O'Reilly Auto Parts 2010 Annual Report Download - page 82

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with a corresponding income tax benefit of $0.4 million. During the year ended December 31, 2008, the Company recorded $0.8
million of compensation expense related to employee share purchases with a corresponding income tax benefit of $0.3 million. At
December 31, 2010, approximately 1,251,000 shares were reserved for future issuance under this plan.
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 makes matching contributions equal to 100% 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 may
also make additional discretionary profit sharing contributions to the plan on an annual basis as determined by the Board of Directors.
Beginning in the fourth quarter of 2009, the Company’s matching and discretionary profit sharing contributions under this plan are
funded in the form of cash. Prior to that time, the Company’s matching and discretionary profit sharing contributions under this plan
were funded in the form 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, 2010, the Company did not record any share based compensation
expense for contributions to this plan. During the year ended December 31, 2009, the Company recorded $6.8 million of share based
compensation expense for contributions to this plan with a corresponding income tax benefit of $2.7 million. During the year ended
December 31, 2008, the Company recorded $4.2 million of share based compensation expense for contributions to this plan with a
corresponding income tax benefit of $1.6 million. The Company did not issue any shares under this plan in 2010. The Company
issued 193,127 shares in 2009 to fund matching contributions at an average grant date fair value of $35.37. The Company issued
321,162 shares in 2008 to fund the 2007 profit sharing and matching contributions at an average grant date fair value of $26.72. At
December 31, 2010, approximately 349,000 shares were reserved for future issuance under this plan; however, the Company does not
anticipate funding the plan with the issuance of shares in the future.
On July 11, 2008, in conjunction with the acquisition of CSK (see Note 2), the Company became the sponsor for a 401(k) plan that
was available to all CSK team members who are at least 21 years of age. The Company’s matching contributions from the July 11,
2008, acquisition date through December 31, 2008, totaled $0.9 million. The CSK 401(k) plan was merged with the Company’s profit
sharing and savings plan effective January 1, 2009.
Supplemental retirement plan agreement:
In conjunction with the CSK acquisition, the Company assumed a supplemental executive retirement plan agreement with CSK’s
former Chairman and Chief Executive Officer, Maynard Jenkins, which provides supplemental retirement benefits for a period of
10 years beginning on the first anniversary of the effective date of termination of his employment. Mr. Jenkins retired on August 15,
2007. The benefit amount in this agreement is fully vested and payable to Mr. Jenkins at a rate of $0.6 million per annum. The
Company has accrued the entire present value of this obligation of approximately $4 million as of the July 11, 2008, acquisition date.
A payment of $0.6 million was made to Mr. Jenkins in 2010, 2009 and between July 11, 2008, the acquisition date, and December 31,
2008. The total amount paid to Mr. Jenkins for the supplemental executive retirement plan agreement, as of December 31, 2010, was
$1.8 million.
NOTE 12—EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings per share for the years ended December 31, 2010, 2009
and 2008 (in thousands, except per share data):
Years ended December 31,
2010 2009 2008
Numerator (basic and diluted):
Net income $ 419,373 $ 307,498 $ 186,232
Denominator:
Weighted-average common shares outstanding – basic 138,654 136,230 124,526
Effect of stock options (See Note 11) 2,348 1,651 887
Effect of exchangeable notes (See Note 4) 990 1 -
Weighted-average common shares outstanding – assuming
dilution 141,992 137,882 125,413
Earnings per share - basic $ 3.02 $ 2.26 $ 1.50
Earnings per share - assuming dilution $ 2.95 $ 2.23 $ 1.48
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Incremental net shares for the exchange feature of the Notes (see Note 4), were included in the diluted earnings per share calculation
for the years ended December 31, 2010, and December 31, 2009. The incremental net shares for the exchange feature of the Notes
were not included in the diluted earnings per share calculation for the year ended December 31, 2008, as the impact would have been
antidilutive.
For the years ended December 31, 2010, 2009 and 2008, there were common stock equivalents which the Company did not include in
the computation of diluted earnings per share. These common stock equivalents represent underlying stock options not included in the
computation of diluted earnings per share, because the inclusion of such equivalents would have been antidilutive. The following
table summarizes the antidilutive stock options as of December 31, 2010, 2009 and 2008 (in thousands):
Years ended December 31,
2010 2009 2008
Antidilutive stock options 1,373 1,587 7,441
Weighted-average exercise price per share $48.15 $35.61 $28.97
NOTE 13—INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes, and also include the tax effect of carry forwards.
Significant components of the Company’s deferred tax assets and liabilities are as follows at December 31, 2010 and 2009 (in
thousands):
2010 2009
Deferred tax assets:
Current:
Allowance for doubtful accounts $ 2,683 $ 1,897
Unrealized loss on cash flow hedges 1,875 1,606
Net operating losses 1,893 16,159
Tax credits 5,437 -
Other accruals 78,479 74,702
Noncurrent:
Tax credits 3,558 9,202
Net operating losses 3,408 4,016
Unrealized losses on cash flow hedges - 3,458
Other accruals 20,464 31,375
Total deferred tax assets 117,797 142,415
Deferred tax liabilities:
Current:
Inventories 56,490 8,430
Noncurrent:
Property and equipment 95,300 62,764
Other 866 3,608
Total deferred tax liabilities 152,656 74,802
Net deferred tax (liabilities) assets $ (34,859) $ 67,613
FORM 10-K