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Form 8-K O REILLY AUTOMOTIVE INC For: Oct 28

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October 28, 2015 4:33 PM EDT

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

Date of report (Date of earliest event reported): October 28, 2015

O'REILLY AUTOMOTIVE, INC.
(Exact name of registrant as specified in its charter)
 
Missouri
000-21318
27-4358837
(State or other jurisdiction
of incorporation or
organization)
(Commission File Number)
(I.R.S. Employer Identification No.)
 
233 South Patterson
Springfield, Missouri 65802
(Address of principal executive offices, Zip code)
 
(417) 862-6708
(Registrant's telephone number, including area code)
 
(Not Applicable)
(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2):

[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))


Section 2 – Financial Information

Item 2.02 Results of Operations and Financial Condition

On October 28, 2015, O'Reilly Automotive, Inc. issued a press release announcing its 2015 third quarter earnings. The text of the press release is attached hereto as Exhibit 99.1.

Section 9 – Financial Statements and Exhibits

Item 9.01 Financial Statements and Exhibits

Exhibit Number
Description
99.1
Press Release dated October 28, 2015

The information in this Current Report on Form 8-K, including the exhibit hereto, shall not be deemed "filed" for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended.



SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.


Date: October 28, 2015
O'REILLY AUTOMOTIVE, INC.
 
 
 
By: /s/ Thomas McFall
 
Thomas McFall
 
Executive Vice President of Finance and Chief Financial Officer
 
(principal financial and accounting officer)

 



EXHIBIT INDEX

Exhibit Number
Description
99.1
Press Release dated October 28, 2015

























Exhibit 99.1
FOR IMMEDIATE RELEASE
O'REILLY AUTOMOTIVE, INC. REPORTS THIRD QUARTER 2015 RESULTS

•
Third quarter comparable store sales increase of 7.9%
•
Record high third quarter operating margin of 20.0%
•
21% increase in third quarter operating profit dollars

Springfield, MO, October 28, 2015 – O'Reilly Automotive, Inc. (the "Company" or "O'Reilly") (Nasdaq: ORLY), a leading retailer in the automotive aftermarket industry, today announced record revenues and earnings for its third quarter ended September 30, 2015.

3rd Quarter Financial Results
Sales for the third quarter ended September 30, 2015, increased $203 million, or 11%, to $2.08 billion from $1.88 billion for the same period one year ago. Gross profit for the third quarter increased to $1.09 billion (or 52.4% of sales) from $968 million (or 51.6% of sales) for the same period one year ago, representing an increase of 13%. Selling, general and administrative expenses ("SG&A") for the third quarter increased to $674 million (or 32.4% of sales) from $624 million (or 33.3% of sales) for the same period one year ago, representing an increase of 8%. Operating income for the third quarter increased to $415 million (or 20.0% of sales) from $344 million (or 18.3% of sales) for the same period one year ago, representing an increase of 21%.

Net income for the third quarter ended September 30, 2015, increased $49 million, or 23%, to $266 million (or 12.8% of sales) from $217 million (or 11.6% of sales) for the same period one year ago. Diluted earnings per common share for the third quarter increased 28% to $2.64 on 101 million shares versus $2.06 on 105 million shares for the same period one year ago.

O’Reilly’s President and CEO, Greg Henslee commented, “We are extremely proud to report another very successful quarter, highlighted by a 7.9% increase in comparable store sales and a record high operating margin of 20.0%. Our industry leading comparable store sales results this quarter represent our 8th consecutive quarter of comparable store sales growth greater than 5%, with an especially robust increase of over 7% in each quarter of this year. This consistently strong performance is the direct result of our Team Members’ commitment to providing excellent customer service every day in all of our stores, and I would like to thank each of our over 72,000 Team Members for their hard work and dedication to our ongoing success.”

Mr. Henslee continued, “Our relentless focus on profitable growth translated our very strong top-line performance into an all-time, record high, operating margin of 20.0%, representing another milestone achievement for O’Reilly. This quarter also represents our 27th consecutive quarter of diluted earnings per share growth greater than 15%, with a 28% increase in third quarter diluted earnings per share to $2.64. Our third quarter earnings per share results included a benefit of approximately $0.11 as the result of the resolution of certain historical tax positions, which was greater than what we would normally expect to realize in the third quarter. While we are pleased to have favorably resolved these issues, this benefit is not representative of our expected tax rate moving forward. Excluding this $0.11 benefit, our third quarter diluted earnings per share increased 23%.”



