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CST: 18/10/2019 13:29:18   

O’Reilly Automotive, Inc. Reports First Quarter 2019 Results

176 Days ago

 

  • First quarter comparable store sales increase of 3.2%
  • 5% increase in operating profit dollars
  • 12% increase in first quarter diluted earnings per share to $4.05

SPRINGFIELD, Mo., April 24, 2019 (GLOBE NEWSWIRE) -- 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 Results
Greg 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 Program
During 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 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.  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 Guidance
The 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 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 table above and the selected financial information below.

Earnings Conference Call Information
The 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 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, 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 SUBSIDIARIES
CONDENSED 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 SUBSIDIARIES
CONDENSED 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 SUBSIDIARIES
CONDENSED 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 SUBSIDIARIES
SELECTED 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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