10-Q/APeriod: Q1 FY2016

O REILLY AUTOMOTIVE INC Quarterly Report (Amendment) for Q1 Ended Mar 31, 2016

Filed May 10, 2016For Securities:ORLY

Summary

O'Reilly Automotive, Inc. (ORLY) reported strong financial results for the first quarter ended March 31, 2016. Sales increased by 10% year-over-year to $2.1 billion, driven by a 6.1% increase in comparable store sales and the addition of 52 net new stores. Net income saw a significant 20% increase to $255.4 million, with diluted earnings per share rising to $2.59 from $2.06 in the prior year's period. The company demonstrated robust operational efficiency, with gross profit margin improving to 52.4% and operating income growing by 19% to $419 million. This strong performance was supported by effective cost management, leading to a decrease in SG&A as a percentage of sales to 32.4%. The company also generated substantial cash flow from operations ($488.2 million) and continued its aggressive share repurchase program, investing $312.6 million in the quarter.

Financial Highlights

44 data points
Beta

Revenue

$2.10B

52.4% Gross Margin

Net Income

$255.37M

12.2% Net Margin

EPS (Diluted)

$0.17

Total Assets

$7.42B

Cash & Equivalents

$716.01M

Free Cash Flow

$399.15M

Financial Statements
Beta
Revenue$2.10B
Cost of Revenue$998.57M
Gross Profit$1.10B
SG&A Expenses$678.95M
Operating Income$418.63M
Interest Expense$14.82M
Net Income$255.37M
EPS (Basic)$0.18
EPS (Diluted)$0.17
Shares Outstanding (Basic)1.46B
Shares Outstanding (Diluted)1.48B

Key Highlights

  • 1Sales grew 10% to $2.1 billion, exceeding the prior year's $1.9 billion.
  • 2Comparable store sales increased by 6.1%, indicating healthy growth in existing locations.
  • 3Net income surged 20% to $255.4 million, with diluted EPS growing to $2.59.
  • 4Gross profit margin improved to 52.4% from 51.9% in the prior year.
  • 5Operating income rose 19% to $419 million, demonstrating strong operational leverage.
  • 6The company repurchased $312.6 million of its common stock during the quarter, reflecting confidence and a commitment to shareholder returns.
  • 7Cash flow from operations was robust at $488.2 million, supporting liquidity and investment.

Frequently Asked Questions

O'Reilly Automotive's primary revenue driver in this quarter was a combination of increased sales from comparable stores (up 6.1%) and the addition of new store locations. The company opened 52 net new stores, contributing to overall sales growth, and benefited from favorable macroeconomic conditions such as increased miles driven and low unemployment.

The company effectively managed its expenses. While Selling, General, and Administrative (SG&A) expenses increased in dollar terms to support store growth, they decreased as a percentage of sales to 32.4% from 33.5% in the prior year, indicating improved operational leverage. Gross profit margin also improved to 52.4% due to product acquisition cost improvements and better leverage of distribution costs.

O'Reilly's capital allocation strategy appears focused on growth and shareholder returns. The company continues to invest in opening new stores (planning 210 net new stores for 2016) and has a significant share repurchase program, repurchasing $312.6 million worth of stock in Q1 2016. They also generated strong operating cash flow ($488.2 million) to fund these activities.

During the quarter, O'Reilly issued $500 million in Senior Notes due 2026. The company's long-term debt increased significantly to $1.89 billion from $1.39 billion. However, the company remains in compliance with all debt covenants, with strong coverage ratios (Consolidated Fixed Charge Coverage Ratio of 6.14x and Consolidated Leverage Ratio of 1.72x), and had no outstanding borrowings under its revolving credit facility as of March 31, 2016, indicating a healthy liquidity position.