PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

O’REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

September 30, 2017 December 31, 2016
(Unaudited) (Note)
Assets
Current assets:
Cash and cash equivalents $ 37,287
$ 146,598
Accounts receivable, net 219,631
197,274
Amounts receivable from suppliers 79,491
82,105
Inventory 2,987,592
2,778,976
Other current assets 34,480
53,022
Total current assets 3,358,481
3,257,975

Property and equipment, at cost 5,114,804
4,832,342
Less: accumulated depreciation and amortization 1,822,123
1,708,911
Net property and equipment 3,292,681
3,123,431

Goodwill 787,210
785,399
Other assets, net 40,956
37,384
Total assets $ 7,479,328
$ 7,204,189

Liabilities and shareholders’ equity
Current liabilities:
Accounts payable $ 3,154,250
$ 2,936,656
Self-insurance reserves 72,223
67,921
Accrued payroll 80,953
71,717
Accrued benefits and withholdings 65,574
74,454
Income taxes payable 6,175
—
Other current liabilities 249,325
249,901
Total current liabilities 3,628,500
3,400,649

Long-term debt 2,900,816
1,887,019
Deferred income taxes 131,847
90,166
Other liabilities 203,986
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, and
92,851,815 as of December 31, 2016 853
929
Additional paid-in capital 1,267,810
1,336,707
Retained (deficit) earnings (654,484 ) 289,500
Total shareholders’ equity 614,179
1,627,136

Total liabilities and shareholders’ equity $ 7,479,328
$ 7,204,189


	March 31, 2024		December 31, 2023
	(Unaudited)		(Note)
Assets
Current assets:
Cash and cash equivalents	$	89,264	$	279,132
Accounts receivable, net		437,821		375,049
Amounts receivable from suppliers		139,267		140,443
Inventory		4,805,164		4,658,367
Other current assets		128,181		105,311
Total current assets		5,599,697		5,558,302

Property and equipment, at cost		8,555,556		8,312,367
Less: accumulated depreciation and amortization		3,360,351		3,275,387
Net property and equipment		5,195,205		5,036,980

Operating lease, right-of-use assets		2,227,783		2,200,554
Goodwill		1,009,857		897,696
Other assets, net		180,512		179,463
Total assets	$	14,213,054	$	13,872,995

Liabilities and shareholders’ deficit
Current liabilities:
Accounts payable	$	6,117,068	$	6,091,700
Self-insurance reserves		130,974		128,548
Accrued payroll		127,704		138,122
Accrued benefits and withholdings		174,125		174,650
Income taxes payable		147,645		7,860
Current portion of operating lease liabilities		399,245		389,536
Other current liabilities		791,633		730,937
Total current liabilities		7,888,394		7,661,353

Long-term debt		5,288,632		5,570,125
Operating lease liabilities, less current portion		1,900,200		1,881,344
Deferred income taxes		321,323		295,471
Other liabilities		205,703		203,980

Shareholders’ equity (deficit):
Common stock, $0.01 par value:
Authorized shares – 245,000,000
Issued and outstanding shares –
58,982,123 as of March 31, 2024, and
59,072,792 as of December 31, 2023		590		591
Additional paid-in capital		1,410,756		1,352,275
Retained deficit		(2,849,108)		(3,131,532)
Accumulated other comprehensive income		46,564		39,388
Total shareholders’ deficit		(1,391,198)		(1,739,278)

Total liabilities and shareholders’ deficit	$	14,213,054	$	13,872,995

Note: The balance sheet at December 31, ~~2016,~~2023, 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.

