O'REILLY AUTO PARTS
PROFESSIONAL PARTS PEOPLE
[LOGO]
April 6, 1999
Dear Shareholder:
You are cordially invited to attend the 1999 Annual Meeting of
Shareholders of O'Reilly Automotive, Inc. to be held at the University
Plaza Convention Center, Arizona Room, 333 John Q. Hammons Parkway,
Springfield, Missouri on Tuesday, May 4, 1999, at 10:00 a.m, local time.
Details of the business to be conducted at the Annual Meeting are
given in the attached Notice of Annual Meeting 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. 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) 862-
2674 ext. 1161.
We look forward to seeing you at the Annual Meeting.
David E. O'Reilly
President and Chief Executive Officer
O'REILLY AUTOMOTIVE, INC.
233 SOUTH PATTERSON
SPRINGFIELD, MISSOURI 65802
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 4, 1999
Springfield, Missouri
April 6, 1999
To the Shareholders of O'Reilly Automotive, Inc.:
The Annual Meeting of Shareholders of O'Reilly Automotive, Inc. (the
"Company"), will be held on Tuesday, May 4, 1999, at 10:00 a.m., local
time, at the University Plaza Convention Center, 333 John Q. Hammons
Parkway, Springfield, Missouri 65806, for the following purposes:
(1) To elect two Class III Directors to the Company's Board of
Directors, to serve for three years;
(2) To consider and approve a proposal to amend the Company's
Restated Articles of Incorporation to increase the shares of
common stock, par value $.01 per share, which the Company is
authorized to issue from 30 million to 90 million; and
(3) To transact such other business as may properly come before the
meeting or any adjournments thereof.
The Board of Directors has fixed the close of business on February 26,
1999, 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. 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 principal office of the Company at 233 South
Patterson, Springfield, Missouri 65802, 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 conduct of the meeting.
A copy of the Company's Annual Shareholders' Report for fiscal year
1998 accompanies this notice.
By Order of the Board of Directors
TRICIA HEADLEY
Secretary
- ------------------------------------------------------------------------------
IMPORTANT
WHETHER OR NOT YOU INTEND TO BE PRESENT AT THE MEETING, PLEASE MARK, SIGN,
DATE AND RETURN THE ACCOMPANYING PROXY PROMPTLY. AN ADDRESSED, POSTAGE-
PAID RETURN ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE.
O'REILLY AUTOMOTIVE, INC.
233 SOUTH PATTERSON
SPRINGFIELD, MISSOURI 65802
PROXY STATEMENT
The enclosed proxy is solicited by the Board of Directors of O'Reilly
Automotive, Inc. (the "Company''), for use at the Annual Meeting of the
Company's shareholders to be held at the University Plaza Convention
Center, 333 John Q. Hammons Parkway, Springfield, Missouri 65806, on
Tuesday, May 4, 1999, at 10:00 a.m., local time, and at any adjournments
thereof. Whether or not you expect to attend the meeting in person, please
return your executed proxy in the enclosed envelope 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 April 6, 1999.
REVOCABILITY OF PROXY
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 of such revocation at any
time prior to the voting of the proxy.
RECORD DATE
Shareholders of record at the close of business on February 26, 1999,
will be entitled to vote at the Annual Meeting.
ACTION TO BE TAKEN UNDER PROXY
All properly executed proxies received by the Board of Directors
pursuant to this solicitation will be voted in accordance with the
shareholder's directions specified in the proxy. If no such directions have
been specified by marking the appropriate squares in the accompanying proxy
card, the shares will be voted by the persons named in the enclosed proxy
card as follows:
(1) FOR the election of David E. O'Reilly and Jay D. Burchfield,
named herein as nominees for Class III Directors of the Company,
to hold office until the annual meeting of the Company's
shareholders in 2002 and until their successors have been duly
elected and qualified;
(2) FOR the adoption of the proposal to amend the Company's Restated
Articles of Incorporation to increase the shares of common stock,
par value $.01 per share ("Common Stock"), which the Company is
authorized to issue from 30 million to 90 million; and
(3) According to their judgment on the transaction of such other
business as may properly come before the meeting or any
postponements or adjournments thereof.
Neither of the two nominees have indicated that they would be unable
or will decline 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 person
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.
VOTING SECURITIES AND VOTING RIGHTS
On February 26, 1999, there were 21,376,421 shares of Common Stock
outstanding, which constitute all of the outstanding shares of the voting
capital stock of the Company. Each share of Common Stock is entitled to
one vote on all matters to come before the Annual Meeting, including the
election of Directors.
