ORLY
$240.20
O'Reilly Automotive
($1.25)
(.52%)
Earnings Details
3rd Quarter September 2017
Wednesday, October 25, 2017 4:31:00 PM
Tweet Share Watch
Summary

O'Reilly Automotive Reports In-line

O'Reilly Automotive (ORLY) reported 3rd Quarter September 2017 earnings of $3.22 per share on revenue of $2.3 billion. The consensus earnings estimate was $3.15 per share on revenue of $2.3 billion. The Earnings Whisper number was $3.22 per share. Revenue grew 5.4% on a year-over-year basis.

The company said it expects fourth quarter earnings of $2.65 to $2.75 per share. The current consensus earnings estimate is $2.80 per share for the quarter ending December 31, 2017.

O'Reilly Automotive Inc is a specialty retailer of automotive aftermarket parts, tools, supplies, equipment and accessories in the United States, selling its products to both do-it-yourself "DIY" and professional service provider customers.

Results
Reported Earnings
$3.22
Earnings Whisper
$3.22
Consensus Estimate
$3.15
Reported Revenue
$2.34 Bil
Revenue Estimate
$2.34 Bil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

O’Reilly Automotive, Inc. Reports Third Quarter 2017 Results

Third quarter comparable store sales increase of 1.8%

-- 11% increase in third quarter diluted earnings per share to $3.22

-- Opened 5,000th store on Friday, October 20, 2017

O’Reilly Automotive, Inc. (the "Company" or "O’Reilly") (ORLY), a leading retailer in the automotive aftermarket industry, today announced record revenues and earnings for its third quarter ended September 30, 2017.

3 Quarter Financial Results

Sales for the third quarter ended September 30, 2017, increased $119 million, or 5%, to $2.34 billion from $2.22 billion for the same period one year ago. Gross profit for the third quarter increased to $1.23 billion (or 52.6% of sales) from $1.17 billion (or 52.7% of sales) for the same period one year ago, representing an increase of 5%. Selling, general and administrative expenses ("SG&A") for the third quarter increased to $768 million (or 32.8% of sales) from $722 million (or 32.5% of sales) for the same period one year ago, representing an increase of 6%. Operating income for the third quarter increased to $462 million (or 19.7% of sales) from $448 million (or 20.2% of sales) for the same period one year ago, representing an increase of 3%.

Net income for the third quarter ended September 30, 2017, increased $5 million, or 2%, to $284 million (or 12.1% of sales) from $278 million (or 12.5% of sales) for the same period one year ago. Diluted earnings per common share for the third quarter increased 11% to $3.22 on 88 million shares versus $2.90 on 96 million shares for the same period one year ago. The Company adopted a new share-based compensation accounting standard during the first quarter of this year, which requires excess tax benefits from share-based compensation payments to be recorded in the income statement. The Company’s diluted earnings per common share of $3.22 for the third quarter ended September 30, 2017, includes a $0.02 benefit from the adoption of the new accounting standard.

Greg Henslee, O’Reilly’s CEO commented, "Our comparable store sales results of 1.8% were solidly in our guidance range of one to three percent for the quarter, as we continued to face a challenging demand environment and experienced severe weather in various parts of the country. Despite the challenges, Team O’Reilly delivered an 11% increase in third quarter diluted earnings per share to $3.22, and I would like to thank our Team Members for their unwavering commitment to our long-term success and for their dedication to providing exceptional service to every customer who depends on O’Reilly for their automotive needs."

"The long-term demand drivers for our industry remain intact and positive, including increasing annual miles driven and a growing and aging vehicle fleet, and we remain very confident in our Team’s ability to take market share by executing our dual market strategy and providing consistently excellent customer service, regardless of the demand environment. During the fourth quarter, we will face headwinds from an additional Sunday, which is our lowest volume day, and from a calendar shift of the Christmas holiday from a Sunday to a Monday. Based on an expected continuation of the business trends we experienced in the first nine months of this year and these calendar headwinds, we are setting our fourth quarter comparable store sales guidance at a range of 0% to 2%."