See accompanying Notes to condensed consolidated 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,
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


	For the Three Months Ended
	March 31,
	2024		2023
Sales	$	3,976,240	$	3,707,864
Cost of goods sold, including warehouse and distribution expenses		1,942,068		1,817,535
Gross profit		2,034,172		1,890,329

Selling, general and administrative expenses		1,281,691		1,173,684
Operating income		752,481		716,645

Other income (expense):
Interest expense		(57,148)		(44,572)
Interest income		1,656		868
Other, net		3,401		4,479
Total other expense		(52,091)		(39,225)

Income before income taxes		700,390		677,420
Provision for income taxes		153,152		160,535
Net income	$	547,238	$	516,885

Earnings per share-basic:
Earnings per share	$	9.27	$	8.36
Weighted-average common shares outstanding – basic		59,017		61,840

Earnings per share-assuming dilution:
Earnings per share	$	9.20	$	8.28
Weighted-average common shares outstanding – assuming dilution		59,454		62,398

See accompanying Notes to condensed consolidated financial statements.

O’REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF ~~CASH FLOWS~~

COMPREHENSIVE INCOME

(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: Certain prior period amounts have been reclassified to conform to current period presentation. See Note 9 “Recent Accounting Pronouncements” to the condensed consolidated financial statements in this report for more information.


	For the Three Months Ended
	March 31,
	2024		2023
Net income	$	547,238	$	516,885
Other comprehensive income (loss):
Foreign currency translation adjustments		7,176		18,898
Total other comprehensive income		7,176		18,898

Comprehensive income	$	554,414	$	535,783

See accompanying Notes to condensed consolidated financial statements.

O’REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT)

(Unaudited)

(In thousands)



	For the Three Months Ended March 31, 2024
								Accumulated
				Additional				Other
	Common Stock			Paid-In		Retained		Comprehensive
	Shares	Par Value		Capital		Deficit		Income		Total
Balance at December 31, 2023	59,073	$	591	$	1,352,275	$	(3,131,532)	$	39,388	$	(1,739,278)
Net income	—		—		—		547,238		—		547,238
Total other comprehensive income	—		—		—		—		7,176		7,176
Issuance of common stock under employee benefit plans, net of forfeitures and shares withheld to cover taxes	6		—		5,607		—		—		5,607
Net issuance of common stock upon exercise of stock options	165		2		52,414		—		—		52,416
Share-based compensation	—		—		6,548		—		—		6,548
Share repurchases, including fees	(262)		(3)		(6,088)		(263,928)		—		(270,019)
Excise tax on share repurchases	—		—		—		(886)		—		(886)
Balance at March 31, 2024	58,982	$	590	$	1,410,756	$	(2,849,108)	$	46,564	$	(1,391,198)

	For the Three Months Ended March 31, 2023
								Accumulated
				Additional				Other
	Common Stock			Paid-In		Retained		Comprehensive
	Shares	Par Value		Capital		Deficit		Income		Total
Balance at December 31, 2022	62,353	$	624	$	1,311,488	$	(2,375,860)	$	2,996	$	(1,060,752)
Net income	—		—		—		516,885		—		516,885
Total other comprehensive income	—		—		—		—		18,898		18,898
Issuance of common stock under employee benefit plans, net of forfeitures and shares withheld to cover taxes	8		—		5,293		—		—		5,293
Net issuance of common stock upon exercise of stock options	35		—		10,255		—		—		10,255
Share-based compensation	—		—		6,980		—		—		6,980
Share repurchases, including fees	(1,357)		(14)		(28,740)		(1,082,707)		—		(1,111,461)
Excise tax on share repurchases	—		—		—		(11,115)		—		(11,115)
Balance at March 31, 2023	61,039	$	610	$	1,305,276	$	(2,952,797)	$	21,894	$	(1,625,017)

See accompanying Notes to condensed consolidated financial statements.

