10-QPeriod: Q2 FY2013

O REILLY AUTOMOTIVE INC Quarterly Report for Q2 Ended Jun 30, 2013

Filed August 8, 2013For Securities:ORLY

Summary

O'Reilly Automotive, Inc. (ORLY) reported a strong second quarter for 2013, demonstrating robust sales growth and improved profitability. Sales increased by 10% year-over-year for the three months ended June 30, 2013, driven by a solid 6.5% comparable store sales growth, indicating healthy demand and effective sales strategies. This sales momentum, coupled with improved gross profit margins and disciplined expense management, led to a significant 22% increase in operating income. Net income also saw a substantial rise of 21%, with diluted Earnings Per Share (EPS) growing by 37% compared to the prior year's quarter. The company continues to execute its growth strategy through new store openings, planning for 190 net new stores in 2013. O'Reilly also maintained a strong liquidity position, with no outstanding borrowings under its revolving credit facility at the end of the quarter, despite an increase in long-term debt primarily due to a new senior note issuance. Shareholder returns remain a focus, as evidenced by continued share repurchases and an increased authorization for the buyback program. Overall, the financial results suggest a company performing well within its industry, effectively navigating the economic environment and executing its strategic initiatives.

Financial Highlights

46 data points
Beta

Revenue

$1.71B

50.8% Gross Margin

Net Income

$177.13M

10.3% Net Margin

EPS (Diluted)

$0.11

Total Assets

$6.12B

Cash & Equivalents

$365.93M

Free Cash Flow

$109.97M

Financial Statements
Beta
Revenue$1.71B
Cost of Revenue$843.09M
Gross Profit$871.88M
SG&A Expenses$575.61M
Operating Income$296.26M
Interest Expense$11.47M
Net Income$177.13M
EPS (Basic)$0.11
EPS (Diluted)$0.11
Shares Outstanding (Basic)1.65B
Shares Outstanding (Diluted)1.68B

Key Highlights

  • 1Sales for the three months ended June 30, 2013, increased by 10% to $1.71 billion, driven by a 6.5% increase in comparable store sales.
  • 2Gross profit margin improved to 50.8% from 49.9% in the prior year's quarter, contributing to a 22% increase in operating income.
  • 3Net income rose by 21% to $177 million, and diluted Earnings Per Share (EPS) increased by 37% to $1.58 from $1.15 year-over-year.
  • 4The company opened 47 net new stores in the quarter, continuing its expansion strategy with a target of 190 net new stores for the full year 2013.
  • 5O'Reilly maintained a strong liquidity position with $365.9 million in cash and cash equivalents and no outstanding borrowings on its revolving credit facility as of June 30, 2013.
  • 6The company issued $300 million of 3.850% Senior Notes due 2023 on June 20, 2013, contributing to an increase in long-term debt.
  • 7Shareholder value was supported by share repurchases totaling $274 million in the quarter, with an additional $500 million authorized for the buyback program.

Frequently Asked Questions

The primary driver of O'Reilly's sales growth in the second quarter of 2013 was a combination of comparable store sales increase of 6.5% and the contribution from new stores opened during the period. This indicates both strong performance in existing locations and successful expansion.

O'Reilly improved its gross profit margin to 50.8% through acquisition cost improvements, pricing management, and reduced inventory shrinkage. While Selling, General, and Administrative (SG&A) expenses increased in absolute terms due to store expansion, they decreased as a percentage of sales to 33.6% from 34.3% year-over-year, primarily due to leveraging store occupancy and headquarter costs over higher sales volumes.

O'Reilly reported no outstanding borrowings on its revolving credit facility as of June 30, 2013, indicating strong liquidity. The company recently issued $300 million in senior notes due 2023 and amended its credit agreement to extend the maturity to July 2018, showing proactive management of its debt structure. The company believes its operating cash flows and available credit are sufficient to meet its future capital needs.

O'Reilly is returning value to shareholders through its share repurchase program. In the second quarter of 2013, the company repurchased $274 million worth of its common stock. Furthermore, the Board of Directors approved an additional $500 million authorization for the share repurchase program, demonstrating a commitment to ongoing capital returns.