Year-to-Date Financial Results
Sales for the first nine months of 2015 increased $566 million, or 10%, to $6.02 billion from $5.45 billion for the same period one year ago. Gross profit for the first nine months of 2015 increased to $3.14 billion (or 52.1% of sales) from $2.80 billion (or 51.3% of sales) for the same period one year ago, representing an increase of 12%. SG&A for the first nine months of 2015 increased to $1.98 billion (or 33.0% of sales) from $1.83 billion (or 33.6% of sales) for the same period one year ago, representing an increase of 8%. Operating income for the first nine months of 2015 increased to $1.15 billion (or 19.1% of sales) from $967 million (or 17.7% of sales) for the same period one year ago, representing an increase of 19%.

Net income for the first nine months of 2015 increased $116 million, or 19%, to $713 million (or 11.8% of sales) from $597 million (or 10.9% of sales) for the same period one year ago. Diluted earnings per common share for the first nine months of 2015 increased 25% to $6.98 on 102 million shares versus $5.58 on 107 million shares for the same period one year ago.

Mr. Henslee added, “During the third quarter, we opened 58 net, new stores, which brings our year-to-date store expansion to 157 net, new stores across 34 states, and we are on target to reach our goal of 205 net, new store openings this year. Additionally, I am pleased to announce that in October, we expanded into our 44th state with the opening of two stores in Connecticut. We continue to be very pleased with the performance of our new store openings, staffed with great Teams who provide excellent customer service, and we remain very confident in the long-term drivers for demand in our industry. Based on these factors, we are pleased to announce our plan to increase the number of our new store openings to 210 net, new stores in 2016. We are very proud of our long record of consistently strong and profitable growth, and we remain focused on continuing to provide unsurpassed levels of service to our customers into the future.”

Share Repurchase Program
During the third quarter ended September 30, 2015, the Company repurchased 1.1 million shares of its common stock, at an average price per share of $238.97, for a total investment of $274 million. During the first nine months of 2015, the Company repurchased 3.8 million shares of its common stock, at an average price per share of $224.39, for a total investment of $849 million. Subsequent to the end of the third quarter and through the date of this release, the Company repurchased an additional 0.1 million shares of its common stock, at an average price per share of $247.74, for a total investment of $30 million. The Company has repurchased a total of 50.3 million shares of its common stock under its share repurchase program since the inception of the program in January of 2011 and through the date of this release, at an average price of $101.48, for a total aggregate investment of $5.10 billion. As of the date of this release, the Company had approximately $400 million remaining under its current share repurchase authorization.

3rd Quarter Comparable Store Sales Results
Comparable store sales are calculated based on the change in sales for stores open at least one year and exclude sales of specialty machinery, sales to independent parts stores and sales to Team Members. Comparable store sales increased 7.9% for the third quarter ended September 30, 2015, versus 6.2% for the same period one year ago. Comparable store sales increased 7.4% for the first nine months of 2015, versus 5.9% for the same period one year ago.

4th Quarter and Updated Full-Year 2015 Guidance
The table below outlines the Company's guidance for selected fourth quarter and updated full-year 2015 financial data:
 
For the Three Months Ending
December 30, 2015
 
For the Year Ending
December 31, 2015
Comparable store sales
3.0% to 5.0%
 
6.5% to 7.0%
Total revenue
 
 
$7.85 billion to $7.95 billion
Gross profit as a percentage of sales
 
 
52.0% to 52.2%
Operating income as a percentage of sales
 
 
18.6% to 18.9%
Diluted earnings per share (1)
$1.97 to $2.01
 
$8.97 to $9.01
Capital expenditures
 
 
$400 million to $430 million
Free cash flow (2)
 
 
$800 million to $850 million
(1) 
Weighted-average shares outstanding, assuming dilution, used in the denominator of this calculation, includes share repurchases made by the Company through the date of this release.
(2) 
Calculated as net cash provided by operating activities less capital expenditures for the period.



Non-GAAP Information
This release contains certain financial information not derived in accordance with United States generally accepted accounting principles ("GAAP"). These items include adjusted debt to earnings before interest, taxes, depreciation, amortization, share-based compensation and rent ("EBITDAR") and free cash flow. The Company does not, nor does it suggest investors should, consider such non-GAAP financial measures in isolation from, or as a substitute for, GAAP financial information. The Company believes that the presentation of adjusted debt to EBITDAR and free cash flow provide meaningful supplemental information to both management and investors that is indicative of the Company's core operations. The Company has included a reconciliation of this additional information to the most comparable GAAP measure in the selected financial information below.

