O'Reilly Automotive, Inc. Reports Third Quarter 2015 Results

  • Third quarter comparable store sales increase of 7.9%
  • Record high third quarter operating margin of 20.0%
  • 21% increase in third quarter operating profit dollars 

SPRINGFIELD, Mo., Oct. 28, 2015 (GLOBE NEWSWIRE) — O’Reilly Automotive, Inc. (the “Company” or “O’Reilly”) (Nasdaq:ORLY), a leading retailer in the automotive aftermarket industry, today announced record revenues and earnings for its third quarter ended September 30, 2015. 

3rd Quarter Financial Results

Sales for the third quarter ended September 30, 2015, increased $203 million, or 11%, to $2.08 billion from $1.88 billion for the same period one year ago.  Gross profit for the third quarter increased to $1.09 billion (or 52.4% of sales) from $968 million (or 51.6% of sales) for the same period one year ago, representing an increase of 13%.  Selling, general and administrative expenses (“SG&A”) for the third quarter increased to $674 million (or 32.4% of sales) from $624 million (or 33.3% of sales) for the same period one year ago, representing an increase of 8%.  Operating income for the third quarter increased to $415 million (or 20.0% of sales) from $344 million (or 18.3% of sales) for the same period one year ago, representing an increase of 21%.

Net income for the third quarter ended September 30, 2015, increased $49 million, or 23%, to $266 million (or 12.8% of sales) from $217 million (or 11.6% of sales) for the same period one year ago.  Diluted earnings per common share for the third quarter increased 28% to $2.64 on 101 million shares versus $2.06 on 105 million shares for the same period one year ago.

O’Reilly’s President and CEO, Greg Henslee commented, “We are extremely proud to report another very successful quarter, highlighted by a 7.9% increase in comparable store sales and a record high operating margin of 20.0%.  Our industry leading comparable store sales results this quarter represent our 8th consecutive quarter of comparable store sales growth greater than 5%, with an especially robust increase of over 7% in each quarter of this year.  This consistently strong performance is the direct result of our Team Members’ commitment to providing excellent customer service every day in all of our stores, and I would like to thank each of our over 72,000 Team Members for their hard work and dedication to our ongoing success.”

Mr. Henslee continued, “Our relentless focus on profitable growth translated our very strong top-line performance into an all-time, record high, operating margin of 20.0%, representing another milestone achievement for O’Reilly.  This quarter also represents our 27th consecutive quarter of diluted earnings per share growth greater than 15%, with a 28% increase in third quarter diluted earnings per share to $2.64.  Our third quarter earnings per share results included a benefit of approximately $0.11 as the result of the resolution of certain historical tax positions, which was greater than what we would normally expect to realize in the third quarter.  While we are pleased to have favorably resolved these issues, this benefit is not representative of our expected tax rate moving forward.  Excluding this $0.11 benefit, our third quarter diluted earnings per share increased 23%.”

Year-to-Date Financial Results

Sales for the first nine months of 2015 increased $566 million, or 10%, to $6.02 billion from $5.45 billion for the same period one year ago.  Gross profit for the first nine months of 2015 increased to $3.14 billion (or 52.1% of sales) from $2.80 billion (or 51.3% of sales) for the same period one year ago, representing an increase of 12%.  SG&A for the first nine months of 2015 increased to $1.98 billion (or 33.0% of sales) from $1.83 billion (or 33.6% of sales) for the same period one year ago, representing an increase of 8%.  Operating income for the first nine months of 2015 increased to $1.15 billion (or 19.1% of sales) from $967 million (or 17.7% of sales) for the same period one year ago, representing an increase of 19%.

Net income for the first nine months of 2015 increased $116 million, or 19%, to $713 million (or 11.8% of sales) from $597 million (or 10.9% of sales) for the same period one year ago.  Diluted earnings per common share for the first nine months of 2015 increased 25% to $6.98 on 102 million shares versus $5.58 on 107 million shares for the same period one year ago.