Year-to-Date Financial Results

Sales for the first nine months of 2017 increased $293 million, or 5%, to $6.79 billion from $6.49 billion for the same period one year ago. Gross profit for the first nine months of 2017 increased to $3.56 billion (or 52.5% of sales) from $3.39 billion (or 52.3% of sales) for the same period one year ago, representing an increase of 5%. SG&A for the first nine months of 2017 increased to $2.24 billion (or 33.0% of sales) from $2.10 billion (or 32.4% of sales) for the same period one year ago, representing an increase of 6%. Operating income for the first nine months of 2017 increased to $1.32 billion (or 19.5% of sales) from $1.29 billion (or 19.9% of sales) for the same period one year ago, representing an increase of 2%. As previously reported, the Company’s operating income for the first nine months of 2017 includes a $9 million reduction in its legal accruals following the expiration of the statute of limitations related to a legacy claim. The Company’s results for the nine months ended September 30, 2016, includes a benefit from one additional day due to Leap Day in February 2016.

Net income for the first nine months of 2017 increased $40 million, or 5%, to $831 million from $792 million for the same period one year ago. Diluted earnings per common share for the first nine months of 2017 increased 12% to $9.15 on 91 million shares versus $8.14 on 97 million shares for the same period one year ago. The Company’s diluted earnings per common share of $9.15 for the first nine months of 2017 includes a $0.35 benefit from the adoption of the new accounting standard.

Mr. Henslee continued, "On October 20th, I had the honor of attending the ribbon cutting ceremony for the opening of our 5,000th store. This is a landmark achievement for O’Reilly and we are especially proud that we have more than doubled our store count over the last 10 years through profitable, organic growth and accretive, strategic acquisitions. Year to date, we opened 171 net, new stores across 34 states, with Texas, Florida and the Northeast still leading as our strongest growth markets, and we will reach our target of 190 net, new stores by the end of the year. We continue to be very pleased with the success of our new stores, supported by highly-trained and technically proficient store Teams, and we plan to continue our long track record of profitable growth with a target of 200 net, new store openings in 2018."

Share Repurchase Program

During the third quarter ended September 30, 2017, the Company repurchased 2.7 million shares of its common stock, at an average price per share of $200.70, for a total investment of $551 million. During the first nine months of 2017, the Company repurchased 8.0 million shares of its common stock, at an average price per share of $235.26, for a total investment of $1.89 billion. Subsequent to the end of the third 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 $210.95, for a total investment of $54 million. The Company has repurchased a total of 65.3 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 $135.01, for a total aggregate investment of $8.81 billion. As of the date of this release, the Company had approximately $941 million remaining under its current share repurchase authorization.

3 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, as well as the sales from Leap Day in the nine months ended September 30, 2016. Comparable store sales increased 1.8% for the third quarter ended September 30, 2017, on top of 4.2% for the same period one year ago. Comparable store sales increased 1.5% for the nine months ended September 30, 2017, on top of 4.8% for the same period one year ago.

4 Quarter and Updated Full-Year 2017 Guidance

The table below outlines the Company’s guidance for selected fourth quarter and updated full-year 2017 financial data:

For the Three Months Ending
For the Year Ending
December 31, 2017
December 31, 2017
Comparable store sales
0% to 2%
1% to 2%
Total revenue
$8.9 billion to $9.0 billion
Gross profit as a percentage of sales
52.5% to 52.7%
Operating income as a percentage of sales
19.0% to 19.4%
Diluted earnings per share
$2.65 to $2.75
$11.82 to $11.92
Capital expenditures
$470 million to $500 million
Free cash flow
$830 million to $880 million
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.
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 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 26, 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 45656975. A replay of the conference call will be available on the Company’s website through Thursday, October 25, 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 October 20, 2017, the Company operated 5,000 stores in 47 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, 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)
September 30, 2017
September 30, 2016 December 31, 2016
(Unaudited)
(Unaudited)
(Note)
Assets
Current assets:
Cash and cash equivalents
$
37,287
$
560,320
$
146,598
Accounts receivable, net
219,631
190,908
197,274
Amounts receivable from suppliers
79,491
96,615
82,105
Inventory
2,987,592
2,789,892
2,778,976
Other current assets
34,480
32,029
53,022
Total current assets
3,358,481
3,669,764
3,257,975
Property and equipment, at cost
5,114,804
4,720,225
4,832,342
Less: accumulated depreciation and amortization 1,822,123
1,661,541
1,708,911
Net property and equipment
3,292,681
3,058,684
3,123,431
Goodwill
787,210
757,251
785,399
Other assets, net
40,956
36,641
37,384
Total assets
$
7,479,328
$
7,522,340
$
7,204,189
Liabilities and shareholders’ equity
Current liabilities:
Accounts payable
$
3,154,250
$
2,999,080
$
2,936,656
Self-insurance reserves
72,223
72,373
67,921
Accrued payroll
80,953
73,160
71,717
Accrued benefits and withholdings
65,574
67,298
74,454
Income taxes payable
6,175
--
--
Other current liabilities
249,325
253,517
249,901
Total current liabilities
3,628,500
3,465,428
3,400,649
Long-term debt
2,900,816
1,886,501
1,887,019
Deferred income taxes
131,847
84,211
90,166
Other liabilities
203,986
185,437
199,219
Shareholders’ equity:
Common stock, $0.01 par value:
Authorized shares - 245,000,000
Issued and outstanding shares -
85,338,294 as of September 30, 2017,
94,727,595 as of September 30, 2016, and
92,851,815 as of December 31, 2016
853
947
929
Additional paid-in capital
1,267,810
1,339,512
1,336,707
Retained (deficit) earnings
(654,484
)
560,304
289,500
Total shareholders’ equity
614,179
1,900,763
1,627,136
Total liabilities and shareholders’ equity
$
7,479,328
$
7,522,340
$
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
For the Nine Months Ended
September 30,
September 30,
2017
2016
2017
2016
Sales
$
2,339,830
$
2,220,955
$
6,786,918
$
6,493,794
Cost of goods sold, including warehouse and distribution expenses 1,109,536
1,050,929
3,225,415
3,099,010
Gross profit
1,230,294
1,170,026
3,561,503
3,394,784
Selling, general and administrative expenses
768,331
722,217
2,238,938
2,103,288
Operating income
461,963
447,809
1,322,565
1,291,496
Other income (expense):
Interest expense
(24,324
)
(18,706
)
(64,555
)
(52,228
)
Interest income
592
1,227
1,768
3,172
Other, net
1,299
1,563
1,302
3,821
Total other expense
(22,433
)
(15,916
)
(61,485
)
(45,235
)
Income before income taxes
439,530
431,893
1,261,080
1,246,261
Provision for income taxes
155,796
153,400
429,591
454,600
Net income
$
283,734
$
278,493
$
831,489
$
791,661
Earnings per share-basic:
Earnings per share
$
3.26
$
2.93
$
9.28
$
8.25
Weighted-average common shares outstanding - basic
86,947
94,891
89,641
95,994
Earnings per share-assuming dilution:
Earnings per share
$
3.22
$
2.90
$
9.15
$
8.14
Weighted-average common shares outstanding - assuming dilution
88,025
96,120
90,869
97,309
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 $0.02 and $0.35 benefit to diluted earnings per common share for the three and nine months ended September 30, 2017, respectively, comprised of a $0.03 and $0.39, respectively, earnings per share increase from a lower effective tax rate, partially offset by a $0.01 and $0.04, respectively, earnings per share decrease from an increase in the number of weighted-average common shares outstanding assuming dilution. The Company’s Condensed Consolidated Statements of Income for the prior periods ending September 30, 2016, were not restated to conform to the current periods’ presentation.
O’REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
For the Nine Months Ended
September 30,
2017
2016
(As Adjusted, Note)
Operating activities:
Net income
$
831,489
$
791,661
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of property, equipment and intangibles
173,500
161,447
Amortization of debt discount and issuance costs
2,078
1,811
Deferred income taxes
41,848
4,439
Share-based compensation programs
14,835
14,371
Other
8,174
4,174
Changes in operating assets and liabilities:
Accounts receivable
(28,761
)
(35,312
)
Inventory
(208,338
)
(158,877
)
Accounts payable
217,486
390,849
Income taxes payable
32,124
39,636
Other
2,984
60
Net cash provided by operating activities
1,087,419
1,214,259
Investing activities:
Purchases of property and equipment
(347,756
)
(356,234
)
Proceeds from sale of property and equipment
1,906
2,489
Payments received on notes receivable
--
1,047
Other
(2,072
)
--
Net cash used in investing activities
(347,922
)
(352,698
)
Financing activities:
Proceeds from borrowings on revolving credit facility
2,487,000
--
Payments on revolving credit facility
(2,218,000
)
--
Proceeds from the issuance of long-term debt
748,800
499,160
Payment of debt issuance costs
(7,490
)
(4,125
)
Repurchases of common stock
(1,893,148
)
(959,789
)
Net proceeds from issuance of common stock
34,186
47,419
Other
(156
)
(207
)
Net cash used in financing activities
(848,808
)
(417,542
)
Net (decrease) increase in cash and cash equivalents
(109,311
)
444,019
Cash and cash equivalents at beginning of the period
146,598
116,301
Cash and cash equivalents at end of the period
$
37,287
$
560,320
Supplemental disclosures of cash flow information:
Income taxes paid
$
359,838
$
416,901
Interest paid, net of capitalized interest
72,252
59,547

