O'Reilly Auto Parts 2014 Annual Report Download - page 22

FORM 10-K
15
Risks related to us and unanticipated fluctuations in our quarterly operating results could affect our stock price.
We believe that quarter-to-quarter comparisons of our financial results are not necessarily meaningful indicators of our future operating
results and should not be relied on as an indication of future performance. If our quarterly operating results fail to meet the expectations
of analysts, the trading price of our common stock could be negatively affected. We cannot be certain that our business strategy and our
plans to integrate the operations of acquired businesses will be successful or that they will successfully meet the expectations of these
analysts. If we fail to adequately address any of these risks or difficulties, our stock price would likely suffer.
The market price of our common stock may be volatile and could expose us to securities class action litigation.
The stock market and the price of our common stock may be subject to wide fluctuations based upon general economic and market
conditions. The market price of our common stock may also be affected by our ability to meet analysts' expectations. Failure to meet
such expectations, even slightly, could have an adverse effect on the market price of our common stock.
In addition, stock market volatility has had a significant effect on the market prices of securities issued by many companies for reasons
unrelated to the operating performance of these companies. Downturns in the stock market may cause the price of our common stock to
decline. In the past, following periods of volatility in the market price of a company's securities, securities class action litigation has
often been instituted against such companies. If similar litigation were instituted against us, it could result in substantial costs and a
diversion of our management's attention and resources, which could have an adverse effect on our business.
Our increased debt levels could adversely affect our cash flow and prevent us from fulfilling our obligations.
We have an unsecured revolving credit facility and unsecured senior notes, which could have important consequences to our financial
health. For example, our level of indebtedness could, among other things:
• make it more difficult to satisfy our financial obligations, including those relating to the senior unsecured notes and our credit
facility;
• increase our vulnerability to adverse economic and industry conditions;
• limit our flexibility in planning for, or reacting to, changes and opportunities in our industry, which may place us at a competitive
disadvantage;
• require us to dedicate a substantial portion of our cash flows to service the principal and interest on the debt, reducing the funds
available for other business purposes, such as working capital, capital expenditures or other cash requirements;
• limit our ability to incur additional debt with acceptable terms, if at all; and
• expose us to fluctuations in interest rates.
In addition, the terms of our financing obligations include restrictions, such as affirmative, negative and financial 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, results of operations and cash flows.
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 supplier 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 and a higher facility fee on commitments 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 supplier financing
programs at attractive rates. Decreased participation in our supplier financing programs would lead to an increase in working capital
needed to operate the business, adversely affecting our cash flows.
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, financial condition and cash
flows.