What is a Rule 10b5-1 trading plan?

A Rule 10b5-1 trading plan is a pre-arranged plan for buying or selling company stock. It allows insiders, like company executives or directors, to buy or sell stock at a predetermined time or at a predetermined price, or based on a predetermined formula. This plan provides an affirmative defense against allegations of insider trading, as it demonstrates that the trades were planned at a time when the insider did not possess material non-public information.

Why are these individuals selling O'Reilly stock?

Larry O’Reilly has established his plan to diversify his personal investment portfolio. Randy Johnson's plan is specifically designed to facilitate the exercise and subsequent sale of stock options that are approaching their expiration date.

Does this indicate a negative outlook for O'Reilly Automotive?

Not necessarily. The establishment of Rule 10b5-1 plans is a common practice for corporate insiders to manage their stock and option holdings in a way that complies with insider trading regulations. The plans are established during unrestricted trading periods and without non-public information, suggesting that the sales are pre-planned portfolio management rather than a reaction to adverse company performance.

Will investors be notified of future trades?

Yes. Both Mr. O’Reilly and Mr. Johnson have informed the Company that they will publicly disclose any stock sales or option exercises made under their respective plans, as required by federal securities laws. These disclosures are typically made through subsequent SEC filings, such as Form 4.

ORLY 8-K SEC Disclosure

Summary

O'Reilly Automotive, Inc. (ORLY) filed an 8-K on August 19, 2011, to report on the establishment of Rule 10b5-1 trading plans by two key individuals. Larry O’Reilly, a Board Director, has set up a plan for selling company stock to diversify his personal portfolio. This plan allows for the sale of specific share amounts at predetermined market prices, subject to certain limitations, and was initiated during an open trading window while Mr. O'Reilly possessed no material non-public information. Similarly, Randy Johnson, Senior Vice-President of Inventory Management, has also established a Rule 10b5-1 plan. This plan facilitates the exercise of stock options and subsequent sales of the acquired shares. The objective is to manage options that are set to expire in December 2013. This plan was also established under appropriate trading conditions, with Mr. Johnson not being in possession of material non-public information. Both individuals have committed to public disclosure of any trades made under these plans as required by law.

Key Highlights

1Board Director Larry O’Reilly established a Rule 10b5-1 trading plan for stock sales aimed at portfolio diversification.
2Senior Vice-President Randy Johnson established a Rule 10b5-1 trading plan for exercising stock options and subsequent sales.
3Both trading plans were established during the Company’s unrestricted trading window.
4Both individuals confirmed they were not in possession of material, non-public information when establishing their respective plans.
5Sales and option exercises under these plans will be publicly disclosed as required by federal securities laws.
6The plan for Randy Johnson specifically addresses stock options with a ten-year contractual life expiring in December 2013.

O REILLY AUTOMOTIVE INC 8-K Report, Corporate Update (Aug 19, 2011)

Summary

Key Highlights

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