O'Reilly Auto Parts 2006 Annual Report Download - page 40

o’reilly automotive 2006 annual report
page 38
$11,080,000, in the years ended December 31, 2006, 2005 and 2004, respectively. The remaining unrecognized compensation cost related to unvested
awards at December 31, 2006, was $7,702,000 and the weighted-average period of time over which this cost will be recognized is 3.3 years.
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, 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. During the year ended December 31, 2004, the Company issued 187,754 shares under the
purchase plan at a weighted average price of $20.85 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, 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,
2006, approximately 400,000 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, 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. During the year ended December 31, 2004,
the Company recorded $5,278,000 of compensation cost for contributions to this plan and a corresponding income tax benefit of $1,969,000. The
compensation cost recorded in 2006 includes matching contributions made in 2006 and profit sharing contributions accrued in 2006 to be funded
with issuance of shares of common stock in 2007. 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. The Company issued 238,828 shares in 2004 to fund profit sharing and matching contributions at an average
grant date fair value of $19.36. A portion of these shares related to profit sharing contributions accrued in prior periods. At December 31, 2006,
approximately 1,061,000 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 $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 Company recorded $248,000 of compensation cost for this plan for the year ended December 31, 2004 and
recognized a corresponding income tax benefit of $93,000. The total fair value of shares vested (at vest date) for the years ended December 31, 2006,
2005 and 2004 were $503,000, $524,000 and $335,000, respectively. The remaining unrecognized compensation cost related to unvested awards at
December 31, 2006 was $536,000. The Company awarded 18,698 shares under this plan in 2006 with an average grant date fair value of $33.12.
The Company awarded 14,986 shares under this plan in 2005 with an average grant date fair value of $25.41. The Company awarded 15,834 shares
under this plan in 2004 with an average grant date fair value of $19.05. Compensation cost for shares awarded in 2006 will be recognized over the
three-year vesting period. Changes in the Company’s restricted stock for the year ended December 31, 2006 were as follows:
weighted-
average
grant date
shares fair value
Non-vested at December 31, 2005 15,052 $22.68
Granted during the period 18,698 33.12
Vested during the period (15,685) 26.49
Forfeited during the period (1,774) 27.94
Non-vested at December 31, 2006 16,291 $30.80
At December 31, 2006, approximately 659,000 shares were reserved for future issuance under this plan.
notes to consolidated financial statements (continued)