×

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 sales3.0% 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, net163,889 152,779 143,900
Amounts receivable from suppliers76,861 67,073 69,311
Inventory2,606,813 2,517,927 2,554,789
Other current assets33,085 34,689 48,418
Total current assets3,157,564 3,070,751 3,066,978
Property and equipment, at cost4,275,349 3,895,165 3,993,509
Less: accumulated depreciation and amortization1,470,199 1,294,053 1,334,949
Net property and equipment2,805,150 2,601,112 2,658,560
Notes receivable, less current portion14,265 14,283 13,349
Goodwill757,093 756,335 756,384
Other assets, net41,194 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 reserves69,251 65,632 64,882
Accrued payroll84,295 71,451 78,442
Accrued benefits and withholdings65,010 58,602 62,946
Deferred income taxes7,445 21,039 17,258
Income taxes payable17,574 18,645
Other current liabilities234,211 201,475 189,836
Current portion of long-term debt 44 25
Total current liabilities3,103,912 2,845,942 2,830,556
Long-term debt, less current portion1,396,995 1,396,488 1,396,615
Deferred income taxes72,197 61,789 85,164
Other liabilities200,076 194,551 209,548
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, 2014987 1,024 1,016
Additional paid-in capital1,268,357 1,168,741 1,194,929
Retained earnings732,742 806,641 822,473
Total shareholders' equity2,002,086 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 expenses990,947 908,671 2,882,618 2,655,109
Gross profit1,089,254 968,201 3,135,004 2,796,794
Selling, general and administrative expenses673,994 624,433 1,983,603 1,829,432
Operating income415,260 343,768 1,151,401 967,362
Other income (expense):
Interest expense(14,296) (12,983) (43,017) (39,211)
Interest income551 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 taxes400,868 332,318 1,110,740 932,076
Provision for income taxes134,600 115,321 398,100 335,572
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 – basic99,270 103,498 100,468 105,146
��
Earnings per share-assuming dilution:
Earnings per share$2.64 $2.06 $6.98 $5.58
Weighted-average common shares outstanding – assuming dilution100,770 105,222 102,041 106,945

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 intangibles158,065 143,515
Amortization of debt discount and issuance costs1,578 1,563
Excess tax benefit from share-based compensation(50,759) (32,296)
Deferred income taxes(22,780) (18,108)
Share-based compensation programs16,656 17,424
Other4,194 3,801
Changes in operating assets and liabilities:
Accounts receivable(24,511) (26,167)
Inventory(52,024) (142,880)
Accounts payable208,959 352,533
Income taxes payable85,428 51,043
Other25,276 36,022
Net cash provided by operating activities1,062,722 982,954
Investing activities:
Purchases of property and equipment(296,474) (317,157)
Proceeds from sale of property and equipment2,197 2,304
Payments received on notes receivable3,028 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 compensation50,759 32,296
Net proceeds from issuance of common stock53,351 51,006
Net cash used in financing activities(745,117) (603,906)
Net increase in cash and cash equivalents26,356 66,965
Cash and cash equivalents at beginning of the period250,560 231,318
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 interest51,003 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.


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

Source: O'REILLY AUTO PARTS