O'Reilly Auto Parts 2013 Annual Report Download - page 41

FORM 10-K
35
outstanding stand-by letters of credit and similar instruments, 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, including, but not limited to, possible termination of credit extensions, immediate payment of
outstanding principal amounts plus accrued interest and other amounts payable under the Credit Agreement and litigation from our lenders.
We had a consolidated fixed charge coverage ratio of 4.98 times and 4.95 times as of December 31, 2013 and 2012, respectively, and a
consolidated leverage ratio of 1.90 times and 1.83 times as of December 31, 2013 and 2012, 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.
The table below outlines the calculations of the consolidated fixed charge coverage ratio and consolidated leverage ratio covenants, as
defined in the Credit Agreement governing the Revolving Credit Facility, for the twelve months ended December 31, 2013 and 2012
(dollars in thousands):
For the Year Ended December 31,
2013 2012
GAAP net income $ 670,292 $ 585,746
Add: Interest expense 49,074 40,200
Rent expense 254,892 240,869
Provision for income taxes 388,650 355,775
Depreciation expense 183,220 176,705
Amortization (benefit) expense (40)401
Non-cash share-based compensation 21,722 22,026
Non-GAAP adjusted net income (EBITDAR) $ 1,567,810 $ 1,421,722
Interest expense $ 49,074 $ 40,200
Capitalized interest 10,644 6,064
Rent expense 254,892 240,869
Total fixed charges $ 314,610 $ 287,133
Consolidated fixed charge coverage ratio 4.98 4.95
GAAP debt $ 1,396,208 $ 1,095,956
Stand-by letters of credit 51,715 57,281
Discount on senior notes 3,890 4,366
Six-times rent expense 1,529,352 1,445,214
Non-GAAP adjusted debt $ 2,981,165 $ 2,602,817
Consolidated leverage ratio 1.90 1.83
The consolidated fixed charge coverage ratio and consolidated leverage ratio discussed and presented in the table above are not derived
in accordance with U.S. GAAP. We do not, nor do we suggest investors should, consider such non-GAAP financial measures in isolation
from, or as a substitute for, GAAP financial information. We believe that the presentation of our consolidated fixed charge coverage ratio
and consolidated leverage ratio and free cash flow provides meaningful supplemental information to both management and investors that
reflects the required covenants under our credit agreement. We include these items in judging our performance and believe this non-
GAAP information is useful to investors as well. Material limitations of these non-GAAP measures are that such measures do not reflect
actual GAAP amounts. We compensate for such limitations by presenting, in the tables above, a reconciliation to the most directly
comparable GAAP measures.
Share repurchase program:
Under our share repurchase program, as approved by our Board of Directors, we may, from time to time, repurchase shares of our common
stock, solely through open market purchases effected through a broker dealer at prevailing market prices, based on a variety of factors
such as price, corporate trading policy requirements and overall market conditions. We may increase or otherwise modify, renew, suspend
or terminate the share repurchase program at any time, without prior notice. During 2013, we announced that our Board of Directors
approved a resolution to increase the cumulative authorization amount by $500 million, which is effective for a three-year period and