UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act
of 1934
(Amendment No. )
Filed by the Registrant
x
Filed by a Party other than the Registrant
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Check the appropriate box:
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PreliminaryProxy Statement
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Confidential, For Use of the Commission
Only
(as permitted by Rule 14a-6(e)(2))
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x
Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Under Rule 14a-12
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OReilly Automotive, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy
Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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Title of each class of securities to which transaction applies:
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Aggregate number of securities to which transaction applies:
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Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and
state how it was determined):
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4.
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Proposed maximum aggregate value of transactions:
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Fee paid previously with preliminary materials.
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously.
Identify the previous filing by registration statement number, or the form or schedule and the date of its filing.
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1.
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Amount previously paid:
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Form, Schedule or Registration Statement No.:
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March 18, 2011
Dear Shareholder:
You are cordially invited to attend the 2011 Annual Meeting of
Shareholders of OReilly Automotive, Inc. to be held at the Doubletree Hotel Springfield, 2431 North Glenstone Avenue, Springfield, Missouri 65803, on Tuesday, May 3, 2011, at 10:00 a.m. central time.
Details of the business to be conducted at the Annual Meeting are given in the attached Notice of Annual Meeting of Shareholders and
Proxy Statement.
In addition to the specific matters to be acted upon, there will be a report on the progress of the Company
and an opportunity for questions of general interest to the shareholders.
It is important that your shares be represented at
the meeting. Whether or not you plan to attend in person, please complete, sign, date and return the enclosed proxy card in the envelope provided at your earliest convenience or vote via telephone or Internet using the instructions on the proxy
card. If you attend the meeting, you may vote your shares in person even though you have previously signed and returned your proxy.
In order to assist us in preparing for the Annual Meeting, please let us know if you plan to attend by contacting Tricia Headley, our Corporate Secretary, at 233 South Patterson, Springfield, Missouri
65802, (417) 874-7161.
We look forward to seeing you at the Annual Meeting.
David E. OReilly
Chairman of the Board
OREILLY AUTOMOTIVE, INC.
233 South Patterson
Springfield, Missouri 65802
NOTICE OF ANNUAL MEETING OF
SHAREHOLDERS
To be held on May 3, 2011
Springfield, Missouri
March 18, 2011
The Annual Meeting of Shareholders of OReilly Automotive, Inc. (the Company), will be held on Tuesday, May 3,
2011, at 10:00 a.m. central time, at the Doubletree Hotel Springfield, 2431 North Glenstone Avenue, Springfield, Missouri 65803.
The Annual Meeting is being held for the following purposes:
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(1)
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To elect three Class III Directors, each to serve for a three-year term;
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(2)
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To conduct an advisory (non-binding) vote on executive compensation;
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(3)
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To conduct an advisory (non-binding) vote on the frequency (either one, two or three years) of conducting future advisory (non-binding) votes on executive compensation;
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(4)
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To ratify the appointment of Ernst & Young, LLP, as independent auditors for the fiscal year ending December 31, 2011; and
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(5)
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To transact such other business as may properly come before the meeting or any adjournments thereof.
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The Board of Directors has fixed the close of business on February 28, 2011, as the record date for the determination of
shareholders entitled to notice of and to vote at the Annual Meeting and any adjournments or postponements thereof. A list of all shareholders entitled to vote at the Annual Meeting, arranged in alphabetical order and showing the address of and
number of shares held by each shareholder, will be available during usual business hours at the office of the Corporate Secretary, Tricia Headley, at 2831 South Ingram Mill Road, Springfield, Missouri 65804, to be examined by any shareholder for any
purpose reasonably related to the Annual Meeting for 10 days prior to the date thereof. The list will also be available for examination throughout the course of the meeting.
Your vote is important to ensure a quorum at the meeting. Even if you own only a few shares, and whether or not you expect to be present at the meeting, we request you mark, date, sign and mail the
enclosed proxy card in the postage-paid envelope provided or vote your shares by telephone or Internet as directed on the enclosed proxy card. Telephone and Internet voting facilities for shareholders of record will be available 24 hours a day and
will close on Monday, May 2, 2011, at 11:59 p.m. eastern time.
A copy of the Companys Annual Shareholders
Report for fiscal year 2010 accompanies this notice.
By Order of the Board of Directors,
Tricia Headley
Secretary
TABLE OF CONTENTS
OREILLY AUTOMOTIVE, INC.
233 South Patterson
Springfield, Missouri 65802
PROXY
STATEMENT
The enclosed proxy is solicited by the Board of Directors of OReilly Automotive, Inc. (the
Company), for use at the Annual Meeting of our shareholders to be held at the Doubletree Hotel Springfield, 2431 North Glenstone Avenue, Springfield, Missouri 65803, on Tuesday, May 3, 2011, at 10:00 a.m., central time, and at any
adjournments thereof. Whether or not you expect to attend the meeting in person, please return your executed proxy card in the enclosed postage-paid envelope or vote via telephone or Internet, using the instructions discussed below and on the
proxy card, and the shares represented thereby will be voted in accordance with your wishes. This Proxy Statement and the accompanying proxy card are first being mailed to shareholders on or about March 18, 2011.
Solicitation of proxies is being made by us and may be made by mail, electronic mail, telephone or fax. The cost of solicitation of
proxies will be borne by us and will also include reimbursement paid to brokerage firms and others for their reasonable out-of-pocket expenses of forwarding solicitation materials to their principals.
GENERAL INFORMATION ABOUT THE MEETING AND VOTING
What is the purpose of the Annual Meeting?
At our Annual Meeting,
shareholders will act upon the matters described in the accompanying notice of meeting. In addition, our management will report on OReilly Automotive Inc.s performance during fiscal 2010 and respond to questions from shareholders.
When and where will the 2011 Annual Meeting be held?
The 2011 Annual Meeting will be held at the Doubletree Hotel Springfield, 2431 North Glenstone Avenue, Springfield, Missouri 65803, on Tuesday, May 3, 2011, at 10:00 a.m. central time.
What is a shareholder of record?
A shareholder of record is a shareholder whose ownership of our common stock is reflected directly on the books and records of our transfer agent, Computershare Trust Company, N.A.
What is the record date for the Annual Meeting?
The record date is February 28, 2011. Shareholders of record at the close of business on February 28, 2011, will be entitled to vote at the Annual Meeting. Each share of common stock will have
one vote on each matter to be voted upon.
Which OReilly shares are included in the proxy card I received?
The proxy card you received covers the number of common shares to be voted in your account as of the record date.
What matters will be voted on at the Annual Meeting?
At the Annual Meeting, shareholders will be asked to vote on the following proposals, which were solicited by the Board of Directors:
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To elect three Class III Directors, each to serve for a three-year term;
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To conduct an advisory (non-binding) vote on executive compensation;
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To conduct an advisory (non-binding) vote on the frequency (either one, two or three years) of conducting future advisory (non-binding) votes on
executive compensation; and
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To ratify the appointment of Ernst & Young, LLP, as independent auditors for the fiscal year ending December 31, 2011.
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May I vote with my proxy card in person at the Annual Meeting?
If you wish to vote your shares in person at the Annual Meeting, you may bring a signed proxy card with your choices specified by marking
the appropriate boxes on the card.
2
May I vote without attending the Annual Meeting?
If you do not plan to attend the meeting, you have three additional options to vote your shares:
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1.
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Via Mail
: You may vote by properly completing and signing the enclosed proxy card and returning the proxy in the enclosed, postage-paid envelope. Please specify
your choices on the proxy card by marking the appropriate boxes. Shares will be voted by your written instructions; however, it is not necessary to mark any boxes if you wish to vote in accordance with the Board of Directors recommendations,
outlined further below. Mark, sign and date your proxy card and return in the postage-paid envelope we have provided or return to OReilly Automotive, Inc. Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
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Via the Internet
: You may vote on the Internet by visiting
www.proxyvote.com
. Have your proxy card in hand when you access the website and follow the
instructions to obtain your records and create an electronic voting instruction form.
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Via Telephone
: Using any touch-tone telephone, you may vote your shares by dialing toll-free to 1-800-690-6903. Have your proxy card in hand when calling and
follow the instructions.
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If you choose to vote on the Internet or by telephone, please note the voting will
close at 11:59 PM eastern time, on May 2, 2011.
If you do not attend the Annual Meeting, your shares cannot be voted
unless a signed proxy card is returned, shares are voted using the Internet or the telephone, or other specific arrangements have been made to have your shares represented. Whether or not you attend the meeting, we encourage you to vote your shares
promptly.
May I change my vote after I submit my proxy?
You may change your vote after submitting a proxy card. If, after sending in your proxy, you decide to vote in person or desire to revoke
your proxy for any other reason, you may do so by notifying the Secretary of the Company in writing at our principal office at any time prior to the voting of the proxy. Our principal executive office is located at 233 South Patterson, Springfield,
Missouri 65802.
Are my votes confidential?
All shareholder meeting proxies, ballots and tabulations that identify the vote of a particular shareholder will be kept confidential, except as necessary to allow the inspectors of election to certify
the voting results or to meet legal requirements. Representatives of Broadridge Financial Solutions (Broadridge) will act as the inspector of election and will count the votes.
How will my vote be counted?
All votes will be tabulated by
Broadridge. All properly executed proxies received by the Board of Directors pursuant to this solicitation will be voted in accordance with the shareholders directions specified in the proxy. If no such directions have been specified by
marking the appropriate squares in the signed and returned proxy card, the shares will be voted by the persons named in the enclosed proxy card as follows:
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(1)
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FOR the election of David E. OReilly, Jay D. Burchfield and Paul R. Lederer, named herein as nominees for Class III Directors of the Company, to hold office until
the Annual Meeting of our shareholders in 2014 and until his successor has been duly elected and qualified;
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(2)
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FOR the approval, by an advisory (non-binding) vote, of the 2010 compensation of our Named Executive Officers;
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(3)
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For the selection, by an advisory (non-binding) vote, of conducting future advisory (non-binding) votes on executive compensation every THREE YEARS
(triennial); and
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(4)
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FOR the ratification of the selection of Ernst & Young, LLP, as our independent auditors for the fiscal year ending December 31, 2011.
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The Board of Directors is not aware of any matter to be presented for action at the Annual Meeting other than
the matters set forth herein. Our shareholders have no dissenters or appraisal rights in connection with any of the proposals described herein.
No nominee has indicated that he or she would be unable or unwilling to serve as a Director. However, should any nominee become unable or unwilling to serve for any reason, it is intended that the persons
named in the proxy will vote for the election of such other persons in their stead as may be designated by the Board of Directors. The Board of Directors is not aware of any reason that might cause any nominee to be unavailable to serve as a
Director.
May I contact OReillys Transfer Agent?
You may contact our transfer agent either by writing Computershare Trust Company, N.A., Post Office Box 43078, Providence, Rhode Island
02940, or by telephoning at (800) 884-4225.
3
What constitutes a quorum?
On February 28, 2011, there were 140,849,493 shares of Common Stock outstanding, which constitute all of the outstanding shares of
our voting capital stock. A majority of the outstanding shares entitled to vote at the Annual Meeting, represented in person or by proxy, will constitute a quorum at the meeting. The affirmative vote of a majority of the shares present in person or
represented by proxy at the Annual Meeting and entitled to vote is required to elect each person nominated for Director. Shares present at the meeting, but which are represented by proxies that are marked WITHHOLD AUTHORITY with respect
to the election of all persons or any person to serve on the Board of Directors or for which no direction is given, will be considered in determining whether the requisite number of affirmative votes are cast on such matter. Proxies marked
WITHHOLD AUTHORITY will have the same effect as a vote against the nominee as to which such direction applies. Shares not present at the meeting will not affect the election of Directors.
In voting on Proposals 2 (Executive Compensation) and 4 (Ratification of Auditors), the vote required will be the affirmative vote of the
majority of the shares of Common Stock present in person or represented by proxy at the Annual Meeting and entitled to vote on the proposal, unless Missouri law or our Articles of Incorporation, as amended, or Bylaws, as amended, require a greater
vote. Shares of Common Stock represented by proxies which are marked Abstain, proxies on which no direction on the proposal is provided or proxies which are marked to deny discretionary authority on other matters will be counted for the
purpose of determining the number of shares represented by proxy at the meeting. Abstentions and proxies that deny discretionary authority will thus have the same effect as if the shares of Common Stock were voted against such proposal to ratify the
appointment of the independent registered public accounting firm and against the proposal to approve the Companys executive compensation, respectively. With regard to Proposal 3 (Say on Pay), there is no standard for determining which
frequency has been adopted by shareholders. If none of the alternatives receives a majority vote, the alternative that receives the most votes will be deemed approved by shareholders. You may vote in favor of these proposals, against
these proposals or abstain from voting. Proxies marked or voted abstain on the proposal regarding the frequency of future advisory votes on executive compensation will not be counted as a vote for any of the three options, and the Board
of Directors shall determine the impact of such votes.
While counted for quorum purposes, shares represented by a proxy as to
which there is a broker non-vote (for example, where a broker does not have discretionary authority to vote the shares) as to one or more matters to be voted on shall not be deemed represented at the meeting for purposes of such matter
or matters and, therefore, will have no effect thereon.
How does the Board of Directors recommend I vote?
The Board of Directors recommends a vote FOR each of the Class III nominees. The Board of Directors recommends a vote
FOR the approval, by an advisory (non-binding) vote, of the 2010 compensation of our Named Executive Officers. The Board of Directors recommends a vote for the selection, by an advisory (non-binding) vote, of conducting future advisory
(non-binding) votes on executive compensation every THREE YEARS (triennial). The Board of Directors recommends a vote FOR the ratification of the selection of Ernst & Young, LLP, as our independent auditors for the
year ending December 31, 2011.
Are the Notice, Proxy Statement and Annual Report available on the Internet?
The Notice and Proxy Statement and Annual Report are available at
www.proxyvote.com
. The required control number can be found on
your proxy card in the box next to the arrow.
