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
first quarter ended March 31, 2017.
1st Quarter Financial
ResultsSales for the first quarter ended March 31,
2017, increased $60 million, or 3%, to $2.16 billion from $2.10
billion for the same period one year ago. Gross profit for
the first quarter increased to $1.13 billion (or 52.5% of sales)
from $1.10 billion (or 52.4% of sales) for the same period one year
ago, representing an increase of 3%. Selling, general and
administrative expenses for the first quarter increased to $728
million (or 33.8% of sales) from $679 million (or 32.4% of sales)
for the same period one year ago, representing an increase of
7%. Operating income for the first quarter decreased to $403
million (or 18.7% of sales) from $419 million (or 20.0% of sales)
for the same period one year ago, representing a decrease of
4%. The Company’s results for the prior period ended March
31, 2016, included a benefit from one additional day due to Leap
Day in February 2016.
Net income for the first quarter ended
March 31, 2017, increased $10 million, or 4%, to $265 million
(or 12.3% of sales) from $255 million (or 12.2% of sales) for the
same period one year ago. Diluted earnings per common share
for the first quarter increased 9% to $2.83 on 93 million shares
versus $2.59 on 99 million shares for the same period one year
ago. The Company adopted a new share-based compensation
accounting standard during the first quarter ended March 31,
2017, which requires excess tax benefits from share-based
compensation payments to be recorded in the income statement, and
the Company’s first quarter diluted earnings per common share of
$2.83 includes a $0.23 benefit from the adoption of this new
accounting standard.
“On our February 7, 2017 conference call, we
discussed the volatility weather brings to our first quarter
results. Based on mild January temperatures and the headwind
that created in our business, we reduced our quarterly comparable
store sales guidance for the first quarter to 2% to 4%. The
unseasonal weather continued in February, and the absence of
typical spring weather in many of our markets in March, combined
with the dislocation of tax refunds, continued to create headwinds
for the remainder of the quarter. We believe these headwinds
were the primary drivers of our below expectation comparable store
sales of 0.8%.” commented Greg Henslee, O’Reilly’s CEO. “With
these transient headwinds behind us and the onset of our spring
selling season, we are establishing our second quarter comparable
store sales guidance of 3% to 5% and maintaining our full-year
comparable store sales guidance of 3% to 5%. We continue to
strongly believe our Team’s strength and ability to consistently
execute our business model, along with the positive industry
factors of an aging vehicle fleet, increasing number of vehicles on
the road, relatively low gas prices and low unemployment rates,
will continue to underpin our solid, long-term profitable
growth.”
“Excluding the benefit of the change in
accounting for stock option gains, our earnings per share fell well
short of our guidance range of $2.78 to $2.88, as the shortfall in
sales created leverage pressure on all areas of our business.
The unseasonal weather created mix headwinds to our gross margin
and the soft sales resulted in deleverage of fixed costs in our
gross margin and our SG&A, although our Team did a good job of
controlling expenses during this slower than anticipated demand
environment. Despite the specific challenges of the first
quarter, our Team was able to generate a very respectable 18.7%
operating profit.” Mr. Henslee continued, “Looking forward to the
remainder of the year, we continue to expect our business to be
solid and are reiterating our full-year operating profit guidance
range of 20.1% to 20.5% of sales.”
Share Repurchase ProgramDuring
the first quarter ended March 31, 2017, the Company
repurchased 1.8 million shares of its common stock, at an average
price per share of $268.09, for a total investment of $490
million. Subsequent to the end of the first quarter and
through the date of this release, the Company repurchased an
additional 0.3 million shares of its common stock, at an average
price per share of $259.18, for a total investment of $76
million. The Company has repurchased a total of 59.1 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 $125.75, for a total
aggregate investment of $7.43 billion. As of the date of this
release, the Company had approximately $322 million remaining under
its current share repurchase authorization.
