10-QPeriod: Q1 FY2012

O REILLY AUTOMOTIVE INC Quarterly Report for Q1 Ended Mar 31, 2012

Filed May 10, 2012For Securities:ORLY

Summary

O'Reilly Automotive, Inc. (ORLY) reported strong financial results for the first quarter ended March 31, 2012. The company demonstrated significant growth in sales and net income, driven by robust comparable store sales and the expansion of its store network. This performance indicates a healthy demand for automotive aftermarket parts and services, even amidst ongoing macroeconomic uncertainties. Key to the company's success was an increase in gross profit margin, attributed to improved distribution center efficiencies, better vendor cost negotiations, and a more focused advertising strategy. While selling, general, and administrative expenses increased to support store growth, they grew at a slower rate than sales, leading to improved operating income. The company also maintained strong liquidity and managed its debt effectively, demonstrating financial prudence. Investors can find reassurance in ORLY's consistent growth trajectory and its strategic focus on serving both DIY and professional markets.

Financial Highlights

46 data points
Beta

Revenue

$1.53B

49.8% Gross Margin

Net Income

$147.49M

9.6% Net Margin

EPS (Diluted)

$0.08

Total Assets

$5.75B

Cash & Equivalents

$575.20M

Free Cash Flow

$339.07M

Financial Statements
Beta
Revenue$1.53B
Cost of Revenue$767.71M
Gross Profit$761.68M
SG&A Expenses$514.18M
Operating Income$247.50M
Interest Expense$9.13M
Net Income$147.49M
EPS (Basic)$0.08
EPS (Diluted)$0.08
Shares Outstanding (Basic)1.90B
Shares Outstanding (Diluted)1.94B

Key Highlights

  • 1Sales increased by 11% to $1.53 billion for the first quarter of 2012, compared to $1.38 billion in the same period of 2011.
  • 2Net income rose by 44% to $147 million ($1.14 per diluted share) in Q1 2012, up from $102 million ($0.72 per diluted share) in Q1 2011.
  • 3Comparable store sales grew by 7.4% for the quarter, indicating strong performance in existing locations.
  • 4Gross profit margin improved to 49.8% from 48.4% year-over-year, driven by efficiencies and cost improvements.
  • 5The company opened 69 net new stores in the quarter, expanding its footprint to 3,809 locations.
  • 6Despite increased operating expenses due to store expansion, SG&A as a percentage of sales decreased due to improved leverage.
  • 7O'Reilly repurchased approximately $154 million of its common stock during the quarter, reflecting a commitment to shareholder returns.

Frequently Asked Questions

The increase in sales and net income was primarily driven by strong comparable store sales growth (7.4%), which indicates healthy demand at existing locations. This was complemented by the opening of 69 net new stores during the quarter, expanding the company's reach. Improved operational efficiencies, including distribution center performance and vendor cost negotiations, also contributed to a higher gross profit margin, further boosting net income.

O'Reilly is managing expenses effectively by leveraging its fixed costs across a growing sales base. While Selling, General, and Administrative (SG&A) expenses increased in absolute dollars to support new store openings, they decreased as a percentage of sales. This improved leverage was achieved through better occupancy and headquarter cost utilization, lower utility costs due to milder weather, and efficient advertising spend, partially offset by increased store-level payroll to enhance customer service.

The company maintains strong liquidity, with cash and cash equivalents significantly increasing to $575 million at the end of the quarter, up from $361 million at the end of the prior year. O'Reilly has an undrawn $660 million revolving credit facility, indicating ample borrowing capacity. Long-term debt consists primarily of senior notes, and the company is in compliance with all debt covenants, demonstrating a stable financial position.

While not detailed extensively in this quarterly report, the company's primary risks, as noted in its discussion of market conditions, include macroeconomic factors such as unemployment rates, fuel costs, and consumer spending habits. Competition within the automotive aftermarket industry is also a key consideration. The company's strategy aims to mitigate these risks by focusing on customer service, product availability, and efficient operations, and by observing an aging vehicle population which typically requires more maintenance.