A majority of the outstanding shares present or represented by proxy
will constitute a quorum at the meeting. The affirmative vote of a
majority of the votes 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. The affirmative vote of a majority of the
outstanding shares entitled to vote is required to adopt the proposal to
amend the Company's Restated Articles of Incorporation. Shares present at
the meeting but which abstain or are represented by proxies which are
marked "WITHHOLD AUTHORITY'' with respect to the election of any person to
serve on the Board of Directors will be considered in determining whether
the requisite number of affirmative votes are cast on such matter.
Accordingly, such proxies will have the same effect as a vote against the
nominee as to which such abstention or direction applies. Shares not
present at the meeting will not affect the election of directors but will
have the same effect as a vote against the proposal to increase the
authorized shares of Common Stock. With regard to any other matter, except
for the election of Directors, abstentions (including proxies which deny
discretionary authority on any matters properly brought before the meeting)
will be counted as shares present and entitled to vote and will have the
same effect as a vote against any such matter. Broker non-votes will not be
treated as shares represented at the meeting as to such matter(s) not voted
on and therefore will have no effect.
PROPOSAL 1 ELECTION OF CLASS III DIRECTORS
INFORMATION ABOUT THE NOMINEES AND DIRECTORS CONTINUING IN OFFICE
The Company's Amended and Restated By-laws currently provide for three
classes of Directors, each class serving for 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 2000 and 2001, respectively. The Board of
Directors has nominated David E. O'Reilly and Jay D. Burchfield, who are
the current Class III Directors, for a term expiring at the annual
shareholders meeting in 2002. The following table lists the principal
occupation for at least the last five years of each of the nominees and the
present directors continuing in office, his or her present positions and
offices with the Company, the year in which he or she first was elected or
appointed a director (each serving continuously since first elected or
appointed), his or her age and his or her directorships in any company with
a class of securities registered pursuant to Sections 12 or 15(d) of the
Securities Exchange Act of 1934 or in any company registered as an
investment company under the Investment Company Act of 1940. Charles H.
O'Reilly, Sr. is the father of Charles H. O'Reilly, Jr., Rosalie O'Reilly
Wooten, Lawrence P. O'Reilly and David E. O'Reilly.
<TABLE>
<CAPTION>
SERVICE AS
DIRECTOR
NAME AGE PRINCIPAL OCCUPATION SINCE
DIRECTORS CONTINUING IN OFFICE CLASS I
(TERMS EXPIRING IN 2000)
<S> <C> <C> <C>
Charles H. O'Reilly, Sr. 86 Chairman Emeritus since March 1993 1957
and a co-founder of the Company;
Chairman of the Board from 1975
to March 1993
Charles H. O'Reilly, Jr. 59 Chairman of the Board since March 1966
1993; President and Chief Executive
Officer of the Company from 1975
to March 1993
DIRECTORS CONTINUING IN OFFICE CLASS II
(TERMS EXPIRING IN 2001)
Rosalie O'Reilly Wooten 56 Executive Vice-President of the 1980
Company since 1980
Lawrence P. O'Reilly 52 President and Chief Operating 1969
Officer of the Company since March
1993; Vice-President of the Company
from 1975 to March 1993
Joe C. Greene 63 Attorney-At-Law, managing partner 1993
of the Springfield, Missouri firm
of Greene & Curtis, LLP and Director
of Commerce Bank, N.A. in Springfield,
Missouri; Mr. Greene has been engaged
in the private practice of law for
more than 30 years
NOMINEES FOR DIRECTOR CLASS III
(TO BE ELECTED TO SERVE A THREE-YEAR TERM EXPIRING IN 2002)
David E. O'Reilly 49 President and Chief Executive Officer 1972
of the Company since March 1993;
Vice President of the Company from
1975 to March 1993
Jay D. Burchfield 52 Chairman of the Board and Director 1997
of City Bancorp in Springfield,
Missouri from January 1997 to present;
Chairman of the Board and CEO of
Boatmen's National Bank of Oklahoma
in Tulsa, Oklahoma from January 1996
to January 1997; Chairman, President
and CEO of Boatmen's Bank of Southern
Missouri in Springfield, Missouri
from April 1987 to January 1996.
Mr. Burchfield's career has spanned
more than 25 years in the banking
industry.
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE NOMINEES.
INFORMATION CONCERNING BOARD OF DIRECTORS
During 1998, 4 meetings of the Board of Directors were held. During
such year, each Director attended 75% or more of the aggregate of (i) the
total number of meetings of the Board of Directors held during the period
for which he or she has been a Director and (ii) 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 Charles H. O'Reilly, Sr., who attended 25% of the aggregate meetings.
The Board of Directors of the Company has a standing Audit Committee
consisting of Messrs. David E. O'Reilly, Jay D. Burchfield and Joe C.