Where may I find the voting results of the Annual Meeting?
We plan to announce the preliminary voting results at the Annual Meeting and plan to publish the final results in a Form 8-K filed with
the Securities and Exchange Commission within four business days following the Annual Meeting.
Will a proxy solicitor be used?
We have not engaged a third party proxy solicitor to assist in the solicitation of proxies for the 2011 Annual Meeting
of Shareholders.
4
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth information as of December 31, 2010, with respect to each person (other than management) known to the
Company to be the beneficial owner of more than five percent (5%) of its outstanding shares of Common Stock.
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Name and Address of
Beneficial Owner
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Amount and Nature of
Beneficial Ownership
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Percent
Of Class
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T. Rowe Price Associates, Inc.
100 E. Pratt Street
Baltimore, Maryland 21202
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17,847,422
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(1)
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12.7%
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(1)
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As reflected on such beneficial owners Schedule 13G/A dated February 11, 2011, provided to the Company in accordance with the Securities Exchange Act of
1934, as amended (the Exchange Act). These securities are owned by various individual and institutional investors, which T. Rowe Price Associates, Inc. (Price Associates) serves as investment advisor with power to direct
investments and/or sole power to vote the securities. For purposes of the reporting requirements of the Exchange Act, Price Associates is deemed to be a beneficial owner of such securities; however, Price Associates expressly disclaims that it is,
in fact, the beneficial owner of such securities. Of the 17,847,422 shares reported, Price Associates claimed sole voting power of 4,627,822 shares, no shared voting power, sole dispositive power of 17,847,422 shares and no shared dispositive power.
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SECURITY OWNERSHIP OF DIRECTORS AND MANAGEMENT
The following table sets forth, as of February 28, 2011, the beneficial ownership of the Companys outstanding shares of common
stock for each current Director (including currently nominated existing Directors), each of the Companys Named Executive Officers and all Directors and executive officers as a group. Unless otherwise indicated, the Company believes that the
beneficial owners set forth in the following table have sole voting and dispositive power.
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Name
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Direct
Ownership
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Indirect
Ownership
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Currently
Exercisable
Options (a)
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Total
Ownership
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Percent
of class
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David E. OReilly (b)
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489,802
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1,537,325
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382,500
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2,409,627
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1.69%
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Charles H. OReilly, Jr. (c)
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170,918
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304,318
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5,000
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480,236
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*
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Lawrence P. OReilly (d)
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779,398
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57,465
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5,000
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841,863
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*
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Rosalie OReilly-Wooten (e)
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705,026
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272,200
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5,000
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982,226
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*
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Jay D. Burchfield (f)
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7,683
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20,693
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30,000
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58,376
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*
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Thomas T. Hendrickson
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--
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--
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5,000
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5,000
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*
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Paul R. Lederer
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8,000
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--
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35,000
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43,000
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*
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John Murphy
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--
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--
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20,000
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20,000
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*
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Ronald Rashkow
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--
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--
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30,000
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30,000
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*
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Greg Henslee (g)
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36,999
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5,055
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371,100
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413,154
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*
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Ted F. Wise (h)
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51,452
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215,166
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338,600
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605,218
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*
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Thomas G. McFall (i)
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3,462
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426
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145,000
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148,888
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*
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Jeff M. Shaw (j)
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23,440
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5,460
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50,000
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78,900
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*
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All Directors and executive officers as a group (16 persons)
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2,292,771
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2,429,715
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1,612,200
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6,334,686
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4.45%
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* denotes less than 1.0%
(a)
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With respect to each person, assumes the exercise of all stock options held by such person that are currently exercisable or exercisable within 60 days of
February 28, 2011 (such options being referred to hereinafter as currently exercisable options).
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(b)
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The stated number of directly owned shares includes 4,510 restricted shares awarded under the Companys Performance Incentive Plan. The stated number of indirectly
owned shares includes 1,529,707 shares controlled by David E. OReilly as trustee of a trust for the benefit of his children and 7,618 shares held in the OReilly Employee Savings Plus Plan with T. Rowe Price Investment Services, Inc. as
trustee. The beneficially owned shares controlled by Mr. OReilly, as trustee of a trust for the benefit of his children, are partially pledged as collateral for a loan.
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(c)
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The stated number of indirectly owned shares includes 111,018 shares owned by Charles H. OReilly, Jr.s spouse, 90,000 shares held in a Grantor Retained
Annuity Trust (GRAT), 20,000 shares held in a Charitable Remainder Annuity Trust and 83,300 shares controlled by Mr. OReilly as trustee of a trust for the benefit of his step-mother. A portion of Mr. OReillys
directly owned shares and a portion of Mr. OReillys indirectly owned shares held by Mr. OReillys spouse are pledged against a line of credit.
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(d)
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The stated number of indirectly owned shares includes 19,917 shares owned by Lawrence P. OReillys spouse and 37,548 shares held in a GRAT. A portion of
Mr. OReillys directly owned shares are pledged against a line of credit.
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(e)
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The stated number of indirectly owned shares is held in a GRAT.
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(f)
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The stated number of indirectly owned shares is held in a family limited partnership in which Jay D. Burchfield acts as general manager.
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(g)
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The stated number of directly owned shares includes 17,179 shares held in the OReilly Employee Stock Purchase Plan and the stated number of indirectly owned
shares includes 5,055 shares held in the OReilly Employee Savings Plus Plan with T. Rowe Price Investment Services, Inc. as trustee.
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(h)
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The stated number of indirectly owned shares includes 116,000 shares held by a revocable trust of which Ted F. Wises spouse, as the sole trustee, has sole voting
and dispositive power, 90,000 shares held in a GRAT and 9,166 shares held in the OReilly Employee Savings Plus Plan with T. Rowe Price Investment Services, Inc. as trustee.
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(i)
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The stated number of directly owned shares includes 1,375 shares held in the OReilly Employee Stock Purchase Plan. The stated number of indirectly owned shares is
held in the OReilly Employee Savings Plus Plan with T. Rowe Price Investment Services, Inc. as trustee.
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(j)
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The stated number of directly owned shares includes 2,150 shares held in the OReilly Employee Stock Purchase Plan and 821 restricted shares awarded under the
Companys Performance Incentive Plan. The stated number of indirectly owned shares is held in the OReilly Employee Savings Plus Plan with T. Rowe Price Investment Services, Inc. as trustee.
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6
PROPOSAL 1 ELECTION OF CLASS III DIRECTORS
Information about the Nominees and Directors Continuing in Office
The Companys Bylaws, as amended, and Articles of Incorporation, as amended, provide for three classes of Directors, each class serving a three-year term expiring one year after expiration of the
term of the preceding class, so that the term of one class will expire each year. The terms of the current Class I and Class II Directors expire in 2012 and 2013, respectively. The Board of Directors has nominated David E. OReilly, Jay D.
Burchfield and Paul R. Lederer as Class III Directors for a term expiring at the Companys Annual Meeting of our Shareholders in 2014.
The following table lists (i) the business experience and principal occupation for at least the last five years of each of the nominees and the present Directors continuing in office, (ii) his
or her present positions and offices with the Company, as applicable, (iii) the year in which he or she was first elected or appointed a Director (each serving continuously since first elected or appointed, unless otherwise stated),
(iv) his or her age, (v) his or her directorships for at least the last five years in any company with a class of securities registered pursuant to Section 12 or subject to the requirements of Section 15(d) of the Securities
Exchange Act of 1934, as amended, or in any company registered as an investment company under the Investment Company Act of 1940 (as specifically noted), as applicable and (vi) the qualifications or skills, which the Director possesses, that
qualify him or her for service on the Companys Board.
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Nominees for Director - Class III
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(To Be Elected to Serve a Three-Year Term Expiring in 2014)
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David E. OReilly
Director since 1972
Age: 61
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Chairman of the Board from February 2005 to current; Co-Chairman of the Board from August 1999 to February 2005; Chief Executive Officer from March 1993 to February 2005;
President of the Company from March 1993 to August 1999; Vice President of the Company from 1975 to March 1993. Mr. OReilly is being re-nominated as a Director because, among his other qualifications, he possesses over 40 years of experience
and expertise in the Companys operations and strategic business development, and has held leadership roles in numerous aftermarket industry organizations and associations.
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Jay D. Burchfield
Director since 1997
Age: 64
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Chairman of the Board and Director of Trust Company of the Ozarks since April 1998; Director of Banyan Group, Inc., a clinical research organization, since January 1998; Director
of Quest Capital Alliance, a venture capital organization since January 2002; Director of Quest Commercial finance, a corporate finance organization since January 2004; Director of Heart of America Beverage, a Miller/Coors distributor in Missouri,
Oklahoma and Arkansas, since January 2003; Director of Intuitive Medical Software, an electronic medical records provider, since January 2008; Director of Primary Care Education, a company providing continued medical education for doctors, since
January 2009; Director and Treasurer of the I-470 Community Improvement District, a tax increment financing plan to develop road infrastructure in Lees Summit, MO, since January 2009. Mr. Burchfields career has spanned more than 35 years
in the banking and financial services industry. Mr. Burchfield is being re-nominated as a Director because, among his other qualifications, he possesses experience and expertise in the banking industry, strategic business development, executive
compensation and leadership development.
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Paul R. Lederer
Director since 2001
Age: 71
|
|
Lead Director from 2002 to current; Retired in October 1998; Executive Vice President of Worldwide Aftermarket of Federal-Mogul Corporation February 1998 to October 1998;
President and Chief Operating Officer of Fel-Pro from November 1994 to February 1998, when it was acquired by Federal-Mogul Corporation; presently a Director of MAXIMUS and Dorman Products; previously served as director of UCI, Inc. (ceased
directorship in early 2011). Mr. Lederer had been a Director of the Company from April 1993 to July 1997 and was appointed again as a Director in 2001. Mr. Lederer is being re-nominated as a Director because, among his other qualifications, he
possesses over 40 years of experience and expertise in the automotive aftermarket industry, as well as experience in operations and governance as a chief executive officer and has served as a director on over 15 boards.
|
7
|
|
|
Directors Continuing in Office - Class I
|
|
(Term Expiring in 2012)
|
|
|
Charles H. OReilly Jr.
Director since 1966
Age: 71
|
|
Retired from active Company management in February 2002 and has served as a consultant to the Company pursuant to a retirement agreement since that time. Vice-Chairman of the
Board since August 1999; Chairman of the Board from March 1993 to August 1999; President and Chief Executive Officer of the Company from 1975 to March 1993. Mr. OReilly was last re-nominated as a Director because, among his other
qualifications, he possesses 53 years of experience and expertise in the Companys operations and in the automotive aftermarket industry, as well as experience in strategic business development, real estate investment and risk management and
assessment.
|
|
|
John Murphy
Director since 2003
Age: 60
|
|
Served as Senior Vice President and Chief Financial Officer of Smurfit-Stone Container Corporation, a leading manufacturer of paperboard and paper-based packaging products, from
2009 to 2010. Served as President and Chief Executive Officer of Accuride Corporation and a member of its Board of Directors until 2008; served as Accurides President and Chief Operating Officer during 2007; served as President and Chief
Financial Officer during 2006, and as Executive Vice President/Finance and Chief Financial Officer of Accuride from 1998 to 2006. (Accuride Corporation filed Chapter 11 bankruptcy in October of 2009, emerging in 2010); Mr. Murphy was elected as a
director and audit committee member of Graham Packaging in February of 2011. Mr. Murphy holds a Bachelor of Science in Accounting from Pennsylvania State University and Master Of Business Administration from University of Colorado, and is a
Certified Public Accountant. Mr. Murphy was last re-nominated as a Director because, among his other qualifications, he possesses experience and expertise in the automotive aftermarket industry and in the accounting and finance areas including
experience as a chief financial officer. Mr. Murphy also possesses experience in enterprise risk management and assessment, as well as experience in restructuring and mergers and acquisitions.
|
|
|
Ronald Rashkow
Director since 2003
Age: 70
|
|
Founder, CEO, and chairman of Handy Andy Home Improvement Centers, a retail chain with 72 stores in eight Midwest states. Mr. Rashkow currently is CEO and Principal of RPMS, Inc.
a strategic consulting enterprise. Current advisory boards include Hilco Trading, among the largest asset liquidation companies in the country, and RTC a specialty retail fixturing and merchandising company. Mr. Rashkow is currently chairman of
the Knapp Entrepreneurial Center advisory board at the University of IIT. Additional activities include substantial interests in retail commercial shopping center investments and development. Mr. Rashkow was last re-nominated as a Director because,
among his other qualifications, he possesses experience and expertise in the retail industry, executive compensation, risk management, operations as a chief executive officer and advisory services to retail companies and private equity groups
focused on retail companies.
|
|
|
|
Directors Continuing in Office - Class II
|
|
(Term Expiring in 2013)
|
|
|
Lawrence P. OReilly
Director since 1969
Age: 64
|
|
Retired from active Company management in February 2003 and has served as a consultant to the Company pursuant to a retirement
agreement since that time; Vice- Chairman of the Board from February 2005 to current; Co-Chairman of the Board from August 1999 to February 2005; Chief Operating Officer from March 1993 to February 2003; President from March 1993 to August 1999;
Vice President of the Company from 1975 to March 1993. Chairman and Director of St. Johns Hospital Springfield since January 2000; Board Member of the Missouri Sports Hall of Fame since January 2003; and Trustee of the Lance Armstrong Endowment
Board since December of 2005. Mr. OReilly was last re-nominated as a Director because, among his other qualifications, he possesses 42 years of experience and expertise in the Companys operations, in the automotive aftermarket industry
and strategic business development.
|
8
|
|
|
Rosalie OReilly-Wooten
Director since 1980
Age: 69
|
|
Retired from active Company management in February 2002 and has served as a consultant to the Company pursuant to a retirement agreement since that time. Executive Vice President
of the Company from March 1993 to February 2002 where she managed Telecommunications, Risk Management and Human Resources. Currently serving on the Ozarks Greenways Board of Directors, CASA Advisory Board, Breast Cancer Foundation of the Ozarks
Advisory Board, Missouri Council for the Arts Board and Drury University Board of Trustees. Ms. Wooten was last re-nominated as a Director because, among her other qualifications, she possesses 30 years of experience and expertise in the
Companys operations, in the automotive aftermarket industry and experience in leadership development, risk management and human resources.
|
|
|
Thomas T. Hendrickson
Director since 2010
Age: 56
|
|
Chief Administrative Officer, Chief Financial Officer and Treasurer for The Sports Authority, Inc., the parent of retailer Sports Authority, since 2003; Director of
Sports Authority since 2006. From 1998 to 2003, Mr. Hendrickson held the positions of Executive Vice President and Chief Financial Officer, and Treasurer of Gart Sports Company until its merger with Sports Authority in 2003. He was Vice President of
Finance, Senior Vice President, and Executive Vice President and Chief Financial Officer of Sportmart, Inc. from 1993 to 1997. From 1987 to 1993, Mr. Hendrickson was employed as a Divisional Vice President and Controller of Millers Outpost
Stores, a retailer specializing in apparel to young consumers. Mr. Hendrickson is a Certified Public Accountant and has over 28 years of retail business experience. Mr. Hendrickson was last nominated as a Director because, among his other
qualifications, he possesses experience and expertise in the retail industry, risk assessment and in the accounting and finance areas including experience as a chief financial officer.
|
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE CLASS III NOMINEES.