Mr. Henslee added, “During the third quarter, we opened 58 net, new stores, which brings our year-to-date store expansion to 157 net, new stores across 34 states, and we are on target to reach our goal of 205 net, new store openings this year.  Additionally, I am pleased to announce that in October, we expanded into our 44th state with the opening of two stores in Connecticut.  We continue to be very pleased with the performance of our new store openings, staffed with great Teams who provide excellent customer service, and we remain very confident in the long-term drivers for demand in our industry.  Based on these factors, we are pleased to announce our plan to increase the number of our new store openings to 210 net, new stores in 2016.  We are very proud of our long record of consistently strong and profitable growth, and we remain focused on continuing to provide unsurpassed levels of service to our customers into the future.”

Share Repurchase Program

During the third quarter ended September 30, 2015, the Company repurchased 1.1 million shares of its common stock, at an average price per share of $238.97, for a total investment of $274 million.  During the first nine months of 2015, the Company repurchased 3.8 million shares of its common stock, at an average price per share of $224.39, for a total investment of $849 million.  Subsequent to the end of the third quarter and through the date of this release, the Company repurchased an additional 0.1 million shares of its common stock, at an average price per share of $247.74, for a total investment of $30 million.  The Company has repurchased a total of 50.3 million shares of its common stock under its share repurchase program since the inception of the program in January of 2011 and through the date of this release, at an average price of $101.48, for a total aggregate investment of $5.10 billion.  As of the date of this release, the Company had approximately $400 million remaining under its current share repurchase authorization. 

3rd Quarter Comparable Store Sales Results

Comparable store sales are calculated based on the change in sales for stores open at least one year and exclude sales of specialty machinery, sales to independent parts stores and sales to Team Members.  Comparable store sales increased 7.9% for the third quarter ended September 30, 2015, versus 6.2% for the same period one year ago.  Comparable store sales increased 7.4% for the first nine months of 2015, versus 5.9% for the same period one year ago.

4th Quarter and Updated Full-Year 2015 Guidance

The table below outlines the Company’s guidance for selected fourth quarter and updated full-year 2015 financial data:

  For the Three Months Ending
December 30, 2015
  For the Year Ending
December 31, 2015
Comparable store sales 3.0% to 5.0%   6.5% to 7.0%
Total revenue     $7.85 billion to $7.95 billion
Gross profit as a percentage of sales     52.0% to 52.2%
Operating income as a percentage of sales     18.6% to 18.9%
Diluted earnings per share (1) $1.97 to $2.01   $8.97 to $9.01
Capital expenditures     $400 million to $430 million
Free cash flow (2)     $800 million to $850 million
       
(1)  Weighted-average shares outstanding, assuming dilution, used in the denominator of this calculation,
includes share repurchases made by the Company through the date of this release.
(2) Calculated as net cash provided by operating activities less capital expenditures for the period.
 

Non-GAAP Information

This release contains certain financial information not derived in accordance with United States generally accepted accounting principles (“GAAP”).  These items include adjusted debt to earnings before interest, taxes, depreciation, amortization, share-based compensation and rent (“EBITDAR”) and free cash flow.  The Company does not, nor does it suggest investors should, consider such non-GAAP financial measures in isolation from, or as a substitute for, GAAP financial information.  The Company believes that the presentation of adjusted debt to EBITDAR and free cash flow provide meaningful supplemental information to both management and investors that is indicative of the Company’s core operations.  The Company has included a reconciliation of this additional information to the most comparable GAAP measure in the selected financial information below.

Earnings Conference Call Information

The Company will host a conference call on Thursday, October 29, 2015, at 10:00 a.m. central time to discuss its results as well as future expectations.  Investors may listen to the conference call live on the Company’s website at www.oreillyauto.com by clicking on “Investor Relations” and then “News Room.”  Interested analysts are invited to join the call.  The dial-in number for the call is (847) 585-4405; the conference call identification number is 40850185.  A replay of the conference call will be available on the Company’s website through October 28, 2016.

