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, 2019.
1st Quarter Financial
ResultsGreg Johnson, O’Reilly’s CEO and Co-President,
commented, “Team O’Reilly’s commitment to consistently providing
excellent customer service resulted in another solid, profitable
quarter, highlighted by a 5% increase in operating profit dollars
and a 12% increase in diluted earnings per share to $4.05, which
also benefited from a lower tax rate, and exceeded the top end of
our first quarter guidance range. Weather in the first
quarter has historically driven volatility in our business, and we
experienced significant demand volatility this quarter. While
we saw a fair amount of frigid, snowy weather that drove business
during the quarter, and should help drive demand for the remainder
of the year, we also experienced abnormally high levels of rain,
which is not conducive to our business. Additionally, delays
in tax refunds and a reduction of total refund dollars during the
quarter were a headwind to our business. However, March
finished strong, and we remain confident in the underlying business
trends in our industry. As a result, we are establishing our
second quarter comparable store sales guidance at a range of 3% to
5% and are also reiterating our full-year comparable stores sales
guidance at a range of 3% to 5%. I would like to take this
opportunity to thank each of our over 80,000 Team Members for their
hard work and dedication to O’Reilly’s continued success.”
Sales for the first quarter ended March 31,
2019, increased $128 million, or 6%, to $2.41 billion from $2.28
billion for the same period one year ago. Gross profit for
the first quarter increased 6% to $1.28 billion (or 53.1% of sales)
from $1.20 billion (or 52.6% of sales) for the same period one year
ago. Selling, general and administrative expenses for the
first quarter increased 7% to $835 million (or 34.6% of sales) from
$778 million (or 34.1% of sales) for the same period one year
ago. Operating income for the first quarter increased 5% to
$445 million (or 18.5% of sales) from $423 million (or 18.5% of
sales) for the same period one year ago.
Net income for the first quarter ended
March 31, 2019, increased $16 million, or 5%, to $321 million
(or 13.3% of sales) from $305 million (or 13.4% of sales) for the
same period one year ago. Diluted earnings per common share
for the first quarter increased 12% to $4.05 on 79 million shares
versus $3.61 on 85 million shares for the same period one year
ago.
Mr. Johnson continued, “During the first
quarter, we opened 62 net, new stores across 27 states, and we
continue to be pleased with the performance of our new store
openings. We are also very happy to announce the purchase of
a 580,000 square foot building in northern Mississippi during the
first quarter, which will be the location for our newest
distribution center project. This facility will allow us to
provide an even higher level of service to the Memphis area
markets, while also adding capacity for additional store growth
throughout the central and southern regions of the country.
Our industry leading parts availability and highly trained and
technically proficient Team Members are our greatest strengths, and
we continue to be pleased with the opportunities to profitably grow
and gain share in new and existing markets.”
Share Repurchase ProgramDuring
the first quarter ended March 31, 2019, the Company
repurchased 0.9 million shares of its common stock, at an average
price per share of $347.09, for a total investment of $322
million. Subsequent to the end of the first quarter and
through the date of this release, the Company did not repurchase
any additional shares of its common stock. The Company has
repurchased a total of 73.2 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 $151.16, for a total aggregate investment of
$11.07 billion. As of the date of this release, the Company
had approximately $680 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. Online sales, resulting from ship-to-home
orders and pick-up-in-store orders, for stores open at least one
year, are included in the comparable store sales calculation.
Comparable store sales increased 3.2% for the first quarter ended
March 31, 2019, on top of 3.4% for the same period one year
ago.