Earnings Conference Call Information
The Company will host a conference call on Thursday, October 29, 2015, at 10:00 a.m. central time to discuss its results as well as future expectations. Investors may listen to the conference call live on the Company's website at www.oreillyauto.com by clicking on "Investor Relations" and then "News Room." Interested analysts are invited to join the call. The dial-in number for the call is (847) 585-4405; the conference call identification number is 40850185. A replay of the conference call will be available on the Company's website through October 28, 2016.

About O'Reilly Automotive, Inc.
O'Reilly Automotive, Inc. was founded in 1957 by the O'Reilly family and is one of the largest specialty retailers of automotive aftermarket parts, tools, supplies, equipment and accessories in the United States, serving both the do-it-yourself and professional service provider markets. Visit the Company's website at www.oreillyauto.com for additional information about O'Reilly, including access to online shopping and current promotions, store locations, hours and services, employment opportunities and other programs. As of September 30, 2015, the Company operated 4,523 stores in 43 states.

Forward-Looking Statements
The Company claims the protection of the safe-harbor for forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. You can identify these statements by forward-looking words such as "estimate," "may," "could," "will," "believe," "expect," "would," "consider," "should," "anticipate," "project," "plan," "intend" or similar words. In addition, statements contained within this press release that are not historical facts are forward-looking statements, such as statements discussing, among other things, expected growth, store development, integration and expansion strategy, business strategies, future revenues and future performance. These forward-looking statements are based on estimates, projections, beliefs and assumptions and are not guarantees of future events and results. Such statements are subject to risks, uncertainties and assumptions, including, but not limited to, the economy in general, inflation, product demand, the market for auto parts, competition, weather, risks associated with the performance of acquired businesses, our ability to hire and retain qualified employees, consumer debt levels, our increased debt levels, credit ratings on public debt, governmental regulations, terrorist activities, war and the threat of war. Actual results may materially differ from anticipated results described or implied in these forward-looking statements. Please refer to the "Risk Factors" section of the annual report on Form 10-K for the year ended December 31, 2014, for additional factors that could materially affect the Company's financial performance. Forward-looking statements speak only as of the date they were made and the Company undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.

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



O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
 
September 30, 2015
 
September 30, 2014
 
December 31, 2014
 
(Unaudited)
 
(Unaudited)
 
(Note)
Assets
 
 
 
 
 
Current assets:
 
 
 
 
 
Cash and cash equivalents
$
276,916

 
$
298,283

 
$
250,560

Accounts receivable, net
163,889

 
152,779

 
143,900

Amounts receivable from suppliers
76,861

 
67,073

 
69,311

Inventory
2,606,813

 
2,517,927

 
2,554,789

Other current assets
33,085

 
34,689

 
48,418

Total current assets
3,157,564

 
3,070,751

 
3,066,978

 
 
 
 
 
 
Property and equipment, at cost
4,275,349

 
3,895,165

 
3,993,509

Less: accumulated depreciation and amortization
1,470,199

 
1,294,053

 
1,334,949

Net property and equipment
2,805,150

 
2,601,112

 
2,658,560

 
 
 
 
 
 
Notes receivable, less current portion
14,265

 
14,283

 
13,349

Goodwill
757,093

 
756,335

 
756,384

Other assets, net
41,194

 
32,695

 
45,030

Total assets
$
6,775,266

 
$
6,475,176

 
$
6,540,301

 
 
 
 
 
 
Liabilities and shareholders' equity
 
 
 
 
 
Current liabilities:
 
 
 
 
 
Accounts payable
$
2,626,126

 
$
2,409,054

 
$
2,417,167

Self-insurance reserves
69,251

 
65,632

 
64,882

Accrued payroll
84,295

 
71,451

 
78,442

Accrued benefits and withholdings
65,010

 
58,602

 
62,946

Deferred income taxes
7,445

 
21,039

 
17,258

Income taxes payable
17,574

 
18,645

 
—

Other current liabilities
234,211

 
201,475

 
189,836

Current portion of long-term debt
—

 
44

 
25

Total current liabilities
3,103,912

 
2,845,942

 
2,830,556

 
 
 
 
 
 
Long-term debt, less current portion
1,396,995

 
1,396,488

 
1,396,615

Deferred income taxes
72,197

 
61,789

 
85,164

Other liabilities
200,076

 
194,551

 
209,548

 
 
 
 
 
 
Shareholders' equity:
 
 
 
 
 
Common stock, $0.01 par value:
 
 
 
 
 
Authorized shares – 245,000,000
 
 
 
 
 
