O'Reilly Auto Parts 2007 Annual Report Download - page 42

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Employee Stock Purchase Plan
The Company’s employee stock purchase plan permits all eligible employees to purchase shares of the Company’s common stock at 85% of the
fair market value. Participants may authorize the Company to withhold up to 5% of their annual salary to participate in the plan. The stock
purchase plan authorizes up to 2,600,000 shares to be granted. During the year ended December 31, 2007, the Company issued 156,466 shares
under the purchase plan at a weighted average price of $29.12 per share. During the year ended December 31, 2006, the Company issued
165,306 shares under the purchase plan at a weighted average price of $27.36 per share. During the year ended December 31, 2005, the
Company issued 161,903 shares under the purchase plan at a weighted average price of $27.57 per share. SFAS No. 123R requires compensation
expense to be recognized based on the discount between the grant date fair value and the employee purchase price for shares sold to employees.
During the year ended December 31, 2007, the Company recorded $804,000 of compensation cost related to employee share purchases and a
corresponding income tax benefit of $290,000. During the year ended December 31, 2006, the Company recorded $799,000 of compensation
cost related to employee share purchases and a corresponding income tax benefit of $295,000. At December 31, 2007, approximately 243,000
shares were reserved for future issuance.
Other Employee Benefit Plans
The Company sponsors a contributory profit sharing and savings plan that covers substantially all employees who are at least 21 years of age and
have at least six months of service. The Company has agreed to make matching contributions equal to 50% of the first 2% of each employee’s
wages that are contributed and 25% of the next 4% of each employee’s wages that are contributed. The Company also makes additional discretionary
profit sharing contributions to the plan on an annual basis as determined by the Board of Directors. The Company’s matching and profit sharing
contributions under this plan are funded in the form of shares of the Company’s common stock. A total of 4,200,000 shares of common stock
have been authorized for issuance under this plan. During the year ended December 31, 2007, the Company recorded $6,849,000 of compensation
cost for contributions to this plan and a corresponding income tax benefit of $2,527,000. During the year ended December 31, 2006, the
Company recorded $6,429,000 of compensation cost for contributions to this plan and a corresponding income tax benefit of $2,372,000.
During the year ended December 31, 2005, the Company recorded $6,606,000 of compensation cost for contributions to this plan and a
corresponding income tax benefit of $2,444,000. The compensation cost recorded in 2007 includes matching contributions made in 2007 and
profit sharing contributions accrued in 2007 to be funded with issuance of shares of common stock in 2008. The Company issued 197,431
shares in 2007 to fund profit sharing and matching contributions at an average grant date fair value of $32.90. The Company issued 204,000
shares in 2006 to fund profit sharing and matching contributions at an average grant date fair value of $34.34. The Company issued 210,461
shares in 2005 to fund profit sharing and matching contributions at an average grant date fair value of $25.79. A portion of these shares related
to profit sharing contributions accrued in prior periods. At December 31, 2007, approximately 863,000 shares were reserved for future issuance
under this plan.
The Company has in effect a performance incentive plan for the Company’s senior management under which the Company awards shares of
restricted stock that vest equally over a three-year period and are held in escrow until such vesting has occurred. Shares are forfeited when an
employee ceases employment. A total of 800,000 shares of common stock have been authorized for issuance under this plan. Shares awarded
under this plan are valued based on the market price of the Company’s common stock on the date of grant and compensation cost is recorded
over the vesting period. The Company recorded $459,000 of compensation cost for this plan for the year ended December 31, 2007 and
recognized a corresponding income tax benefit of $169,000. The Company recorded $416,000 of compensation cost for this plan for the year
ended December 31, 2006 and recognized a corresponding income tax benefit of $154,000. The Company recorded $289,000 of compensation
cost for this plan for the year ended December 31, 2005 and recognized a corresponding income tax benefit of $107,000. The total fair value of
shares vested (at vest date) for the years ended December 31, 2007, 2006 and 2005 were $478,000, $503,000 and $524,000, respectively. The
remaining unrecognized compensation cost related to unvested awards at December 31, 2007 was $521,000. The Company awarded 16,189
shares under this plan in 2007 with an average grant date fair value of $34.02. The Company awarded 18,698 shares under this plan in 2006
with an average grant date fair value of $33.12. The Company awarded 14,896 shares under this plan in 2005 with an average grant date fair
value of $25.41. Compensation cost for shares awarded is recognized over the three-year vesting period. Changes in the Company’s restricted
stock for the year ended December 31, 2007 were as follows:
Shares Weighted-Average Grant Date Fair Value
Non-vested at December 31, 2006 16,291 $ 30.80
Granted during the period 16,189 34.02
Vested during the period (14,738) 31.05
Forfeited during the period (2,619) 32.53
Non-vested at December 31, 2007 15,123 $ 33.70
At December 31, 2007, approximately 645,000 shares were reserved for future issuance under this plan.
Notes to Consolidated Financial Statements (continued)