1st Quarter Comparable Store Sales
ResultsComparable 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, as well as the sales from Leap Day in the three
months ended March 31, 2016. Comparable store sales
increased 0.8% for the first quarter ended March 31, 2017, on
top of 6.1% for the same period one year ago.
2nd Quarter and Updated Full-Year 2017
GuidanceThe table below outlines the Company’s guidance
for selected second quarter and updated full-year 2017 financial
data:
|
For the Three Months Ending June 30, 2017 |
|
For the Year Ending December 31, 2017 |
Comparable store
sales |
3% to
5% |
|
3% to
5% |
Total revenue |
|
|
$9.1
billion to $9.3 billion |
Gross profit as a
percentage of sales |
|
|
52.8%
to 53.2% |
Operating income as a
percentage of sales |
|
|
20.1%
to 20.5% |
Diluted earnings per
share (1) |
$3.10
to $3.20 |
|
$12.05
to $12.15 |
Capital
expenditures |
|
|
$470
million to $500 million |
Free cash flow (2) |
|
|
$930
million to $980 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 and excess tax benefit from
share-based compensation payments for the period.
Non-GAAP InformationThis
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
InformationThe Company will host a conference call on
Thursday, April 27, 2017, 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) 619-6397; the
conference call identification number is 44556935. A replay
of the conference call will be available on the Company’s website
through Thursday, April 26, 2018.
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 March 31, 2017,
the Company operated 4,888 stores in 47 states.
Forward-Looking StatementsThe
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, 2016, 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) |
|
|
|
|
|
|
|
March 31, 2017 |
|
March 31, 2016 |
|
December 31, 2016 |
|
(Unaudited) |
|
(Unaudited) |
|
(Note) |
Assets |
|
|
|
|
|
Current assets: |
|
|
|
|
|
Cash and
cash equivalents |
$ |
27,539 |
|
|
$ |
716,008 |
|
|
$ |
146,598 |
|
Accounts
receivable, net |
195,651 |
|
|
178,282 |
|
|
197,274 |
|
Amounts
receivable from suppliers |
71,157 |
|
|
68,486 |
|
|
82,105 |
|
Inventory |
2,872,646 |
|
|
2,701,760 |
|
|
2,778,976 |
|
Other
current assets |
38,540 |
|
|
36,927 |
|
|
53,022 |
|
Total
current assets |
3,205,533 |
|
|
3,701,463 |
|
|
3,257,975 |
|
|
|
|
|
|
|
Property and equipment,
at cost |
4,935,126 |
|
|
4,473,747 |
|
|
4,832,342 |
|
Less: accumulated
depreciation and amortization |
1,760,476 |
|
|
1,559,820 |
|
|
1,708,911 |
|
Net
property and equipment |
3,174,650 |
|
|
2,913,927 |
|
|
3,123,431 |
|
|
|
|
|
|
|
Notes receivable, less
current portion |
— |
|
|
12,172 |
|
|
— |
|
Goodwill |
785,568 |
|
|
757,130 |
|
|
785,399 |
|
Other assets, net |
37,973 |
|
|
35,081 |
|
|
37,384 |
|
Total assets |
$ |
7,203,724 |
|
|
$ |
7,419,773 |
|
|
$ |
7,204,189 |
|
|
|
|
|
|
|
Liabilities and
shareholders’ equity |
|
|
|
|
|
Current
liabilities: |
|
|
|
|
|
Accounts
payable |
$ |
2,987,996 |
|
|
$ |
2,782,609 |
|
|
$ |
2,936,656 |
|
Self-insurance reserves |
70,479 |
|
|
71,069 |
|
|
67,921 |
|
Accrued
payroll |
75,762 |
|
|
66,842 |
|
|
71,717 |
