10-QPeriod: Q3 FY2011

O REILLY AUTOMOTIVE INC Quarterly Report for Q3 Ended Sep 30, 2011

Filed November 8, 2011For Securities:ORLY

Summary

O'Reilly Automotive, Inc. (ORLY) reported strong financial performance for the nine months ended September 30, 2011, demonstrating robust sales growth and improved profitability. Total sales increased by 8% year-over-year, driven by both comparable store sales growth and the opening of new locations. The company successfully expanded its store count, ending the period with 3,707 stores. Profitability saw significant gains, with net income up 23% for the nine-month period. This improvement was supported by a higher gross profit margin, benefiting from a favorable product mix and improved inventory management, and a decrease in selling, general, and administrative expenses as a percentage of sales due to operational efficiencies and leverage. The company also refinanced its debt, issuing new senior notes and establishing a new unsecured revolving credit facility, strengthening its capital structure and extending its debt maturity profile. Furthermore, ORLY significantly increased its share repurchase program, demonstrating a commitment to returning value to shareholders. The company also settled a legacy DOJ investigation related to the CSK acquisition, incurring a one-time penalty but concluding a significant legal overhang. Overall, the results indicate a company executing well on its growth strategy while managing its financial resources effectively.

Financial Highlights

46 data points
Beta

Revenue

$1.54B

49.1% Gross Margin

Net Income

$148.44M

9.7% Net Margin

EPS (Diluted)

$0.07

Total Assets

$5.40B

Cash & Equivalents

$276.72M

Free Cash Flow

$186.02M

Financial Statements
Beta
Revenue$1.54B
Cost of Revenue$781.24M
Gross Profit$754.21M
SG&A Expenses$513.16M
Operating Income$241.05M
Interest Expense$7.21M
Net Income$148.44M
EPS (Basic)$0.07
EPS (Diluted)$0.07
Shares Outstanding (Basic)1.99B
Shares Outstanding (Diluted)2.03B

Key Highlights

  • 1Total sales increased by 8% to $4.40 billion for the nine months ended September 30, 2011, compared to the prior year period.
  • 2Net income grew by 23% to $385 million for the nine months ended September 30, 2011, compared to the prior year period.
  • 3Comparable store sales increased by 4.9% for the nine months ended September 30, 2011.
  • 4The company opened 149 new stores and closed 12 stores during the nine months ended September 30, 2011, expanding its total store count to 3,707.
  • 5O'Reilly issued $500 million in 4.875% Senior Notes due 2021 and $300 million in 4.625% Senior Notes due 2021, refinancing its debt structure.
  • 6The share repurchase program was increased to $1 billion, and $840 million was repurchased during the first nine months of 2011.
  • 7The company paid a $20.9 million penalty to settle a legacy DOJ investigation related to the CSK acquisition, concluding this matter.

Frequently Asked Questions

O'Reilly's growth strategy focuses on opening new stores for greater market penetration and expansion into contiguous markets, alongside serving both DIY and professional service provider customers. The company opened 149 net new stores in the first nine months of 2011, increasing its total store count to 3,707. Comparable store sales also showed positive growth, increasing by 4.9% for the nine-month period, indicating healthy performance in existing locations.

O'Reilly significantly restructured its debt during the period. It issued $500 million in 4.875% Senior Notes due 2021 and $300 million in 4.625% Senior Notes due 2021, replacing its previous asset-based revolving credit facility. This move diversified its debt, extended maturity dates, and provided greater financial flexibility. The company also entered into a new $660 million unsecured revolving credit facility.

O'Reilly paid a one-time monetary penalty of $20.9 million during the third quarter of 2011 to settle the Department of Justice investigation into CSK's pre-acquisition accounting practices. This payment resolved the matter, removing a significant legal overhang for the company. While it impacted cash flow in the short term, the resolution is seen as a positive step for the company.

O'Reilly has a robust share repurchase program. The authorization was increased to $1 billion, and the company repurchased approximately $840 million of its common stock during the first nine months of 2011, demonstrating a strong commitment to shareholder returns through share buybacks.