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 $46.0 million of Excess tax benefit from share-based compensation from Net cash used in financing activities to Net cash provided by operating activities for the nine months ended September 30, 2016.

O’REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
SELECTED FINANCIAL INFORMATION
(Unaudited)
For the Twelve Months Ended
September 30,
Adjusted Debt to EBITDAR:
2017
2016
(In thousands, except adjusted debt to EBITDAR ratio)
GAAP debt
$
2,900,816
$
1,886,501
Add:
Letters of credit
41,258
38,618
Discount on senior notes
3,894
3,295
Debt issuance costs
14,290
10,204
Six-times rent expense
1,770,498
1,679,178
Adjusted debt
$
4,730,756
$
3,617,796
GAAP net income
$
1,077,519
$
1,010,237
Add:
Interest expense
83,258
66,340
Provision for income taxes
574,491
585,650
Depreciation and amortization
229,919
213,638
Share-based compensation expense 19,323
19,614
Rent expense
295,083
279,863
EBITDAR
$
2,279,593
$
2,175,342
Adjusted debt to EBITDAR
2.08
1.66
September 30,
2017
2016
Selected Balance Sheet Ratios:
Inventory turnover
1.5
1.5
Average inventory per store (in thousands) $
599
$
592
Accounts payable to inventory
105.6
%
107.5
%
Return on equity
95.1
%
53.9
%
Return on assets
14.7
%
14.0
%
For the Three Months Ended
For the Nine Months Ended
September 30,
September 30,
2017
2016
2017
2016
Reconciliation of Free Cash Flow (in thousands):
Cash provided by operating activities
$
376,912
$
385,525
$
1,087,419
$
1,214,259
Less:
Capital expenditures
120,250
135,818
347,756
356,234
Excess tax benefit from share-based compensation payments 2,803
15,898
35,282
46,034
Free cash flow
$
253,859
$
233,809
$
704,381
$
811,991
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,
2017
2016
2017
2016
2017
2016
Beginning store count 4,934
4,660
4,829
4,571
4,712
4,523
New stores opened
52
52
162
142
232
191
Stores acquired
--
--
--
--
48
--
Stores closed
(2
)
--
(7
)
(1
)
(8
)
(2
)
Ending store count
4,984
4,712
4,984
4,712
4,984
4,712
For the Three Months Ended
For the Twelve Months Ended
September 30,
September 30,
2017
2016
2017
2016
Total employment
75,809
74,055
Square footage (in thousands)
36,340
34,274
Sales per weighted-average square foot
$
64.37
$
64.83
$
248.82
$
250.16
Sales per weighted-average store (in thousands) $
469
$
471
$
1,811
$
1,816
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.
Calculated as inventory divided by store count at the end of the reported period.
Calculated as accounts payable divided by inventory.
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.
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.
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.
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.
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

https://resource.globenewswire.com/Resource/Download/1a8324f4-d72c-47eb-a1cf-2b211f0aecff?size=1

<img src="http://www.globenewswire.com/newsroom/ti?ndecode=MTUwIzY5ODQxNTE=" alt="" width="1" height="1"/>