- 28% increase in third quarter diluted earnings per
share to $1.69
- Third quarter comparable store sales increase of
4.6%
- Record high quarterly operating margin of
17.4%
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, 2013.
3rd Quarter Financial Results
Sales for the third quarter ended September 30, 2013, increased
$126 million, or 8%, to $1.73 billion from $1.60 billion for the
same period one year ago. Gross profit for the third quarter
increased to $879 million (or 50.9% of sales) from $805 million (or
50.3% of sales) for the same period one year ago, representing an
increase of 9%. Selling, general and administrative expenses
("SG&A") for the third quarter increased to $579 million (or
33.5% of sales) from $542 million (or 33.9% of sales) for the same
period one year ago, representing an increase of 7%. Operating
income for the third quarter increased to $300 million (or 17.4% of
sales) from $263 million (or 16.4% of sales) for the same period
one year ago, representing an increase of 14%.
Net income for the third quarter ended September 30, 2013,
increased $27 million, or 17%, to $186 million (or 10.8% of sales)
from $159 million (or 9.9% of sales) for the same period one year
ago. Diluted earnings per common share for the third quarter
increased 28% to $1.69 on 110 million shares versus $1.32 for the
same period one year ago on 121 million shares.
Commenting on the Company's third quarter results, President and
CEO, Greg Henslee, stated, "We are proud to report another very
profitable quarter which represents our 19th consecutive quarter of
15% or greater adjusted diluted earnings per share growth. Our
Team's relentless dedication to providing consistent, unsurpassed
levels of customer service resulted in our industry-leading
comparable store sales growth of 4.6%. We continue to focus on
long-term profitable growth, and our unwavering efforts to control
expenses allowed us to deliver a record quarterly operating margin
of 17.4%, which is a 100 basis point improvement over the third
quarter of 2012, and drove a 28% increase in diluted earnings per
share to $1.69. We remain very committed to the disciplined
execution of our proven model of serving both retail and
professional service provider customers, and I want to thank each
of our Team Members for their hard work and commitment to our
continued success."
Year-to-Date Financial Results
Sales for the first nine months of 2013 increased $334 million,
or 7%, to $5.03 billion from $4.69 billion for the same period one
year ago. Gross profit for the first nine months of 2013
increased to $2.55 billion (or 50.7% of sales) from $2.35 billion
(or 50.0% of sales) for the same period one year ago, representing
an increase of 9%. SG&A for the first nine months of 2013
increased to $1.70 billion (or 33.8% of sales) from $1.59 billion
(or 33.9% of sales) for the same period one year ago, representing
an increase of 7%. Operating income for the first nine months
of 2013 increased to $848 million (or 16.9% of sales) from $754
million (or 16.1% of sales) for the same period one year ago,
representing an increase of 12%.
Net income for the first nine months of 2013 increased $65
million, or 14%, to $518 million (or 10.3% of sales) from $453
million (or 9.6% of sales) for the same period one year ago.
Diluted earnings per common share for the first nine months
of 2013 increased 29% to $4.63 on 112 million shares versus $3.60
for the same period one year ago on 126 million shares.
Mr. Henslee continued, "We are on target to open 190 net, new
stores in 2013 and are very pleased with the strong results we
continue to see from our new stores. Based on our proven track
record of profitable new store growth and the attractive
opportunities we see in both existing and new markets, we plan to
increase our new store growth in 2014 to 200 new stores. To
support our future expansion, we are excited to announce our plan
to relocate our Lewiston, Maine, distribution center to a larger
facility in Devens, Massachusetts, which is located in the western
suburbs of Boston. This new distribution center is currently
scheduled to open in the second half of 2014 and will have the
capacity to service 280 stores, allowing us to better support our
existing stores in those markets and providing a foundation for our
continued growth in New England. We are on schedule to open
our previously announced distribution centers in central Florida
and Chicago during 2014 and we remain highly confident in our
ability to sustain our trend of profitable growth by consistently
providing the highest level of customer service in the
industry."