|
Accrued
benefits and withholdings |
49,081 |
|
|
49,175 |
|
|
74,454 |
|
Income
taxes payable |
89,640 |
|
|
114,321 |
|
|
— |
|
Other
current liabilities |
232,805 |
|
|
231,661 |
|
|
249,901 |
|
Total
current liabilities |
3,505,763 |
|
|
3,315,677 |
|
|
3,400,649 |
|
|
|
|
|
|
|
Long-term debt |
1,977,539 |
|
|
1,885,877 |
|
|
1,887,019 |
|
Deferred income
taxes |
92,610 |
|
|
76,450 |
|
|
90,166 |
|
Other liabilities |
205,216 |
|
|
201,928 |
|
|
199,219 |
|
|
|
|
|
|
|
Shareholders’
equity: |
|
|
|
|
|
Common
stock, $0.01 par value: |
|
|
|
|
|
Authorized shares – 245,000,000 |
|
|
|
|
|
Issued
and outstanding shares – |
|
|
|
|
|
91,320,866 as of March 31, 2017, |
|
|
|
|
|
96,726,677 as of March 31, 2016, and |
|
|
|
|
|
92,851,815 as of December 31, 2016 |
913 |
|
|
967 |
|
|
929 |
|
Additional paid-in capital |
1,331,416 |
|
|
1,301,057 |
|
|
1,336,707 |
|
Retained
earnings |
90,267 |
|
|
637,817 |
|
|
289,500 |
|
Total shareholders’
equity |
1,422,596 |
|
|
1,939,841 |
|
|
1,627,136 |
|
|
|
|
|
|
|
Total liabilities and
shareholders’ equity |
$ |
7,203,724 |
|
|
$ |
7,419,773 |
|
|
$ |
7,204,189 |
|
Note: The balance sheet at December 31,
2016, 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 March
31, |
|
2017 |
|
2016 |
Sales |
$ |
2,156,259 |
|
|
$ |
2,096,150 |
|
Cost of goods sold,
including warehouse and distribution expenses |
1,025,112 |
|
|
998,571 |
|
Gross profit |
1,131,147 |
|
|
1,097,579 |
|
|
|
|
|
Selling, general and
administrative expenses |
727,990 |
|
|
678,953 |
|
Operating income |
403,157 |
|
|
418,626 |
|
|
|
|
|
Other income
(expense): |
|
|
|
Interest
expense |
(19,404 |
) |
|
(14,821 |
) |
Interest
income |
706 |
|
|
752 |
|
Other,
net |
765 |
|
|
1,017 |
|
Total
other expense |
(17,933 |
) |
|
(13,052 |
) |
|
|
|
|
Income before income
taxes |
385,224 |
|
|
405,574 |
|
Provision for income
taxes (1) |
120,290 |
|
|
150,200 |
|
Net income (1) |
$ |
264,934 |
|
|
$ |
255,374 |
|
|
|
|
|
Earnings per
share-basic: |
|
|
|
Earnings per share |
$ |
2.88 |
|
|
$ |
2.63 |
|
Weighted-average common
shares outstanding – basic |
92,001 |
|
|
97,140 |
|
|
|
|
|
Earnings per
share-assuming dilution: (1) |
|
|
|
Earnings per share |
$ |
2.83 |
|
|
$ |
2.59 |
|
Weighted-average common
shares outstanding – assuming dilution |
93,495 |
|
|
98,537 |
|
(1) The Company adopted a new share-based
compensation accounting standard during the first quarter ended
March 31, 2017. This new standard requires excess tax
benefits related to share-based compensation payments to be
recorded through the income statement. The adoption of this
new accounting standard resulted in a $0.23 benefit to diluted
earnings per common share for the first quarter ended March 31,
2017, comprised of a $0.25 earnings per share increase from a lower
effective tax rate, partially offset by a $0.02 earnings per share
decrease from an increase in the number of weighted-average common
shares outstanding - assuming dilution. The Company’s
Condensed Consolidated Statement of Income for the prior period
ending March 31, 2016, was not restated to conform to the current
period’s presentation.