9
INFORMATION CONCERNING THE BOARD OF DIRECTORS
Director Independence
Rules of the Nasdaq Stock Market (the Nasdaq) require that a majority of the Board of Directors be independent.
Under the Nasdaq rules, a director is independent if he or she is not an officer or employee of the Company and does not have any relationship with the Company which, in the opinion of the Board, would interfere with the exercise of independent
judgment in carrying out the responsibilities of a director. The Board has reviewed the independence of its Directors under the Nasdaq rules. During this review, the Board considered transactions and relationships between each Director or any member
of his or her family and the Company during 2010. Consistent with these considerations, the Board has determined that Messrs. Burchfield, Hendrickson, Lederer, Murphy and Rashkow are independent under the Nasdaq rules.
Family Relationships
Charles H. OReilly, Jr., Rosalie OReilly-Wooten, Lawrence P. OReilly and David E. OReilly, Directors of the
Board, are siblings.
Leadership Structure
The Companys leadership structure, within its Board of Directors, consists of a Chairman of the Board, two Vice Chairmen of the Board, a Lead Director, an Audit Committee, a Corporate
Governance/Nominating Committee and a Compensation Committee. The Lead Director also serves on the Audit Committee, the Compensation Committee and as Chairman of the Corporate Governance/Nominating Committee. All Committee members are independent
Directors, under the Nasdaq rules. The Companys Bylaws, as amended, permit the positions of Chairman of the Board and Chief Executive Officer to be held by the same person. However, the Board has historically believed that these roles and
their attendant responsibilities should be separate and fulfilled by two separate individuals. The Company believes having separate roles allows its Board to effectively provide guidance to and oversight of its management. In 2005, the Corporate
Governance/Nominating Committee recommended and the Board approved the appointment of David E. OReilly to serve in the role of Chairman of the Board of the Company. The appointment was made in recognition of the substantial role
Mr. OReilly plays in the development of the Companys strategic initiatives. The appointment of Mr. OReilly as Chairman of the Board did not alter Gregory L. Henslees duties and responsibilities as Chief Executive
Officer of the Company.
Lead Director
Following the passage of the Sarbanes-Oxley Act of 2002 and in the interest of sound corporate governance, the Board has adopted a practice of appointing a Lead Director who is charged with acting as a
liaison among other Directors, with management and between board committees and the Board. The Lead Director could also preside at Board meetings in the absence of the Chairman. This position improves the functionality of the Board and its
Committees and aids in the fiduciary obligations each Director has to the Company and its shareholders. Paul R. Lederer has served as Director, Executive Vice President and Chief Operating Officer within the automotive aftermarket and has over 40
years of experience in this industry. Based upon Mr. Lederers experience, qualifications and skills, in 2002, the Corporate Governance/Nominating Committee nominated, and the Board of Directors approved, Mr. Lederer to serve as Lead
Director.
Meeting Attendance
During fiscal year 2010, four regularly scheduled meetings of the Board of Directors were held. During such year, each Director attended (i) 100% of the total number of meetings of the Board of
Directors held during the period for which he or she has served as a Director, with the exception of Lawrence P. OReilly, who attended 75% of the meetings, and (ii) 100% of the total number of meetings held by all committees of the Board
of Directors on which he or she served during the period for which he or she served, with the exception of Ronald Rashkow, who attended 86% of the meetings.
Committees of the Board
The Board of Directors has three standing
committees, the Audit Committee, the Compensation Committee and the Corporate Governance/Nominating Committee. Each committee is governed by a written charter and is comprised solely of independent directors in accordance with the Nasdaq Stock
Market Listing Qualifications. Charters for each committee are available on the Companys website at
www.oreillyauto.com
, and can be obtained free of charge by written request to the attention of the Secretary at the Companys
address appearing on the first page of this proxy statement or by telephone at (417) 874-7161.
10
Current committee membership, including the committee chairperson, is identified in the
below table:
|
|
|
|
|
|
|
Name
|
|
Audit
|
|
Compensation
|
|
Corporate Governance/
Nominating
|
Jay D. Burchfield
|
|
ü
|
|
Chair
|
|
ü
|
Thomas Hendrickson
|
|
ü
|
|
|
|
|
Paul R. Lederer
|
|
ü
|
|
ü
|
|
Chair
|
John Murphy
|
|
Chair
|
|
|
|
ü
|
Ronald Rashkow
|
|
ü
|
|
ü
|
|
|
As explained above, Charles H. OReilly, Jr., Rosalie OReilly-Wooten, Lawrence P.
OReilly and David E. OReilly do not qualify as independent directors; therefore, they do not participate on any committee of the Board.
Audit Committee
The Companys standing Audit Committee was
established in accordance with Section (3)(a)(58)(A) of the Exchange Act. The Audit Committee is responsible for reviewing reports of the Companys financial results, audits and internal controls, including the Companys Internal
Audit Department, and communicating the results of these evaluations to management. The Audit Committee recommends the engagement of independent auditors, confers with the external auditors regarding the adequacy of the Companys financial
controls and fiscal policy in accordance with generally accepted auditing standards and directs changes to financial policies or procedures as appropriate. The Committee also reviews the procedure of the independent registered public accounting firm
for ensuring its independence with respect to the services performed for the Company.
The Board has determined that each
member of the Audit Committee is independent pursuant to the Nasdaq rules, as well as the independence requirements for audit committee members under Rule 10A-3 promulgated under the Exchange Act. In addition, the Board has determined
that Mr. Murphy and Mr. Hendrickson, members of the Audit Committee, are both qualified as an audit committee financial expert, as that term is defined in the rules of the Securities and Exchange Commission (SEC). During fiscal
year 2010, eight Audit Committee meetings were held. The Companys Audit Committee Charter may be viewed on its website at
www.oreillyauto.com
.
Compensation Committee
The purpose of the Compensation Committee is to
act on behalf of the Board of Directors with respect to the establishment and administration of the policies which govern the annual compensation of the Companys executive officers. The Committee has responsibility for defining and
articulating the Companys overall executive compensation philosophy, and administering and approving all elements of compensation for elected executive officers. The Committee is directly responsible for reviewing and approving the corporate
goals and objectives relevant to the Chairman and CEOs compensation, evaluating his performance based on those goals and objectives, and determining and approving the Chairman and CEOs compensation level based on this evaluation. The
Companys Human Resources Department works directly with the Compensation Committee to assist in making recommendations to the Committee for the Chairman and CEOs total compensation. The Compensation Committee also oversees the grants and
related actions under the Companys various equity plans.
The Committee has the authority to retain consultants and
advisors as it may deem appropriate in its discretion. The Committee utilizes third party compensation survey data and outside consultant advisors in order to achieve its goal of attracting and retaining executive officers who contribute to the
long-term success of the Company. In 2010, the Committee retained Buck Consultants (Buck) for compensation advisory services. As part of the engagement, Buck provided the Committee with assessments of the Companys executive
compensation program including, among other things, a review of total compensation philosophy, a definition of the Companys peer group, an assessment of short and long-term incentive plans with regard to alignment, risk and pay for performance
including recommendations for target incentive opportunity, the relationship between current pay practices and the Companys total compensation strategy, share ownership guidelines and the effectiveness of designing executive incentive
compensation plans to drive financial performance and creating alignment with ownership interests. During fiscal year 2010, six Compensation Committee meetings were held. The Companys Compensation Committee Charter may be viewed on its website
at
www.oreillyauto.com
.
11
Corporate Governance/Nominating Committee
The principal purposes of the Corporate Governance/Nominating Committee are: (1) to establish criteria for the selection of
Directors and to recommend to the Board the nominees for Director in connection with the Companys Annual Meeting of our shareholders; (2) to take a leadership role in shaping the Companys corporate governance policies and to issue
and implement the Corporate Governance Principles of the Company; (3) to develop and coordinate annual evaluations of the Board, its committees and its members; and (4) to adhere to all legal standards required by the SEC and Nasdaq.
During fiscal year 2010, four Corporate Governance/Nominating Committee meetings were held. The Companys Corporate Governance Principles may be viewed along with the Corporate Governance/Nominating Committee Charter on its website at
www.oreillyauto.com
.
The Corporate Governance/Nominating Committee does not have a written policy on the consideration
of Director candidates recommended by shareholders. It is the view of the Board of Directors that all candidates, whether recommended by a shareholder or the Corporate Governance/Nominating Committee, shall be evaluated based on the same established
criteria for persons to be nominated for election to the Board and its committees. The established criteria for persons to be nominated for election to the Board and its committees, taking into account the composition of the Board as a whole, at a
minimum, includes (a) a candidates qualification as independent under the federal securities laws and the rules and regulations of the SEC and Nasdaq applicable to the Board and each of its committees; (b) depth and
breadth of experience within the Companys industry and otherwise; (c) outside time commitments; (d) special areas of expertise; (e) accounting and financial knowledge; (f) business judgment; (g) leadership ability;
(h) experience in developing and assessing business strategies; (i) corporate governance expertise; (j) risk management skills; and (k) for incumbent members of the Board, the past performance of the incumbent director. The
Corporate Governance/Nominating Committees methods for identifying candidates for election to the Companys Board include the solicitation of possible candidates from a number of sources, including from members of its Board, its
executives, individuals personally known to the members of its Board and other research. The Board believes it is best qualified to evaluate candidates based on its knowledge of the Companys business structure and the Corporate
Governance/Nominating Committee may retain one or more third-party search firms to identify suitable candidates.
Shareholder Nominations
A shareholder who desires to nominate one or more persons for election as directors shall deliver timely
notice (as defined in Section 12, Article II of the Companys Amended and Restated Bylaws (Bylaws) of the shareholders intent to make such nomination or nominations, either by personal delivery or by United States
mail, postage prepaid, to the Secretary of the Company at the Companys address appearing on the first page of this proxy statement. In accordance with Section 13, Article II of the Bylaws, such notice shall set forth: (a) the name
and address of record of the shareholder who intends to make the nomination; (b) the class and number of shares of the capital stock that are beneficially owned by the shareholder on the date of such notice; (c) the name, age, business and
residential addresses, and principal occupation or employment of each proposed nominee; (d) a description of all arrangements or understandings between the shareholder and each nominee, and other arrangements or understandings known to the
shareholder, pursuant to which the nomination or nominations are to be made by the shareholder; (e) any other information regarding each proposed nominee that would be required to be included in a proxy statement filed with the SEC; and
(f) the written consent of each proposed nominee being so named to serve as a Director of the Company. The presiding officer of a meeting may, if the facts warrant, determine at the meeting that a nomination was not made in accordance with the
foregoing procedure, and if he or she should make that determination, he or she shall so declare at the meeting, and the defective nomination shall be disregarded.
Director Attendance of Annual Meeting
The Company encourages, but does
not require, the members of its Board of Directors to attend the Annual Meeting of our Shareholders. All members of the Board of Directors attended the Companys 2010 Annual Meeting of our Shareholders, with the exception of John Murphy.
Risk Oversight
It is managements responsibility to manage risk and bring to the Board of Directors attention the most material risks to the Company. The Board of Directors has oversight responsibility of the
processes established to report and monitor systems for material risks applicable to the Company. In its oversight role, the Board of Directors annually reviews the Companys strategic plan, which addresses, among other things, the risks and
opportunities facing the Company. A quarterly risk overview is provided to the Board by the Companys General Counsel and the Companys Vice President of Treasury and Risk Management, which details the Companys current and future
litigation and self insurance risks and risk exposures. The Board has delegated certain risk management oversight
12
responsibility to the Board committees. As part of its responsibilities as set forth in its charter, the Audit Committee is responsible for discussing with management the Companys major
financial risk exposures and the steps management has taken to monitor and control those exposures, including the Companys risk assessment and risk management policies. The Audit Committee reviews, with management, the Companys financial
performance and financing arrangements and meets with the Companys external auditors to review the Companys compliance with all applicable financial reporting and Sarbanes-Oxley requirements. The Corporate Governance/Nominating Committee
reviews the Companys corporate governance guidelines and their implementation and reviews the Corporate Risk Assessment and Management Status Report. This report identifies the material business risks (including strategic and operational) for
the Company as a whole and identifies the controls that respond to and mitigate those risks. The Corporate Governance/Nominating Committee also receives a Fraud Risk Assessment report from management which reviews the Companys Code of Conduct
and Ethics program compliance as well as the Companys TIPS Hotline and Corporate policies and procedures. The Compensation Committee has overall responsibility for executive officer succession planning and reviews succession plans each year.
