O'Reilly Auto Parts 2012 Annual Report Download - page 46

FORM 10-k
36
which $106 million were not covered under an interest rate swap contract. All outstanding borrowings under the ABL Credit Facility
were repaid, and all related interest rate swap transaction contracts were terminated on January 14, 2011, and the ABL Credit Facility
was retired concurrent with the issuance of our 4.875% Senior Notes due 2021, as further described below. In conjunction with the
retirement of our ABL Credit Facility, we recognized a one-time non-cash charge to write off the balance of debt issuance costs
related to the ABL Credit Facility in the amount of $22 million and a one-time charge related to the termination of our interest rate
swap contracts in the amount of $4 million, which are included in “Other income (expense)” on the accompanying Consolidated
Statements of Income for the year ended December 31, 2011.
Senior Notes:
4.875% Senior Notes due 2021:
On January 14, 2011, we issued $500 million aggregate principal amount of unsecured 4.875% Senior Notes due 2021 (“4.875%
Senior Notes due 2021”) at a price to the public of 99.297% of their face value with United Missouri Bank, N.A. (“UMB”) as trustee.
Interest on the 4.875% Senior Notes due 2021 is payable on January 14 and July 14 of each year, which began on July 14, 2011, and is
computed on the basis of a 360-day year.
4.625% Senior Notes due 2021:
On September 19, 2011, we issued $300 million aggregate principal amount of unsecured 4.625% Senior Notes due 2021 (“4.625%
Senior Notes due 2021”) at a price to the public of 99.826% of their face value with UMB as trustee. Interest on the 4.625% Senior
Notes due 2021 is payable on March 15 and September 15 of each year, which began on March 15, 2012, and is computed on the basis
of a 360-day year.
3.800% Senior Notes due 2022
On August 21, 2012, we issued $300 million aggregate principal amount of unsecured 3.800% Senior Notes due 2022 (“3.800%
Senior Notes due 2022”) at a price to the public of 99.627% of their face value with UMB as trustee. Interest on the 3.800% Senior
Notes due 2022 is payable on March 1 and September 1 of each year, beginning on March 1, 2013, and is computed on the basis of a
360-day year. The net proceeds from the issuance of the 3.800% Senior Notes due 2022 were used to pay fees and expenses related to
the offering, with the remainder intended to be used to repay borrowings outstanding from time to time under the Revolving Credit
Facility and for general corporate purposes, including share repurchases.
The senior notes are guaranteed on a senior unsecured basis by each of our subsidiaries (“Subsidiary Guarantors”) that incurs or
guarantees our obligations under our Revolving Credit Facility or certain of our other debt or any of our Subsidiary Guarantors. The
guarantees are joint and several and full and unconditional, subject to certain customary automatic release provisions, including
release of the subsidiary guarantor’s guarantee under our Credit Agreement and certain other debt, or, in certain circumstances, the
sales or other disposition of a majority of the voting power of the capital interest in, or of all or substantially all of the property of, the
subsidiary guarantor. Each of the Subsidiary Guarantors is wholly-owned, directly or indirectly, by us and we have no independent
assets or operations other than those of our subsidiaries. Our only direct or indirect subsidiaries that would not be Subsidiary
Guarantors would be minor subsidiaries. Neither we, nor any of our Subsidiary Guarantors, are subject to any material or significant
restrictions on our ability to obtain funds from our subsidiaries by dividend or loan or to transfer assets from such subsidiaries, except
as provided by applicable law. Each of our senior notes is subject to certain customary covenants, with which we complied as of
December 31, 2012.
Debt covenants:
The indentures governing our senior notes contain 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
indentures. These covenants are, however, subject to a number of important limitations and exceptions.
The Credit Agreement contains covenants, including limitations on total outstanding borrowings under the Revolving Credit Facility,
a minimum consolidated fixed charge coverage ratio of 2.00 times through December 31, 2012; 2.25 times through December 31,
2014; 2.50 times through maturity; and a maximum adjusted consolidated leverage ratio of 3.00 times through maturity. The
consolidated leverage ratio includes a calculation of adjusted earnings before interest, taxes, depreciation, amortization, rent and stock
option compensation expense (“EBITDAR”) to adjusted debt. Adjusted debt includes outstanding debt, outstanding stand-by letters of
credit, six-times rent expense and excludes any premium or discount recorded in conjunction with the issuance of long-term debt. In
the event that we should default on any covenant contained within the Credit Agreement, certain actions may be taken against us,
including but not limited to possible termination of credit extensions, immediate payment of outstanding principal amount plus
accrued interest and litigation from our lenders. We had a fixed charge coverage ratio of 4.95 times and 4.86 times as of December
31, 2012 and 2011, respectively, and an adjusted debt to adjusted EBITDAR ratio of 1.83 times and 1.75 times as of December 31,
2012 and 2011, respectively, remaining in compliance with all covenants related to the borrowing arrangements. Under our current
financing plan, we have targeted an adjusted debt to adjusted EBITDAR ratio range of 2.00 times to 2.25 times.