01—Abstract
Summary
Summary of the 10-K filed March 2, 2009. Cited figures are marked; the original filing is the authoritative source.
O'Reilly Automotive, Inc. (ORLY) filed its annual report for the fiscal year ended December 31, 2008, detailing significant strategic initiatives and operational performance against a backdrop of challenging economic conditions.
The most notable development during the year was the acquisition of CSK Auto Corporation on July 11, 2008, a move that substantially expanded O'Reilly's geographic footprint and store count, particularly in the Western United States. While the integration of CSK presented opportunities for growth and synergy, it also introduced complexities and integration costs, as reflected in the increase in SG&A expenses. The company's core business demonstrated resilience, with comparable store sales showing a modest increase, though this was below historical trends due to macroeconomic pressures impacting consumer discretionary spending.
Management focused on executing its dual-market strategy, leveraging its 'Professional Parts People' and extensive distribution network to maintain customer service levels. Investors should note the significant increase in debt following the CSK acquisition, which was financed through a new $1.2 billiona asset-based revolving credit facility.
02—Key points
Key Highlights
- Completed the acquisition of CSK Auto Corporation on July 11, 2008, significantly expanding the company's store base to 3,285 locations across 38 states.
- Sales increased by 42% to $3.58 billion, primarily driven by the CSK acquisition and the opening of 150 new O'Reilly stores.
- Comparable store sales increased by 1.5% for the year, indicating resilience despite challenging macroeconomic conditions, though this was lower than the previous year.
- Gross profit margin improved to 45.5% from 44.4% in the prior year, attributed to a better product mix, lower acquisition costs, and distribution efficiencies.
- Selling, general, and administrative (SG&A) expenses increased by 59% due to the CSK acquisition and integration costs.
- The company entered into a $1.2 billion asset-based revolving credit facility to finance the CSK acquisition, significantly increasing its debt levels.
- Management is actively working on integrating CSK's operations, including rebranding stores and optimizing distribution infrastructure, with a stated goal of continuing growth through its dual-market strategy.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2008, O Reilly Automotive Inc kept $0.05.
- Revenue$3.58B100.0%
- Cost of revenue−$1.95B54.5%
- Gross profit$1.63B45.5%
- Operating costs−$1.29B36.1%
- Operating income$335.6M9.4%
- Interest, other & tax−$149.4M4.2%
- Net income$186.2M5.2%
Where FY2008 revenue went
$3.58B- Cost of revenue: $1.95B, 54% of revenue
- SG&A: $1.29B, 36% of revenue
- Net income: $186.2M, 5.2% of revenue
- Interest, other & tax: $149.4M, 4.2% of revenue
Kept 5.2% as net incomeNet income $186.2M · 5.2%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2008filed March 2, 2009Financial Statements
| Revenue | $3.58B |
| Cost of Revenue | $1.95B |
| Gross Profit | $1.63B |
| SG&A Expenses | $1.29B |
| Operating Income | $335.62M |
| Interest Expense | $26.14M |
| Net Income | $186.23M |
| EPS (Basic) | $0.10 |
| EPS (Diluted) | $0.10 |
| Shares Outstanding (Basic) | 1.87B |
| Shares Outstanding (Diluted) | 1.88B |
05—Questions
Frequently Asked Questions
What was the most significant event for O'Reilly Automotive in 2008?
The most significant event was the acquisition of CSK Auto Corporation on July 11, 2008. This acquisition substantially expanded O'Reilly's store count and geographic reach, adding 1,342 stores and entering 12 new states.
How did the CSK acquisition impact the company's financial performance?
The CSK acquisition led to a significant increase in sales (42% for the year). However, it also resulted in higher selling, general, and administrative (SG&A) expenses due to integration costs and a one-time charge for aligning CSK's vacation policy. The company also took on substantial debt to finance the acquisition.
What is the outlook for comparable store sales given the economic environment?
In 2008, comparable store sales increased by 1.5%, which was lower than historical trends. Management attributed this to challenging macroeconomic factors affecting consumer discretionary income. They anticipate future growth as CSK stores are integrated and rebranded, aiming to leverage their dual-market strategy.
What is the company's debt situation following the CSK acquisition?
The company entered into a $1.2 billion asset-based revolving credit facility to fund the CSK acquisition. This significantly increased its outstanding debt and debt service requirements. Management believes cash flow from operations and the credit facility will be sufficient to meet its liquidity needs.
06—Continue