O'Reilly Auto Parts 2001 Annual Report Download - page 30

O’REILLY AUTOMOTIVE 2001 ANNUAL REPORT
A MODEL YEAR
Page 28
Rental expense amounted to $25,122,000, $16,219,000 and
$14,122,000 for the years ended December 31, 2001, 2000 and
1999, respectively.
Other Commitments
The Company had construction commitments, which totaled
approximately $22.3 million, at December 31, 2001.
NOTE 8—LEGAL PROCEEDINGS
The Company is a defendant in a lawsuit entitled “Coalition for a
Level Playing Field, L.L.C., et. al., v. AutoZone, Inc., et. al.,” in the
United States District Court for the Eastern District of New York.
The over 100 plaintiffs consist primarily of warehouse distributors
and jobbers, and the eight defendants are principally automotive
aftermarket parts retailers. The plaintiffs allege that the defendants
violated certain provisions of the Robinson-Patman Act by receiving
and inducing various forms of price discriminations from manufacturers
of automotive parts. The plaintiffs seek compensatory damages,
as well as injunctive and other equitable relief. The Company and
the other defendants filed a motion to dismiss this action and
subsequently, on October 23, 2001, the court overruled a substantial
portion of the defendant’s motion. The Company believes the claims
are without merit and that this lawsuit will not have a material
adverse effect on the Company’s consolidated financial position,
results of operations or cash flows.
The Company was involved in litigation as a result of a com-
plaint filed against Hi/LO in May 1997. The plaintiff in this lawsuit
sought to certify a class action on behalf of persons or entities in
the states of Texas, Louisiana and California that had purchased a
battery from Hi/LO since May 1990. The complaint alleged that Hi/LO
offered and sold ‘’old,’’ ‘’used’’ and ‘’out of warranty’’ batteries as if
the batteries were new, resulting in claims for violations of deceptive
trade practices, breach of contract, negligence, fraud, negligent
misrepresentation and breach of warranty. On January 15, 2001, the
Company reached a favorable verbal settlement with the plaintiffs’
counsel. The settlement, which was not significant and which was
accrued at December 31, 2001 and 2000, was approved on
October 18, 2001, by the 60th Judicial District Court of Texas.
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—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 4% 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 $3,207,000 in 2001, $2,454,000 in 2000 and $2,618,000
in 1999. 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
2001 37,081 $969,000
2000 49,891 724,000
1999 29,481 658,000
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)