2nd Quarter and Updated Full-Year 2019
GuidanceThe table below outlines the Company’s guidance
for selected second quarter and updated full-year 2019 financial
data:
|
For the Three Months Ending June 30, 2019 |
|
For the Year Ending December 31,
2019 |
Comparable store
sales |
3% to
5% |
|
3% to 5% |
Total revenue |
|
|
$10.0 billion to $10.3 billion |
Gross profit as a
percentage of sales |
|
|
52.7% to 53.2% |
Operating income as a
percentage of sales |
|
|
18.7% to 19.2% |
Effective income tax
rate |
|
|
23.5% |
Diluted earnings per
share (1) |
$4.55
to $4.65 |
|
$17.37 to $17.47 |
Net cash provided by
operating activities |
|
|
$1.6 billion to $1.8 billion |
Capital
expenditures |
|
|
$625 million to $675 million |
Free cash flow (2) |
|
|
$1.0 billion to $1.1 billion |
(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) Free cash flow is a non-GAAP financial
measure. The table below reconciles Free cash flow guidance
to Net cash provided by operating activities guidance, the most
directly comparable GAAP financial measure:
(in
millions) |
For the Year Ending December 31, 2019 |
Net cash
provided by operating activities |
$ |
1,635 |
|
to |
$ |
1,790 |
|
Less: |
Capital
expenditures |
625 |
|
to |
675 |
|
|
Excess tax benefit from
share-based compensation payments |
10 |
|
to |
15 |
|
Free cash
flow |
$ |
1,000 |
|
to |
$ |
1,100 |
|
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 table above and the selected financial information below.
Earnings Conference Call
InformationThe Company will host a conference call on
Thursday, April 25, 2019, 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) 619-6396; the
conference call identification number is 48386877. A replay
of the conference call will be available on the Company’s website
through Friday, April 24, 2020.
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, 2019,
the Company operated 5,306 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, tariffs, 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, information security and cyber-attacks, 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, 2018, and subsequent Securities and
Exchange Commission filings 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.
For further
information contact: |
Investor &
Media Contact |
|
Mark Merz (417)
829-5878 |
O’REILLY AUTOMOTIVE, INC. AND
SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE SHEETS(In
thousands, except share data)
|
March 31, 2019 (1) |
|
March 31, 2018 |
|
December 31, 2018 |
|
(Unaudited) |
|
(Unaudited) |
|
(Note) |
Assets |
|
|
|
|
|
Current assets: |
|
|
|
|
|
Cash and
cash equivalents |
$ |
56,717 |
|
|
$ |
38,525 |
|
|
$ |
31,315 |
|
Accounts
receivable, net |
250,680 |
|
|
224,386 |
|
|
192,026 |
|
Amounts
receivable from suppliers |
66,452 |
|
|
78,232 |
|
|
78,155 |
|
Inventory |
3,228,901 |
|
|
3,052,748 |
|
|
3,193,344 |
|
Other
current assets |
46,896 |
|
|
52,520 |
|
|
48,262 |
|
Total
current assets |
3,649,646 |
|
|
3,446,411 |
|
|
3,543,102 |
|
|
|
|
|
|
|
Property and equipment,
at cost |
5,761,729 |
|
|
5,292,431 |
|
|
5,645,552 |
|
Less: accumulated
depreciation and amortization |
2,085,019 |
|
|
1,902,668 |
|
|
2,058,550 |
|
Net
property and equipment |
3,676,710 |
|
|
3,389,763 |
|
|