O’REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)


	For the Three Months Ended
	March 31,
	2024		2023
Operating activities:
Net income	$	547,238	$	516,885
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of property, equipment and intangibles		109,648		93,747
Amortization of debt discount and issuance costs		1,593		1,215
Deferred income taxes		2,374		3,393
Share-based compensation programs		7,022		7,435
Other		2,997		29
Changes in operating assets and liabilities:
Accounts receivable		(36,954)		(2,610)
Inventory		(92,042)		(179,481)
Accounts payable		6,107		172,701
Income taxes payable		140,025		145,441
Other		16,207		(44,991)
Net cash provided by operating activities		704,215		713,764

Investing activities:
Purchases of property and equipment		(249,240)		(223,268)
Proceeds from sale of property and equipment		3,853		2,704
Other, including acquisitions, net of cash acquired		(155,366)		(956)
Net cash used in investing activities		(400,753)		(221,520)

Financing activities:
Proceeds from borrowings on revolving credit facility		30,000		1,216,000
Payments on revolving credit facility		—		(661,000)
Net payments of commercial paper		(310,805)		—
Repurchases of common stock		(270,019)		(1,111,461)
Net proceeds from issuance of common stock		57,815		15,146
Other		(569)		(354)
Net cash used in financing activities		(493,578)		(541,669)

Effect of exchange rate changes on cash		248		714
Net decrease in cash and cash equivalents		(189,868)		(48,711)
Cash and cash equivalents at beginning of the period		279,132		108,583
Cash and cash equivalents at end of the period	$	89,264	$	59,872

Supplemental disclosures of cash flow information:
Income taxes paid	$	9,798	$	9,696
Interest paid, net of capitalized interest		34,671		26,531

See accompanying Notes to condensed consolidated financial statements.

O’REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

~~September 30, 2017~~

March 31, 2024

NOTE 1 -– BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements of O’Reilly Automotive, Inc. and its subsidiaries (the “Company” or “O’Reilly”) have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three ~~and nine~~ months ended ~~September 30, 2017,~~March 31, 2024, are not necessarily indicative of the results that may be expected for the year ended December 31, ~~2017.~~2024. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s ~~Annual Report~~annual report on Form 10-K for the year ended December 31, ~~2016.~~

Certain prior period amounts have been reclassified to conform to current period presentation. These reclassifications had no effect on reported totals for assets, liabilities, shareholders’ equity, cash flows or net income. See Note 9 “Recent Accounting Pronouncements” to the2023.

Principles of consolidation:

The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All inter-company balances and transactions have been eliminated in consolidation.

NOTE 2 – BUSINESS COMBINATION

On January 22, 2024, the Company completed the previously announced strategic acquisition of Groupe Del Vasto (“Vast Auto”), an auto parts supplier headquartered in Montreal, Quebec, Canada, pursuant to a stock purchase agreement whereby 100% of all outstanding shares of Vast Auto were acquired, with all consideration paid in cash at closing. The acquisition of Vast Auto represents O’Reilly’s entrance into the Canadian automotive aftermarket. At the time of the acquisition, Vast Auto operated two distribution centers and six satellite warehouses that support a network of 23 company-owned stores and thousands of independent jobber and professional customers across Eastern Canada. The results of Vast Auto’s operations have been included in the Company’s condensed consolidated financial statements beginning from the date of acquisition. Pro forma results of operations related to the acquisition of Vast Auto are not presented as Vast Auto’s results are not material to the Company’s results of operations.

The purchase price allocation process consists of collecting data and information to enable the Company to value the assets acquired and liabilities assumed as a result of the business combination. Potential identifiable intangible assets under evaluation include, but are not limited to, trade names and trademarks, non-compete agreements, and customer relationships. In addition, other assets, including internal use software, and other assumed liabilities may be identified, valued, and recorded. Due to the close proximity of the Vast Auto acquisition closing date and the Company’s fiscal quarter end, the Company remains in the initial measurement period.

The preliminary purchase price allocation, which is provisional and will change as additional information is obtained and valuation work is completed during the initial measurement period, resulted in the initial recognition of $109.8 million of goodwill and intangible assets included in “Goodwill”, including impacts from the recognition of applicable deferred taxes related to the acquisition, on the accompanying Condensed Consolidated Balance Sheets as of March 31, 2024. Goodwill generated from this ~~report~~acquisition is not amortizable for ~~more information.~~tax purposes.