Issued and outstanding shares –
 
 
 
 
 
98,714,308 as of September 30, 2015,
 
 
 
 
 
102,393,366 as of September 30, 2014, and
 
 
 
 
 
101,602,935 as of December 31, 2014
987

 
1,024

 
1,016

Additional paid-in capital
1,268,357

 
1,168,741

 
1,194,929

Retained earnings
732,742

 
806,641

 
822,473

Total shareholders' equity
2,002,086

 
1,976,406

 
2,018,418

 
 
 
 
 
 
Total liabilities and shareholders' equity
$
6,775,266

 
$
6,475,176

 
$
6,540,301

Note: The balance sheet at December 31, 2014, has been derived from the audited consolidated financial statements at that date, but does not include all of the information and footnotes required by United States generally accepted accounting principles for complete financial statements.


O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share data)




 
For the Three Months Ended 
 September 30,
 
For the Nine Months Ended 
 September 30,
 
2015
 
2014
 
2015
 
2014
Sales
$
2,080,201

 
$
1,876,872

 
$
6,017,622

 
$
5,451,903

Cost of goods sold, including warehouse and distribution expenses
990,947

 
908,671

 
2,882,618

 
2,655,109

Gross profit
1,089,254

 
968,201

 
3,135,004

 
2,796,794

 
 
 
 
 
 
 
 
Selling, general and administrative expenses
673,994

 
624,433

 
1,983,603

 
1,829,432

Operating income
415,260

 
343,768

 
1,151,401

 
967,362

 
 
 
 
 
 
 
 
Other income (expense):
 
 
 
 
 
 
 
Interest expense
(14,296
)
 
(12,983
)
 
(43,017
)
 
(39,211
)
Interest income
551

 
551

 
1,708

 
1,688

Other, net
(647
)
 
982

 
648

 
2,237

Total other expense
(14,392
)
 
(11,450
)
 
(40,661
)
 
(35,286
)
 
 
 
 
 
 
 
 
Income before income taxes
400,868

 
332,318

 
1,110,740

 
932,076

Provision for income taxes
134,600

 
115,321

 
398,100

 
335,572

Net income
$
266,268

 
$
216,997

 
$
712,640

 
$
596,504

 
 
 
 
 
 
 
 
Earnings per share-basic:
 
 
 
 
 
 
 
Earnings per share
$
2.68

 
$
2.10

 
$
7.09

 
$
5.67

Weighted-average common shares outstanding – basic
99,270

 
103,498

 
100,468

 
105,146

 
 
 
 
 
 
 
 
Earnings per share-assuming dilution:
 
 
 
 
 
 
 
Earnings per share
$
2.64

 
$
2.06

 
$
6.98

 
$
5.58

Weighted-average common shares outstanding – assuming dilution
100,770

 
105,222

 
102,041

 
106,945











O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)


 
For the Nine Months Ended 
 September 30,
 
2015
 
2014
Operating activities:
 
 
 
Net income
$
712,640

 
$
596,504

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization of property, equipment and intangibles
158,065

 
143,515

Amortization of debt discount and issuance costs
1,578

 
1,563

Excess tax benefit from share-based compensation
(50,759
)
 
(32,296
)
Deferred income taxes
(22,780
)
 
(18,108
)
Share-based compensation programs
16,656

 
17,424

Other
4,194

 
3,801

Changes in operating assets and liabilities:
 
 
 
Accounts receivable
(24,511
)
 
(26,167
)
Inventory
(52,024
)
 
(142,880
)
Accounts payable
208,959

 
352,533

Income taxes payable
85,428

 
51,043

Other
25,276

 
36,022

Net cash provided by operating activities
1,062,722

 
982,954

 
 
 
 
Investing activities:
 
 
 
Purchases of property and equipment
(296,474
)
 
(317,157
)
Proceeds from sale of property and equipment
2,197

 
2,304

Payments received on notes receivable
3,028

 
2,770

Net cash used in investing activities
(291,249
)
 
(312,083
)
 
 
 
 
Financing activities:
 
 
 
Principal payments on capital leases
(25
)
 
(54
)
Repurchases of common stock
(849,202
)
 
(687,154
)
Excess tax benefit from share-based compensation
50,759

 
32,296

Net proceeds from issuance of common stock
53,351

 
51,006

Net cash used in financing activities
(745,117
)
 
(603,906
)
 
 
 
 
Net increase in cash and cash equivalents
26,356

 
66,965

Cash and cash equivalents at beginning of the period
250,560

 
231,318

Cash and cash equivalents at end of the period
$
276,916

 
$
298,283

 
 
