite the fact that we
opened 170 new stores during the year.
Investing activities:
The decrease in cash used in investing activities in 2012 compared to 2011 was primarily the result of decreased capital expenditures
during 2012, partially offset by small acquisitions during the year. Total capital expenditures were $301 million, $328 million, and
$365 million in 2012, 2011, and 2010, respectively. The decrease in capital expenditures during 2012, as compared to 2011, was
primarily related to the mix of owned versus leased stores opened. We were able to find real estate with attractive lease factors during
2012 and as a result, opened a larger number of leased locations during 2012 as compared to the year prior. Opening a new store in a
leased location requires a smaller capital investment than opening an owned location.
The decrease in cash used in investing activities in 2011 compared to 2010 was primarily the result of decreased capital expenditures.
During 2010, we completed the comprehensive expansion of our distribution system in the CSK markets and the conversion of the
CSK stores to the O’Reilly POS, resulting in reduced levels of conversion related capital expenditures during 2011.
We opened 180, 170, and 149 net, new stores in 2012, 2011, and 2010, respectively, and acquired 56 stores in 2012. We plan to open
190 net, new stores in 2013. The costs associated with the opening of a new store (including the cost of land acquisition,
improvements, fixtures, vehicles, net inventory investment and computer equipment) are estimated to average approximately $1.7
million to $1.9 million; however, such costs may be significantly reduced where we lease, rather than purchase, the store site.
Financing activities:
The increase in net cash used in financing activities during 2012 compared to 2011 was primarily attributable to the impact of
repurchases of our common stock during 2012, in accordance with our Board-approved share repurchase program and greater net
proceeds from the issuance of long-term debt during 2011, partially offset by an increase in the net proceeds from the exercise of stock
options issued under the Company’s incentive programs and the related tax benefits during 2012.
The increase in net cash used in financing activities during 2011 compared to 2010 is primarily attributable to the impact of
repurchases of our common stock during 2011 in accordance with our Board-approved share repurchase program, which was partially
offset by an increase in net long term borrowings in 2011 as compared to net repayments under our facilities during 2010. The net
borrowings in 2011 are the result of proceeds from the issuance of our 4.875% Senior Notes due 2021 and our 4.625% Senior Notes
due 2021 in January and September of 2011, respectively, partially offset by the repayment and termination of our previous ABL
Credit Facility and the payment of debt issuance costs related to the issuance of our senior notes and the establishment of our new
unsecured Revolving Credit Facility. The net repayments under our facilities in 2010 were the result of our focus on using available
cash on hand to reduce the level of outstanding borrowings under our secured ABL Credit Facility.
Credit facilities:
On January 14, 2011, we entered into a new credit agreement for a five-year $750 million unsecured revolving credit facility
(“Revolving Credit Facility”) arranged by BA and Barclays Capital, which was scheduled to mature in January of 2016. During 2011,
we amended the unsecured Revolving Credit Facility, which decreased the facility to $660 million and reduced the fees and interest
rate margins for borrowings under the Revolving Credit Facility. The amendment also extended the maturity of the Revolving Credit
Facility to September of 2016. In conjunction with the amendment to the Revolving Credit Facility, we recognized a one-time charge
related to the modification to the credit facility in the amount of $0.3 million, which is included in “Other income (expense)” on the
accompanying Consolidated Statements of Income for the year ended December 31, 2011. The Revolving Credit Facility includes a
$200 million sub-limit for the issuance of letters of credit and a $75 million sub-limit for swing line borrowings. As described in the
credit agreement governing the Revolving Credit Facility, we may, from time to time subject to certain conditions, increase the
aggregate commitments under the Revolving Credit Facility by up to $200 million. We had stand-by letters of credit, primarily to
satisfy workers’ compensation, general liability and other insurance policies, in the amount of $57 million and $60 million as of
December 13, 2012 and 2011, respectively. As of December 31, 2012 and 2011, we had no outstanding borrowings under the
Revolving Credit Facility.
On July 11, 2008, we entered into a credit agreement for a five-year asset-based revolving credit facility, which was scheduled to
mature in July of 2013. At December 31, 2010, we had outstanding borrowings of $356 million under the ABL Credit Facility, of