O'Reilly Auto Parts 2012 Annual Report Download - page 76

FORM 10-k
66
The remaining unrecognized compensation expense related to unvested restricted share awards at December 31, 2012, was $2.7
million and the weighted-average period of time over which this cost will be recognized is 2.1 years
.
Employee stock purchase plan:
The Company’s employee stock purchase plan (the “ESPP”) permits eligible employees to purchase shares of the Company’s
common stock at 85% of the fair market value. Employees may authorize the Company to withhold up to 5% of their annual salary to
participate in the plan. The fair value of shares issued under the ESPP is based on the average of the high and low market prices of the
Company’s common stock during the offering periods. Compensation expense is recognized based on the discount between the grant-
date fair value and the employee purchase price for the shares sold to employees.
The following table summarizes activity related to the Company’s ESPP for the years ended December 31, 2012, 2011 and 2010:
For the Year Ended December 31,
2012 2011 2010
Compensation expense for shares issued under the ESPP (in millions) $ 1.5 $ 1.3 $ 1.1
Income tax benefit from compensation expense for shares issued under the ESPP (in
millions) $ 0.6 $ 0.5 $ 0.4
Shares issued under the ESPP (in thousands) 114.6 134.5 152.9
Weighted-average price of shares issued under the ESPP $ 75.42 $ 53.93 $ 40.86
Profit sharing and savings plan:
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.
The Company did not issue any shares under this plan for the years ended December 31, 2012, 2011 or 2010. The Company does not
anticipate funding the plan with the issuance of shares in the future. The Company made monetary matching contributions to the plan
in the amounts of $15.6 million, $11.8 million and $11.8 million for the years ended December 31, 2012, 2011 and 2010, respectively.
NOTE 11 – COMMITMENTS
Construction commitments:
As of December 31, 2012, the Company had construction commitments in the amount of $89.3 million.
Letter of credit commitments:
As of December 31, 2012, the Company had outstanding letters of credit, primarily to satisfy workers’ compensation, general liability
and other insurance policies, in the amount of $57.3 million (see Note 4).
Debt financing commitments:
The Company’s senior notes are redeemable in whole, at any time, or in part, from time to time, at the Company’s option upon not
less than 30 nor more than 60 days’ notice at a redemption price, plus any accrued and unpaid interest to, but not including the
redemption date, equal to the greater of (i) 100% of the principal amount thereof or (2) the sum of the present value of the remaining
scheduled payments of principal and interest thereon discounted to the redemption date on a semiannual basis at the applicable
Treasury Yield plus basis points identified in the indentures governing the notes. In addition, if at any time the Company undergoes a
Change of Control Triggering Event (as defined in the indentures governing the notes), the holders may require the Company to
repurchase all or a portion of their senior notes at a price equal to 101% of the principal amount of the notes being repurchased, plus
accrued and unpaid interest, if any, to but not including the repurchase date (see Note 4).
Self-insurance reserves:
The Company uses a combination of insurance and self-insurance mechanisms to provide for the potential liabilities for Team
Member health care benefits, workers’ compensation, vehicle liability, general liability and property loss. With the exception of
certain Team Member health care benefit liabilities, employment related claims and litigation, certain commercial litigation and
certain regulatory matters, the Company obtains third-party insurance coverage to limit its exposure to this obligation.
NOTE 12 – LEGAL MATTERS
O’Reilly is currently involved in litigation incidental to the ordinary conduct of the Company’s business. The Company records
reserves for litigation losses in instances where a material adverse outcome is probable and the Company is able to reasonably
estimate the probable loss. The Company reserves for an estimate of material legal costs to be incurred in pending litigation matters.
Although the Company cannot ascertain the amount of liability that it may incur from any of these matters, it does not currently