3,587,002 |
|
|
|
|
|
|
|
Operating lease,
right-of-use assets |
1,886,364 |
|
|
— |
|
|
— |
|
Goodwill |
808,717 |
|
|
789,104 |
|
|
807,260 |
|
Other assets, net |
40,125 |
|
|
41,379 |
|
|
43,425 |
|
Total assets |
$ |
10,061,562 |
|
|
$ |
7,666,657 |
|
|
$ |
7,980,789 |
|
|
|
|
|
|
|
Liabilities and
shareholders’ equity |
|
|
|
|
|
Current
liabilities: |
|
|
|
|
|
Accounts
payable |
$ |
3,438,679 |
|
|
$ |
3,222,785 |
|
|
$ |
3,376,403 |
|
Self-insurance reserves |
77,359 |
|
|
74,826 |
|
|
77,012 |
|
Accrued
payroll |
94,192 |
|
|
84,579 |
|
|
86,520 |
|
Accrued
benefits and withholdings |
65,106 |
|
|
62,435 |
|
|
89,082 |
|
Income
taxes payable |
92,816 |
|
|
66,618 |
|
|
11,013 |
|
Current
portion of operating lease liabilities |
296,605 |
|
|
— |
|
|
— |
|
Other
current liabilities |
261,575 |
|
|
236,938 |
|
|
253,990 |
|
Total
current liabilities |
4,326,332 |
|
|
3,748,181 |
|
|
3,894,020 |
|
|
|
|
|
|
|
Long-term debt |
3,460,921 |
|
|
3,193,066 |
|
|
3,417,122 |
|
Operating lease
liabilities, less current portion |
1,629,311 |
|
|
— |
|
|
— |
|
Deferred income
taxes |
109,480 |
|
|
89,776 |
|
|
105,566 |
|
Other liabilities |
163,153 |
|
|
211,806 |
|
|
210,414 |
|
|
|
|
|
|
|
Shareholders’
equity: |
|
|
|
|
|
Common
stock, $0.01 par value: |
|
|
|
|
|
Authorized shares – 245,000,000 |
|
|
|
|
|
Issued
and outstanding shares – |
|
|
|
|
|
78,262,099 as of March 31, 2019, |
|
|
|
|
|
82,267,885 as of March 31, 2018, and |
|
|
|
|
|
79,043,919 as of December 31, 2018 |
783 |
|
|
823 |
|
|
790 |
|
Additional paid-in capital |
1,268,032 |
|
|
1,247,366 |
|
|
1,262,063 |
|
Retained
deficit |
(896,450 |
) |
|
(824,361 |
) |
|
(909,186 |
) |
Total shareholders’
equity |
372,365 |
|
|
423,828 |
|
|
353,667 |
|
|
|
|
|
|
|
Total liabilities and
shareholders’ equity |
$ |
10,061,562 |
|
|
$ |
7,666,657 |
|
|
$ |
7,980,789 |
|
Note: The balance sheet at December 31,
2018, 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.
(1) The Company adopted Accounting Standard
Codification 842 - Leases (“ASC 842”) during the first quarter
ended March 31, 2019, using the additional, optional transition
method, which does not require prior periods to be restated.
O’REILLY AUTOMOTIVE, INC. AND
SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF
INCOME(Unaudited)(In thousands, except per share data)
|
For the Three Months Ended March
31, |
|
2019 |
|
2018 |
Sales |
$ |
2,410,608 |
|
|
$ |
2,282,681 |
|
Cost of goods sold,
including warehouse and distribution expenses |
1,131,318 |
|
|
1,081,423 |
|
Gross profit |
1,279,290 |
|
|
1,201,258 |
|
|
|
|
|
Selling, general and
administrative expenses |
834,504 |
|
|
778,412 |
|
Operating income |
444,786 |
|
|
422,846 |
|
|
|
|
|
Other income
(expense): |
|
|
|
Interest
expense |
(34,291 |
) |
|
(28,217 |
) |
Interest
income |
554 |
|
|
572 |
|
Other,
net |
3,103 |
|
|
205 |
|
Total
other expense |
(30,634 |
) |
|
(27,440 |
) |
|
|
|
|
Income before income
taxes |
414,152 |
|
|
395,406 |
|
Provision for income
taxes |
93,000 |
|
|
90,500 |
|
Net income |
$ |
321,152 |
|
|
$ |
304,906 |
|
|
|
|
|
Earnings per
share-basic: |
|
|
|
Earnings per share |
$ |
4.09 |
|
|
$ |
3.65 |
|
Weighted-average common
shares outstanding – basic |
78,484 |
|
|
83,530 |
|
|
|
|
|
