10-QPeriod: Q1 FY2010

O REILLY AUTOMOTIVE INC Quarterly Report for Q1 Ended Mar 31, 2010

Filed May 7, 2010For Securities:ORLY

Summary

O'Reilly Automotive Inc. (ORLY) reported a strong first quarter for 2010, demonstrating robust sales growth and improved profitability. Sales increased by 10% year-over-year, driven by comparable store sales growth of 6.9% and the addition of new stores. This sales increase, coupled with improved gross profit margins and effective management of selling, general, and administrative expenses, led to a significant 52% increase in diluted earnings per share to $0.70 from $0.46 in the prior year period. The company also managed its debt effectively, reducing its overall outstanding debt by $88.2 million during the quarter. The company continues its expansion strategy, planning to open approximately 150 stores in 2010, funded by operating cash flow and existing credit facilities, signaling confidence in its ongoing growth trajectory.

Financial Highlights

43 data points
Beta

Revenue

$1.28B

48.3% Gross Margin

Net Income

$97.48M

7.6% Net Margin

EPS (Diluted)

$0.05

Total Assets

$4.84B

Cash & Equivalents

$29.87M

Free Cash Flow

$79.92M

Financial Statements
Beta
Revenue$1.28B
Cost of Revenue$661.72M
Gross Profit$618.35M
SG&A Expenses$449.90M
Operating Income$168.44M
Interest Expense$10.88M
Net Income$97.48M
EPS (Basic)$0.05
EPS (Diluted)$0.05
Shares Outstanding (Basic)2.06B
Shares Outstanding (Diluted)2.09B

Key Highlights

  • 1Net income increased by approximately 55% to $97.5 million in Q1 2010 from $62.8 million in Q1 2009.
  • 2Diluted earnings per share (EPS) grew by 52% to $0.70 from $0.46 in the same period.
  • 3Total sales for the first quarter increased by 10% to $1.28 billion compared to $1.16 billion in the prior year.
  • 4Gross profit margin improved to 48.3% from 46.6% in the prior year's first quarter, reflecting better product acquisition costs and vendor negotiations.
  • 5Selling, general, and administrative (SG&A) expenses as a percentage of sales decreased to 35.1% from 36.9%, indicating improved operational leverage.
  • 6Net cash provided by operating activities significantly increased to $170.6 million from $86.6 million in the prior year's comparable quarter.
  • 7The company plans to open approximately 150 new stores in 2010, indicating continued investment in market expansion.

Frequently Asked Questions

O'Reilly Automotive reported a strong first quarter in 2010 with a significant increase in net income to $97.5 million and diluted EPS to $0.70, up from $62.8 million and $0.46 respectively in the same period last year. Sales grew 10% year-over-year to $1.28 billion, driven by comparable store sales and new store openings. Gross profit margins improved to 48.3% due to better vendor terms and operational efficiencies, while SG&A as a percentage of sales decreased.

The sales growth was driven by a combination of factors including a 6.9% increase in comparable store sales, the opening of 49 new stores in the quarter, and the ongoing integration and conversion of stores acquired from CSK. The company also highlighted improved inventory availability, a broader product selection, and effective promotional efforts as contributing factors.

O'Reilly Automotive has reduced its total outstanding debt by $88.2 million during the quarter. The company has a $1.2 billion asset-based revolving credit facility, and as of March 31, 2010, had $593.2 million in outstanding borrowings with $531.2 million in aggregate availability for additional borrowings. The company intends to use cash generated from operations to pay down debt. They also have interest rate swap agreements to mitigate interest rate risk on a portion of their variable rate debt.

The company is resolving governmental investigations related to its acquisition of CSK Auto Corporation. While the SEC investigation into CSK was settled, a DOJ criminal investigation remains ongoing. O'Reilly is engaged in discussions with the DOJ to resolve this matter and is incurring legal fees related to these investigations and indemnification obligations for former CSK employees. Management believes these matters, while subject to uncertainty, will not have a material adverse effect on the company's financial condition or results of operations.