O’REILLY AUTOMOTIVE, INC. AND
SUBSIDIARIES |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS |
(Unaudited) |
(In thousands) |
|
|
For the Three Months Ended March
31, |
|
2017 |
|
2016 |
|
|
|
(As Adjusted, Note) |
Operating
activities: |
|
|
|
Net income |
$ |
264,934 |
|
|
$ |
255,374 |
|
Adjustments to
reconcile net income to net cash provided by operating
activities: |
|
|
|
Depreciation and amortization of property, equipment and
intangibles |
57,008 |
|
|
52,778 |
|
Amortization of debt discount and issuance costs |
642 |
|
|
546 |
|
Deferred
income taxes |
2,611 |
|
|
(3,322 |
) |
Share-based compensation programs |
5,428 |
|
|
5,178 |
|
Other |
1,810 |
|
|
1,481 |
|
Changes
in operating assets and liabilities: |
|
|
|
Accounts
receivable |
219 |
|
|
(19,206 |
) |
Inventory |
(93,167 |
) |
|
(70,745 |
) |
Accounts
payable |
51,230 |
|
|
174,378 |
|
Income
taxes payable |
116,009 |
|
|
127,638 |
|
Other |
(30,024 |
) |
|
(20,979 |
) |
Net cash
provided by operating activities |
376,700 |
|
|
503,121 |
|
|
|
|
|
Investing
activities: |
|
|
|
Purchases of property
and equipment |
(110,632 |
) |
|
(103,974 |
) |
Proceeds from sale of
property and equipment |
245 |
|
|
864 |
|
Payments received on
notes receivable |
— |
|
|
1,047 |
|
Other |
(636 |
) |
|
— |
|
Net cash
used in investing activities |
(111,023 |
) |
|
(102,063 |
) |
|
|
|
|
Financing
activities: |
|
|
|
Proceeds from
borrowings on revolving credit facility |
482,000 |
|
|
— |
|
Payments on revolving
credit facility |
(392,000 |
) |
|
— |
|
Proceeds from the
issuance of long-term debt |
— |
|
|
499,160 |
|
Payment of debt
issuance costs |
— |
|
|
(3,725 |
) |
Repurchases of common
stock |
(490,330 |
) |
|
(312,656 |
) |
Net proceeds from
issuance of common stock |
15,750 |
|
|
16,074 |
|
Other |
(156 |
) |
|
(204 |
) |
Net cash
(used in) provided by financing activities |
(384,736 |
) |
|
198,649 |
|
|
|
|
|
Net (decrease) increase
in cash and cash equivalents |
(119,059 |
) |
|
599,707 |
|
Cash and cash
equivalents at beginning of the period |
146,598 |
|
|
116,301 |
|
Cash and cash
equivalents at end of the period |
$ |
27,539 |
|
|
$ |
716,008 |
|
|
|
|
|
Supplemental
disclosures of cash flow information: |
|
|
|
Income taxes paid |
$ |
— |
|
|
$ |
23,765 |
|
Interest paid, net of
capitalized interest |
31,954 |
|
|
23,063 |
|
Note: The Company adopted a new share-based
compensation accounting standard during the first quarter ended
March 31, 2017. This new standard requires excess tax
benefits related to share-based compensation payments to be
presented as operating activities in the statement of cash flows,
rather than presented as an inflow from financing activities and an
outflow from operating activities under the previous
standard. The retrospective application of this new
accounting standard resulted in the reclassification of $14.8
million of Excess tax benefit from share-based compensation from
Net cash provided by financing activities to Net cash provided by
operating activities for the three months ended March 31, 2016.