Share Repurchase Program
During the third quarter ended September 30, 2013, the Company
repurchased 1.5 million shares of its common stock at an average
price per share of $120.71 for a total investment of $185
million. During the nine months ended September 30, 2013, the
Company repurchased 6.5 million shares of its common stock at an
average price per share of $104.93 for a total investment of $687
million. Subsequent to the end of the third quarter and
through the date of this release, the Company repurchased an
additional 0.2 million shares of its common stock at an average
price per share of $125.74 for a total investment of $31
million. The Company has repurchased a total of 38.9 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 $80.77, for a total
aggregate investment of $3.1 billion. As of the date of this
release, the Company had approximately $360 million remaining under
its current share repurchase authorization.
3rd Quarter and Year-to-Date 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, sales to
Team Members and sales from the acquired VIP stores due to the
significant change in the business model and lack of historical
data. Comparable store sales increased 4.6% for the third
quarter ended September 30, 2013, versus 1.3% for the same period
one year ago. Comparable store sales increased 3.9% for the
first nine months of 2013, versus 3.7% for the same period one year
ago.
4th Quarter and Updated Full-Year 2013
Guidance
The table below outlines the Company's guidance for selected
fourth quarter and updated full-year 2013 financial data:
|
For the Three Months
Ending |
For the Year
Ending |
|
December 31,
2013 |
December 31,
2013 |
Comparable store sales |
3% to 5% |
3.5% to 4.5% |
Total revenue |
|
$6.6 billion to $6.7 billion |
Gross profit as a percentage of sales |
|
50.5% to 50.7% |
Operating profit as a percentage of
sales |
|
16.2% to 16.5% |
Diluted earnings per share (1) |
$1.27 to $1.31 |
$5.91 to $5.95 |
Capital expenditures |
|
$395 million to $415 million |
Free cash flow (2) |
|
$470 million to $500 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 flows
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 net income,
rent-adjusted debt to adjusted 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
financial results and estimates excluding the impact of the former
CSK Auto Corporation ("CSK") officer clawback, as well as the
presentation of adjusted debt to adjusted 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 excludes this item in judging its
performance and believes this non-GAAP information is useful to
investors as well. 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 24,
2013, 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 35678714. A replay of
the call will be available on the Company's website following the
conference call.
About O'Reilly Automotive, Inc.
O'Reilly Automotive, Inc. 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. Founded in 1957 by the O'Reilly family, the Company
operated 4,135 stores in 42 states as of September 30, 2013.
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 "expect,"
"believe," "anticipate," "should," "plan," "intend," "estimate,"
"project," "will" 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, competition, product demand, the market for auto parts,
the economy in general, inflation, consumer debt levels,
governmental regulations, the Company's increased debt levels,
credit ratings on public debt, the Company's ability to hire and
retain qualified employees, risks associated with the performance