About O’Reilly Automotive, Inc.

O’Reilly Automotive, Inc. was founded in 1957 by the O’Reilly family and is one of the largest specialty retailers of automotive aftermarket parts, tools, supplies, equipment and accessories in the United States, serving both the do-it-yourself and professional service provider markets.  Visit the Company’s website at www.oreillyauto.com for additional information about O’Reilly, including access to online shopping and current promotions, store locations, hours and services, employment opportunities and other programs.  As of September 30, 2015, the Company operated 4,523 stores in 43 states.

Forward-Looking Statements

The Company claims the protection of the safe-harbor for forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  You can identify these statements by forward-looking words such as “estimate,” “may,” “could,” “will,” “believe,” “expect,” “would,” “consider,” “should,” “anticipate,” “project,” “plan,” “intend” or similar words.  In addition, statements contained within this press release that are not historical facts are forward-looking statements, such as statements discussing, among other things, expected growth, store development, integration and expansion strategy, business strategies, future revenues and future performance.  These forward-looking statements are based on estimates, projections, beliefs and assumptions and are not guarantees of future events and results.  Such statements are subject to risks, uncertainties and assumptions, including, but not limited to, the economy in general, inflation, product demand, the market for auto parts, competition, weather, risks associated with the performance of acquired businesses, our ability to hire and retain qualified employees, consumer debt levels, our increased debt levels, credit ratings on public debt, governmental regulations, terrorist activities, war and the threat of war.  Actual results may materially differ from anticipated results described or implied in these forward-looking statements.  Please refer to the “Risk Factors” section of the annual report on Form 10-K for the year ended December 31, 2014, for additional factors that could materially affect the Company’s financial performance.  Forward-looking statements speak only as of the date they were made and the Company undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.

O’REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
           
  September 30, 2015   September 30, 2014   December 31, 2014
  (Unaudited)   (Unaudited)   (Note)
Assets          
Current assets:          
Cash and cash equivalents $ 276,916     $ 298,283     $ 250,560  
Accounts receivable, net 163,889     152,779     143,900  
Amounts receivable from suppliers 76,861     67,073     69,311  
Inventory 2,606,813     2,517,927     2,554,789  
Other current assets 33,085     34,689     48,418  
Total current assets 3,157,564     3,070,751     3,066,978  
           
Property and equipment, at cost 4,275,349     3,895,165     3,993,509  
Less: accumulated depreciation and amortization 1,470,199     1,294,053     1,334,949  
Net property and equipment 2,805,150     2,601,112     2,658,560  
           
Notes receivable, less current portion 14,265     14,283     13,349  
Goodwill 757,093     756,335     756,384  
Other assets, net 41,194     32,695     45,030  
Total assets $ 6,775,266     $ 6,475,176     $ 6,540,301  
           
Liabilities and shareholders’ equity          
Current liabilities:          
Accounts payable $ 2,626,126     $ 2,409,054     $ 2,417,167  
Self-insurance reserves 69,251     65,632     64,882  
Accrued payroll 84,295     71,451     78,442  
Accrued benefits and withholdings 65,010     58,602     62,946  
Deferred income taxes 7,445     21,039     17,258  
Income taxes payable 17,574     18,645      
Other current liabilities 234,211     201,475     189,836  
Current portion of long-term debt     44     25  
Total current liabilities 3,103,912     2,845,942     2,830,556  
           
Long-term debt, less current portion 1,396,995     1,396,488     1,396,615  
Deferred income taxes 72,197     61,789     85,164  
Other liabilities 200,076     194,551     209,548  
           
Shareholders’ equity:          
Common stock, $0.01 par value:          
Authorized shares – 245,000,000          
Issued and outstanding shares – 98,714,308 as of September 30, 2015, 102,393,366 as of September 30, 2014, and 101,602,935 as of December 31, 2014 987     1,024     1,016  
Additional paid-in capital 1,268,357     1,168,741     1,194,929  
Retained earnings 732,742     806,641     822,473  
Total shareholders’ equity 2,002,086     1,976,406     2,018,418  
           
Total liabilities and shareholders’ equity $ 6,775,266     $ 6,475,176     $ 6,540,301  
 
Note:  The balance sheet at December 31, 2014, has been derived from the audited consolidated financial statements at that date, but does not include all of the information and footnotes required by United States generally accepted accounting principles for complete financial statements.
 

