10-QPeriod: Q3 FY2009

O REILLY AUTOMOTIVE INC Quarterly Report for Q3 Ended Sep 30, 2009

Filed November 6, 2009For Securities:ORLY

Summary

O'Reilly Automotive Inc. (ORLY) reported strong performance in the third quarter and first nine months of 2009, driven by robust sales growth and improved profitability, largely attributable to the successful integration of the CSK Auto acquisition. Sales for the nine months increased by 49% year-over-year, reaching $3.67 billion, with comparable store sales showing a healthy 5.3% increase in the third quarter. The company also demonstrated significant operational leverage, with gross profit margins improving to 48.5% in Q3 2009 and SG&A expenses growing at a slower rate than sales, leading to a substantial increase in net income and diluted EPS. Despite the positive financial results, the company continues to navigate the integration of CSK, including the closure and rebranding of acquired stores, which contributed to increased SG&A expenses. The balance sheet reflects growth in inventory and property and equipment, consistent with store expansion and integration efforts. Management's outlook remains cautiously optimistic, citing the increasing average age of vehicles and persistent unperformed maintenance as long-term drivers of demand, while acknowledging potential short-term headwinds from macroeconomic conditions.

Financial Highlights

25 data points
Beta

Revenue

$1.26B

48.5% Gross Margin

Net Income

$87.22M

6.9% Net Margin

EPS (Diluted)

$0.04

Cash & Equivalents

$29.54M

Free Cash Flow

$50.19M

Financial Statements
Beta
Revenue$1.26B
Cost of Revenue$647.68M
Gross Profit$610.55M
SG&A Expenses$461.36M
Operating Income$149.20M
Interest Expense$11.09M
Net Income$87.22M
EPS (Basic)$0.04
EPS (Diluted)$0.04
Shares Outstanding (Basic)2.05B
Shares Outstanding (Diluted)2.08B

Key Highlights

  • 1Sales for the nine months ended September 30, 2009, increased by 49% to $3.67 billion, driven significantly by the acquisition of CSK Auto.
  • 2Comparable store sales increased by 5.3% in the third quarter of 2009, indicating organic growth and effective sales strategies.
  • 3Gross profit margin improved to 48.5% in Q3 2009 from 45.6% in Q3 2008, attributed to improved product mix, lower acquisition costs, and distribution efficiencies.
  • 4Net income for the nine months rose 63% to $235.6 million, with diluted EPS increasing to $1.71 from $1.18 in the prior year period.
  • 5The company ended the quarter with $29.5 million in cash and cash equivalents, while managing $703.7 million in total debt and capital lease obligations.
  • 6Integration efforts related to the CSK acquisition, including store conversions and administrative consolidations, are ongoing and impacting SG&A expenses.
  • 7The company continues to invest in property and equipment, with net capital expenditures of $317.2 million for the nine months, supporting growth and integration initiatives.

Frequently Asked Questions

The primary driver of O'Reilly's significant sales growth in the first nine months of 2009 was the acquisition of CSK Auto Corporation, which was completed in July 2008. This acquisition contributed substantially to the 49% increase in sales to $3.67 billion for the period.

The integration of CSK Auto led to an increase in Selling, General, and Administrative (SG&A) expenses, primarily due to the additional personnel and resources required to support the expanded store base and the ongoing efforts to convert and rebrand CSK stores. The company also incurred expenses related to consolidating CSK's headquarters operations into its own facilities.

As of September 30, 2009, O'Reilly Automotive had total debt and capital lease obligations of $703.7 million, a decrease from the prior year-end. The company had $29.5 million in cash and cash equivalents and $538.2 million in aggregate availability for additional borrowings under its asset-based revolving credit facility, indicating a generally stable liquidity position.

O'Reilly identifies several key drivers for future demand, including the increasing average age of vehicles on the road, which necessitates more maintenance and replacement parts. Other factors include the total number of miles driven and registered vehicles, and the amount of unperformed or deferred maintenance by consumers who may be extending the life of their current vehicles due to economic conditions.