01—Abstract
Summary
Summary of the 10-K filed February 28, 2011. Cited figures are marked; the original filing is the authoritative source.
O'Reilly Automotive, Inc. (ORLY) demonstrated robust growth and operational execution in its fiscal year ending December 31, 2010.
The company successfully integrated the acquired CSK Auto Corporation, expanding its store count to 3,570 across 38 states. Sales saw a significant increase of 11%a, driven by strong comparable store sales growth of 8.8% and the addition of new stores. The integration of CSK has progressed well, with all stores converted to O'Reilly's systems by the end of 2010, positioning the company for continued market share gains and operational efficiencies.
Financially, O'Reilly reported a substantial increase in operating income and net income, reflecting improved gross margins due to better product mix and vendor negotiations, alongside leverage on selling, general, and administrative expenses. The company also addressed its debt structure, repaying significant portions of its credit facility and issuing new senior notes in early 2011 to strengthen its financial position. Despite economic headwinds, O'Reilly's strategy of serving both DIY and professional service providers, coupled with its focus on customer service and efficient distribution, appears to be yielding positive results.
02—Key points
Key Highlights
- Sales increased by 11% to $5.4 billion in fiscal year 2010, driven by a strong comparable store sales growth of 8.8%.
- The company successfully integrated 1,342 acquired CSK Auto Corporation stores, expanding its total store count to 3,570 across 38 states.
- Operating income grew by 33% to $713 million, demonstrating improved operational leverage and profitability.
- Net income increased by 36% to $419 million, reflecting the positive impact of sales growth and operational efficiencies.
- The company is strategically expanding its store base, planning to open 170 net new stores in 2011.
- O'Reilly continues to enhance its dual market strategy, serving both Do-It-Yourself (DIY) and professional service provider customers, with professional sales growing.
- The company repaid a significant portion of its debt and refinanced its credit facility in early 2011, strengthening its balance sheet.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2010, O Reilly Automotive Inc kept $0.08.
- Revenue$5.40B100.0%
- Cost of revenue−$2.78B51.4%
- Gross profit$2.62B48.6%
- Operating costs−$1.91B35.4%
- Operating income$712.8M13.2%
- Interest, other & tax−$293.4M5.4%
- Net income$419.4M7.8%
Where FY2010 revenue went
$5.40B- Cost of revenue: $2.78B, 51% of revenue
- SG&A: $1.89B, 35% of revenue
- Net income: $419.4M, 7.8% of revenue
- Interest, other & tax: $293.4M, 5.4% of revenue
Kept 7.8% as net incomeNet income $419.4M · 7.8%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2010filed February 28, 2011Financial Statements
FY2010 against FY2009
| Line item | FY2010FY2009 | Change |
|---|---|---|
| Revenue | $5.40B$4.85B | +11.4% |
| Cost of Revenue | $2.78B$2.52B | +10.2% |
| Gross Profit | $2.62B$2.33B | +12.7% |
| SG&A Expenses | $1.89B$1.79B | +5.5% |
| Operating Income | $712.78M$537.62M | +32.6% |
| Interest Expense | $39.27M$45.18M | −13.1% |
| Net Income | $419.37M$307.50M | +36.4% |
| EPS (Basic) | $0.20$0.15 | +33.6% |
| EPS (Diluted) | $0.20$0.15 | +32.3% |
| Shares Outstanding (Basic) | 2.08B2.04B | +1.8% |
| Shares Outstanding (Diluted) | 2.13B2.07B | +3.0% |
05—Questions
Frequently Asked Questions
What was the impact of the CSK Auto Corporation acquisition on O'Reilly's operations?
The acquisition of CSK Auto Corporation, completed in July 2008, significantly expanded O'Reilly's footprint, adding 1,342 stores in 22 states. By the end of 2010, all CSK stores had been converted to O'Reilly's systems, and the company had integrated them into its distribution network. This integration is key to O'Reilly's strategy of expanding its market share in the Western United States and implementing its dual-market strategy more broadly.
How did O'Reilly manage its debt and financing in 2010 and early 2011?
O'Reilly generated strong cash flow from operations, which allowed it to substantially pay down its outstanding borrowings under its secured credit facility in 2010. In January 2011, the company further strengthened its financial position by issuing $500 million in unsecured senior notes and entering into a new $750 million unsecured revolving credit facility, which replaced its previous secured credit facility. This proactive approach reduced its overall debt and improved its liquidity.
What is O'Reilly's growth strategy moving forward?
O'Reilly's growth strategy involves aggressively opening new stores, planning for approximately 170 net new stores in 2011. It also focuses on achieving profitable same-store sales growth by enhancing customer service and product availability. Additionally, the company continues to selectively pursue strategic acquisitions that align with its business model and market expansion goals.
How did the company's sales mix between DIY and professional customers evolve?
Historically, O'Reilly aimed for a 50/50 sales mix between DIY and professional service providers. In 2010, DIY customers represented approximately 62% of sales, while professional service providers accounted for 38%. The company expects this mix to move closer to historical averages as it continues to grow its commercial business, particularly within the acquired CSK store network.
06—Continue