The Compensation Committee also reviews total compensation for the Companys management and executives including base salary, incentive compensation, benefits, and perquisites to ensure they are market competitive and consistent with the
Companys performance goals and ensures that the compensation plans and arrangements do not create inappropriate risks. Each committee regularly reports to the full Board.
Board Diversity
The Board of Directors does not have a formal policy on
Board diversity as it relates to the selection of nominees for the Board. The Board believes that while diversity and variety of experiences and viewpoints represented on the Board should always be considered, a Director nominee should not be chosen
nor excluded solely or largely because of race, color, religion, disability, age, gender, national origin or sexual orientation or identity. In selecting a Director nominee, the Corporate Governance/Nominating Committee focuses on skills,
viewpoints, expertise or background that would complement the existing Board. The Corporate Governance/Nominating Committee will also consider diversity in market knowledge, experience, employment, and other factors. Decisions by the Board regarding
continued service of Directors are made based on expected contributions to the Board in furtherance of the interests of shareholders, not based on race, color, gender or other demographic, orientation or identity.
Compensation of Directors
Independent Directors are paid an annual fee and meeting fees for attendance at each Board and Committee meeting. Each Committee Chairman is paid an additional fee for their service as chairman of their
respective Committees. The Company also reimbursed Directors for out-of-pocket expenses incurred in connection with their attendance at Board and Committee meetings. As an incentive for recruiting and retaining qualified Directors, the Company also
maintains a Directors stock option plan. This plan provides for an annual grant to each independent Director of a non-qualified stock option to purchase shares of common stock at a per share exercise price equal to the fair market value of the
common stock on the date the option is granted. The stock options are granted on the first business day following the Annual Meeting of our Shareholders and have a life of seven years. Upon resignation from the Board for any reason other than
retirement, death or disability, all outstanding stock options are immediately forfeited. The following table summarizes the compensation paid to the independent Directors, including the stock options granted, during 2010:
|
|
|
Annual fee
|
|
Each independent Director received $36,000, paid in equal quarterly
amounts for their time served as a Director.
|
|
|
Committee Chairman fees
|
|
$7,500: Audit Committee
|
|
|
$4,000: Compensation Committee
|
|
|
$4,000: Corporate Governance/Nominating Committee
|
|
|
Quarterly meeting fees
|
|
$2,500 for attendance at each meeting of the Board
|
|
|
Audit Committee meeting fees
|
|
$1,000 to each Audit Committee member for attendance at each
additional Audit Committee meeting
|
|
|
Special meeting fees
|
|
$1,000 for attendance at each special meeting of the Board.
|
|
|
Director non-qualified stock options
|
|
In fiscal 2010, each independent Director received a grant of 5,000 non-
qualified stock options which fully vest six months after the date of the
grant. Each option
represented the right to purchase 5,000 shares of the
Companys common stock at an exercise price of $48.31 per share.
|
Independent Directors fees in the aggregate amount of $254,000 were paid during 2010. The Company does not pay any fees to David E. OReilly for service on the Board or any committee, as he is
an employee of the Company.
13
Each of the employee consultant members of the Companys Board of Directors (Charles H.
OReilly, Jr., Lawrence P. OReilly and Rosalie OReilly-Wooten), receives an annual payment for services provided to the Board pursuant to written retirement agreements. Such agreements, as amended and which are in substantially
identical form, provide for each of the foregoing Directors to be retained as a consultant upon retirement from active Company management, for a period of ten years. These agreements consist of the compensation and supplemental benefits identified
below:
|
|
|
yearly salary of $125,000, adjusted annually three percent for inflation and payable in equal monthly payments;
|
|
|
|
medical and vehicle benefits; and
|
|
|
|
out-of-pocket expenses incurred in connection with services to the Board and attendance at Board meetings.
|
During the period covered by the retirement agreements, these Directors have agreed that they shall not become associated with, engage
in, or render service to any other business in competition with the Company.
The following table details the compensation
paid to all Directors for the fiscal year ended December 31, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DIRECTOR COMPENSATION
|
|
Name
|
|
Fees Earned or
Paid In Cash
($)
|
|
|
Stock
Awards
($)
|
|
|
Options
Awards
($)
(a)
|
|
|
Non-Equity
Incentive
Plan
Compensation
($)
|
|
|
Change In Pension
Value and Nonqualified
Deferred
Compensation
Earnings
|
|
|
All Other
Compensation
($)
(b)
|
|
|
Total
($)
|
|
Charles H. OReilly
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
171,386
|
|
|
|
171,386
|
|
Lawrence P. OReilly
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
171,071
|
|
|
|
171,071
|
|
Rosalie OReilly-Wooten
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
172,844
|
|
|
|
172,844
|
|
Jay D. Burchfield
|
|
|
54,000
|
|
|
|
--
|
|
|
|
80,550
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
134,550
|
|
Thomas Hendrickson
|
|
|
36,500
|
|
|
|
--
|
|
|
|
80,550
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
117,050
|
|
Paul R. Lederer
|
|
|
56,000
|
|
|
|
--
|
|
|
|
80,550
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
136,550
|
|
John Murphy
|
|
|
57,500
|
|
|
|
--
|
|
|
|
80,550
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
138,050
|
|
Ronald Rashkow
|
|
|
50,000
|
|
|
|
--
|
|
|
|
80,550
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
130,550
|
|
|
(a)
|
Option awards granted to the Directors become 100% exercisable with respect to the covered shares six months from the date of grant and expire after seven years. The
amounts recognized in the above table reflect the grant date fair value of stock option awards granted during 2010 and was determined using the Black-Scholes option-pricing model. The Black-Scholes model requires the use of assumptions, including
expected volatility, expected life, the risk free rate and the expected dividend yield. Please see the footnotes to the Companys consolidated financial statements included in its Annual Report on Form 10-K for the fiscal year ended
December 31, 2010 for further discussion of these assumptions. The Companys Directors had the following stock option awards outstanding as of December 31, 2010:
|
|
|
|
|
|
|
|
|
|
Name
|
|
Number of Securities
Underlying
Unexercised Options
(#)
Exercisable
|
|
|
Number of Securities
Underlying
Unexercised Options
(#)
Unexercisable
|
|
Charles H. OReilly
|
|
|
5,000
|
|
|
|
--
|
|
Lawrence P. OReilly
|
|
|
5,000
|
|
|
|
--
|
|
Rosalie OReilly-Wooten
|
|
|
5,000
|
|
|
|
--
|
|
Jay D. Burchfield
|
|
|
30,000
|
|
|
|
--
|
|
Thomas Hendrickson
|
|
|
5,000
|
|
|
|
--
|
|
Paul R. Lederer
|
|
|
40,000
|
|
|
|
--
|
|
John R. Murphy
|
|
|
20,000
|
|
|
|
--
|
|
Ronald Rashkow
|
|
|
30,000
|
|
|
|
--
|
|
|
(b)
|
Represents payments during 2010 for consultation services as well as medical, dental and vehicle benefits pursuant to written retirement agreements. The payments for
consultation services totaled $158,346 for each of the employee consultant Directors while medical and vehicle benefits totaled $13,040, $12,725 and $14,498 for Charles H. OReilly, Jr., Lawrence P. OReilly and Rosalie
OReilly-Wooten, respectively.
|
Compensation Committee Interlocks and Insider Participation
No member of the Compensation Committee is now an officer or an employee of the Company or any of its subsidiaries or has been, at any
time, an officer or an employee of the Company or any of its subsidiaries.
14
COMPENSATION OF EXECUTIVE OFFICERS
Compensation Discussion and Analysis
This section describes the compensation packages for our Named Executive Officers (NEOs). Our NEOs include our Chief Executive Officer, our Chief Financial Officer and our three other most
highly compensated officers that were employed at December 31, 2010. Our NEOs and their positions with the Company are identified below:
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|
|
David E. OReilly Chairman of the Board
|
|
|
|
Gregory L. Henslee Chief Executive Officer and Co-President
|
|
|
|
Ted F. Wise Chief Operating Officer and Co-President
|
|
|
|
Thomas G. McFall Chief Financial Officer and Executive Vice-President of Finance
|
|
|
|
Jeff M. Shaw Senior Vice-President of Store Operations and Sales
|
Executive Summary
The Compensation Committee of the Companys Board
of Directors is responsible for reviewing the performance of the Companys executive officers, recommending to the Board of Directors compensation packages and specific compensation levels for its executive officers and other management team
members, establishing policies and guidelines for other benefit programs and administering the award of stock options and other stock-based incentives under the Companys incentive plans.
The policies and procedures of the Compensation Committee are designed to assist the Companys Board of Directors in its oversight
of the implementation and effectiveness of its policies and strategies regarding the investment in its largest asset, its Team Members. These strategies and policies include, but are not limited to:
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recruiting and retaining qualified team members;
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|
|
|
the career development and progression of team members;
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|
management succession, in conjunction with the Companys Corporate Governance/Nominating Committee; and
|
Compensation Objectives and Philosophy
The main objective of the Companys compensation philosophy is to provide its executive officers and management with a total compensation package that is competitive and equitable, which encourages
and rewards performance based in part upon the Companys performance in terms of increases in shareholder value. The Companys compensation objectives include both long-term, share-based incentives and short-term, cash incentives. The
Company believes that aligning the interests of its executives and management with those of its shareholders further promotes the success of not only the Company, but also its Team Members.
Risk Assessment of Compensation Programs
The Compensation Committee has
reviewed the potential effects of the various components of the Companys executive officers compensation and benefits programs on individual and collective behavior and, ultimately, on its risk profile and overall approach to risk
management. During its review, the Committee focused on the Companys short-term incentives, long-term incentives, and change-in-control benefits as having the greatest potential to create incentives for individual or collective risk taking.
Following a thorough review of these and the other components of the Companys compensation and benefits programs, the Committee has determined that the programs do not create any incentives with respect to individual or collective behavior
that are likely to have a material adverse effect upon either its risk profile or overall approach to risk management.
Additionally, the Companys non-executive officer and management compensation policies and practices do not excessively incentivize
or create need for inappropriate risk-taking by its Team Members and therefore, it is not reasonably likely that current compensation policies and practices would have a material adverse effect on the Company.
Overview of Compensation Programs
The key elements of the compensation packages for the Companys executive officers are base salary, annual cash incentive compensation and long-term, share-based incentives. In determining the
composition of elements in each compensation package, the Compensation Committee looks to create a balanced reward, utilizing market-driven influences and external compensation
15
benchmarks as well as current cash considerations. To ensure that the Company thrives in the competitive working environment, the Compensation Committee consults industry resources, references
and benchmarks to determine competitive market ranges and reasonable levels of compensation. In addition, during 2010, the Committee engaged Buck to provide an assessment of executive compensation.
In reviewing the compensation packages of each of the Companys executives and management, the Compensation Committee tallies the
corresponding dollar value of each element of an individuals compensation, including salary, incentive compensation, accumulated realized and unrealized share-based compensation gains, the dollar value to such individual and cost to the
Company of all perquisites and other personal benefits, the earnings and accumulated benefits under the Companys non-qualified deferred compensation program and under several potential severance and change-in-control scenarios. For new
appointments to executive management, the Companys management presents compensation recommendations to the Committee for consideration.
Competitive Assessments
The Companys Human Resources department provides the Committee with industry benchmark information and compensation survey data. In
addition, during 2010 Buck provided the Committee with additional industry benchmark information and compensation survey data. The Committee considers the Companys relative performance compared with an established group of peer companies in
the automotive aftermarket industry and other specialty retailers. The companies comprising the 2010 peer group for the Company were as follows:
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|
|
|
|
Advance Auto
Parts
AutoZone
Genuine Parts
Pep Boys
Collective Brands
|
|
Fastenal
Dollar Tree
Foot Locker
PetSmart
Barnes &
Noble
|
|
American
Eagle
Ross
Stores
Sherwin
Williams
Williams
Sonoma
|
The Compensation Committee reviews the Companys peer group, as necessary, to ensure that the
comparisons are meaningful. The Committee evaluates peers who conduct business outside of the automotive aftermarket industry based on criteria such as revenue, operating margin, profit margin and market capitalization. The Committee also considers
broad-based survey data, compiled by Mercer and Buck, of total compensation for top management at companies with total revenues comparable to the total revenues of the Company. The Committee uses the industry and market survey data as a context in
reviewing the overall compensation levels and maintaining a reasonable and competitive compensation program. The Committee does not use this data to set specific compensation targets for a position. Rather, the Committee evaluates the overall
performance of the Company and the individual performance of management to set compensation at reasonable and competitive levels.
Base
Salary
In determining annual base salary, it is the Compensation Committees goal to bring the Companys
executives and management in line with base compensation being paid by its peer group. The Compensation Committee specifically reviews compensation information for other publicly traded automotive aftermarket companies and compensation surveys and
data for other specialty retailers. The Compensation Committee believes that the Companys principal competitors for executive management are not necessarily the same companies that would be included in a peer group compiled for purposes of
comparing shareholder returns. Consequently, the companies that are reviewed for such compensation purposes, as noted in Overview of Compensation Programs, may not be the same as the companies comprising the Nasdaq Retail Trade Stocks
Total Return Index, Nasdaq United States Stock Market Total Returns Index or the Standard and Poors 500 Index included in the Annual Shareholders Report of the Company for fiscal 2010 that accompanies this Proxy Statement. The
Compensation Committee established increased base salary levels in 2010 for the Companys NEOs to maintain compensation at competitive levels and to reflect its performance and the individual performance of each of its NEOs.
