O'Reilly Auto Parts 2013 Annual Report Download - page 39

FORM 10-K
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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 86.6%,
84.7% and 64.4% at December 31, 2013, 2012 and 2011, respectively. The smaller increase in our accounts payable to inventory ratio
in 2013 is the result of a smaller increase in the number of new vendors added to our financing programs in the current year versus the
prior year. We launched our enhanced vendor financing program in January of 2011, and were able to add a large number of vendors to
the programs during 2011 and 2012. As we anniversary these vendor additions to the programs, we expect to see a slower rate of growth
in our accounts payable to inventory ratio. The smaller increase in income taxes payable was primarily the result of a prepaid tax position
at the beginning of 2012 versus a payable position at the beginning of 2013.
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 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. Our accounts payable to inventory ratio was 84.7%, 64.4% and
44.3% at December 31, 2012, 2011 and 2010, 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
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.
Investing activities:
The increase in net cash used in investing activities in 2013 compared to 2012 was primarily the result of an increase in capital expenditures
during the current year related to the purchase and construction of new distribution facilities during 2013 to support our ongoing store
growth. The total capital expenditures were $396 million and $301 million in 2013 and 2012, respectively.
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 and $328 million in 2012
and 2011, 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 rates 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.
We opened 190, 180, and 170 net, new stores in 2013, 2012, and 2011, respectively, and acquired 56 stores in 2012. We plan to open
200 net, new stores in 2014. 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 $1.3 million to $1.5 million;
however, such costs may be significantly reduced where we lease, rather than purchase, the store site.
Financing activities:
The decrease in net cash used in financing activities during 2013 compared to 2012 is primarily attributable to the impact of fewer share
repurchases of our common stock during the current year, in accordance with our Board-approved share repurchase program.
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.
Credit facilities:
On January 14, 2011, we entered into a credit agreement (the "Credit Agreement") for a five-year $750 million unsecured revolving credit
facility (the "Revolving Credit Facility") arranged by Bank of America, N.A. and Barclays Capital, originally scheduled to mature in
January of 2016. During 2011, we completed our first amendment to the Revolving Credit Facility, decreasing the aggregate commitments
under the Revolving Credit Facility to $660 million, extending the maturity date of the Credit Agreement to September of 2016 and
reducing the facility fee and interest rate margins for borrowings under the Revolving Credit Facility. In conjunction with the first
amendment to the Revolving Credit Facility, we recognized a one-time charge related to the modification 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. In July of 2013, we completed our second amendment to the Credit Agreement, decreasing the aggregate commitments under
the Revolving Credit Facility to $600 million, extending the maturity date on the Credit Agreement to July of 2018 and reducing the
facility fee and interest rate margins for borrowings under the Revolving Credit Facility. The Credit Agreement 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 outstanding stand-by letters of credit, primarily to support obligations