O'Reilly Auto Parts 2015 Annual Report Download - page 24

FORM 10-K
16
• expose us to fluctuations in interest rates.
In addition, the terms of our financing obligations include restrictions, such as affirmative, negative and financial covenants, conditions
on borrowing and subsidiary guarantees. A failure to comply with these restrictions could result in a default under our financing obligations
or could require us to obtain waivers from our lenders for failure to comply with these restrictions. The occurrence of a default that
remains uncured or the inability to secure a necessary consent or waiver could have a material adverse effect on our business, financial
condition, results of operations and cash flows.
A downgrade in our credit rating would impact our cost of capital and could impact the market value of our unsecured senior notes,
as well as limit our access to attractive supplier financing programs.
Credit ratings are an important component of our cost of capital. These ratings are based upon, among other factors, our financial strength.
Our current credit ratings provide us with the ability to borrow funds at favorable rates. A downgrade in our current credit rating from
either rating agency could adversely affect our cost of capital by causing us to pay a higher interest rate on borrowed funds under our
credit facility and a higher facility fee on commitments under our credit facility. A downgrade in our current credit rating could also
adversely affect the market price and/or liquidity of our notes, preventing a holder from selling the notes at a favorable price, as well as
adversely affect our ability to issue new notes in the future. In addition, a downgrade in our current credit rating could limit the financial
institutions willing to commit funds to our supplier financing programs at attractive rates. Decreased participation in our supplier financing
programs would lead to an increase in working capital needed to operate the business, adversely affecting our cash flows.
A breach of customer, Team Member or Company information could damage our reputation or result in substantial additional costs
or possible litigation.
Our business involves the storage of personal information about our customers and Team Members. We have taken reasonable and
appropriate steps to protect this information; however, if we experience a significant data security breach, we could be exposed to damage
to our reputation, additional costs, lost sales or possible regulatory action. The regulatory environment related to information security
and privacy is constantly evolving, and compliance with those requirements could result in additional costs. There is no guarantee that
the procedures that we have implemented to protect against unauthorized access to secured data are adequate to safeguard against all data
security breaches, and such a breach could potentially have a negative impact on our results of operations, financial condition and cash
flows.
Litigation, governmental proceedings, environmental legislation and regulations, employment legislation and regulations and
healthcare reform legislation may affect our business, financial condition, results of operations and cash flows.
We are, and in the future may become, involved in lawsuits, regulatory inquiries, and governmental and other legal proceedings, arising
out of the ordinary course of our business. The damages sought against us in some of these litigation proceedings may be material and
may adversely affect our business, results of operations, financial condition and cash flows.
Environmental legislation and regulations, like the initiatives to limit greenhouse gas emissions and bills related to climate change, could
adversely impact all industries. While it is uncertain whether these initiatives will become law, additional climate change related mandates
could potentially be forthcoming and these matters, if enacted, could adversely impact our costs, by, among other things, increasing fuel
prices.
Our business is subject to employment legislation and regulations, including requirements related to minimum wage. Our success depends,
in part, on our ability to manage operating costs and identify opportunities to reduce costs. Our ability to meet labor needs, while
controlling costs is subject to external factors, such as minimum wage legislation. A violation of, or change in, employment legislation
and/or regulations could hinder our ability to control costs, which could have a material adverse effect on our business, results of operations,
financial condition and cash flows.
The enacted Patient Protection and Affordable Care Act, as well as other healthcare reform legislation considered by Congress and state
legislatures, significantly impacts our healthcare cost structure and increases our healthcare-related expenses. We continue to evaluate
potential additional impacts the healthcare reform legislation will have on our business and the steps necessary to mitigate such impacts.
If we cannot effectively mitigate the potential additional impacts of the healthcare reform legislation, our results of operations, financial
condition and cash flows may be adversely impacted.
Item 1B. Unresolved Staff Comments
None.