Performance Incentive Compensation Plan
The Compensation Committee has established an incentive compensation plan for the Companys Chief Executive Officer, Chief Operating Officer and Chief Financial Officer based upon certain objective
performance goals. At the beginning of each year, a comprehensive operating plan is developed which contains estimates for the Companys projected performance for the year. The operating plan is compiled by reviewing the Companys
historical performance, trends in the automotive aftermarket and retail industry and the performance of industry peers and other comparable companies. The targets for incentive compensation plans set by the Compensation Committee generally
correspond to this operating plan, which is approved by the Companys Board of Directors in
16
February of each year, and reflects these projected results for the upcoming fiscal year. The Compensation Committee has designed these targeted performance goals to address both Company and
individual performance. The Company financial performance metrics utilized by the Compensation Committee include sales performance, net income performance and financial returns, as well as various balance sheet measures. Targets are set forth in
ranges with a corresponding incentive percentage for each level of attainment. The Companys actual performance in each of these areas is compared to the individual targets predetermined by the Committee, in order to determine the incentive
amount, if any, achieved by each executive officer. Upon achievement of such performance goals, executive officers receive incentive compensation based upon a percentage of their respective base salaries for the attainment of a defined performance
goal. The overall potential varies depending upon the executives position. For 2010, the Companys Chief Executive Officer had a cumulative target of 100% of his base salary and its Chief Operating Officer and Chief Financial Officer each
had cumulative targets of 80% of their respective base salaries.
The Companys Senior Vice President of Store Operations
and Sales participates in its Performance Incentive Plan (PIP), which has been established by the Company, to award cash and restricted stock to all members of senior management. The PIP incentives are based on individual performance
goals established for each member of senior management as well as certain Company performance targets for the plan year. The Companys targets for the PIP incentives are established in a similar manner to the performance targets set forth for
the incentive plan for its Chief Executive Officer, Chief Operating Officer and Chief Financial Officer. For 2010, the Companys Senior Vice President of Store Operations and Sales had a cumulative target of 35% of his base salary.
The targets for the NEO plans are highly confidential and competitively sensitive. The Company believes that if it were to publish its
targets, it would allow competitors to recreate its internal forecasts and gain valuable insight on its business strategies. Such public disclosure could materially harm the Companys competitive position within its industry. Because the
targets are confidential, the Company believes that the best indication of the difficulty of achieving such targets is its track record with respect to incentive payouts. Over the last five years, annual incentive payouts under the executive plan
have exceeded target three times and have been below target two times (incentive payments during this period of time have ranged from 48% to 403% of target). Over the last five years, annual incentive payouts for the portion of the PIP based on
Company performance targets have equaled or exceeded target four times and have been below target once (the portion of the incentive payments based on Company performance during this period of time have ranged from 76% to 220% of target). The table
below includes the 2010 performance incentive compensation plan targets and payouts for each of the Companys NEOs:
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|
|
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|
Named Executive Officer
|
|
Base Salary
($)
|
|
|
Target
(%)
|
|
|
Target
($)
|
|
|
Incentive
Achieved
(%)
|
|
|
Incentive
Achieved
($)
|
|
Chief Executive Officer
|
|
|
850,000
|
|
|
|
100
|
|
|
|
850,000
|
|
|
|
403
|
|
|
|
3,429,089
|
|
Chief Operating Officer
|
|
|
610,000
|
|
|
|
80
|
|
|
|
488,000
|
|
|
|
403
|
|
|
|
1,968,700
|
|
Chief Financial Officer
|
|
|
450,000
|
|
|
|
80
|
|
|
|
360,000
|
|
|
|
403
|
|
|
|
1,452,320
|
|
Senior Vice President of Store Operations and Sales
|
|
|
205,000
|
|
|
|
35
|
|
|
|
71,750
|
|
|
|
173
|
|
|
|
123,769
|
|
Long-Term, Stock-Based Incentives
The Company offers long-term incentives for senior executives and management in the form of stock option and restricted
stock awards. Stock options and restricted stock may be awarded to the Companys NEOs, upper- and middle-managers, store managers and other key personnel.
The Company believes that its stock-based incentive award programs are an important component of compensation as an incentive for long-term corporate performance. The Compensation Committee has determined
that the annual grant of stock options to the Companys Chairman of the Board, Chief Executive Officer, Chief Operating Officer and Chief Financial Officer is a key component of such executives total compensation packages based on their
duties. The amounts of such grants are determined by the Committee annually in conjunction with performance reviews and salary adjustments during the February Compensation Committee meeting. In determining whether and how many stock options should
be granted, the Committee considers the responsibilities and seniority of each of the executives, as well as the Companys financial performance and other factors as it deems appropriate, consistent with its compensation philosophy and
policies. The stock options awarded by the Committee in 2010, as reflected in the
Grants of Plan Based Awards
table, include an annual grant of stock options determined by the Committee in consideration of the factors described above.
The Company awards restricted stock to its Senior Vice President of Store Operations and Sales, as well as all members of
senior management on an annual basis as the restricted stock component of the PIP award. The amount of such award is determined in the same manner as the cash component of the PIP incentive and reflects the individual contribution, responsibility
and performance of
17
the Team Member as well as certain company performance targets. Restricted stock awards under the PIP plan are granted in the year following the target plan year, coincide with the payment of the
cash portion of the incentive for the target plan year and vest in equal annual installments over a three-year period commencing with the first anniversary of the target plan year.
In the past, the Compensation Committee has reviewed and considered using other equity-based incentives for the long-term compensation
component. After a thorough analysis, including the use of a national consulting firm, stock options and restricted stock were considered the most effective methods of aligning management interests with those of shareholders.
The Compensation Committee has also established specific stock option awards to be granted upon the achievement of certain defined
positions of employment. These are automatic grants that occur on the date of promotion or appointment to such positions with an option price equal to the fair market value of the common stock underlying the option on such date. It is the
Companys belief that these position-related grants provide additional incentive to its executives, management and other team members to set personal long-term employment goals. In furtherance of this belief, the Company also has a team member
stock purchase plan that enables team members to purchase its common stock at a discount through payroll deductions and a 401(k) plan under which team members can invest in its common stock. In addition, the Compensation Committee may grant stock
option awards in connection with a material business event, such as a large acquisition. The Committee believes that these special stock option awards provide additional incentive to the Companys executives, management and other team members
to ensure these material acquisitions are integrated effectively and efficiently. During 2010, no NEO received a position level stock option award or other special stock option award in connection with a material business event.
Other
The Company
sponsors a 401(k) Profit Sharing and Savings Plan (401(k) Plan) that allows team members to make plan contributions on a pre-tax basis. The Company matches 100% of the first 2% of the team members compensation, and 25% of the next
4% of the members compensation. Although NEOs are eligible to participate in the 401(k) plan, the application of the annual limitations on contributions under Section 401(a)(17) of the Internal Revenue Code prevents highly compensated
employees, as defined by the Internal Revenue Code, from participating at the same levels as non-highly compensated employees. The OReilly Automotive Deferred Compensation Plan (Deferred Comp Plan) provides executives who
participate in the 401(k) Plan with the opportunity to defer up to the full 6% of covered compensation by making contributions to the Deferred Comp Plan that are then matched by the Company as if they had been made under the 401(k) Plan. The
Deferred Comp Plan is solely intended to restore contributions lost because of application of the annual limitations under the Internal Revenue Code that are applicable to the 401(k) Plan. This benefit, which assists Executives in accumulating funds
for retirement, is consistent with observed competitive practices of similarly situated companies.
It is the Companys
policy to have the compensation paid to its Chairman of the Board, Chief Executive Officer, Chief Operating Officer, Chief Financial Officer and other NEOs qualify as performance-based and deductible for federal income tax purposes under
Section 162(m) of the Internal Revenue Code. The Company has structured its incentive plans so that incentive payments and stock options are fully deductible.
In addition, the Company provides its NEOs with certain perquisites which the Compensation Committee believes are reasonable and consistent with the objectives of attracting and retaining superior team
members as well as maintaining a competitive total compensation package for the named executives. Perquisites can include personal use of a Company automobile, reimbursement for health and country club memberships and reimbursements under the
Companys Executive Management Medical Reimbursement Benefit Plan. Perquisite amounts for the Companys NEOs are included in the below
Summary Compensation Table
in the column
All Other Compensation
.
Compensation Mix
The
Companys 2010 compensation mix, which includes base salary, equity and non-equity incentive compensation and stock options, for each of its NEOs is summarized in the table below:
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|
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|
|
|
|
|
|
|
|
|
|
Named Executive Officer
|
|
Base
Salary
|
|
|
Equity
Incentive
Compensation
|
|
|
Stock
Options
|
|
|
Non-Equity
Incentive
Compensation
|
|
|
Other
Benefits
|
|
|
Total
Compensation
|
|
Chairman of the Board
|
|
|
62
|
%
|
|
|
--
|
%
|
|
|
35
|
%
|
|
|
--
|
%
|
|
|
3
|
%
|
|
|
100
|
%
|
Chief Executive Officer
|
|
|
17
|
%
|
|
|
--
|
%
|
|
|
12
|
%
|
|
|
70
|
%
|
|
|
1
|
%
|
|
|
100
|
%
|
Chief Operating Officer
|
|
|
20
|
%
|
|
|
--
|
%
|
|
|
14
|
%
|
|
|
65
|
%
|
|
|
1
|
%
|
|
|
100
|
%
|
Chief Financial Officer
|
|
|
19
|
%
|
|
|
--
|
%
|
|
|
16
|
%
|
|
|
64
|
%
|
|
|
1
|
%
|
|
|
100
|
%
|
Senior Vice President of Store Operations and Sales
|
|
|
59
|
%
|
|
|
12
|
%
|
|
|
--
|
%
|
|
|
24
|
%
|
|
|
5
|
%
|
|
|
100
|
%
|
18
COMPENSATION COMMITTEE REPORT
We have reviewed and discussed the foregoing Compensation Discussion and Analysis with management. Based on our review and discussion
with management, we have recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement and in OReilly Automotive, Inc.s Annual Report on Form 10-K for the year ended
December 31, 2010.
Respectfully submitted,
THE COMPENSATION COMMITTEE OF THE BOARD
OF DIRECTORS OF OREILLY
AUTOMOTIVE, INC.
Jay D. Burchfield
Chairman of the Compensation Committee
Paul R. Lederer
Member of the Compensation Committee
Ronald Rashkow
Member of the Compensation Committee
19
EXECUTIVE COMPENSATION TABLES
The following table reports the annual compensation paid to or earned by the Chief Executive Officer, Chief Financial Officer and three
other most highly compensated executive officers (the NEOs) for the fiscal years ended December 31, 2010, 2009 and 2008:
SUMMARY COMPENSATION TABLE
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|
|
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Name And Principal
Position
|
|
Year
|
|
|
Salary
($)
(a)
|
|
|
Bonus
($)
|
|
|
Stock
Awards
($)
(b)
|
|
|
Grant Date
Fair
Value
of Stock and
Option
Awards
($)
(c)
|
|
|
Non-Equity
Incentive
Plan
Compensation
($)
(d)
|
|
|
Change In
Pension
Value
and Nonqualified
Deferred
Compensation
Earnings
($)
|
|
|
All Other
Compensation
($)
|
|
|
Total
($)
|
|
David E. OReilly
Chairman of the Board
|
|
|
2010
2009
2008
|
|
|
|
520,192
500,000
500,000
|
|
|
|
--
--
--
|
|
|
|
--
--
--
|
|
|
|
288,750
198,896
297,027
|
|
|
|
--
--
600,000
|
|
|
|
--
--
--
|
|
|
|
27,619(e)
27,343(f)
29,262(g)
|
|
|
|
836,561
726,239
1,426,289
|
|
Gregory L. Henslee
Chief Executive Officer and Co-President
|
|
|
2010
2009
2008
|
|
|
|
842,308
784,615
695,413
|
|
|
|
--
--
--
|
|
|
|
--
--
--
|
|
|
|
577,500
397,791
873,136
|
|
|
|
3,429,089
2,303,251
1,050,000
|
|
|
|
--
--
--
|
|
|
|
47,799(e)
55,438(f)
41,579(g)
|
|
|
|
4,896,696
3,541,095
2,660,128
|
|
Ted F. Wise
Chief Operating Officer and Co-President
|
|
|
2010
2009
2008
|
|
|
|
605,385
576,154
554,034
|
|
|
|
--
--
--
|
|
|
|
--
--
--
|
|
|
|
404,250
358,012
701,486
|
|
|
|
1,968,700
1,335,886
666,000
|
|
|
|
--
--
--
|
|
|
|
33,732(e)
31,864(f)
33,017(g)
|
|
|
|
3,012,067
2,301,916
1,954,537
|
|
Thomas G. McFall
Chief Financial Officer and Executive Vice-President of Finance
|
|
|
2010
2009
2008
|
|
|
|
434,616
342,308
292,308
|
|
|
|
--
--
--
|
|
|
|
--
--
--
|
|
|
|
346,500
238,675
468,065
|
|
|
|
1,452,320
806,138
360,000
|
|
|
|
--
--
--
|
|
|
|
31,333(e)
26,833(f)
24,806(g)
|
|
|
|
2,264,769
1,413,954
1,145,179
|
|
Jeff M. Shaw
Senior Vice-President of Store Operations and Sales
|
|
|
2010
2009
2008
|
|
|
|
202,692
187,692
173,692
|
|
|
|
--
--
--
|
|
|
|
41,252
35,455
22,451
|
|
|
|
--
--
195,358
|
|
|
|
82,517
70,945
44,924
|
|
|
|
--
--
--
|
|
|
|
15,547(e)
14,688(f)
15,489(g)
|
|
|
|
342,008
308,780
451,914
|
|
(a)
|
The
Salary
column includes the portion of salary deferred at NEOs election under the Companys Profit Sharing and Savings Plan.
|
(b)
|
The
Stock Awards
column refers to restricted share awards granted under the Companys Performance Incentive Plan (PIP) in 2009, 2010 and 2011,
which were earned for performance in 2008, 2009 and 2010, respectively, as further discussed in the
Performance Incentive Compensation Plan
and
Long-Term Stock-Based Incentives
sections of the
Compensation Discussion and
Analysis
portion of this report. All shares awarded under the PIP vest in equal installments over a three-year period commencing on the first anniversary of the award.
|
(c)
|
The
Grant Date Fair Value of Stock and Option Awards
column refers to the option awards granted to the NEOs, which become exercisable with respect to 25% of the
covered shares one year from the date of grant; 50% exercisable two years from the date of grant; 75% exercisable three years from the date of grant and the remainder become exercisable four years from the date of grant. The awards granted to
Mr. OReilly and Mr. Wise in 2008, 2009 and 2010 are eligible for immediate vesting upon their retirement provided that they provide notice of their intent to retire one year prior to their retirement date. The amounts recognized in
the above table reflect the grant date fair value of stock option awards granted during 2008, 2009 and 2010. During the fiscal years ended December 31, 2010, 2009 and 2008, no option awards were forfeited by the named executives. The grant date
fair value of option awards was determined using the Black-Scholes option-pricing model. The Black-Scholes model requires the use of assumptions, including expected volatility, expected life, the risk free rate and the expected dividend yield.