Greene, and a standing Compensation Committee consisting of Messrs.
Burchfield and Greene. The purpose of the Audit Committee is to review the
results and scope of the audit and services provided by the Company's
independent public accountants. 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 Company's executive officers. The Compensation
Committee also administers the Company's stock option and other benefit
plans. During 1998, two Audit Committee meetings and one Compensation
Committee meeting were held.
The Company has no standing nominating committee or other committee
performing a similar function.
COMPENSATION OF DIRECTORS
The Company pays an annual fee of $10,000 to Directors who are not
employees of the Company. In addition, the Company pays non-employee
Directors $500 for each Board of Directors meeting or committee meeting
attended. The Company also reimburses Directors for out-of-pocket expenses
incurred in connection with their attendance at Board and committee
meetings. Directors' fees of $23,500 were paid during 1998.
The Company also maintains a Directors' Stock Option Plan, providing
for an automatic annual grant (on the first business day following an
annual shareholders' meeting) to each director who is not an employee of
the Company of a non-qualified stock option to purchase 5,000 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. Director stock
options expire immediately upon the date on which the optionee ceases to be
a director for any reason or seven years after the date on which the option
is granted, whichever first occurs. Each of the Company's two non-employee
directors were granted options in 1998 to purchase 5,000 shares of Common
Stock under the Company's Directors' Stock Option Plan at an exercise price
of $27.00 per share.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee consists of Joe C. Greene and Jay D.
Burchfield.
Joe C. Greene, a Director of the Company, is the Managing Partner of
the law firm of Greene & Curtis, LLP, which has provided legal services to
the Company in prior years and is expected to provide legal services to the
Company in the future. Mr. Greene is also a Director of Commerce Bank,
N.A. in Springfield, Missouri which has loaned $5 million to the Company
under a promissory note.
Jay D. Burchfield, a Director of the Company since August 20, 1997, is
the Chairman of the Board of Directors of City Bancorp in Springfield,
Missouri. Mr. Burchfield's career has spanned more than 25 years,
primarily in banking.
The company believes that the terms of the legal services provided by
Mr. Greene are no less favorable to the Company than those that would have
been available to the Company in comparable transactions with unaffiliated
parties.
EXECUTIVE COMPENSATION
The following information is given for the fiscal years ended December
31, 1998, 1997 and 1996 concerning annual and long-term compensation for
services rendered to the Company and its subsidiaries for the Company's
Chief Executive Officer and each of the Company's four other most highly
compensated executive officers (other than the Chief Executive Officer)
during 1998.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long Term Compensation
-----------------------------------
Awards Payouts
-----------------------------------
Annual Compensation Restricted Securities All Other
Name and Stock Underlying LTIP Compensation
Principal Position Year Salary($)(a) Bonus($) Other($) Awards Options(c)(#) Payouts($) $(b)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Charles H. O'Reilly, Jr. 1998 198,500 198,500 - - - - 7,956
Chairman of the 1997 199,000 199,000 - - 15,000 - 7,631
Board 1996 192,000 192,000 - - - - 7,641
David E. O'Reilly 1998 277,000 277,000 - - - - 7,691
President and Chief 1997 258,500 258,500 - - 70,000 - 7,079
Executive Officer 1996 240,000 240,000 - - - - 7,116
Lawrence P. O'Reilly 1998 277,000 277,000 - - - - 7,919
President and Chief 1997 258,500 258,500 - - 70,000 - 7,307
Operating Officer 1996 240,000 240,000 - - - - 7,344
Rosalie O'Reilly Wooten 1998 159,000 - - - - - 6,688
Executive Vice 1997 158,000 - - - 15,000 - 6,437
President 1996 149,000 31,000 - - - - 6,099
Ted F. Wise 1998 190,000 95,000 - - - - 6,854
Executive Vice 1997 173,000 85,000 - - 50,000 - 7,079
President 1996 165,000 75,000 - - - - 6,700
</TABLE>
(a) Includes portion of salary deferred at named executive's election
under the Company's Profit Sharing and Savings Plan.
(b) "All Other Compensation" for the year ended December 31, 1998
includes (i) Company contributions of $7,056, $7,343, $7,343, $5,788 and
$6,056 to its Profit Sharing and Savings Plan made on behalf of Charles H.
O'Reilly, Jr., David E. O'Reilly, Lawrence P. O'Reilly, Rosalie O'Reilly
Wooten and Ted F. Wise, respectively, and (ii) the benefits inuring to
Charles H. O'Reilly, Jr. ($900), David E. O'Reilly ($348), Lawrence P.
O'Reilly ($576), Rosalie O'Reilly Wooten ($900), and Ted F. Wise ($348),
from the Company's payment of certain life insurance premiums.
