10-QPeriod: Q1 FY2014

O REILLY AUTOMOTIVE INC Quarterly Report for Q1 Ended Mar 31, 2014

Filed May 9, 2014For Securities:ORLY

Summary

O'Reilly Automotive, Inc. (ORLY) reported a strong first quarter for 2014, demonstrating robust sales growth and improved profitability. Sales increased by 9% year-over-year, driven by a significant 6.3% comparable store sales growth, indicating healthy demand for their products and services. This growth was supported by a focus on both Do-It-Yourself (DIY) and professional service provider customers, with notable increases in average ticket values and transaction counts. The company also showed improved operational efficiency, with gross profit margin expanding to 50.8% and operating income growing by 14%. This was partly attributed to favorable product mix, especially from hard part categories, and effective vendor cost management. Furthermore, O'Reilly continued its strategic store expansion, adding 51 net new stores during the quarter, bringing the total store count to 4,216. The company's financial position remains solid, with significant cash generated from operations, enabling continued investment in growth initiatives and share repurchases.

Financial Highlights

44 data points
Beta

Revenue

$1.73B

50.8% Gross Margin

Net Income

$173.86M

10.1% Net Margin

EPS (Diluted)

$0.11

Total Assets

$6.43B

Cash & Equivalents

$511.83M

Free Cash Flow

$262.46M

Financial Statements
Beta
Revenue$1.73B
Cost of Revenue$850.23M
Gross Profit$877.72M
SG&A Expenses$590.60M
Operating Income$287.12M
Interest Expense$13.41M
Net Income$173.86M
EPS (Basic)$0.11
EPS (Diluted)$0.11
Shares Outstanding (Basic)1.59B
Shares Outstanding (Diluted)1.62B

Key Highlights

  • 1Sales increased by 9% to $1.73 billion for the three months ended March 31, 2014, compared to the prior year.
  • 2Comparable store sales grew by a strong 6.3% for the same period, demonstrating organic growth.
  • 3Gross profit margin improved to 50.8% from 50.4% year-over-year, driven by favorable product mix and cost improvements.
  • 4Operating income increased by 14% to $287 million, reflecting efficient operations and sales growth.
  • 5Net income rose by 13% to $174 million, resulting in diluted EPS of $1.61, up from $1.36 in the prior year.
  • 6The company opened 51 net new stores, expanding its footprint to 4,216 locations.
  • 7Net cash provided by operating activities significantly increased to $345.5 million, up from $226.3 million, supporting liquidity and investment.

Frequently Asked Questions

O'Reilly's sales growth was driven by a combination of a 6.3% increase in comparable store sales and the addition of new stores. The growth in comparable store sales was fueled by solid increases in average ticket values and customer transaction counts for both DIY and professional service provider customers, with a notable contribution from higher-margin hard part categories and increased vehicle repairs due to harsh winter weather.

The company improved its gross profit margin to 50.8% through acquisition cost improvements with vendors and a favorable product mix, particularly from hard part sales. Selling, general, and administrative (SG&A) expenses increased in total dollars due to store expansion but decreased as a percentage of sales, indicating leverage on occupancy costs. These factors contributed to a 14% increase in operating income.

O'Reilly's strategy focuses on opening new stores to penetrate existing markets and expand into new ones, with a plan to open 200 net new stores in 2014. Growth is being funded by cash flows generated from operations and available borrowings under their unsecured revolving credit facility. The company also continues its share repurchase program, with $623.7 million remaining authorization as of the reporting period.

O'Reilly maintained a strong liquidity position, with cash and cash equivalents increasing to $511.8 million from $231.3 million at the end of the previous year. Net cash provided by operating activities saw a substantial increase to $345.5 million. The company had no outstanding borrowings under its $600 million revolving credit facility and remained in compliance with all debt covenants, indicating a healthy financial standing.