NOTE 3 – VARIABLE INTEREST ENTITIES

The Company invests in certain tax credit funds that promote renewable energy. These investments generate a return primarily through the realization of federal tax credits and other tax benefits. The Company accounts for the tax attributes of its renewable energy investments using the deferral method. Under this method, realized investment tax credits and other tax benefits are recognized as a reduction of the renewable energy tax credits.

The Company has determined its investment in these tax credit funds were investments in variable interest entities (“VIEs”). The Company analyzes any investments in VIEs at inception and again if certain triggering events are identified to determine if it is the primary beneficiary. The Company considers a variety of factors in identifying the entity that holds the power to direct matters that most significantly impact the VIEs’ economic performance including, but not limited to, the ability to direct financing, leasing, construction, and other operating decisions and activities. As of March 31, 2024, the Company had invested in six unconsolidated tax credit fund entities that were considered to be VIEs and concluded it was not the primary beneficiary of any of the entities, as it did not have the power to control the activities that most significantly impact the entities, and has therefore accounted for these investments using the equity method.

The Company’s maximum exposure to losses associated with these VIEs is generally limited to its net investment, which was $29.8 million as of March 31, 2024, and was included in “Other assets, net” on the accompanying Condensed Consolidated Balance Sheets.

NOTE 24 – FAIR VALUE MEASUREMENTS

The Company uses the fair value hierarchy, which prioritizes the inputs used to measure the fair value of certain of its financial instruments. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement). The Company uses the income and market approaches to determine the fair value of its assets and liabilities. The three levels of the fair value hierarchy are set forth below:

~~Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity can access at the measurement date.~~

~~Level 2 – Inputs other than quoted prices in active markets included within Level 1 that are observable for the asset or liability, either directly or indirectly.~~

~~Level 3 – Unobservable inputs for the asset or liability.~~

●

Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity can access at the measurement date.

●

Level 2 – Inputs other than quoted prices in active markets included within Level 1 that are observable for the asset or liability, either directly or indirectly.

●

Level 3 – Unobservable inputs for the asset or liability.

Financial assets and liabilities measured at fair value on a recurring basis:

The Company invests in various marketable securities with the intention of selling these securities to fulfill its future unsecured ~~obligation~~obligations under the Company’s nonqualified deferred compensation plan. See Note 612 for further information concerning the Company’s benefit plans.

The Company’s marketable securities were accounted for as trading securities and the carrying amount of its marketable securities were included in “Other assets, net” on the accompanying Condensed Consolidated Balance Sheets as of ~~September 30, 2017~~,March 31, 2024, and December 31, ~~2016~~.2023. The Company recorded an increase in fair value related to its marketable securities in the ~~amounts~~amount of ~~$1.0~~$3.5 million and ~~$0.9~~$2.5 million for the three months ended ~~September 30, 2017~~March 31, 2024 and ~~2016,~~2023, respectively, which were included in “Other income (expense)” on the accompanying Condensed Consolidated Statements of Income. The Company recorded an increase in fair value related to its marketable securities in the amounts of $2.6 million and $1.4 million for the nine months ended September 30, 2017 and 2016, respectively, which were included in “Other income (expense)” on the accompanying Condensed Consolidated Statements of Income.

The tables below identify the estimated fair value of the Company’s marketable securities, determined by reference to quoted market prices (Level 1), as of ~~September 30, 2017~~,March 31, 2024, and December 31, ~~2016~~2023 (in thousands):

September 30, 2017
Quoted Prices in Active Markets for Identical Instruments
(Level 1) Significant Other Observable Inputs
(Level 2) Significant Unobservable Inputs
(Level 3) Total
Marketable securities $ 24,528
$ —
$ —
$ 24,528

December 31, 2016
Quoted Prices in Active Markets for Identical Instruments
(Level 1) Significant Other Observable Inputs
(Level 2) Significant Unobservable Inputs
(Level 3) Total
Marketable securities $ 20,462
$ —
$ —
$ 20,462