Earnings per
share-assuming dilution: |
|
|
|
Earnings per share |
$ |
4.05 |
|
|
$ |
3.61 |
|
Weighted-average common
shares outstanding – assuming dilution |
79,297 |
|
|
84,523 |
|
O’REILLY AUTOMOTIVE, INC. AND
SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS(Unaudited) (In thousands)
|
For the Three Months Ended March
31, |
|
2019 |
|
2018 |
|
|
|
|
Operating
activities: |
|
|
|
Net income |
$ |
321,152 |
|
|
$ |
304,906 |
|
Adjustments to
reconcile net income to net cash provided by operating
activities: |
|
|
|
Depreciation and amortization of property, equipment and
intangibles |
63,964 |
|
|
69,920 |
|
Amortization of debt discount and issuance costs |
918 |
|
|
795 |
|
Deferred
income taxes |
4,312 |
|
|
4,370 |
|
Share-based compensation programs |
5,424 |
|
|
5,176 |
|
Other |
2,245 |
|
|
2,244 |
|
Changes
in operating assets and liabilities: |
|
|
|
Accounts
receivable |
(60,914 |
) |
|
(10,421 |
) |
Inventory |
(35,405 |
) |
|
(42,643 |
) |
Accounts
payable |
60,918 |
|
|
32,756 |
|
Income
taxes payable |
82,476 |
|
|
79,380 |
|
Other |
(4,468 |
) |
|
(14,206 |
) |
Net cash
provided by operating activities |
440,622 |
|
|
432,277 |
|
|
|
|
|
Investing
activities: |
|
|
|
Purchases of property
and equipment |
(152,914 |
) |
|
(114,843 |
) |
Proceeds from sale of
property and equipment |
1,811 |
|
|
752 |
|
Other |
(295 |
) |
|
(375 |
) |
Net cash
used in investing activities |
(151,398 |
) |
|
(114,466 |
) |
|
|
|
|
Financing
activities: |
|
|
|
Proceeds from
borrowings on revolving credit facility |
874,000 |
|
|
755,000 |
|
Payments on revolving
credit facility |
(831,000 |
) |
|
(541,000 |
) |
Repurchases of common
stock |
(321,856 |
) |
|
(549,450 |
) |
Net proceeds from
issuance of common stock |
15,224 |
|
|
11,972 |
|
Other |
(190 |
) |
|
(2,156 |
) |
Net cash
used in financing activities |
(263,822 |
) |
|
(325,634 |
) |
|
|
|
|
Net increase (decrease)
in cash and cash equivalents |
25,402 |
|
|
(7,823 |
) |
Cash and cash
equivalents at beginning of the period |
31,315 |
|
|
46,348 |
|
Cash and cash
equivalents at end of the period |
$ |
56,717 |
|
|
$ |
38,525 |
|
|
|
|
|
Supplemental
disclosures of cash flow information: |
|
|
|
Income taxes paid |
$ |
5,335 |
|
|
$ |
7,939 |
|
Interest paid, net of
capitalized interest |
47,796 |
|
|
48,763 |
|
O’REILLY AUTOMOTIVE, INC. AND
SUBSIDIARIESSELECTED FINANCIAL
INFORMATION (Unaudited)
|
For the Twelve Months Ended March
31, |
Adjusted Debt to EBITDAR: |
2019 |
|
2018 |
(In
thousands, except adjusted debt to EBITDAR ratio) |
|
|
|
GAAP
debt |
$ |
3,460,921 |
|
|
$ |
3,193,066 |
|
Add: |
Letters of credit |
39,201 |
|
|
36,943 |
|
|
Discount on senior
notes |
4,090 |
|
|
3,548 |
|
|
Debt issuance
costs |
14,989 |
|
|
13,386 |
|
|
Six-times rent
expense |
1,937,286 |
|
|
1,810,932 |
|
Adjusted
debt |
$ |
5,456,487 |
|
|
$ |
5,057,875 |
|
|
|
|
|
|
GAAP net
income |
$ |
1,340,733 |
|
|
$ |
1,173,776 |
|
Add: |
Interest expense |
128,203 |
|
|
100,162 |
|
|
Provision for income
taxes |
372,100 |
|
|
474,210 |
|
|
Depreciation and
amortization |
252,981 |
|
|
246,757 |
|
|
Share-based
compensation expense |
20,424 |
|
|
19,149 |
|
|
Rent expense (i) |
322,881 |
|
|
301,822 |
|
EBITDAR |
$ |
2,437,322 |
|
|
$ |
2,315,876 |
|
|
|
|
|
|
Adjusted
