10-QPeriod: Q2 FY2014

O REILLY AUTOMOTIVE INC Quarterly Report for Q2 Ended Jun 30, 2014

Filed August 8, 2014For Securities:ORLY

Summary

O'Reilly Automotive, Inc. (ORLY) reported strong financial performance for the second quarter and first half of 2014. Sales increased by 8% year-over-year for both periods, driven by comparable store sales growth and the opening of new locations. Gross profit also saw a significant increase of 9%, with margins improving to 51.5% for the quarter, attributed to cost improvements and a favorable product mix. Operating income and net income showed robust growth of 14% and 16%, respectively, for the quarter, reflecting efficient cost management and increased sales. Financially, the company demonstrated solid liquidity, with a substantial increase in cash and cash equivalents, up to $453.4 million from $231.3 million at the end of 2013. This was supported by strong operating cash flows of $655.5 million for the first half of the year. O'Reilly continued its expansion strategy, opening 93 net new stores in the first half of 2014, bringing the total store count to 4,257. The company also maintained a healthy financial position, with debt covenants remaining in compliance. Shareholder returns were supported by ongoing share repurchases, with $346.1 million remaining under the program as of June 30, 2014.

Financial Highlights

44 data points
Beta

Revenue

$1.85B

51.5% Gross Margin

Net Income

$205.65M

11.1% Net Margin

EPS (Diluted)

$0.13

Total Assets

$6.51B

Cash & Equivalents

$453.43M

Free Cash Flow

$198.13M

Financial Statements
Beta
Revenue$1.85B
Cost of Revenue$896.21M
Gross Profit$950.88M
SG&A Expenses$614.40M
Operating Income$336.47M
Interest Expense$12.82M
Net Income$205.65M
EPS (Basic)$0.13
EPS (Diluted)$0.13
Shares Outstanding (Basic)1.59B
Shares Outstanding (Diluted)1.61B

Key Highlights

  • 1Sales increased by 8% to $1.85 billion for the three months ended June 30, 2014, and by 8% to $3.58 billion for the six months ended June 30, 2014.
  • 2Comparable store sales increased by 5.1% for the three months and 5.7% for the six months ended June 30, 2014.
  • 3Gross profit increased by 9% to $951 million for the three months and $1.83 billion for the six months, with gross margin improving to 51.5% and 51.1% respectively.
  • 4Net income rose by 16% to $206 million for the three months and 14% to $380 million for the six months.
  • 5Diluted earnings per share increased by 21% to $1.91 for the three months and 20% to $3.52 for the six months.
  • 6Cash and cash equivalents significantly increased to $453.4 million as of June 30, 2014.
  • 7The company opened 93 net new stores in the first six months of 2014, ending the period with 4,257 stores.

Frequently Asked Questions

Sales growth was driven by a combination of comparable store sales increases (5.1% for the quarter) and the contribution from new store openings. Increased average ticket values for both DIY and professional customers, along with a rise in transaction counts for the professional segment, also contributed positively.

Profitability improved significantly. Gross profit increased by 9% with margin expansion due to cost improvements and a favorable product mix. Operating income grew 14% and net income increased by 16% for the quarter, indicating effective cost management and strong sales performance.

O'Reilly's cash and cash equivalents increased substantially to $453.4 million as of June 30, 2014. The company generated strong operating cash flows ($655.5 million for the first six months) and had no outstanding borrowings under its $600 million revolving credit facility, indicating a healthy liquidity position to fund operations and growth initiatives.

The company's strategy focuses on expanding its store footprint, with plans to open 200 net new stores in 2014. They also emphasize a dual market strategy serving both do-it-yourself (DIY) customers and professional service providers, supported by enhanced services and a broad product offering with quality differentiation.