O’REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share data)
       
  For the Three Months Ended
 September 30,
  For the Nine Months Ended
 September 30,
  2015   2014   2015   2014
Sales $ 2,080,201     $ 1,876,872     $ 6,017,622     $ 5,451,903  
Cost of goods sold, including warehouse and distribution expenses 990,947     908,671     2,882,618     2,655,109  
Gross profit 1,089,254     968,201     3,135,004     2,796,794  
               
Selling, general and administrative expenses 673,994     624,433     1,983,603     1,829,432  
Operating income 415,260     343,768     1,151,401     967,362  
               
Other income (expense):              
Interest expense (14,296 )   (12,983 )   (43,017 )   (39,211 )
Interest income 551     551     1,708     1,688  
Other, net (647 )   982     648     2,237  
Total other expense (14,392 )   (11,450 )   (40,661 )   (35,286 )
               
Income before income taxes 400,868     332,318     1,110,740     932,076  
Provision for income taxes 134,600     115,321     398,100     335,572  
Net income $ 266,268     $ 216,997     $ 712,640     $ 596,504  
               
Earnings per share-basic:              
Earnings per share $ 2.68     $ 2.10     $ 7.09     $ 5.67  
Weighted-average common shares outstanding – basic 99,270     103,498     100,468     105,146  
               
Earnings per share-assuming dilution:              
Earnings per share $ 2.64     $ 2.06     $ 6.98     $ 5.58  
Weighted-average common shares outstanding – assuming dilution 100,770     105,222     102,041     106,945  
                       

 

O’REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
   
  For the Nine Months Ended
 September 30,
  2015   2014
Operating activities:      
Net income $ 712,640     $ 596,504  
Adjustments to reconcile net income to net cash provided by operating activities:      
Depreciation and amortization of property, equipment and intangibles 158,065     143,515  
Amortization of debt discount and issuance costs 1,578     1,563  
Excess tax benefit from share-based compensation (50,759 )   (32,296 )
Deferred income taxes (22,780 )   (18,108 )
Share-based compensation programs 16,656     17,424  
Other 4,194     3,801  
Changes in operating assets and liabilities:      
Accounts receivable (24,511 )   (26,167 )
Inventory (52,024 )   (142,880 )
Accounts payable 208,959     352,533  
Income taxes payable 85,428     51,043  
Other 25,276     36,022  
Net cash provided by operating activities 1,062,722     982,954  
       
Investing activities:      
Purchases of property and equipment (296,474 )   (317,157 )
Proceeds from sale of property and equipment 2,197     2,304  
Payments received on notes receivable 3,028     2,770  
Net cash used in investing activities (291,249 )   (312,083 )
       
Financing activities:      
Principal payments on capital leases (25 )   (54 )
Repurchases of common stock (849,202 )   (687,154 )
Excess tax benefit from share-based compensation 50,759     32,296  
Net proceeds from issuance of common stock 53,351     51,006  
Net cash used in financing activities (745,117 )   (603,906 )
       
Net increase in cash and cash equivalents 26,356     66,965  
Cash and cash equivalents at beginning of the period 250,560     231,318  
Cash and cash equivalents at end of the period $ 276,916     $ 298,283  
       
Supplemental disclosures of cash flow information:      
Income taxes paid $ 342,920     $ 308,029  
Interest paid, net of capitalized interest 51,003     47,173  
           

O’REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
SELECTED FINANCIAL INFORMATION
 (Unaudited)
                       
