10-QPeriod: Q3 FY2006

O REILLY AUTOMOTIVE INC Quarterly Report for Q3 Ended Sep 30, 2006

Filed November 8, 2006For Securities:ORLY

Summary

O'Reilly Automotive, Inc. (ORLY) reported a solid third quarter for 2006, demonstrating continued growth and improved profitability. Sales increased by 10.0% to $597.1 million compared to the prior year's third quarter, driven by both new store openings and a comparable store sales increase of 3.6%. For the first nine months of 2006, sales grew by 12.7% to $1.72 billion. Gross profit margin also saw improvement, rising to 44.1% from 43.5% in the prior year's quarter, attributed to better product mix and acquisition costs. While operating expenses as a percentage of sales saw a slight increase due to higher advertising, energy, and fuel costs, overall operating income grew. The company continues to invest in expansion, with 1,596 stores in operation at the end of the quarter, up from 1,432 a year prior, and plans for further store openings. Management expressed confidence in their ability to fund future growth through operating cash flow and existing credit facilities.

Key Highlights

  • 1Total sales for Q3 2006 increased by 10.0% to $597.1 million compared to Q3 2005.
  • 2Comparable store sales grew by 3.6% in Q3 2006, indicating healthy performance in existing locations.
  • 3Gross profit margin improved to 44.1% in Q3 2006 from 43.5% in Q3 2005.
  • 4The company expanded its store count to 1,596 by September 30, 2006, an increase of 164 stores year-over-year.
  • 5Net income for the nine months ended September 30, 2006, was $137.7 million, up from $124.8 million in the same period of 2005.
  • 6The company maintains a strong liquidity position with $40.8 million in cash and cash equivalents and $70 million of availability under its revolving credit facility.
  • 7The company adopted SFAS No. 123R (Share-Based Payment) in Q1 2006, impacting stock-based compensation expense recognition.

Frequently Asked Questions

Sales growth was driven by two primary factors: the opening of new stores and a 3.6% increase in comparable store sales. The company's expansion strategy continues to contribute significantly to top-line growth, while existing stores are also showing positive sales momentum.

Profitability improved in the third quarter of 2006. Gross profit margin increased to 44.1% due to favorable product mix and acquisition costs. While operating expenses as a percentage of sales saw a slight uptick due to rising energy and fuel costs, the overall increase in sales and gross profit dollars led to growth in operating income.

O'Reilly Automotive expressed confidence in its financial position. They reported $40.8 million in cash and cash equivalents and had $70 million available under their revolving credit facility as of September 30, 2006. The company plans to fund its ongoing store expansion program through operating cash flow and existing credit facilities, indicating a positive outlook for future growth.

The company adopted SFAS No. 123R, 'Share Based Payment,' starting in the first quarter of 2006. This change requires the recognition of compensation expense for stock-based awards based on their fair value, impacting how stock options and other equity-based compensation are accounted for. Prior periods were not restated.