of acquired businesses, weather, 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, 2012,
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,
2013 |
September 30, 2012 |
December 31, 2012 |
|
(Unaudited) |
(Unaudited) |
(Note) |
Assets |
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ 363,008 |
$ 422,705 |
$ 248,128 |
Accounts receivable, net |
141,928 |
152,532 |
122,989 |
Amounts receivable from vendors |
72,366 |
70,214 |
58,185 |
Inventory |
2,364,538 |
2,207,454 |
2,276,331 |
Other current assets |
33,933 |
29,945 |
27,315 |
Total current assets |
2,975,773 |
2,882,850 |
2,732,948 |
|
|
|
|
Property and equipment, at cost |
3,524,762 |
3,190,321 |
3,269,570 |
Less: accumulated depreciation and
amortization |
1,146,364 |
1,016,237 |
1,057,980 |
Net property and equipment |
2,378,398 |
2,174,084 |
2,211,590 |
|
|
|
|
Notes receivable, less current portion |
14,556 |
6,390 |
5,347 |
Goodwill |
758,523 |
744,153 |
758,410 |
Other assets, net |
39,926 |
41,879 |
40,892 |
Total assets |
$ 6,167,176 |
$ 5,849,356 |
$ 5,749,187 |
|
|
|
|
Liabilities and shareholders'
equity |
|
|
|
Current liabilities: |
|
|
|
Accounts payable |
$ 2,075,525 |
$ 1,863,353 |
$ 1,929,112 |
Self-insurance reserves |
57,030 |
56,050 |
54,190 |
Accrued payroll |
61,135 |
56,570 |
60,120 |
Accrued benefits and withholdings |
44,110 |
41,846 |
42,417 |
Deferred income taxes |
10,968 |
1,279 |
19,472 |
Income taxes payable |
-- |
11,702 |
5,932 |
Other current liabilities |
190,220 |
164,256 |
161,400 |
Current portion of long-term debt |
68 |
353 |
222 |
Total current liabilities |
2,439,056 |
2,195,409 |
2,272,865 |
|
|
|
|
Long-term debt, less current portion |
1,396,031 |
1,095,672 |
1,095,734 |
Deferred income taxes |
96,549 |
107,987 |
79,544 |
Other liabilities |
199,653 |
191,765 |
192,737 |
|
|
|
|
Shareholders' equity: |
|
|
|
Common stock, $0.01 par value: |
|
|
|
Authorized shares – 245,000,000 |
|
|
|
Issued and outstanding shares
– |
|
|
|
107,667,354 as of September 30,
2013, |
|
|
|
116,056,105 as of September 30,
2012, and |
|
|
|
112,963,413 as of December 31,
2012 |
1,077 |
1,161 |
1,130 |
Additional paid-in capital |
1,115,710 |
1,088,802 |
1,083,910 |
Retained earnings |
919,100 |
1,168,560 |
1,023,267 |
Total shareholders' equity |
2,035,887 |
2,258,523 |
2,108,307 |
Total liabilities and shareholders'
equity |
$ 6,167,176 |
$ 5,849,356 |
$ 5,749,187 |
|
|
|
|
Note: The balance sheet at
December 31, 2012, has been derived from the audited consolidated
financial statements at that date, but does not include all of the
information and footnotes required by accounting principles
generally accepted in the United States 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 |
For the Nine Months
Ended |
|
September 30, |
September 30, |
|
|
2013 |
2012 |
2013 |
2012 |
Sales |
$ 1,728,025 |
$ 1,601,558 |
$ 5,028,003 |
$ 4,693,799 |
Cost of goods sold, including warehouse and
distribution expenses |
848,862 |
796,065 |
2,478,302 |
2,346,765 |
Gross profit |
879,163 |
805,493 |
2,549,701 |
2,347,034 |
|
|
|
|
|
Selling, general and administrative
expenses |
578,783 |
542,175 |
1,701,976 |
1,592,612 |
Operating income |
300,380 |
263,318 |
847,725 |
754,422 |
|
|
|
|
|
Other income (expense): |
|
|
|
|
Interest expense |
(13,295) |
(10,451) |
(36,162) |
(28,722) |
Interest income |
514 |
565 |
1,460 |
1,850 |
Other, net |
690 |
550 |
2,022 |
1,294 |
Total other expense |
(12,091) |
(9,336) |
(32,680) |
(25,578) |
|
|
|
|
|
Income before income taxes |
288,289 |
253,982 |
815,045 |
728,844 |
Provision for income taxes |
101,800 |