Please see the footnotes to the Companys Consolidated Financial Statements included in its Annual Report on Form 10-K for the fiscal year ended December 31, 2010 for further discussion of these assumptions.
|
(d)
|
The
Non-Equity Incentive Plan Compensation
column refers to the cash payouts under the Companys annual performance incentive plans, which are paid in the
year following the plan year. Detailed descriptions of the annual performance incentive plans can be found in the
Performance Incentive Compensation Plan
and
Long-Term Stock-Based Incentives
sections of the
Compensation Discussion
and Analysis
portion of this report
|
(e)
|
Includes Company contributions of $15,577, $25,269, $18,162, $17,384 and $6,057 to its Profit Sharing and Savings Plan or Deferred Compensation Plan made on behalf of
David OReilly, Gregory Henslee, Ted Wise, Thomas McFall and Jeff Shaw, respectively.
|
(f)
|
Includes Company contributions of $15,000, $23,538, $17,285, $13,692 and $5,631 to its Profit Sharing and Savings Plan or Deferred Compensation Plan made on behalf of
David OReilly, Gregory Henslee, Ted Wise, Thomas McFall and Jeff Shaw, respectively.
|
(g)
|
Includes Company contributions of $17,522, $23,291, $19,057, $14,215 and $7,063 to its Profit Sharing and Savings Plan or Deferred Compensation Plan made on behalf of
David OReilly, Gregory Henslee, Ted Wise, Thomas McFall and Jeff Shaw, respectively.
|
20
The following table reports all grants of awards in 2010 to each of the NEOs:
GRANTS OF PLAN-BASED AWARDS
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|
|
|
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|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Grant
Date
|
|
|
Estimated Future
Payouts
Under Non-Equity Incentive Plan
Awards
(a)
|
|
|
Estimated Future Payouts
Under Equity Incentive
Plan
Awards
(b)
|
|
|
All Other
Stock
Awards:
Number
of Shares
of Stock
or Units
(#)
(c)
|
|
|
All
Other
Option
Awards:
Number of
Securities
Underlying
Options
(#)
(d)
|
|
|
Exercise
or Base
Price
of
Options
Awards
($/Sh)
|
|
|
Grant
Date Fair
Value
of
Stock
and
Option
Awards
($)
|
|
|
|
Threshold
($)
|
|
|
Target
($)
|
|
|
Max
($)
|
|
|
Threshold
(#)
|
|
|
Target
(#)
|
|
|
Max
(#)
|
|
|
|
|
|
David E. OReilly
|
|
|
02/11/10
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
25,000
|
|
|
|
39.52
|
|
|
|
288,750
|
|
Gregory L. Henslee
|
|
|
02/11/10
|
|
|
|
--
|
|
|
|
850,000
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
50,000
|
|
|
|
39.52
|
|
|
|
577,500
|
|
Ted F. Wise
|
|
|
02/11/10
|
|
|
|
--
|
|
|
|
488,000
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
35,000
|
|
|
|
39.52
|
|
|
|
404,250
|
|
Thomas G. McFall
|
|
|
02/11/10
|
|
|
|
--
|
|
|
|
360,000
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
30,000
|
|
|
|
39.52
|
|
|
|
346,500
|
|
Jeff M. Shaw
|
|
|
02/11/10
|
|
|
|
--
|
|
|
|
47,834
|
|
|
|
--
|
|
|
|
--
|
|
|
|
23,916
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
Jeff M. Shaw
|
|
|
03/08/10
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
896
|
|
|
|
--
|
|
|
|
--
|
|
|
|
35,455
|
|
|
(a)
|
The
Estimated Future Payouts Under Non-Equity Incentive Plan Awards Target
column refers to the potential cash payouts under the Companys annual
performance incentive plans for 2010, which would be paid during 2011. The Compensation Committee approved the goals for the 2010 incentive plans in February of 2010. The payout amounts for each NEO for 2010 were reviewed and approved by the
Compensation Committee and the Board of Directors in February of 2011, upon completion of the consolidated financial statements for the fiscal year ended December 31, 2010. The
Summary Compensation Table
details amounts actually paid
under the 2010 annual performance incentive plans in the
Non-Equity Incentive Plan Compensation
column, which was paid in the year following the plan year. Detailed descriptions of the annual performance incentive plans can be found in the
Performance Incentive Compensation Plan
and
Long-Term Stock-Based Incentives
sections of the
Compensation Discussion and Analysis
portion of this report.
|
|
(b)
|
The
Estimated Future Payouts Under Equity Incentive Plan Awards Target
column refers to potential restricted stock awards under the Companys annual
performance incentive plans for 2010, which would be granted during 2011. The Compensation Committee approved the goals for the 2010 incentive plans in February of 2010. The restricted stock award amounts for the NEO for 2010 was reviewed and
approved by the Compensation Committee and the Board of Directors in February of 2011, upon completion of the consolidated financial statements for the fiscal year ended December, 31, 2010. The
Summary Compensation Table
details the fair
value of the restricted shares actually earned under the 2010 annual performance incentive plans in the
Stock Awards
column, which were granted in the year following the plan year. Detailed descriptions of the annual performance incentive
plans can be found in the
Performance Incentive Compensation Plan
and
Long-Term Stock-Based Incentives
sections of the
Compensation Discussion and Analysis
portion of this report.
|
|
(c)
|
The
All Other Stock Awards: Number of Shares of Stock or Units
column refers to restricted shares granted on March 8, 2010, under the Companys
Performance Incentive Plan, which vest in three equal installments on December 31, 2010, 2011 and 2012. These shares were earned as a component of the 2009 annual performance incentive plan. A detailed description of the Companys
Performance Incentive Plan can be found in the
Long-Term Stock-Based Incentives
section of the
Compensation Discussion and Analysis
portion of this report.
|
|
(d)
|
The
All Other Option Awards: Number of Securities Underlying Options
column refers to stock option awards granted to the NEOs, which become exercisable with
respect to 25% of the covered shares one year from the date of grant; 50% exercisable two years from the date of grant; 75% exercisable three years from the date of grant, while the remainder become exercisable four years from the date of grant. The
awards granted to Mr. OReilly and Mr. Wise in 2010 are eligible for immediate vesting upon their retirement provided that they provide notice of their intent to retire one year prior to their retirement date.
|
21
The following table details information concerning unexercised stock options, stock options
that have not vested and stock awards that have not vested for each of the NEOs as of December 31, 2010:
OUTSTANDING
EQUITY AWARDS AT FISCAL YEAR-END TABLE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
Name
|
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
|
|
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
|
|
|
Equity Incentive
Plan Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options
(#)
|
|
|
Option
Exercise
Price
($)
|
|
|
Option
Expiration
Date
|
|
|
Number
of Shares
or Units of
Stock
That Have
Not
Vested
(#)
|
|
|
Market
Value of
Shares or
Units
of
Stock That
Have Not
Vested
($)
|
|
|
Equity Incentive
Plan Awards:
Number
of
Unearned
Shares, Units or
Other Rights
That Have Not
Vested
(#)
|
|
|
Equity Incentive
Plan Awards:
Market
or
Payout Value
Unearned of
Shares, Units or
Other Rights
That Have Not
Vested
($)
|
|
David E. OReilly
|
|
|
157,500
|
|
|
|
--
|
|
|
|
--
|
|
|
|
18.78
|
|
|
|
02/05/14
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
|
80,000
|
|
|
|
--
|
|
|
|
--
|
|
|
|
23.20
|
|
|
|
02/03/15
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
|
15,000
|
|
|
|
--
|
|
|
|
--
|
|
|
|
24.84
|
|
|
|
04/06/15
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
|
45,000
|
|
|
|
--
|
|
|
|
--
|
|
|
|
32.78
|
|
|
|
02/09/16
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
|
26,250
|
|
|
|
8,750
|
(a)
|
|
|
--
|
|
|
|
34.71
|
|
|
|
02/15/17
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
|
12,500
|
|
|
|
12,500
|
(b)
|
|
|
--
|
|
|
|
28.70
|
|
|
|
02/14/18
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
|
12,500
|
|
|
|
12,500
|
(c)
|
|
|
--
|
|
|
|
22.65
|
|
|
|
07/11/18
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
|
6,250
|
|
|
|
18,750
|
(d)
|
|
|
--
|
|
|
|
28.69
|
|
|
|
02/10/19
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
|
--
|
|
|
|
25,000
|
(e)
|
|
|
--
|
|
|
|
39.52
|
|
|
|
02/11/20
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
Gregory L. Henslee
|
|
|
86,100
|
|
|
|
--
|
|
|
|
--
|
|
|
|
18.78
|
|
|
|
02/05/14
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
|
45,000
|
|
|
|
--
|
|
|
|
--
|
|
|
|
23.20
|
|
|
|
02/03/15
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
|
15,000
|
|
|
|
--
|
|
|
|
--
|
|
|
|
24.84
|
|
|
|
04/06/15
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
|
50,000
|
|
|
|
--
|
|
|
|
--
|
|
|
|
32.78
|
|
|
|
02/09/16
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
|
37,500
|
|
|
|
12,500
|
(a)
|
|
|
--
|
|
|
|
34.71
|
|
|
|
02/15/17
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
|
25,000
|
|
|
|
25,000
|
(b)
|
|
|
--
|
|
|
|
28.70
|
|
|
|
02/14/18
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
|
50,000
|
|
|
|
50,000
|
(c)
|
|
|
--
|
|
|
|
22.65
|
|
|
|
07/11/18
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
|
12,500
|
|
|
|
37,500
|
(d)
|
|
|
--
|
|
|
|
28.69
|
|
|
|
02/10/19
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
|
--
|
|
|
|
50,000
|
(e)
|
|
|
--
|
|
|
|
39.52
|
|
|
|
02/11/20
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
Ted F. Wise
|
|
|
86,100
|
|
|
|
--
|
|
|
|
--
|
|
|
|
18.78
|
|
|
|
02/05/14
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
|
45,000
|
|
|
|
--
|
|
|
|
--
|
|
|
|
23.20
|
|
|
|
02/03/15
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
|
15,000
|
|
|
|
--
|
|
|
|
--
|
|
|
|
24.84
|
|
|
|
04/06/15
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
|
45,000
|
|
|
|
--
|
|
|
|
--
|
|
|
|
32.78
|
|
|
|
02/09/16
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
|
33,750
|
|
|
|
11,250
|
(a)
|
|
|
--
|
|
|
|
34.71
|
|
|
|
02/15/17
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
|
17,500
|
|
|
|
17,500
|
(b)
|
|
|
--
|
|
|
|
28.70
|
|
|
|
02/14/18
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
|
5,000
|
|
|
|
5,000
|
(f)
|
|
|
--
|
|
|
|
27.99
|
|
|
|
02/20/18
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
|
37,500
|
|
|
|
37,500
|
(c)
|
|
|
--
|
|
|
|
22.65
|
|
|
|
07/11/18
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
|
11,250
|
|
|
|
33,750
|
(d)
|
|
|
--
|
|
|
|
28.69
|
|
|
|
02/10/19
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
|
--
|
|
|
|
35,000
|
(e)
|
|
|
--
|
|
|
|
39.52
|
|
|
|
02/11/20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas G. McFall
|
|
|
50,000
|
|
|
|
--
|
|
|
|
--
|
|
|
|
31.69
|
|
|
|
05/31/16
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
|
15,000
|
|
|
|
--
|
|
|
|
--
|
|
|
|
32.06
|
|
|
|
12/31/16
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
|
7,500
|
|
|
|
2,500
|
(a)
|
|
|
--
|
|
|
|
34.71
|
|
|
|
02/15/17
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
|
7,500
|
|
|
|
7,500
|
(b)
|
|
|
--
|
|
|
|
28.70
|
|
|
|
02/14/18
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
|
7,500
|
|
|
|
7,500
|
(b)
|
|
|
--
|
|
|
|
28.70
|
|
|
|
02/14/18
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
|
25,000
|
|
|
|
25,000
|
(c)
|
|
|
--
|
|
|
|
22.65
|
|
|
|
07/11/18
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
|
7,500
|
|
|
|
22,500
|
(d)
|
|
|
--
|
|
|
|
28.69
|
|
|
|
02/10/19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
--
|
|
|
|
30,000
|
(e)
|
|
|
--
|
|
|
|
39.52
|
|
|
|
02/11/20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jeff M. Shaw
|
|
|
25,000
|
|
|
|
--
|
|
|
|
--
|
|
|
|
19.26
|
|
|
|
12/30/13
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
|
7,500
|
|
|
|
--
|
|
|
|
--
|
|
|
|
24.84
|
|
|
|
04/06/15
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
|
17,500
|
|
|
|
17,500
|
(c)
|
|
|
--
|
|
|
|
22.65
|
|
|
|
07/11/18
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
821
|
(g)
|
|
|
49,605
|
|
|
|
--
|
|
|
|
--
|
|
|
(a)
|
Represents stock options granted on February 15, 2007, which become exercisable in four equal installments on February 15, 2008, 2009, 2010 and 2011.
