O'Reilly Auto Parts 2014 Annual Report Download - page 67

FORM 10-K
60
Nonqualified deferred compensation plan:
The Company sponsors a nonqualified deferred compensation plan (the "Deferred Compensation Plan") for highly compensated employees
whose contributions to the 401(k) Plan are limited due to the application of the annual limitations under the Internal Revenue Code. The
Deferred Compensation Plan provides these employees with the opportunity to defer the full 6% of compensation, including salary and
incentive based compensation that would have been covered under the 401(k) Plan, which are then matched by the Company using the
same formula as the 401(k) Plan. Beginning in 2014, an employee must be employed on December 31 to receive that year's Company
matching contribution, with the matching contribution funded annually in the January following the year in which the matching contribution
was earned. In the event of bankruptcy, the assets of this plan are available to satisfy the claims of general creditors. The Company has
an unsecured obligation to pay, in the future, the value of the deferred compensation and Company match adjusted to reflect the
performance, whether positive or negative, of selected investment measurement options chosen by each participant during the deferral
period. The liability for compensation deferred under the Deferred Compensation Plan was $15.4 million as of December 31, 2014, and
was included within "Other liabilities" on the Consolidated Balance Sheet. The Company expensed matching contributions under the
Deferred Compensation Plan in the amounts of $0.2 million, $0.2 million and $0.1 million for the years ended December 31, 2014, 2013
and 2012, respectively.
NOTE 10 – COMMITMENTS
Construction commitments:
As of December 31, 2014, the Company had construction commitments in the amount of $65.9 million.
Letter of credit commitments:
As of December 31, 2014, the Company had outstanding letters of credit, primarily to satisfy workers' compensation, general liability
and other insurance policies, in the amount of $47.9 million (see Note 5).
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 (ii) 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 5).
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 11 – 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 believe that, in the aggregate,
these matters, taking into account applicable insurance and reserves, will have a material adverse effect on its consolidated financial
position, results of operations or cash flows in a particular quarter or annual period.
The Company received a subpoena from the District Attorney of the County of Alameda, along with other environmental prosecutorial
offices in the state of California, seeking documents and information related to the handling, storage and disposal of hazardous waste.
Management has an ongoing and open dialogue with these agencies regarding this matter and is cooperating fully with the request;
however, at this time a prediction of the ultimate outcome of these efforts cannot be determined.
In addition, O'Reilly was involved in resolving governmental investigations that were being conducted against CSK and CSK's former
officers and other litigation, prior to its acquisition by O'Reilly, as described below. As previously reported all governmental investigations
and litigation related to these CSK legacy issues, both civil and criminal, have concluded. However, under Delaware law, the charter
documents of the CSK entities, and certain indemnification agreements, CSK may have certain indemnification obligations. As a result
of the CSK acquisition, O'Reilly has incurred legal fees and costs related to these potential indemnification obligations arising from the