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Pastimes : Clown-Free Zone... sorry, no clowns allowed -- Ignore unavailable to you. Want to Upgrade?

To: yard_man who wrote (160753)	4/18/2002 12:06:07 PM
From: reaper	Read Replies (2) \| Respond to of 436258

the inherent returns at AZO seem better than at ORLY, though AZO is certainly an expensive stock right now. i am attracted to ORLY partially because of the low returns but mostly because of stuff like the family selling stock, synthetic leases, and the fact that the company is selling real estate to a company controlled by the O'Reilly family to raise cash. without these transactions the company does not generate sufficient cash flow to fund its growth, IMO. from the O'Reilly 10K: On December 15, 2000, we entered into a $50 million Synthetic Operating Lease Facility ("the Facility") with a group of financial institutions. Under the Facility, the lessor acquires land to be developed for O'Reilly Auto Parts stores and funds our development thereof as the Construction Agent and Guarantor. We subsequently lease the property from the lessor for an initial term of five years and have the option to request up to two additional successive renewal periods of five years each from the lessor, although the lessor is not obligated to grant us either renewal period. The Facility provides for a residual value guarantee of approximately $36.6 million at December 31, 2001, and purchase options on the properties. It also contains a provision for an event of default whereby the lessor, among other things, may require us to purchase any or all of the properties. We are utilizing the Facility to finance a portion of our store growth. Funding under the Facility at December 31, 2001, and 2000, totaled $43.0 million and $1.0 million, respectively. On December 29, 2000, we completed a sale-leaseback transaction. Under the terms of the transaction, we sold 90 properties, including land, buildings and improvements, for $52.3 million. The lease, which is being accounted for as an operating lease, provides for an initial lease term of 21 years and may be extended for one ten-year period and two additional successive periods of five years each. The resulting gain of $4.5 million has been deferred and is being amortized over the initial lease term. Net rent expense during the initial term is approximately $5.5 million annually and is included in the table of future minimum annual rental commitments under noncancelable operating leases. Proceeds from the transaction were used to reduce outstanding borrowings under our revolving credit facility. In August, 2001, the Company completed a sale-leaseback with O'Reilly-Wooten 2000 LLC (an entity owned by certain shareholders of the Company). The transaction closed on September 1, 2001, with a purchase price of approximately $5.6 million for nine O'Reilly Auto Parts stores and did not result in a material gain or loss. The lease, which has been accounted for as an operating lease, calls for an initial term of 15 years with three five-year renewal options.