(c) See "Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-
End Option Values" tables for additional information with respect to these
options.
INFORMATION AS TO STOCK OPTIONS
During the 1998 fiscal year, no grants of options to purchase Common
Stock were made to the executive officers. Additionally, there were no
exercises of options by the executive officers in 1998.
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
NUMBER OF NUMBER OF VALUE OF UNEXERCISED
SECURITIES UNEXERCISED OPTIONS IN-THE-MONEY
UNDERLYING AT FY-END OPTIONS
OPTIONS VALUE EXERCISABLE/ AT FY-END($)(1)
NAME EXERCISED(#) REALIZED($) UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Charles H. O'Reilly, Jr. 0 0 103,750/11,250 $3,497,813/$255,938
David E. O'Reilly 0 0 147,500/22,500 4,813,125/511,875
Lawrence P. O'Reilly 0 0 147,500/22,500 4,813,125/511,875
Rosalie O'Reilly Wooten 0 0 43,750/11,250 1,450,313/255,938
Ted F. Wise 0 0 57,500/22,500 1,824,375/511,875
</TABLE>
_______
(1) Represents the market value of the underlying Common Stock on December
31, 1998, less the aggregate exercise price.
EMPLOYMENT ARRANGEMENTS WITH EXECUTIVE OFFICERS
The Company entered into written employment agreements effective
January 1, 1993, with David E. O'Reilly, Lawrence P. O'Reilly, Charles H.
O'Reilly, Jr. and Rosalie O'Reilly Wooten. Such agreements, which are in
substantially identical form, provide for each of the foregoing executive
officers to be employed by the Company for a minimum period of three years
and automatically renew for each calendar year thereafter. As compensation
for services rendered to the Company, the agreements provide for each
executive officer to receive (i) a base annual salary of $220,000 for David
and Lawrence O'Reilly, $176,000 for Charles O'Reilly, Jr. and $140,000 for
Rosalie O'Reilly Wooten, adjusted annually for increases in the cost of
living as reflected by the Consumer Price Index for All Urban Consumers as
determined by the United States Department of Labor, Bureau of Labor
Statistics, and (ii) a bonus, the amount of which is determined by
reference to such criteria as may be established by the Compensation
Committee.
The Company has also entered into written retirement agreements with
David E. O'Reilly, Lawrence P. O'Reilly, Charles H. O'Reilly, Jr. and
Rosalie O'Reilly Wooten. Such agreements, which are in substantially
identical form, provide for each of the foregoing executive officers to be
employed as a consultant upon retirement, for a period of ten years at a
yearly salary of $100,000. The agreements also provide for each officer to
receive medical benefits, death and disability benefits, as well as the use
of a car and the Company plane.
An executive officer's employment may be terminated by the Company for
cause (as defined in the agreement) or without cause. If an executive
officer's employment is terminated for cause or if an executive officer
resigns, such executive officer's salary and bonus rights will cease on
the date of such termination or resignation. If the Company terminates an
executive officer without cause, all compensation payments will continue
through the remainder of the agreement's term. Pursuant to his or her
respective agreement, each executive officer has agreed for so long as he
or she is receiving payments thereunder 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.
REPORT OF THE COMPENSATION COMMITTEE
GENERAL
The Compensation Committee of the Board of Directors is responsible
for recommending to the Board of Directors a compensation package and
specific compensation levels for the executive officers of the Company.
Additionally, the Compensation Committee establishes policies and
guidelines for other benefit programs and administers the award of stock
options under the Company's 1993 Stock Option Plan. The Compensation
Committee is composed of two non-employee members of the Board of
Directors.
POLICY
The Compensation Committee's policy with respect to executive
compensation is to provide the executive officers of the Company with a
total compensation package which is competitive and equitable and which
encourages and rewards performance based in part upon the Company's
performance in terms of increases in share value. The key components of the
Company's compensation package for its executive officers are base salary,
annual cash bonuses and long-term, stock-based incentives.
BASE SALARY
The minimum annual base salary of each of Charles H. O'Reilly, Jr.,
David E. O'Reilly, Lawrence P. O'Reilly and Rosalie O'Reilly Wooten is
fixed under their employment agreements with the Company, subject to
increases by the Board of Directors (after considering the recommendations
of the Compensation Committee). The base salary for each of these executive
officers was established prior to the Company's initial public offering in
April 1993. The minimum annual base salary, which was set by the Board of
Directors (as then constituted) for purposes of the employment agreements
with each of the aforementioned executive officers, represented the
subjective judgment of the Board as to a fair minimum compensation level,
taking into account the then contemplated initial public offering and the
potential for additional cash compensation in the form of a bonus for 1993.