 
 
Supplemental disclosures of cash flow information:
 
 
 
Income taxes paid
$
342,920

 
$
308,029

Interest paid, net of capitalized interest
51,003

 
47,173





O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
SELECTED FINANCIAL INFORMATION
(Unaudited)


 
For the Twelve Months Ended
September 30,
Adjusted Debt to EBITDAR:
2015
 
2014
(In thousands, except adjusted debt to EBITDAR ratio)
 
 
 
GAAP debt
$
1,396,995

 
$
1,396,532

Add:
Letters of credit
45,924

 
47,782

 
Discount on senior notes
3,005

 
3,512

 
Six-times rent expense
1,626,480

 
1,560,060

Adjusted debt
$
3,072,404

 
$
3,007,886

 
 
 
 
 
GAAP net income
$
894,318

 
$
748,851

Add:
Interest expense
57,096

 
52,123

 
Provision for income taxes
506,528

 
427,122

 
Depreciation and amortization
208,755

 
190,624

 
Share-based compensation expense
22,327

 
22,661

 
Rent expense
271,080

 
260,010

EBITDAR
$
1,960,104

 
$
1,701,391

 
 
 
 
 
Adjusted debt to EBITDAR
1.57

 
1.77



 
September 30,
 
2015
 
2014
Selected Balance Sheet Ratios:
 
 
 
Inventory turnover (1)
1.5

 
1.4

Average inventory per store (in thousands) (2)
$
576

 
$
584

Accounts payable to inventory (3)
100.7
%
 
95.7
%
Return on equity (4)
44.0
%
 
36.4
%
Return on assets (5)
13.4
%
 
11.8
%


 
For the Three Months Ended 
 September 30,
 
For the Nine Months Ended 
 September 30,
 
2015
 
2014
 
2015
 
2014
Selected Financial Information (in thousands):
 
 
 
 
 
 
 
Capital expenditures
$
109,943

 
$
122,228

 
$
296,474

 
$
317,157

Free cash flow (6)
254,326

 
205,201

 
766,248

 
665,797

Depreciation and amortization
52,058

 
48,511

 
158,065

 
143,515

Interest expense
14,296

 
12,983

 
43,017

 
39,211

Rent expense
$
68,063

 
$
65,927

 
$
204,075

 
$
196,023




Store and Team Member Information:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
For the Three Months Ended 
 September 30,
 
For the Nine Months Ended 
 September 30,
 
For the Twelve Months Ended
September 30,
 
2015
 
2014
 
2015
 
2014
 
2015
 
2014
Beginning store count
4,465

 
4,257

 
4,366

 
4,166

 
4,311

 
4,135

New stores opened
59

 
57

 
160

 
150

 
217

 
182

Stores closed
(1
)
 
(3
)
 
(3
)
 
(5
)
 
(5
)
 
(6
)
Ending store count
4,523

 
4,311

 
4,523

 
4,311

 
4,523

 
4,311



 
For the Three Months Ended 
 September 30,
 
For the Twelve Months Ended
September 30,
 
2015
 
2014
 
2015
 
2014
Total employment
72,161

 
67,695

 
 
 
 
Square footage (in thousands)
32,779

 
31,165

 
 
 
 
Sales per weighted-average square foot (7)
$
63.47

 
$
60.16

 
$
241.38

 
$
230.26

Sales per weighted-average store (in thousands) (8)
$
460

 
$
435

 
$
1,748

 
$
1,663



(1)    Calculated as cost of goods sold for the last 12 months divided by average inventory. Average inventory is calculated as the average of inventory for the trailing four quarters used in determining the denominator.
(2)    Calculated as inventory divided by store count at the end of the reported period.
(3)    Calculated as accounts payable divided by inventory.
(4)    Calculated as net income for the last 12 months divided by average total shareholders' equity. Average total shareholders' equity is calculated as the average of total shareholders' equity for the trailing four quarters used in determining the denominator.
(5)    Calculated as net income for the last 12 months divided by average total assets. Average total assets is calculated as the average of total assets for the trailing four quarters used in determining the denominator.
(6)    Calculated as net cash provided by operating activities less capital expenditures for the period.
(7)    Calculated as sales less jobber sales, divided by weighted-average square footage. Weighted-average square footage is determined by weighting store square footage based on the approximate dates of store openings, acquisitions, expansions or closings.
(8)    Calculated as sales less jobber sales, divided by weighted-average stores. Weighted-average stores is determined by weighting stores based on their approximate opening, acquisition or closing dates.




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