O'Reilly Auto Parts 2000 Annual Report Download - page 30

2000 AR
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NOTE 8 – LEGAL PROCEEDINGS
continued
file a response, which was filed on April 14, 1999. On May 3,
1999, the Company filed a reply to that response. On June 6,
2000, the Supreme Court of Texas denied the appeal for a
mandamus. On January 15, 2001, the Company reached a
favorable verbal settlement with the plaintiffs’ counsel. The
settlement documents are currently being prepared and will be
subject to the approval of the Trial Court. The Company believes
that this lawsuit will not have a material adverse effect on the
Company’s consolidated financial position, results of operations,
or cash flows.
In addition, the Company is involved in various other legal
proceedings incidental to the conduct of its business. Although
the Company cannot ascertain the amount of liability that it may
incur from any of these matters, it does not currently believe that,
in the aggregate, they will have a material adverse effect on the
consolidated financial position, results of operations or cash flows
of the Company.
NOTE 9 – INTEREST RATE RISK MANAGEMENT
The Company entered into an interest rate swap agreement to
effectively convert a portion of its floating rate long-term debt to a
fixed rate basis, thereby reducing the impact of interest rate changes
on future income. Pursuant to this pay-fixed swap agreement, the
Company agreed to exchange, at specified intervals, the difference
between the fixed and the floating interest amounts calculated on
the notional amount of the swap agreement which totaled $50 million,
$50 million and $100 million, respectively, at January 27, 2000,
December 31, 1999, and 1998. The Company’s fixed interest rate
under the swap agreement was 5.66% and the counterparty’s
floating rate was 6.20% at January 27, 2000, and December 31,
1999. The swap agreement expired on January 27, 2000.
NOTE 10 – EMPLOYEE BENEFIT PLANS
The Company sponsors a contributory profit sharing and savings
plan that covers substantially all employees who are 21 years of age
with at least six months of service. Employees may contribute up to
15% of their annual compensation subject to Internal Revenue Code
maximum limitations. The Company has agreed to make matching
contributions equal to 50% of the first 2% of each employee’s
contribution and 25% of the next 2% of each employee’s contribution.
Additional contributions to the plan may be made as determined
annually by the Board of Directors. After three years of service,
Company contributions and earnings thereon vest at the rate of 20%
per year. Company contributions charged to operations amounted
to $2,454,000 in 2000, $2,618,000 in 1999 and $1,818,000 in
1998. Company contributions, in the form of common stock, to the
profit sharing and savings plan to match employee contributions
during the years ended December 31 were as follows:
Year Market
Contributed Shares Value
2000 49,891 $724,000
1999 29,481 658,000
1998 31,438 514,000
Profit sharing contributions accrued at December 31, 2000, 1999,
and 1998 funded in the next year through the issuance of shares
of the Company’s common stock were as follows:
Year Market
Funded Shares Value
2000 132,890 $1,919,000
1999 60,640 1,300,000
1998 72,386 1,070,000
The Company also sponsors an unfunded non-contributory defined
benefit health care plan, which provides certain health benefits to
retired employees. According to the terms of this plan, retirees’
annual benefits are limited to $1,000 per employee starting at age
66 for employees with 20 or more years of service. Post-retirement
benefit costs for each of the years ended December 31, 2000,
1999, and 1998 amounted to $12,000.
Additionally, the Company has adopted a stock purchase plan
under which 1,000,000 shares of common stock are reserved for
future issuance. Under the plan, substantially all employees and
non-employee directors have the right to purchase shares of the
Company’s common stock monthly at a price equal to 85% of the
fair market value of the stock. Under the plan, 147,315 shares were
issued at a weighted-average price of $12.83 per share during
2000, 78,927 shares were issued at a weighted-average price of
$18.90 per share during 1999, and 74,632 shares were issued at
a weighted-average price of $15.05 per share during 1998.
The Company has in effect a performance incentive plan for the
Company’s senior management under which 400,000 shares of
restricted stock are reserved for future issuance. Under the plan,
12,164 shares, 6,796 shares and 5,358 shares were issued during
2000, 1999 and 1998, respectively.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS continued …
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