O'Reilly Auto Parts 2013 Annual Report Download - page 24

FORM 10-K
18
In addition, the terms of our financing obligations include restrictions, such as affirmative and negative covenants, conditions on borrowing
and subsidiary guarantees. A failure to comply with these restrictions could result in a default under our financing obligations or could
require us to obtain waivers from our lenders for failure to comply with these restrictions. The occurrence of a default that remains
uncured or the inability to secure a necessary consent or waiver could have a material adverse effect on our business, financial condition
or results of operations.
A downgrade in our credit rating would impact our cost of capital and could impact the market value of our unsecured senior notes
as well as limit our access to attractive vendor financing programs.
Credit ratings are an important part of our cost of capital. These ratings are based upon, among other factors, our financial strength. Our
current credit ratings provide us with the ability to borrow funds at favorable rates. A downgrade in our current credit rating from either
rating agency could adversely affect our cost of capital by causing us to pay a higher interest rate on borrowed funds under our credit
facility. A downgrade could also adversely affect the market price and/or liquidity of our notes, preventing a holder from selling the notes
at a favorable price, as well as adversely affect our ability to issue new notes in the future. In addition, a downgrade could limit the
financial institutions willing to commit funds to our vendor financing programs at attractive rates. Decreased participation in our vendor
financing programs would lead to an increase in working capital needed to operate the business, adversely affecting our cash flow.
A breach of customer, Team Member or Company information could damage our reputation or result in substantial additional costs
or possible litigation.
Our business involves the storage of personal information about our customers and Team Members. We have taken reasonable and
appropriate steps to protect this information; however, if we experience a significant data security breach, we could be exposed to damage
to our reputation, additional costs, lost sales or possible regulatory action. The regulatory environment related to information security
and privacy is constantly evolving, and compliance with those requirements could result in additional costs. There is no guarantee that
the procedures that we have implemented to protect against unauthorized access to secured data are adequate to safeguard against all data
security breaches, and such a breach could potentially have a negative impact on our results of operations and financial condition.
Litigation, governmental proceedings, environmental legislation and regulations and employment laws and regulations may affect
our business, financial condition and results of operations.
We are, and in the future may become, involved in lawsuits, regulatory inquiries, and governmental and other legal proceedings, arising
out of the ordinary course of our business. The damages sought against us in some of these litigation proceedings may be material and
may adversely affect our business, results of operations and financial condition.
Environmental legislation and regulations, like the initiatives to limit greenhouse gas emissions and bills related to climate change, could
adversely impact all industries. While it is uncertain whether these initiatives will become law, additional climate change related mandates
could potentially be forthcoming and these matters, if enacted, could adversely impact our costs, by, among other things, increasing fuel
prices.
Our business is subject to employment laws and regulations, including requirements related to minimum wage. Our success depends,
in part, on our ability to manage operating costs and identify opportunities to reduce costs. Our ability to meet labor needs, while
controlling costs is subject to external factors, such as minimum wage legislation. A violation of or change in employment laws and/or
regulations could hinder our ability to control costs, which could have a material adverse effect on our business, results of operations and
financial condition.
Healthcare reform legislation could have a negative impact on our business, financial condition and results of operations.
The enacted Patient Protection and Affordable Care Act, as well as other healthcare reform legislation considered by Congress and state
legislatures, significantly impacts our healthcare cost structure and increases our healthcare-related expenses. We are currently evaluating
the potential additional impact the healthcare reform legislation will have on our business and the steps necessary to mitigate such impact,
including potential further modifications to our current benefit plans, operational changes to minimize the effect of the legislation on our
cost structure and increases to selling prices to mitigate the expected increase in healthcare-related expenses. If we cannot effectively
modify our programs and operations in response to the new legislation, our results of operations, financial condition and cash flows may
be adversely impacted.
Item 1B. Unresolved Staff Comments
None.