94,650 |
297,100 |
275,900 |
Net income |
$ 186,489 |
$ 159,332 |
$ 517,945 |
$ 452,944 |
|
|
|
|
|
Earnings per share-basic: |
|
|
|
|
Earnings per share |
$ 1.72 |
$ 1.34 |
$ 4.71 |
$ 3.67 |
Weighted-average common shares outstanding –
basic |
108,307 |
118,546 |
110,034 |
123,448 |
|
|
|
|
|
Earnings per share-assuming dilution: |
|
|
|
|
Earnings per share |
$ 1.69 |
$ 1.32 |
$ 4.63 |
$ 3.60 |
Weighted-average common shares outstanding –
assuming dilution |
110,193 |
120,539 |
111,885 |
125,670 |
|
|
O'REILLY AUTOMOTIVE,
INC. AND SUBSIDIARIES |
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS |
(Unaudited) |
(In thousands) |
|
|
|
|
For the Nine Months
Ended |
|
September
30, |
|
2013 |
2012 |
Operating activities: |
|
|
Net income |
$ 517,945 |
$ 452,944 |
Adjustments to reconcile net income to net
cash provided by operating activities: |
|
|
Depreciation and amortization of
property, equipment and intangibles |
136,071 |
132,496 |
Amortization of debt discount and
issuance costs |
1,526 |
1,295 |
Excess tax benefit from stock
options exercised |
(25,195) |
(30,138) |
Deferred income taxes |
8,501 |
18,412 |
Share-based compensation
programs |
16,485 |
16,576 |
Other |
4,635 |
5,402 |
Changes in operating assets and
liabilities: |
|
|
Accounts receivable |
(24,489) |
(22,748) |
Inventory |
(88,206) |
(221,706) |
Accounts payable |
146,413 |
584,089 |
Income taxes payable |
18,842 |
68,622 |
Other |
7,320 |
27,882 |
Net cash provided by operating
activities |
719,848 |
1,033,126 |
|
|
|
Investing activities: |
|
|
Purchases of property and equipment |
(299,511) |
(217,341) |
Proceeds from sale of property and
equipment |
1,101 |
2,600 |
Payments received on notes receivable |
3,905 |
3,115 |
Net cash used in investing
activities |
(294,505) |
(211,626) |
|
|
|
Financing activities: |
|
|
Proceeds from the issuance of long-term
debt |
299,976 |
298,881 |
Payment of debt issuance costs |
(2,967) |
(2,229) |
Principal payments on capital leases |
(207) |
(742) |
Repurchases of common stock |
(687,162) |
(1,133,518) |
Excess tax benefit from stock options
exercised |
25,195 |
30,138 |
Net proceeds from issuance of common
stock |
54,702 |
47,123 |
Net cash used in financing
activities |
(310,463) |
(760,347) |
|
|
|
Net increase in cash and cash
equivalents |
114,880 |
61,153 |
Cash and cash equivalents at beginning of
period |
248,128 |
361,552 |
Cash and cash equivalents at end of
period |
$ 363,008 |
$ 422,705 |
|
|
|
Supplemental disclosures of cash flow
information: |
|
|
Income taxes paid |
$ 271,898 |
$ 187,750 |
Interest paid, net of capitalized
interest |
44,060 |
35,960 |
|
|
O'REILLY AUTOMOTIVE,
INC. AND SUBSIDIARIES |
|
SELECTED FINANCIAL
INFORMATION |
|
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Twelve Months
Ended |
|
Adjusted Debt to Adjusted
EBITDAR: |
|
September
30, |
|
(In thousands, except adjusted debt to
adjusted EBITDAR ratio) |
|
2013 |
2012 |
|
GAAP debt |
|
$ 1,396,099 |
$ 1,096,025 |
|
Add: Letters of credit |
|
52,481 |
57,578 |
|
Discount on senior notes |
|
4,015 |
4,490 |
|
Six-times rent expense |
|
1,513,260 |
1,429,842 |
|
Non-GAAP adjusted debt |
|
$ 2,965,855 |
$ 2,587,935 |
|
|
|
|
|
|
GAAP net income |
|
$ 650,747 |
$ 575,932 |
|
Add: Former CSK officer clawback, net of
tax |
|
-- |
(1,741) |
|
Non-GAAP adjusted net income |
|
650,747 |
574,191 |
|
Add: Interest expense |
|
47,640 |
38,181 |
|
Taxes, net of impact of former CSK
officer clawback |
|
376,975 |
349,443 |
|
Depreciation and amortization |
|
180,681 |
175,635 |
|
Share-based compensation expense |
|
21,935 |