|
|
(b)
|
Represents stock options granted on February 14, 2008, which become exercisable in four equal installments on February 14, 2009, 2010, 2011 and 2012.
|
|
(c)
|
Represents stock options granted on July 11, 2008, which become exercisable in four equal installments on July 11, 2009, 2010, 2011 and 2012.
|
|
(d)
|
Represents stock options granted on February 10, 2009, which become exercisable in four equal installments on February 10, 2010, 2011, 2012 and 2013.
|
|
(e)
|
Represents stock options granted on February 11, 2010, which become exercisable in four equal installments on February 11, 2011, 2012, 2013 and 2014.
|
|
(f)
|
Represents stock options granted on February 20, 2008, which become exercisable in four equal installments on February 20, 2009, 2010, 2011 and 2012.
|
|
(g)
|
Represents restricted shares granted on March 4, 2009, and March 8, 2010, under the Companys Performance Incentive Plan, which vest in two installments
of 523 shares on December 31, 2011, and 298 shares on December 31, 2012.
|
22
The following table lists option awards exercised and shares of restricted stock awards
which vested during 2010 and the aggregate dollar values realized upon such exercise or vesting for each of the NEOs:
OPTION EXERCISES AND STOCK VESTED
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPTION AWARDS
|
|
|
STOCK AWARDS
|
|
Name
|
|
Number of Shares Acquired
On
Exercise
(#)
|
|
|
Value Realized On Exercise
($)
|
|
|
Number of Shares Acquired
On
Vesting
(#) (a)
|
|
|
Value Realized On Vesting
($)
|
|
David E. OReilly
|
|
|
60,000
|
|
|
|
2,295,704
|
|
|
|
--
|
|
|
|
--
|
|
Gregory L. Henslee
|
|
|
82,000
|
|
|
|
3,388,806
|
|
|
|
--
|
|
|
|
--
|
|
Ted F. Wise
|
|
|
122,000
|
|
|
|
4,482,500
|
|
|
|
--
|
|
|
|
--
|
|
Jeff M. Shaw
|
|
|
45,000
|
|
|
|
1,558,501
|
|
|
|
706
|
|
|
|
42,657
|
|
|
(a)
|
Shares acquired on vesting reflects the vesting of stock awards granted under the Companys Performance Incentive Plan (PIP) in 2007, 2008 and 2009.
All shares awarded under the PIP vest in three equal installments commencing on December 31 in the year of the award and annually each December 31, thereafter.
|
The following table sets forth information regarding the contributions by each NEO and the Company under the OReilly Automotive,
Inc. Deferred Compensation Plan during 2010 as well as information on aggregate earnings, withdrawals and balances for each NEO:
NONQUALIFIED DEFERRED COMPENSATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Executive Contributions
In Last Fiscal
Year
($)
(a)
|
|
|
Registrant Contributions
In Last Fiscal
Year
($)
(b)
|
|
|
Aggregate Earnings
In Last Fiscal
Year
($)
|
|
|
Aggregate
Withdrawals/
Distributions
($)
|
|
|
Aggregate Balance
At Last Fiscal Year End
($)
|
|
David E. OReilly
|
|
|
24,952
|
|
|
|
9,981
|
|
|
|
74,222
|
|
|
|
--
|
|
|
|
464,641
|
|
Gregory L. Henslee
|
|
|
80,635
|
|
|
|
21,979
|
|
|
|
74,424
|
|
|
|
--
|
|
|
|
479,659
|
|
Ted F. Wise
|
|
|
287,671
|
|
|
|
15,646
|
|
|
|
183,362
|
|
|
|
--
|
|
|
|
1,447,290
|
|
Thomas G. McFall
|
|
|
20,866
|
|
|
|
8,346
|
|
|
|
25,953
|
|
|
|
--
|
|
|
|
127,391
|
|
Jeff M. Shaw
|
|
|
77,608
|
|
|
|
1,940
|
|
|
|
45,586
|
|
|
|
--
|
|
|
|
412,254
|
|
|
(a)
|
All NEO contribution amounts have been included in the
Salary
column of the
Summary Compensation Table
.
|
|
(b)
|
All Company contribution amounts have been included in the
All Other Compensation
column of the
Summary Compensation Table
.
|
Change in Control Agreements
The Company has entered into change in control agreements with certain NEOs, which become effecti
v
e only upon a Change in Control. Under the agreements, a Change in Control is deemed to occur if
any one of the following events shall occur:
|
|
|
A third party becomes beneficial owner of 40% or more of the Companys common stock;
|
|
|
|
There is a majority change in the number of directors which causes at least two thirds of the Board of Directors to consist of new directors that were
not nominated by the Company;
|
|
|
|
The Company engages in a merger or consolidation where the Companys pre-transaction shareholders would fail to hold at least 60% of the combined
voting power of the securities of the surviving entity; or
|
|
|
|
The stockholders of the Company approve a plan of complete liquidation or dissolution of the Company;
|
If upon or within six months after a Change in Control, any of the NEOs with a valid change in control agreement terminates their
employment for Good Reason or such executives employment is terminated by the Company without cause or by reason of death or disability, then the executive will be entitled to:
|
|
|
An amount equal to one times the executives annual salary;
|
|
|
|
Immediate vesting and exercisability of all outstanding stock options, restricted stock or other equity or equity-based awards;
|
|
|
|
All accrued but unpaid incentive compensation including any unpaid annual incentive compensation earned in previous years and a prorated portion of
current year target incentive compensation;
|
|
|
|
Continuation of insurance coverage for 18 months;
|
|
|
|
A gross-up payment for excise taxes; and
|
|
|
|
All legal fees and expenses incurred in disputing the termination of the executives employment;
|
23
Employment Arrangements with Executive Officers
The Company entered into a written employment agreement effective January 1, 1993, with David E. OReilly. Such agreement
provides for Mr. OReilly to be employed by the Company for a minimum period of three years and automatically renews for each calendar year thereafter. As compensation for services rendered to the Company, the agreement provides for
Mr. OReilly to receive (i) a base annual salary adjusted annually, and (ii) a bonus, the amount of which is determined by reference to such criteria as may be established by the Compensation Committee. Mr. OReilly, in
consultation with the Compensation Committee, has elected to exclude himself from participating in the bonus portion of his employment agreement pursuant to his responsibilities of providing strategic direction and guidance to the company and his
more limited role in the Companys day-to-day operational activities.
Mr. OReillys employment may be
terminated by the Company for cause (as defined in the agreement) or without cause. If Mr. OReillys employment is terminated for cause or if Mr. OReilly resigns, his salary and bonus rights will cease on the date of such
termination or resignation. If the Company terminates Mr. OReilly without cause, all compensation payments will continue through the remainder of the agreements term. Pursuant to his agreement, Mr. OReilly has agreed for
so long as he is receiving payments there under to refrain from disclosing information confidential to the Company or engaging, directly or indirectly, in any automotive parts distribution, manufacturing or sales business in the states in which the
Company operates without prior written consent of the Company.
Certain Relationships and Related Transactions
The Company leases 69 store locations from two real estate investment partnerships and one limited liability partnership formed by the
OReilly family. David E. OReilly, Lawrence P. OReilly, Charles H. OReilly, Jr. and Rosalie OReilly-Wooten, their spouses, children and grandchildren each hold a beneficial interest in such investment partnerships or the
limited liability partnership. The Company has entered into separate master lease agreements with each of the affiliated real estate investment partnerships and limited liability partnership for the locations covered thereby. The master leases
generally provide for payment of a fixed base rent, payment of certain tax, insurance and maintenance expenses and original terms of six to fifteen years, subject to one or more renewals at the Companys option. The original term of the master
lease agreements with the real estate investment partnerships expired in December 2004 and has been renewed by modifications to the master lease agreements that extend the term of the lease for each individual property under the lease. The terms of
these modifications expire on dates ranging from March 31, 2011, to December 31, 2029. The term of the master leases with the limited liability partnership expire on dates ranging from December 31, 2013, to December 31, 2028. The
total aggregate rent payments paid by the Company to the investment partnerships and the limited liability partnership totaled $4.0 million in fiscal 2010. The Company believes that the terms and conditions of the transactions with affiliates
described above were no less favorable to the Company than those that would have been available to the Company in comparable transactions with unaffiliated parties.
Approval or Ratification of Transactions with Related Persons
Pursuant to
the terms of the Audit Committee Charter, the Audit Committee is responsible for reviewing and approving all proposed transactions between the Company, any of the Companys officers or directors, or relatives or affiliates of any such officers
or directors, to ensure that such related party transactions are on a similar economic basis as a like transaction that occurred at arms length with an independent third party, are in the Companys overall best interest and in the best
interest of the Companys shareholders. The quarterly Audit Committee meeting includes a standing agenda item for the review of such related party transactions. The Audit Committee has not adopted any specific procedures for the conduct of the
reviews, rather each transaction is considered in light of the individual facts and circumstances. In the course of its review and approval of a transaction, the Audit Committee considers, among other factors it deems appropriate:
|
|
|
whether the transaction is fair and reasonable to the Company;
|
|
|
|
the business reasons for the transaction;
|
|
|
|
whether the transaction would impair the independence of one or more of the Companys officers or directors; and
|
|
|
|
whether the transaction is material, taking into account the significance of the transaction.
|
During the most recent fiscal year, all related party transactions were reviewed in accordance with the above procedures.
24
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires the Companys executive officers and Directors, and persons who own more than 10% of
a registered class of the Companys equity securities, to file reports of ownership and changes in ownership with the SEC. Such individuals are required by SEC regulation to furnish the Company with copies of all Section 16(a) forms they
file. To the Companys knowledge, based solely on its review of the copies of such forms furnished to it and written representations with respect to the timely filing of all reports required to be filed, it believes that such persons complied
with all Section 16(a) filing requirements applicable to them with respect to transactions during fiscal 2010 with the following exceptions:
|
|
|
exercise of stock options and corresponding equity swap on March 1, 2010, by Paul R. Lederer that was not reported until March 11, 2010;
|
|
|
|
sale of shares of the Companys common stock on May 4, 2010, by Ronald Rashkow that was not reported until May 7, 2010; and
|
|
|
|
sale of shares of the Companys common stock on May 18, 2010, by Charles H. OReilly that was not reported until May 21, 2010.
|
25
AUDIT COMMITTEE REPORT
The Audit Committee functions pursuant to a written charter, which may be viewed on the Companys website at
www.oreillyauto.com
. In compliance with that charter and in connection with the December 31, 2010, financial statements, the Audit Committee:
|
|
|
reviewed and discussed with management the Companys audited financial statements as of and for the year ended December 31, 2010; and
|
|
|
|
discussed with the Companys independent auditors the matters required to be discussed by Statement on Auditing Standards No. 61,
Communication with Audit Committees
, as amended, as adopted by the Public Company Accounting Oversight Board (PCAOB) in rule 3200T; and
|
|
|
|
received from the independent auditors the written disclosures and a letter from the independent auditors required by the applicable requirements of
the PCAOB, and have discussed with the independent auditors their independence.
|
Based on the reviews and
discussions referred to above, the Audit Committee recommended to the Board of Directors that the audited financial statements referred to above be included in the Companys Annual Report on Form 10-K for the fiscal year ended December 31,
2010.
|
THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
OF OREILLY AUTOMOTIVE, INC.
|
|
John Murphy
|
Chairman of the Audit Committee
|
|
Jay Burchfield
|
Member of the Audit Committee
|
|
Thomas Hendrickson
|
Member of the Audit Committee
|
|
Paul R. Lederer
|
Member of the Audit Committee
|
|
Ronald Rashkow
|
Member of the Audit Committee
|
26
PROPOSAL 2 ADVISORY VOTE ON EXECUTIVE COMPENSATION
Pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act, the SEC enacted requirements for the Company
to include in this proxy statement a separate resolution, subject to an advisory (non-binding) vote, to approve the compensation of its NEOs. This proposal is commonly referred to as a Say on Pay proposal. As required by these rules, the
Company is asking you to vote FOR the adoption of the following resolution:
Resolved, the compensation paid to the
Companys NEOs, as disclosed in this Proxy statement pursuant to Item 402 of Regulation S-K of the Securities Exchange Act of 1934, including the Compensation Discussion and Analysis, compensation tables and narrative discussion, is hereby
APPROVED.
In considering their vote, shareholders should review the Companys compensation of its NEOs in the
Compensation Discussion and Analysis (CD&A) section herein and Compensation Committee report included in these proxy materials. As described in the CD&A, the Companys executive officer compensation programs are designed
around the following elements:
|
|
|
recruiting and retaining qualified team members;
|
|
|
|
the career development and progression of the Companys team members; and
|
|
|
|
observed industry practices.
|
The main objective of the Companys compensation philosophy is to provide its executive officers and management with a total compensation package that is competitive and equitable, which encourages
and rewards performance based in part upon the Companys performance in terms of increases in share value. The Company believes that aligning the interests of its executives and management with those of its shareholders further promotes the
success of not only the Company, but also its team members. The Companys executive compensation policies are focused upon short-term incentives, and long-term goals, and it is the Companys belief that it creates incentives for individual
or collective risk taking. The Company believes that the current programs do not create any incentives with respect to individual or collective behavior that are likely to have a material adverse effect upon either its risk profile or overall
approach to risk management.
As this vote is advisory in nature, this proposal does not bind the Company to any specific
course of action. However, the Compensation Committee, which is responsible for designing and implementing its executive compensation packages, values the opinions expressed by the Companys shareholders in this vote, and will consider the
outcome of the vote when making decisions on future executive compensation packages.
The affirmative vote of the holders of a
majority of the shares present in person or represented by proxy and entitled to vote at the Annual Meeting will be required for the approval of this resolution. Although this vote is advisory in nature and does not impose any action on the Company
or the Compensation Committee of the Board, the Company strongly encourages all shareholders to vote on this matter.
