10-QPeriod: Q2 FY2017

O REILLY AUTOMOTIVE INC Quarterly Report for Q2 Ended Jun 30, 2017

Filed August 7, 2017For Securities:ORLY

Summary

O'Reilly Automotive, Inc. (ORLY) reported solid financial results for the second quarter and first half of 2017, demonstrating continued growth and profitability. Sales increased year-over-year for both periods, driven by a combination of comparable store sales growth, the integration of acquired stores, and the opening of new locations. The company also saw improvements in gross profit margins and operating income, reflecting effective cost management and a favorable product mix towards higher-quality items. Financially, O'Reilly maintained a strong liquidity position, supported by robust operating cash flows and availability under its revolving credit facility. The company continued its aggressive share repurchase program, underscoring its commitment to returning value to shareholders. Despite facing some headwinds from softer industry demand influenced by weather patterns, O'Reilly's strategic focus on its dual market approach, customer service, and inventory availability appears to be effectively navigating the market dynamics.

Financial Highlights

45 data points
Beta

Revenue

$2.29B

52.4% Gross Margin

Net Income

$282.82M

12.3% Net Margin

EPS (Diluted)

$0.21

Total Assets

$7.35B

Cash & Equivalents

$26.53M

Free Cash Flow

$216.93M

Financial Statements
Beta
Revenue$2.29B
Cost of Revenue$1.09B
Gross Profit$1.20B
SG&A Expenses$742.62M
Operating Income$457.44M
Interest Expense$20.83M
Net Income$282.82M
EPS (Basic)$0.21
EPS (Diluted)$0.21
Shares Outstanding (Basic)1.35B
Shares Outstanding (Diluted)1.37B

Key Highlights

  • 1Total sales increased by 5% to $2.29 billion for the three months ended June 30, 2017, and by 4% to $4.45 billion for the six months ended June 30, 2017, compared to the prior year periods.
  • 2Comparable store sales increased by 1.7% for the three months and 1.3% for the six months ended June 30, 2017, indicating steady performance in existing locations.
  • 3Gross profit margin improved to 52.4% for both the three and six-month periods ended June 30, 2017, up from 51.8% and 52.1% respectively in the prior year, largely due to favorable LIFO adjustments.
  • 4Operating income grew by 8% to $457 million for the three months ended June 30, 2017, and by 2% to $861 million for the six months ended June 30, 2017.
  • 5Net income increased by 10% to $283 million for the three months and by 7% to $548 million for the six months ended June 30, 2017.
  • 6Diluted earnings per share (EPS) saw a significant increase, rising 17% to $3.10 for the three months and 13% to $5.93 for the six months ended June 30, 2017, partly boosted by the adoption of ASU 2016-09 which lowered the effective tax rate.
  • 7The company actively repurchased shares, investing $852 million in the three months and $1.34 billion in the six months ended June 30, 2017, under its expanded share repurchase program.

Frequently Asked Questions

For the three months ended June 30, 2017, O'Reilly reported sales of $2.29 billion, an increase of 5% compared to $2.18 billion in the same period of 2016. This growth was driven by comparable store sales increases and sales from newly opened and acquired stores.

O'Reilly's gross profit margin improved to 52.4% for the quarter, benefiting from favorable LIFO adjustments. Selling, general, and administrative expenses increased but were partially offset by a legal accrual reduction. These factors contributed to an 8% increase in operating income to $457 million for the quarter and a 10% increase in net income to $283 million.

The company generated $710.5 million in cash from operations for the first six months of 2017, though this was a decrease from the prior year due to higher inventory investments. Despite this, O'Reilly maintained sufficient liquidity, with $26.5 million in cash and cash equivalents and significant availability under its $1.2 billion unsecured revolving credit facility. Capital expenditures were $227.5 million for the period, primarily for new store development and distribution expansion.

O'Reilly continued its robust share repurchase program, investing significantly in the quarter and year-to-date. The company also increased its long-term debt to $2.6 billion, largely due to borrowings under its new revolving credit facility, while remaining in compliance with all debt covenants. The total debt level supports ongoing investments in growth and shareholder returns.