Any future recommendation by the Compensation Committee for adjustments to
the annual base salary of an executive officer will be for the purposes of
bringing them in line with base compensation then being paid by the
Company's competitors for executive management, based upon the Compensation
Committee's review of, among other things, compensation data for comparable
companies and positions, and, in the case of executive officers other than
the Chief Executive Officer, the Chairman of the Board or the Chief
Operating Officer, reflecting increased responsibilities. The Compensation
Committee believes that the Company's 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 may not be the same as the companies comprising the Nasdaq-Amex
Retail Trade Stock Price Index included in this Proxy Statement. The base
salaries of the aforementioned executive officers were increased in 1998 to
reflect increases in the Consumer Price Index from 1997 to 1998, increases
in responsibilities due to the Company's growth and to align executive
compensation with comparable companies and positions.
BONUSES
The Compensation Committee has established a bonus plan for the Chief
Executive Officer, the Chairman of the Board and the Chief Operating
Officer of the Company based upon objective criteria. Under this bonus
plan, the Chief Executive Officer, the Chairman of the Board and the Chief
Operating Officer of the Company each will receive a bonus based upon a
percentage of pre-tax earnings (with no minimum level of pre-tax earnings
required), exclusive of extraordinary items, earned by the Company, subject
to a maximum cash bonus equal to such executive officer's base salary for
the year in which such bonus is earned. The bonuses to be awarded to all
other officers of the Company are based upon each such officer's
contribution, responsibility and performance during the year, and are thus
subjective in nature. In formulating its recommendation for the bonuses of
such other officers of the Company, the Compensation Committee considers,
among other things, the evaluation of the Chief Executive Officer of the
Company with regard to the contribution, responsibility and performance of
the officer in question and his views on the appropriate compensation level
of such executive officer.
LONG-TERM INCENTIVES
The only long-term incentive currently offered by the Company is stock
option awards. Stock options may be awarded to the Chief Executive Officer,
the other individual executive officers and upper and middle managers by
the Board of Directors, based upon, in the case of the Chief Executive
Officer and other individual executive officers, the recommendation of the
Compensation Committee.
It is the stock option program which links rewards to the achievement
of long-term corporate performance. In determining whether and how many
options should be granted, the Compensation Committee may consider the
responsibilities and seniority of each of the executive officers, as well
as the financial performance of the Company and such other factors as it
deems appropriate, consistent with the Company's compensation policies.
However, the Compensation Committee has not established specific target
awards governing the receipt, timing or size of option grants. Thus,
determinations with respect to the granting of stock options are subjective
in nature.
CEO COMPENSATION
The base salary of Mr. David E. O'Reilly, the Chief Executive Officer
of the Company, was established under his employment agreement dated
January 1, 1993, and the criterion to be achieved for his bonus was
determined by the Compensation Committee in February 1998, based upon a
percentage of the pre-tax earnings, exclusive of extraordinary items,
earned by the Company in 1997. This cash bonus, in an amount equal to his
base salary for 1998, was paid to the Chief Executive Officer in equal
monthly installments during 1998. The cash bonus to be paid to the Chief
Executive Officer in 1999 will be based upon the same percentage of pre-tax
earnings, exclusive of extraordinary items, earned by the Company in 1998,
not to exceed the Chief Executive Officer's base salary for 1999.
Respectfully submitted,
THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS OF O'REILLY
AUTOMOTIVE, INC.
Jay D. Burchfield, Chairman of the Compensation Committee
Joe C. Greene, Member of the Compensation Committee
TRANSACTIONS WITH INSIDERS AND OTHERS
Fifty-three of the Company's stores were leased from one of two real
estate investment partnerships formed by the O'Reilly family. Leases with
unaffiliated parties generally provide for payment of a fixed base rent,
payment of certain tax, insurance and maintenance expenses, and an original
term of 5 years, subject to one or more renewals at the Company's option.
The Company has entered into separate master lease agreements with each of
the affiliated real estate investment partnerships for the occupancy of the
stores covered thereby. Such master lease agreements expired on December
31, 1998 and were renewed through December 2004. 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.
COMPLIANCE WITH SECTION 162(M) OF THE INTERNAL REVENUE CODE
Section 162(m) of the Internal Revenue Code, enacted in 1993,
generally disallows a tax deduction to public companies for compensation of
over $1 million paid to any one of the corporation's chief executive
officer and four other most highly compensated executive officers for any
single fiscal year. Qualifying performance-based compensation is not
subject to such limitation if certain requirements are met. Because the
Company's 1993 Stock Option Plan may not satisfy the requirements of
Section 162(m) with respect to the options more recently granted
thereunder, the Compensation Committee may take action in the future to
comply with these requirements. Given the current levels of cash
compensation paid to the Company's executive officers, the Compensation
Committee is not expected to take any action with respect to the cash
elements of the Company's executive compensation program at this time, but
will evaluate possible action, to the extent consistent with other
objectives of the Company's compensation program, if the cash compensation
of any executive officer approaches the $1 million level in the future.