THE BOARD OF
DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE APPROVAL OF THE COMPANYS EXECUTIVE OFFICER COMPENSATION AS DESCRIBED IN THIS PROXY STATEMENT.
27
PROPOSAL 3 ADVISORY VOTE ON THE FREQUENCY OF FUTURE SAY
ON PAY VOTES
The Say on Pay rules also require the Company to include in this proxy statement a separate
resolution subject to an advisory (non-binding) vote as to whether the Company should hold an advisory vote on executive compensation every one, two or three years.
Please mark your proxy card to indicate your preference on this proposal by indicating whether the Company should hold an advisory vote on executive compensation every one, two or three years or your
abstention if you wish to abstain.
After considering the benefits and consequences of each option for the frequency of
submitting the advisory vote on executive compensation to shareholders, the Board of Directors recommends submitting the advisory vote on the compensation of its NEOs to its shareholders every three years (triennially). The Board believes a
triennial advisory vote on the compensation of its NEOs will allow it to conduct a meaningful and detailed review of its compensation programs in response to shareholder feedback and implement any necessary adjustments or changes to its programs.
The Companys executive compensation programs are designed to support its long-term business strategy, and a triennial interval will more appropriately reflect that strategy.
Like the executive compensation proposal, this vote is advisory in nature, and does not bind the Company to any specific course of
action. However, the Compensation Committee, which will be ultimately responsible for determining the frequency of future compensation votes, values the opinions expressed by the Companys shareholders in this vote, and will consider the
outcome of the vote when making decisions on the frequency at which advisory votes on executive compensation will be included in future proxy statements.
Generally, the affirmative vote of the holders of a majority of the shares present in person or represented by proxy and entitled to vote at the Annual Meeting would be required for the approval of a
proposal. However, because this vote is advisory in nature, if no one single choice (one, two or three years) receives a total majority of the votes, the option with the majority of the votes will be considered the option chosen by the shareholders.
Although this vote is advisory in nature and does not impose any action on the Company or the Compensation Committee of the Board, the Company strongly encourages all shareholders to vote on this matter.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR A FREQUENCY OF THREE YEARS FOR AN ADVISORY VOTE ON EXECUTIVE COMPENSATION.
28
PROPOSAL 4 RATIFICATION OF SELECTION OF INDEPENDENT
AUDITORS
The Audit Committee of the Board of Directors has selected Ernst & Young, LLP, as the Companys
independent auditors for the year ending December 31, 2011, and has further directed that management submit the selection of independent auditors for ratification by the shareholders at the Annual Meeting. Ernst & Young, LLP, has
audited the Companys financial statements since 1992. Representatives of Ernst & Young, LLP, are expected to be present at the Annual Meeting. They will have an opportunity to make a statement if they so desire and will be available
to respond to appropriate questions.
None of the Companys Bylaws, other governing documents, Missouri or federal law,
or The Nasdaq Global Select Market Listing Qualifications require shareholder ratification of the selection of Ernst & Young, LLP, as the Companys independent auditors. However, the Audit Committee is submitting the selection of
Ernst & Young, LLP, to the shareholders for ratification as a matter of good corporate practice. If the shareholders fail to ratify the selection, the Audit Committee will reconsider whether or not to retain that firm. Even if the selection
is ratified, the Audit Committee, in its discretion, may direct the appointment of different independent auditors at any time during the year if the Audit Committee determines that such a change would be in the best interests of the Company and its
shareholders.
Fees Paid to Independent Registered Public Accounting Firm
The following is a summary of fees billed by Ernst & Young, LLP, for audit and other professional services during the years
ended December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
|
|
2009
|
|
Audit Fees:
|
|
|
|
|
|
|
|
|
|
|
Consists of fees and expenses billed for the audit of the Companys consolidated financial statements for such year, the audit of the effectiveness of internal control over
financial reporting, the review of the Companys quarterly reports on Form 10-Q and reviews in connection with documents filed with the SEC.
|
|
$
|
1,695,297
|
|
|
Consists of fees and expenses billed for the audit of the Companys consolidated financial statements for such year, the audit of the effectiveness of internal control over
financial reporting and for the review of the Companys quarterly reports on Form 10-Q.
|
|
$
|
1,967,995
|
|
|
|
|
|
Audit-Related Fees:
|
|
|
|
|
|
|
|
|
|
|
Consists of fees and expenses billed for the annual audit of the Companys employee benefit plans.
|
|
|
50,525
|
|
|
Consists of fees and expenses billed for the annual audit of the Companys employee benefit plans.
|
|
|
55,440
|
|
|
|
|
|
Tax Fees:
|
|
|
|
|
|
|
|
|
|
|
Consists of fees and expenses billed for tax advisory services, including compliance, planning and consultations.
|
|
|
538,689
|
|
|
Consists of fees and expenses billed for tax advisory services, including compliance, planning and consultations regarding operational realignment.
|
|
|
664,235
|
|
|
|
|
|
Other:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consists of fees and expenses billed for consulting services related to legal investigations.
|
|
|
29,395
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Fees
|
|
$
|
2,284,511
|
|
|
|
|
$
|
2,717,065
|
|
|
|
|
|
|
|
|
|
|
|
|
The Audit Committee has adopted a policy that requires advance approval of all audit, audit-related, tax
services and other services performed by the independent auditor. The policy provides for preapproval by the Audit Committee of specifically defined audit and non-audit services. Unless the specific service has been previously approved with respect
to that year, the Audit Committee must approve the permitted service before the independent auditor is engaged to perform it. The Audit Committee has delegated to the Chairman of the Audit Committee authority to approve permitted services, provided
that the Chairman reports any decisions to the Committee at its next scheduled meeting.
The Audit Committee, after review and
discussion with Ernst & Young, LLP, of the preceding information, determined that the provision of these services was compatible with maintaining Ernst & Young, LLPs independence.
29
Ratification of Independent Auditors
The affirmative vote of the holders of a majority of the shares present in person or represented by proxy and entitled to vote at the
Annual Meeting will be required to ratify the selection of Ernst & Young, LLP.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE
FOR THE PROPOSAL TO RATIFY THE SELECTION OF ERNST & YOUNG, LLP, AS THE COMPANYS INDEPENDENT AUDITORS FOR THE YEAR ENDING DECEMBER 31, 2011.
ANNUAL SHAREHOLDERS REPORT
The Annual
Shareholders Report of the Company for fiscal 2010 containing, among other things, audited consolidated financial statements of the Company, accompanies this Proxy Statement.
FUTURE PROPOSALS OF SHAREHOLDERS
Shareholder proposals intended to be presented at the 2012 Annual Meeting and included in the Companys proxy statement and form of
proxy relating to that meeting pursuant to Rule 14a-8 under the Exchange Act must be received by the Company at the Companys principal executive offices by November 17, 2011. In order for shareholder proposals made outside of Rule 14a-8
under the Exchange Act to be considered timely within the meaning of Rule 14a-4(c) under the Exchange Act, the Companys Amended and Restated Bylaws require that such proposals must be submitted, not later than March 3, 2012,
and not earlier than February 1, 2012.
OTHER BUSINESS
The Board of Directors knows of no business to be brought before the Annual Meeting other than as set forth above. If other matters
properly come before the meeting, it is the intention of the persons named in the solicited proxy to vote the proxy on such matters in accordance with their judgment as to the best interests of the Company.
MISCELLANEOUS
The Company will pay the cost of soliciting proxies in the accompanying form. In addition to solicitation by use of the mails, certain officers and regular employees of the Company may solicit the return
of proxies by telephone, telegram or personal interview and may request brokerage houses and custodians, nominees and fiduciaries to forward soliciting material to their principals and will agree to reimburse them for their reasonable out-of-pocket
expenses.
Shareholders are urged to mark, sign, date and send in their proxies without delay or vote via telephone or
Internet using the instructions on the proxy card.
COMMUNICATION WITH THE BOARD OF DIRECTORS
A shareholder who wishes to communicate with the Companys Board of Directors, specific individual directors or the
independent directors as a group, may do so by directing a written request addressed to such director(s) in care of the Corporate Secretary at the Companys address appearing on the first page of this proxy statement or via e-mail through its
website at
www.oreillyauto.com
. Such communication will be directed to the intended director, group of directors or the entire Board, as the case may be.
HOUSEHOLDING OF MATERIALS
In some instances,
only one copy of this Proxy Statement or Annual Report is being delivered to multiple shareholders, sharing an address, unless we have received instructions from one or more of the shareholders to continue to deliver multiple copies. We will deliver
promptly upon oral or written request a separate copy of the Proxy Statement or Annual Report, as applicable, to any shareholder at your address. If you wish to receive a separate copy of the Proxy Statement or Annual Report, you may call us at
(417) 874-7161, or send a written request to OReilly Automotive, Inc., 233 South Patterson, Springfield, Missouri 65802, Attention: Secretary. Alternatively, shareholders sharing an address who now receive multiple copies of the Proxy
Statement or Annual Report may request delivery of a single copy, also by calling us at the number or writing to us at the address listed above.
30
ADDITIONAL INFORMATION
Additional information regarding the Company can be found in the Companys Annual Report on Form 10-K for the year ended
December 31, 2010, filed by the Company with the SEC.
A copy of the Companys Annual Report on Form 10-K for fiscal
year 2010 (as filed with the SEC), including financial statements and financial statement schedules (excluding exhibits), is available to shareholders without charge, upon written request to OReilly Automotive, Inc., 233 South Patterson,
Springfield, Missouri 65802, Attention: Secretary.
By Order of the Board of Directors,
Tricia Headley
Secretary
Springfield, Missouri
March 18, 2011
31
OREILLY AUTOMOTIVE, INC.
You are cordially invited to attend the Annual Meeting of Shareholders of OReilly Automotive, Inc., to be held at the Doubletree Hotel Springfield,
2431 North Glenstone Avenue, Springfield, Missouri, on Tuesday, May 3, 2011, at 10:00 a.m. Central Time.
2010
HIGHLIGHTS
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18
th
consecutive year of positive comparable store sales
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Comparable store sales increase of 8.8%
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11% increase in sales to $5.4 billion
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Gross profit increased to 48.6% of sales
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Adjusted net income increased 41% to $433 million
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Adjusted EPS increased 37% to $3.05
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Completed system conversions in all acquired CSK stores
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Total store count increased to 3,570 stores in 38 states
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PROXY
OREILLY AUTOMOTIVE, INC.
Annual Meeting of Shareholders Tuesday, May 3, 2011
(THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS)
The undersigned hereby appoints David E. OReilly, Lawrence P. OReilly and Charles H. OReilly, Jr., and each of them, as proxies, with full power of substitution, and hereby authorizes
them to represent and vote as the undersigned designates, all shares of Common Stock of OReilly Automotive, Inc., a Missouri corporation (the Company), held by the undersigned on February 28, 2011, at the Annual Meeting of
Shareholders (the Annual Meeting) to be held on May 3, 2011, at 10:00 a.m. Central Time in Springfield, Missouri, or at any adjournment or postponement thereof, upon the matters set forth on the reverse side of this card, all in
accordance with and as more fully described in the accompanying Notice of Annual Meeting of Shareholders and Proxy Statement, receipt of which is hereby acknowledged.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED IN ACCORDANCE WITH BOARD OF DIRECTORS
RECOMMENDATIONS.
233 SOUTH PATTERSON AVENUE
P.O. BOX 1156
SPRINGFIELD, MO 65801
VOTE BY INTERNET -
www.proxyvote.com
Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 PM Eastern Time, May 2, 2011. Have your proxy card in hand when you access the web site
and follow the instructions to obtain your records and create
an electronic voting instruction form.
ELECTRONIC DELIVERY OF FUTURE
SHAREHOLDER COMMUNICATIONS
If you would like to reduce the costs incurred by OReilly Automotive, Inc. in mailing proxy materials,
you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when
prompted, indicate that you agree to receive or access shareholder communications electronically in future years.
VOTE BY PHONE -
1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up until 11:59 PM Eastern Time, May 2, 2011. Have
your proxy card in hand when you call and follow the instructions.
VOTE BY MAIL
Mark, sign and date your proxy card and return in the postage-paid envelope we have provided or return to OReilly Automotive, Inc. Vote Processing,
c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
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TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
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KEEP THIS PORTION FOR YOUR RECORDS
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DETACH AND RETURN THIS PORTION ONLY
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THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
OREILLY AUTOMOTIVE, INC.
The Board of Directors recommends you vote
FOR
the following proposals (as described in the accompanying Proxy Statement):
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1.
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Election of Directors Nominees:
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For
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Against
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Abstain
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1a
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David E. OReilly
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¨
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¨
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¨
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1b
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Jay D. Burchfield
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¨
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¨
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¨
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1c
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Paul R. Lederer
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¨
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¨
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¨
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2.
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Advisory vote on approval of compensation of executives.
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For
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Against
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Abstain
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¨
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¨
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¨
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The Board of Directors recommends you vote
3 YEARS
on the following proposal (as described in the accompanying Proxy Statement):
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1 Year
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2 Years
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3 Years
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Abstain
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3.
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Advisory vote on the frequency of future say on pay votes.
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¨
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¨
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¨
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¨
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The Board of Directors recommends you vote
FOR
the following proposal (as described in the accompanying Proxy Statement):
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For
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Against
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Abstain
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4.
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Ratification of appointment of Ernst & Young, LLP, as independent auditors for fiscal 2011.
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¨
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¨
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¨
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Yes
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No
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Please indicate if you plan to attend the meeting.
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¨
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¨
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Please sign exactly as name(s) appear
hereon. When shares are held by joint tenants, both should sign. When signing as an attorney, executor, administrator, trustee or guardian, please give full title as such. If a corporation, please sign full corporate name by president or other
authorized officer. If a partnership, please sign in partnership name by authorized person.
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Signature [PLEASE SIGN WITHIN BOX]
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Date
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Signature (Joint Owners)
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Date
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