debt to EBITDAR |
2.24 |
|
|
2.18 |
|
(i) The table below outlines the
calculation of Rent expense and reconciles Rent expense to Total
lease cost, per ASC 842, the most directly comparable GAAP
financial measure, for the three and twelve months ended
March 31, 2019 (in thousands):
Total lease
cost, per ASC 842, for the three months ended March 31, 2019 |
$ |
98,293 |
|
Less: |
Variable non-contract
operating lease components, related to property taxes and
insurance, for the three months ended March 31, 2019 |
14,567 |
|
Rent
expense for the three months ended March 31, 2019 |
83,726 |
|
Add: |
Rent expense for the nine
months ended December 31, 2018, as previously reported prior to the
adoption of ASC 842 |
239,155 |
|
Rent
expense for the twelve months ended March 31, 2019 |
$ |
322,881 |
|
|
March 31, |
|
2019 |
|
2018 |
Selected
Balance Sheet Ratios: |
|
|
|
Inventory turnover
(1) |
1.4 |
|
|
1.4 |
|
Average inventory per
store (in thousands) (2) |
$ |
609 |
|
|
$ |
599 |
|
Accounts payable to
inventory (3) |
106.5 |
% |
|
105.6 |
% |
Return on assets
(4) |
15.9 |
% |
|
15.6 |
% |
|
For the Three Months Ended March
31, |
|
2019 |
|
2018 |
Reconciliation of Free Cash Flow (in
thousands): |
|
|
|
Net cash
provided by operating activities |
$ |
440,622 |
|
|
$ |
432,277 |
|
Less: |
Capital
expenditures |
152,914 |
|
|
114,843 |
|
|
Excess tax benefit from
share-based compensation payments |
8,513 |
|
|
6,318 |
|
Free cash
flow |
$ |
279,195 |
|
|
$ |
311,116 |
|
Store and Team Member
Information: |
|
|
|
|
|
|
|
|
|
|
|
For the
Three Months Ended March 31, |
|
For the
Twelve Months Ended March 31, |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
Beginning store count |
5,219 |
|
|
5,019 |
|
|
5,097 |
|
|
4,888 |
|
New stores opened |
64 |
|
|
78 |
|
|
192 |
|
|
216 |
|
Bennett stores acquired, net of stores merged
(5) |
25 |
|
|
— |
|
|
25 |
|
|
— |
|
Stores closed |
(2 |
) |
|
— |
|
|
(8 |
) |
|
(7 |
) |
Ending store count |
5,306 |
|
|
5,097 |
|
|
5,306 |
|
|
5,097 |
|
|
For the Three Months Ended March
31, |
|
For the Twelve Months Ended March
31, |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
Total employment |
80,366 |
|
|
76,946 |
|
|
|
|
|
Square footage (in
thousands) |
39,110 |
|
|
37,339 |
|
|
|
|
|
Sales per
weighted-average square foot (6) |
$ |
61.41 |
|
|
$ |
61.15 |
|
|
$ |
251.29 |
|
|
$ |
248.58 |
|
Sales per
weighted-average store (in thousands) (7) |
$ |
452 |
|
|
$ |
447 |
|
|
$ |
1,847 |
|
|
$ |
1,814 |
|
(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
assets. Average total assets is calculated as the average of
total assets for the trailing four quarters used in determining the
denominator. |
(5) O’Reilly acquired 33
Bennett Auto Supply, Inc. (“Bennett”) stores after the close of
business on December 31, 2018. During the first quarter ended
March 31, 2019, O’Reilly merged eight of the acquired Bennett
stores into existing O’Reilly locations and plans to merge an
additional five acquired Bennett stores into existing O’Reilly
locations during the second quarter ending June 30, 2019. |
(6) 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. |
(7) 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. |
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