O’REILLY AUTOMOTIVE, INC. AND
SUBSIDIARIES |
SELECTED FINANCIAL INFORMATION |
(Unaudited) |
|
|
|
For the Twelve Months Ended March
31, |
Adjusted Debt to EBITDAR: |
2017 |
|
2016 |
(In
thousands, except adjusted debt to EBITDAR ratio) |
|
|
|
GAAP
debt |
$ |
1,977,539 |
|
|
$ |
1,885,877 |
|
Add: |
Letters of credit |
41,196 |
|
|
38,936 |
|
|
Discount on senior
notes |
3,002 |
|
|
3,586 |
|
|
Debt issuance
costs |
9,459 |
|
|
10,537 |
|
|
Six-times rent
expense |
1,729,020 |
|
|
1,651,944 |
|
Adjusted
debt |
$ |
3,760,216 |
|
|
$ |
3,590,880 |
|
|
|
|
|
|
GAAP net
income |
$ |
1,047,251 |
|
|
$ |
973,726 |
|
Add: |
Interest expense |
75,514 |
|
|
57,548 |
|
|
Provision for income
taxes |
569,590 |
|
|
554,550 |
|
|
Depreciation and
amortization |
222,096 |
|
|
208,084 |
|
|
Share-based
compensation expense |
19,109 |
|
|
21,187 |
|
|
Rent expense |
288,170 |
|
|
275,324 |
|
EBITDAR |
$ |
2,221,730 |
|
|
$ |
2,090,419 |
|
|
|
|
|
|
Adjusted
debt to EBITDAR |
|
1.69 |
|
|
|
1.72 |
|
|
March 31, |
|
2017 |
|
2016 |
Selected
Balance Sheet Ratios: |
|
|
|
Inventory turnover
(1) |
1.5 |
|
|
1.5 |
|
Average inventory per
store (in thousands) (2) |
$ |
588 |
|
|
$ |
584 |
|
Accounts payable to
inventory (3) |
104.0 |
% |
|
103.0 |
% |
Return on equity
(4) |
63.1 |
% |
|
49.5 |
% |
Return on assets
(5) |
14.4 |
% |
|
14.2 |
% |
|
For the Three Months Ended March
31, |
|
2017 |
|
2016 |
Reconciliation of Free Cash Flow (in
thousands): |
|
|
|
Cash
provided by operating activities (6) |
$ |
376,700 |
|
|
$ |
503,121 |
|
Less: |
Capital
expenditures |
110,632 |
|
|
103,974 |
|
|
Excess tax benefit from
share-based compensation payments |
23,314 |
|
|
14,762 |
|
Free cash
flow |
$ |
242,754 |
|
|
$ |
384,385 |
|
Store and Team Member Information: |
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended March
31, |
|
For the Twelve Months Ended March
31, |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
Beginning store
count |
4,829 |
|
|
4,571 |
|
|
4,623 |
|
|
4,433 |
|
New stores opened |
60 |
|
|
52 |
|
|
220 |
|
|
194 |
|
Stores acquired |
— |
|
|
— |
|
|
48 |
|
|
— |
|
Stores closed |
(1 |
) |
|
— |
|
|
(3 |
) |
|
(4 |
) |
Ending store count |
4,888 |
|
|
4,623 |
|
|
4,888 |
|
|
4,623 |
|
|
For the Three Months Ended March
31, |
|
For the Twelve Months Ended March
31, |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
Total employment |
75,108 |
|
|
73,599 |
|
|
|
|
|
Square footage (in
thousands) |
35,573 |
|
|
33,559 |
|
|
|
|
|
Sales per
weighted-average square foot (7) |
$ |
60.53 |
|
|
$ |
62.39 |
|
|
$ |
249.47 |
|
|
$ |
247.28 |
|
Sales per
weighted-average store (in thousands) (8) |
$ |
440 |
|
|
$ |
452 |
|
|
$ |
1,813 |
|
|
$ |
1,792 |
|
(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) Prior period amount has been reclassified to conform to
current period presentation, due to the Company’s adoption of a new
accounting standard during the first quarter ended March 31,
2017. |
(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 closures. |
(8) Calculated as sales less jobber sales, divided by
weighted-average stores. Weighted-average stores is
determined by weighting stores based on their approximate dates of
openings, acquisitions or closures. |
For further information contact:
Investor & Media Contact
Mark Merz (417) 829-5878
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