PERFORMANCE GRAPH
Set forth below is a line graph comparing the annual percentage change
in the cumulative total shareholder return of a $100 investment on December
31, 1993 in the Company's Common Stock against the Nasdaq-Amex Stock Market
Total Return Index and the Nasdaq-Amex Retail Trade Stocks Total Return
Index, assuming reinvestment of all dividends.
Measurement Period O'Reilly Nasdaq-Amex Nasdaq-Amex
(Fiscal Year Covered) Automotive, Inc. Stock Market Retail Trade Stocks
- ------------------------------------------------------------------------------
12/93 $100 $100 $100
12/94 85 102 110
12/95 100 141 110
12/96 110 174 131
12/97 181 213 154
12/98 325 300 187
[LINE GRAPH]
PROPOSAL NUMBER 2 -- AMENDMENT OF THE COMPANY'S RESTATED ARTICLES OF
INCORPORATION
The Board of Directors recommends to the shareholders that the Company
amend its Restated Articles of Incorporation to increase the number of
authorized shares of Common Stock from 30 million to 90 million shares.
Shares of Common Stock, including the additional shares proposed for
authorization, do not have preemptive or similar rights. The full text of
the proposed amendment to the Articles of Incorporation is attached to this
proxy statement as Exhibit A.
As of the Record Date, there were approximately 21,376,421 shares of
Common Stock issued and outstanding and approximately 4,150,000 shares
reserved for future issuance pursuant to outstanding options granted under
the Company's stock plans. On February 4, 1999, the Board of Directors
approved a resolution authorizing the Company to issue and sell up to
3,621,000 shares of Common Stock to Donaldson, Lufkin & Jenrette Securities
Corporation and any other firms selected by the officers of the Company for
offering to the public. If the amendment to the Restated Articles of
Incorporation is approved, the Board of Directors will have the authority
to issue approximately 68,623,579 additional shares of Common Stock without
further shareholder approval. Unless otherwise required by applicable law
or regulation, the shares of Common Stock proposed to be authorized will be
issuable without further shareholder action and on such terms and for such
consideration as may be determined by the Board of Directors. However, the
Nasdaq Stock Market, on which the Common Stock is listed, currently
requires shareholder approval as a prerequisite to listing shares in
several instances, including acquisition transactions where the present or
potential issuance of shares could result in an increase of 20% or more in
the number of shares of Common Stock outstanding.
The Board of Directors believes the authorized number of shares of
Common Stock should be increased to provide sufficient shares for such
corporate purposes as may be determined by the Board of Directors to be
necessary or desirable. These purposes may include, without limitation:
o facilitating broader ownership of the Common Stock by
effecting a stock split or issuing a stock dividend;
o raising capital through the sale of Common Stock;
o attracting and retaining valuable employees by the issuance of
additional stock options, including additional shares reserved
for future option grants under the Company's existing stock
plans or future plans; and
o acquiring other businesses in exchange for shares of Common
Stock.
While the Company continually evaluates potential acquisitions, the
Company has no present agreements or commitments with respect to using
shares of Common Stock as part of any acquisition. The Board of Directors
considers the authorization of additional shares of Common Stock advisable
to ensure prompt availability of shares for issuance should the occasion
arise.
The issuance of additional shares of Common Stock could have the
effect of diluting earnings per share and book value per share, which could
adversely affect the Company's existing shareholders. In addition, the
Company's authorized but unissued shares of Common Stock could be used to
make a change in control of the Company more difficult or costly. Issuing
additional shares of Common Stock could have the effect of diluting stock
ownership of the persons seeking to obtain control of the Company. The
Company is not aware, however, of any pending or threatened efforts to
obtain control of the Company, and the Board of Directors has no current
intention to use the additional shares of Common Stock in order to impede a
takeover attempt.
The proposed amendment does not alter the Company's present ability to
issue up to 5 million shares of preferred stock, par value $.01 per share.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSED AMENDMENT.
SECURITY OWNERSHIP OF MANAGEMENT AND
CERTAIN BENEFICIAL OWNERS
The following table sets forth, as of February 26, 1999, the
beneficial ownership of each current Director (including the two nominees
for Director), each of the executive officers named in the Summary
Compensation Table set forth herein, the executive officers and Directors
as a group, and each shareholder known to management of the Company to own
beneficially more than 5% of the outstanding Common Stock. Unless otherwise
indicated, the Company believes that the beneficial owners set forth in the
table have sole voting and investment power.