                  For the Twelve Months Ended
                  September 30,
Adjusted Debt to EBITDAR:                  2015     2014 
(In thousands, except adjusted debt to EBITDAR ratio)                      
GAAP debt                 $    1,396,995     $   1,396,532  
Add: Letters of credit                   45,924       47,782  
Discount on senior notes                   3,005       3,512  
Six-times rent expense                   1,626,480       1,560,060  
Adjusted debt                 $    3,072,404     $   3,007,886  
                       
GAAP net income                 $    894,318     $   748,851  
Add: Interest expense                   57,096       52,123  
Provision for income taxes                   506,528       427,122  
Depreciation and amortization                   208,755       190,624  
Share-based compensation expense                   22,327       22,661  
Rent expense                   271,080       260,010  
EBITDAR                 $    1,960,104     $   1,701,391  
                       
Adjusted debt to EBITDAR                   1.57       1.77  
                       
                       
                  September 30,
                   2015     2014 
Selected Balance Sheet Ratios:                      
Inventory turnover (1)                   1.5       1.4  
Average inventory per store (in thousands) (2)                 $ 576     $ 584  
Accounts payable to inventory (3)                   100.7 %     95.7 %
Return on equity (4)                   44.0 %     36.4 %
Return on assets (5)                   13.4 %     11.8 %
                       
                       
          For the Three Months Ended   For the Nine Months Ended
           September 30,    September 30,
           2015     2014     2015     2014 
Selected Financial Information (in thousands):                      
Capital expenditures         $    109,943     $   122,228     $    296,474     $   317,157  
Free cash flow (6)           254,326       205,201       766,248       665,797  
Depreciation and amortization           52,058       48,511       158,065       143,515  
Interest expense           14,296       12,983       43,017       39,211  
Rent expense         $    68,063     $   65,927     $    204,075     $   196,023  
                       
                       
Store and Team Member Information:                      
                       
  For the Three Months Ended   For the Nine Months Ended   For the Twelve Months Ended
   September 30,    September 30,   September 30,
   2015     2014     2015     2014     2015     2014 
Beginning store count   4,465       4,257       4,366       4,166       4,311       4,135  
New stores opened   59       57       160       150       217       182  
Stores closed     (1 )       (3 )       (3 )       (5 )       (5 )       (6 )
Ending store count   4,523       4,311       4,523       4,311       4,523       4,311  
                       
                       
          For the Three Months Ended   For the Twelve Months Ended
           September 30,   September 30,
           2015     2014     2015     2014 
Total employment           72,161       67,695          
Square footage (in thousands)           32,779       31,165          
Sales per weighted-average square foot (7)         $    63.47     $   60.16     $    241.38     $   230.26  
Sales per weighted-average store (in thousands) (8)         $    460     $   435     $    1,748     $   1,663  
                       
                       
(1) Calculated as cost of goods sold for the last 12 months divided by average inventory.  Average inventory is calculated as the average of inventory for the trailing four quarters used in determining the denominator.
(2) Calculated as inventory divided by store count at the end of the reported period.
(3) Calculated as accounts payable divided by inventory.
(4) Calculated as net income for the last 12 months divided by average total shareholders’ equity.  Average total shareholders’ equity is calculated as the average of total shareholders’ equity for the trailing four quarters used in determining the denominator.
(5) Calculated as net income for the last 12 months divided by average total assets.  Average total assets is calculated as the average of total assets for the trailing four quarters used in determining the denominator.
(6) Calculated as net cash provided by operating activities less capital expenditures for the period.
(7) Calculated as sales less jobber sales, divided by weighted-average square footage.  Weighted-average square footage is determined by weighting store square footage based on the approximate dates of store openings, acquisitions, expansions or closings.
(8) Calculated as sales less jobber sales, divided by weighted-average stores.  Weighted-average stores is determined by weighting stores based on their approximate opening, acquisition or closing dates.

CONTACT: For further information contact:
Investor & Media Contact
Mark Merz (417) 829-5878