March 31, 2024

Quoted Priced in Active Markets

Significant Other

Significant

for Identical Instruments

Observable Inputs

Unobservable Inputs

(Level 1)

(Level 2)

(Level 3)

Total

Marketable securities

62,219

—

62,219


	December 31, 2023
	Quoted Prices in Active Markets		Significant Other		Significant
	for Identical Instruments		Observable Inputs		Unobservable Inputs
	(Level 1)		(Level 2)		(Level 3)		Total
Marketable securities	$	59,508	$	—	$	—	$	59,508

Non-financial assets and liabilities measured at fair value on a nonrecurring basis:

Certain long-lived non-financial assets and liabilities may be required to be measured at fair value on a nonrecurring basis in certain circumstances, including when there is evidence of impairment. These non-financial assets and liabilities may include assets acquired in a business combination or property and equipment that are determined to be impaired. As of ~~September 30, 2017,~~March 31, 2024, and December 31, ~~2016,~~2023, the Company did not have any non-financial assets or liabilities that had been measured at fair value subsequent to initial recognition.

Fair value of financial instruments:

The carrying amounts of the Company’s senior notes, ~~and~~ unsecured revolving credit facility borrowings, and commercial paper program borrowings are included in “Long-term debt” on the accompanying Condensed Consolidated Balance Sheets as of ~~September 30, 2017,~~March 31, 2024, and December 31, ~~2016. See Note 3 for further information concerning the Company’s senior notes and unsecured revolving credit facility.~~2023.

The table below identifies the estimated fair value of the Company’s senior notes, using the market approach. The fair value as of ~~September 30, 2017,~~March 31, 2024, and December 31, ~~2016,~~2023, was determined by reference to quoted market prices of the same or similar instruments (Level 2) (in thousands):

September 30, 2017 December 31, 2016
Carrying Amount Estimated Fair Value Carrying Amount Estimated Fair Value
Senior Notes $ 2,631,816
$ 2,733,350
$ 1,887,019
$ 1,977,510


	March 31, 2024				December 31, 2023
	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Senior Notes	$	4,821,943	$	4,643,028	$	4,820,543	$	4,687,065

The carrying amount of the Company’s unsecured revolving credit facility approximates fair value (Level 2), as borrowings under the facility bear variable interest at current market rates.

The carrying amount of the Company’s commercial paper program approximates fair value (Level 2), as borrowings under the program bear interest at market rates prevailing at the time of issuance. See Note 7 for further information concerning the Company’s senior notes, unsecured revolving credit facility, and commercial paper program.

The accompanying Condensed Consolidated Balance Sheets include other financial instruments, including cash and cash equivalents, accounts receivable, amounts receivable from suppliers, and accounts payable. Due to the short-term nature of these financial instruments, the Company believes that the carrying values of these instruments approximate their fair values.

NOTE 5 – LEASES

The Company leases certain office space, retail stores, distribution centers, and equipment under long-term, non-cancelable operating leases. The following table summarizes Total lease cost for the three months ended March 31, 2024 and 2023, which were primarily included in “Selling, general and administrative expenses” on the accompanying Condensed Consolidated Statements of Income (in thousands):


	For the Three Months Ended
	March 31,
	2024		2023
Operating lease cost	$	103,556	$	96,518
Short-term operating lease cost		2,500		3,704
Variable operating lease cost		25,634		24,471
Sublease income		(1,154)		(1,214)
Total lease cost	$	130,536	$	123,479

The following table summarizes other lease-related information for the three months ended March 31, 2024 and 2023:


		For the Three Months Ended
		March 31,
		2024		2023
Cash paid for amounts included in the measurement of operating lease liabilities:
	Operating cash flows from operating leases	$	101,616	$	95,494
Right-of-use assets obtained in exchange for new operating lease liabilities			88,091		126,986