AMOUNT AND NATURE OF PERCENT OF
NAME AND ADDRESS BENEFICIAL OWNERSHIP CLASS
Charles H. "Chub" O'Reilly, Sr. (a)(b) 45,005 *
Charles H. O'Reilly, Jr. (a)(c) 1,511,207 6.9%
David E. O'Reilly (a)(d) 1,865,569 8.5
Lawrence P. O'Reilly (a)(e) 1,929,717 8.8
Rosalie O'Reilly Wooten (a)(f) 1,324,138 6.0
Ted F. Wise (a)(g) 164,953 *
Jay Burchfield (h) 12,000 *
Joe C. Greene (i) 27,000 *
All Directors and executive officers
as a group (9 persons) (j) 6,675,636 30.5
The Northwestern Mutual Life
Insurance Company (k) 1,220,300 5.7
U.S. Trust Company of New York (l) 1,160,895 5.5
_____
* less than 1%
(a) The address of Messrs. O'Reilly, Wise and Ms. Wooten is O'Reilly
Automotive, Inc., 233 S. Patterson, Springfield, Missouri 65802.
(b) The stated number of shares includes 1,725 shares held in the
O'Reilly Automotive Employee Stock Purchase Plan with UMB Bank, N.A.
as trustee, 500 shares held by Mr. O'Reilly's wife and 4,780 shares
held in the O'Reilly Employee Savings Plus Plan with SunTrust Bank as
trustee.
(c) The stated number of shares includes 595,148 shares held through the
Charles H. O'Reilly, Jr. Rev. Trust, 515,265 shares controlled by Mr.
O'Reilly as trustee of a trust for the benefit of his children,
63,564 shares held by Mr. O'Reilly as custodian for his son, 196,418
shares controlled by Mr. O'Reilly's wife pursuant to a voting trust,
35,000 shares controlled by Mr. O'Reilly as a general partner of a
family limited partnership, 2,062 shares held in the O'Reilly
Employee Savings Plus Plan with SunTrust Bank as trustee and 103,750
shares subject to options exercisable within 60 days of February 26,
1999.
(d) The stated number of shares includes 381,279 shares held through the
David O'Reilly, Rev. Trust, 1,097,068 shares controlled by Mr.
O'Reilly as trustee of two trusts for the benefit of his children,
238,406 shares held by Mr. O'Reilly as custodian for two of his three
children, 1,316 shares held in the O'Reilly Employee Savings Plus
Plan with SunTrust Bank as trustee and 147,500 shares subject to
options exercisable within 60 days of February 26, 1999.
(e) The stated number of shares includes 686,285 shares held through the
Lawrence P. O'Reilly Rev. Trust, 743,189 shares controlled by Mr.
O'Reilly as trustee of a trust for the benefit of his children,
96,632 shares held by Mr. O'Reilly as custodian for his daughter,
253,894 shares controlled by Mr. O'Reilly's wife pursuant to a voting
trust, 2,217 shares held in the O'Reilly Employee Savings Plus Plan
with SunTrust Bank as trustee and 147,500 shares subject to options
exercisable within 60 days of February 26, 1999.
(f) The stated number of shares includes 471,389 shares held through the
Rosalie O'Reilly Wooten, Rev. Trust, 496,586 shares controlled by Ms.
Wooten as trustee of a trust for the benefit of her children, 134,742
shares held by Ms. Wooten as custodian for her daughter, 176,394
shares controlled by Ms. Wooten's husband as trustee for the benefit
of Ms. Wooten's children and their descendants, 1,277 shares held in
the O'Reilly Employee Savings Plus Plan with SunTrust Bank as trustee
and 43,750 shares subject to options exercisable within 60 days of
February 26, 1999.
(g) Includes 66,297 shares held of record by a revocable trust of which
Mr. Wise, as the sole trustee, has sole voting and investing power,
1,156 shares held in the O'Reilly Employee Savings Plus Plan with
SunTrust Bank as trustee and 57,500 shares subject to options
exercisable within 60 days of February 26, 1999. Also includes 40,000
shares held of record by a revocable trust of which Mr. Wise's wife,
as the sole trustee, has sole voting and investment power.
(h) Includes 10,000 shares subject to options exercisable within 60 days
of February 26, 1999. Mr. Burchfield's mailing address is 1400 East
Briar, Springfield, Missouri 65804.
(i) Includes 25,000 shares subject to options exercisable within 60 days
of February 26, 1999. Mr. Greene's mailing address is 1340 East
Woodhurst, Springfield, Missouri 65804.