21,270 |
|
Rent expense |
|
252,210 |
238,307 |
|
Adjusted EBITDAR |
|
$ 1,530,188 |
$ 1,397,027 |
|
|
|
|
|
|
Adjusted debt to adjusted EBITDAR |
|
1.94 |
1.85 |
|
|
|
|
|
|
|
September
30, |
|
|
|
2013 |
2012 |
|
|
Selected Balance Sheet
Ratios: |
|
|
|
|
Inventory turnover (1) |
1.4 |
1.5 |
|
|
Inventory turnover, net of payables (2) |
10.3 |
6.0 |
|
|
Average inventory per store (in thousands)
(3) |
$ 572 |
$ 567 |
|
|
Accounts payable to inventory (4) |
87.8% |
84.4% |
|
|
Return on equity (5) |
31.7% |
21.7% |
|
|
Return on assets (6) |
10.9% |
10.1% |
|
|
|
|
|
|
|
|
For the Three Months
Ended |
For the Nine Months
Ended |
|
September
30, |
September
30, |
|
2013 |
2012 |
2013 |
2012 |
Selected Financial Information (in
thousands): |
|
|
|
|
Capital expenditures |
$ 122,934 |
$ 66,014 |
$ 299,511 |
$ 217,341 |
Free cash flow (7) |
$ 157,502 |
$ 275,654 |
$ 420,337 |
$ 815,785 |
Depreciation and amortization |
$ 46,389 |
$ 44,266 |
$ 136,071 |
$ 132,496 |
Interest expense |
$ 13,295 |
$ 10,451 |
$ 36,162 |
$ 28,722 |
Lease and rental expense |
$ 63,551 |
$ 60,640 |
$ 190,905 |
$ 179,564 |
|
|
|
|
|
|
|
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, |
|
2013 |
2012 |
2013 |
2012 |
2013 |
2012 |
Beginning store count |
4,087 |
3,859 |
3,976 |
3,740 |
3,896 |
3,707 |
New stores opened |
50 |
38 |
163 |
161 |
187 |
195 |
Stores acquired |
-- |
-- |
-- |
-- |
56 |
-- |
Stores closed |
(2) |
(1) |
(4) |
(5) |
(4) |
(6) |
Ending store count |
4,135 |
3,896 |
4,135 |
3,896 |
4,135 |
3,896 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months
Ended |
For the Twelve Months
Ended |
|
|
|
September
30, |
September
30, |
|
|
|
2013 |
2012 |
2013 |
2012 |
|
|
Total employment |
61,296 |
52,834 |
|
|
|
|
Square footage (in thousands) |
29,820 |
27,751 |
|
|
|
|
Sales per weighted-average square foot
(8) |
$ 57.88 |
$ 57.55 |
$ 223.41 |
$ 222.89 |
|
|
Sales per weighted-average store (in
thousands) (9) |
$ 417 |
$ 409 |
$ 1,605 |
$ 1,583 |
|
|
|
|
|
|
|
|
|
(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 cost of goods sold for the last
12 months divided by average net inventory. Average net
inventory is calculated as the average of inventory less accounts
payable for the trailing four quarters used in determining the
denominator. |
(3) |
Calculated as inventory divided by store
count at the end of the reported period. |
(4) |
Calculated as accounts payable divided by
inventory. |
(5) |
Calculated as adjusted net income for the
last 12 months, adjusted to exclude the benefit related to the
former CSK officer clawback in the amount of $3 million ($2
million, net of tax), 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. |
(6) |
Calculated as adjusted net income for the
last 12 months, adjusted for the item discussed in footnote (5),
divided by average total assets. Average total assets are
calculated as the average of total assets for the trailing four
quarters used in determining the denominator. |
(7) |
Calculated as net cash provided by operating
activities less capital expenditures for the period. |
(8) |
Calculated as sales less jobber sales,
divided by weighted-average square foot. Weighted-average
sales per square foot are weighted to consider the approximate
dates of store openings or expansions. |
(9) |
Calculated as sales less jobber sales,
divided by weighted-average stores. Weighted-average sales per
store are weighted to consider the approximate dates of store
openings or expansions. |
CONTACT: Investor & Media Contact
Mark Merz (417) 829-5878
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