O'Reilly Auto Parts 2003 Annual Report Download - page 37

management’s discussion and analysis
of financial condition and results of operations (continued)
In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based Compensation – Transition and Disclosure, amending
SFAS No. 123, Accounting for Stock-Based Compensation. SFAS 148 gives companies electing to expense employee stock options three
methods to do so. In addition, the statement amends the disclosure requirements to require more prominent disclosure about the
method of accounting for stock-based employee compensation and the effect of the method used on reported results in both annual
and interim financial statements. We have elected to continue using the intrinsic value method of accounting for stock-based
compensation, therefore, SFAS No. 148 did not have any effect on our consolidated financial position or results of operations.
See Note 9 to the consolidated financial statements for additional information regarding stock-based compensation.
In January 2003, the FASB issued Financial Interpretation 46, Consolidation of Variable Interest Entities. The interpretation expands
upon and strengthens existing accounting guidance that addresses when a company should include in its financial statements the assets,
liabilities and activities of another entity. A variable interest entity is a corporation, partnership, trust or any other legal structure used
for business purposes that either (a) does not have equity investors with voting rights or (b) has equity investors that do not provide
sufficient financial resources for the entity to support its activities. The interpretation requires a variable interest entity to be consolidated
by a company if that company is subject to a majority of the risk of loss from the variable interest entity’s activities or is entitled to
receive a majority of the entity’s residual returns or both. The consolidation requirements of the interpretation applied immediately to
variable interest entities created after January 31, 2003. The consolidation requirements applied to older entities in the first fiscal year
or interim period beginning after December 15, 2003. On June 26, 2003, we signed an Amended and Restated Agreement relating
to our properties leased from SunTrust Equity Funding, LLC. The agreement with SunTrust Equity Funding, LLC has been
recorded and disclosed as an operating lease in the consolidated financial statements in accordance with SFAS No. 13 and Financial
Interpretation 46.
In March 2003, the Emerging Issues Task Force (EITF) reached a consensus on Issue No. 02-16, Accounting by a Customer (including a
Reseller) for Certain Consideration Received from a Vendor. Under the new guidance, cash consideration received from a vendor should
be classified as a reduction of cost of sales. If the consideration received represents a payment for assets delivered to the vendor, it
should be classified as revenue. If the consideration is a reimbursement of a specific, incremental, identifiable cost incurred in selling
the vendor’s product, the cost should be characterized as a reduction of that cost incurred. The guidance was adopted by the Company
on January 1, 2003. The Company’s policies and practices for recording such vendor concessions as co-operative advertising and
vendor allowances and discounts were aligned with the EITF’s guidance both prior to and after the application date, therefore, the
release did not have any effect on our consolidated financial position or results of operations.
forward-looking statements
We claim the protection of the safe-harbor for forward-looking statements within the meaning of the Private Securities Litigation
Reform Act of 1995. Certain statements contained within this annual report discuss, among other things, expected growth, store
development and expansion strategy, business strategies, future revenues and future performance. These forward-looking statements
are based on estimates, projections, beliefs and assumptions and are not guarantees of future events and results. Such statements are
subject to risks, uncertainties and assumptions, including, but not limited to, competition, product demand, the market for auto
parts, the economy in general, inflation, consumer debt levels, governmental approvals, our ability to hire and retain qualified
employees, risks associated with the integration of acquired businesses, weather, terrorist activities, war and the threat of war. Actual
results may materially differ from anticipated results described in these forward-looking statements. Please refer to the Risk Factors
sections of the Company’s annual report on Form 10-K for the year ended December 31, 2003, for more details.
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