(j) Includes options to purchase a total of 573,750 shares held by such
directors and executive officers which are exercisable within 60 days
of February 26, 1999.
(k) As reflected on such beneficial owner's Schedule 13G dated as of
December 31, 1998, provided to the Company in accordance with the
Securities Exchange Act of 1934, as amended. The Northwestern Mutual
Life Insurance Company (TNMLIC) is an insurance company as defined in
section 3(a)(19) of the Act. Of the 1,220,300 shares beneficially
owned: 574,300 shares are owned by the Growth Stock Portfolio of
Northwestern Mutual Series Fund, Inc., a wholly owned subsidiary of
TNMLIC and a registered investment company; 140,100 shares are held
in The Northwestern Mutual Life Insurance Group Annuity Separate
Account; 4,000 shares are owned by the Asset Allocation Fund; 25,600
shares are owned by the Aggressive Growth Stock Fund of Mason Street
Funds, Inc., an affiliate of TNMLIC and a registered investment
company; and 900 shares are owned by Northwestern Long Term Care
Insurance Company, a wholly-owned subsidiary of TNMLIC. TNMLIC
reported sole voting and dispositive power of 475,400 shares and
shared voting and dispositive power of 744,900 shares. Such
beneficial owner's mailing address is believed to be 720 East
Wisconsin Avenue, Milwaukee, Wisconsin 53202.
(l) As reflected on such beneficial owner's Schedule 13G dated as of
December 31, 1998, provided to the Company in accordance with the
Securities Exchange Act of 1934, as amended. Such beneficial owner's
mailing address is believed to be 114 West 47th Street, New York, New
York 10036.
COMPLIANCE WITH SECTION 16(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's executive officers and Directors, and persons who
own more than 10% of a registered class of the Company's equity securities,
to file reports of ownership and changes in ownership with the Securities
and Exchange Commission. Such individuals are required by SEC regulation to
furnish the Company with copies of all Section 16(a) forms they file.
Based on the Company's 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, the Company believes that such persons
complied with all Section 16(a) filing requirements applicable to them with
respect to transactions during fiscal 1998, with the exception of Lawrence
P. O'Reilly. A Form 4 filed for Mr. O'Reilly in connection with one
transaction in March 1998 was inadvertantly filed late.
RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS
The firm of Ernst & Young LLP served as the Company's independent
auditors for the year ended December 31, 1998. Representatives of Ernst &
Young LLP are expected to be present at the Annual Meeting to respond to
appropriate questions from shareholders, and such representatives will have
the opportunity to make statements if they so desire.
ANNUAL SHAREHOLDERS' REPORT
The Annual Shareholders' Report of the Company for fiscal 1998
containing, among other things, audited consolidated financial statements
of the Company, accompanies this Proxy Statement.
FUTURE PROPOSALS OF SHAREHOLDERS
Stockholder proposals intended to be presented at the year 2000 Annual
Meeting and included in the Company's 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 Company's principal executive offices by
December 2, 1999. In order for stockholder 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, such proposals must be received by
the Company at the Company's principal executive offices by February 21,
2000. The Company's Amended Bylaws require that proposals of shareholders
made outside of Rule 14a-8 under the Exchange Act must be submitted, in
accordance with the requirements of the By-Laws, not later than February
21, 2000 and not earlier than January 22, 2000.
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.
ADDITIONAL INFORMATION
Additional information regarding the Company can be found in the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1998, filed by the Company with the Securities and Exchange Commission. A
copy of the Company's Annual Report (excluding exhibits) is available to
shareholders without charge, upon written request to O'Reilly Automotive,
Inc., 233 South Patterson, Springfield, Missouri 65802, Attention: Investor
Relations.
By Order of the Board of Directors
Tricia Headley
Secretary
Springfield, Missouri
April 6, 1999
EXHIBIT A
ARTICLES OF AMENDMENT
TO THE
RESTATED ARTICLES OF INCORPORATION
OF
O'REILLY AUTOMOTIVE, INC.
O'REILLY AUTOMOTIVE, INC., a corporation organized and existing under the
laws of the State of Missouri (the "Company"), hereby certifies pursuant
to Section 351.090 of the Missouri General and Business Corporation Law as
follows:
FIRST: The Company desires to amend its Restated Articles of
Incorporation as currently in effect as hereinafter provided.
SECOND: Section (a) of Article III of the Restated Articles of
Incorporation is deleted in its entirety, and the following is
inserted in its place:
"(a) The aggregate number, class and par value of shares which
the corporation shall have authority to issue shall be ninety
million (90,000,000) shares of common stock, par value $.01 per
share (the "Common Stock") and five million (5,000,000) shares
of preferred stock, par value $.01 per share."
