10-QPeriod: Q3 FY2016

O REILLY AUTOMOTIVE INC Quarterly Report for Q3 Ended Sep 30, 2016

Filed November 8, 2016For Securities:ORLY

Summary

O'Reilly Automotive, Inc. (ORLY) reported strong financial results for the nine months ended September 30, 2016. Sales increased by 8% year-over-year to $6.49 billion, driven by a 4.8% comparable store sales growth and the opening of 142 net new stores. This growth translated into a 12% increase in operating income to $1.29 billion and an 11% rise in net income to $792 million. The company demonstrated robust cash flow generation, with operating activities providing $1.17 billion. This strong performance supported continued investment in growth, including capital expenditures of $356 million for new stores and distribution expansion. The balance sheet remains solid, with total assets of $7.52 billion and a healthy liquidity position. Management also highlighted strategic initiatives such as the acquisition of Bond Auto Parts, expected to close by year-end, and ongoing efforts to enhance customer service and product offerings. The company remains confident in its dual market strategy and its ability to gain market share, supported by favorable industry trends such as an aging vehicle fleet and increasing miles driven.

Financial Highlights

44 data points
Beta

Revenue

$2.22B

52.7% Gross Margin

Net Income

$278.49M

12.5% Net Margin

EPS (Diluted)

$0.19

Total Assets

$7.52B

Cash & Equivalents

$560.32M

Free Cash Flow

$249.71M

Financial Statements
Beta
Revenue$2.22B
Cost of Revenue$1.05B
Gross Profit$1.17B
SG&A Expenses$722.22M
Operating Income$447.81M
Interest Expense$18.71M
Net Income$278.49M
EPS (Basic)$0.20
EPS (Diluted)$0.19
Shares Outstanding (Basic)1.42B
Shares Outstanding (Diluted)1.44B

Key Highlights

  • 1Sales grew by 8% to $6.49 billion for the first nine months of 2016, compared to the same period in 2015.
  • 2Comparable store sales increased by 4.8% for the nine-month period, indicating healthy performance in existing locations.
  • 3Net income rose by 11% to $791.7 million for the nine months ended September 30, 2016.
  • 4The company opened 142 net new stores during the first nine months of 2016, expanding its retail footprint.
  • 5Cash flow from operations remained strong, totaling $1.17 billion for the nine-month period.
  • 6The company continues its share repurchase program, with $683 million remaining authorization as of September 30, 2016.
  • 7O'Reilly announced the definitive agreement to acquire Bond Auto Parts, a privately held automotive parts chain, expected to close by year-end.

Frequently Asked Questions

O'Reilly's sales growth was driven by a combination of comparable store sales increases (4.8%) and the opening of 142 net new stores. The company also benefited from favorable macroeconomic factors such as increased miles driven and a growing average vehicle age.

Profitability improved significantly. Gross profit increased by 8% to $3.39 billion, leading to an 8% increase in operating income to $1.29 billion. Net income saw an 11% increase, reaching $791.7 million for the nine-month period.

O'Reilly's growth strategy focuses on opening new stores to penetrate existing markets and expand into new contiguous markets. They also pursue growth through strategic acquisitions, such as the announced purchase of Bond Auto Parts, and by continuing to leverage their dual market strategy serving both DIY and professional customers.

As of September 30, 2016, O'Reilly had $1.89 billion in long-term debt. However, the company maintained a strong liquidity position with $560 million in cash and cash equivalents and no outstanding borrowings under its $600 million unsecured revolving credit facility. The company also reported compliance with all debt covenants.