10-QPeriod: Q2 FY2011

O REILLY AUTOMOTIVE INC Quarterly Report for Q2 Ended Jun 30, 2011

Filed August 8, 2011For Securities:ORLY

Summary

O'Reilly Automotive, Inc. (ORLY) reported a strong second quarter for 2011, demonstrating robust sales growth and improved profitability. Sales increased by 7% year-over-year, driven by a combination of comparable store sales growth and the opening of new locations. The company successfully managed its expenses, leading to a significant 23% increase in operating income. This performance was bolstered by strategic initiatives, including the successful integration of acquired CSK stores and a renewed focus on product mix and commercial sales. Financially, ORLY strengthened its balance sheet through the issuance of $500 million in Senior Notes, which were used to repay existing debt, thereby reducing interest expense and improving its debt structure. The company also continued to return capital to shareholders through its share repurchase program, which was subsequently expanded. Despite some one-time charges related to refinancing, the underlying operational performance indicates a healthy and growing business positioned to capitalize on the automotive aftermarket trends, such as the increasing age of vehicles on the road.

Financial Highlights

46 data points
Beta

Revenue

$1.48B

48.6% Gross Margin

Net Income

$133.77M

9.0% Net Margin

EPS (Diluted)

$0.06

Total Assets

$5.37B

Cash & Equivalents

$268.79M

Free Cash Flow

$211.11M

Financial Statements
Beta
Revenue$1.48B
Cost of Revenue$760.66M
Gross Profit$718.66M
SG&A Expenses$496.29M
Operating Income$222.37M
Interest Expense$6.26M
Net Income$133.77M
EPS (Basic)$0.06
EPS (Diluted)$0.06
Shares Outstanding (Basic)2.06B
Shares Outstanding (Diluted)2.10B

Key Highlights

  • 1Sales increased by 7% to $1.48 billion for the quarter ended June 30, 2011, compared to the prior year period.
  • 2Operating income saw a significant increase of 23% to $222 million, reflecting improved operational efficiency and sales growth.
  • 3Net income grew by 34% to $134 million, demonstrating strong bottom-line performance.
  • 4The company issued $500 million in 4.875% Senior Notes due 2021, using proceeds to repay outstanding debt and strengthen its financial position.
  • 5A $500 million share repurchase program was active, with $338 million repurchased in the first six months of the year, and subsequently increased to $1 billion.
  • 6Comparable store sales increased by 4.4% for the quarter, indicating healthy performance in existing locations.
  • 7The company continued its expansion strategy, opening 44 new stores in the quarter, bringing the total to 3,657 stores.

Frequently Asked Questions

Sales growth was driven by a combination of comparable store sales increases of 4.4% and the opening of 44 new stores during the quarter. Growth in the commercial business and a higher proportion of sales from higher-priced hard parts also contributed to increased average ticket values.

O'Reilly Automotive issued $500 million in 4.875% Senior Notes due 2021 on January 14, 2011, and used the proceeds to repay its asset-based revolving credit facility. This transition resulted in a stronger debt profile with a new unsecured revolving credit facility and a longer-term senior note, while also eliminating related interest rate swap agreements and associated debt issuance costs.

The company is actively repurchasing its common stock under a Board-approved share repurchase program. In the first six months of 2011, $338 million was invested in repurchases. This program was further enhanced by an additional $500 million authorization in August 2011, bringing the total authorization to $1 billion, demonstrating confidence in the company's financial strength and commitment to shareholder value.

The company is involved in resolving legacy matters related to the CSK Auto Corporation acquisition, including a DOJ investigation and SEC actions against former employees. While these matters have involved some charges and ongoing legal costs, the company has reserved for these potential liabilities and management believes the ultimate outcome will not have a material adverse effect on its consolidated financial condition.