NOTE 6 – SUPPLIER FINANCE PROGRAM

The Company has established and maintains supplier finance programs with certain third-party financial institutions, which allow participating merchandise suppliers to voluntarily elect to assign the Company’s payment obligations due to these merchandise suppliers to one of the designated third-party institutions. Under these supplier finance programs, the Company has agreed to pay the third-party financial institutions the stated amount of confirmed merchandise supplier invoices on the original maturity dates of the invoices, which are generally for a term of one year. The Company does not have any assets pledged as security or other forms of guarantees for the committed payment to the third-party financial institutions. As of March 31, 2024, and December 31, 2023, the Company had obligations outstanding under these programs for invoices that were confirmed as valid to the third-party financial institutions in the amounts of $4.3 billion and $4.4 billion, respectively, which were included as a component of “Accounts payable” on the accompanying Condensed Consolidated Balance Sheets.

NOTE 37 – FINANCING

The following table identifies the amounts included in “Long-term debt” on the accompanying Condensed Consolidated Balance Sheets as of ~~September 30, 2017,~~March 31, 2024, and December 31, ~~2016~~2023 (in thousands):

September 30, 2017 December 31, 2016
Revolving Credit Facility, weighted-average variable interest rate of 2.283% $ 269,000
$ —
$500 million, 4.875% Senior Notes due 2021⁽¹⁾, effective interest rate of 4.957%
497,363
496,758
$300 million, 4.625% Senior Notes due 2021⁽²⁾, effective interest rate of 4.646%
298,891
298,679
$300 million, 3.800% Senior Notes due 2022⁽³⁾, effective interest rate of 3.845%
298,126
297,868
$300 million, 3.850% Senior Notes due 2023⁽⁴⁾, effective interest rate of 3.851%
298,525
298,355
$500 million, 3.550% Senior Notes due 2026⁽⁵⁾, effective interest rate of 3.570%
495,682
495,359
$750 million, 3.600% Senior Notes due 2027⁽⁶⁾, effective interest rate of 3.619%
743,229
—
Long-term debt $ 2,900,816
$ 1,887,019


⁽¹⁾	Net of unamortized discount of $1.2 million as of September 30, 2017, and $1.4 million as of December 31, 2016, and debt issuance costs of $1.5 million as of September 30, 2017, and $1.8 million as of December 31, 2016.


⁽²⁾	Net of unamortized discount of $0.2 million as of September 30, 2017, and December 31, 2016, and debt issuance costs of $0.9 million as of September 30, 2017, and $1.1 million as of December 31, 2016.


⁽³⁾	Net of unamortized discount of $0.6 million as of September 30, 2017, and $0.7 million as of December 31, 2016, and debt issuance costs of $1.3 million as of September 30, 2017, and $1.5 million as of December 31, 2016.


⁽⁴⁾	Net of unamortized discount of less than $0.1 million as of September 30, 2017, and December 31, 2016, and debt issuance costs of $1.5 million as of September 30, 2017, and $1.6 million as of December 31, 2016.


⁽⁵⁾	Net of unamortized discount of $0.7 million as of September 30, 2017, and $0.8 million as of December 31, 2016, and debt issuance costs of $3.6 million as of September 30, 2017, and $3.9 million as of December 31, 2016.


⁽⁶⁾	~~Net of unamortized discount of $1.2 million as of September 30, 2017, and debt issuance costs of $5.6 million as of September 30, 2017.~~


	March 31, 2024		December 31, 2023
Revolving Credit Facility, weighted-average variable interest rate of 8.500%	$	30,000	$	—
Commercial paper program, weighted-average variable interest rate of 5.527% as of March 31, 2024, and 5.640% as of December 31, 2023		437,000		750,900
3.550% Senior Notes due 2026, effective interest rate of 3.570%		500,000		500,000
5.750% Senior Notes due 2026, effective interest rate of 5.767%		750,000		750,000
3.600% Senior Notes due 2027, effective interest rate of 3.619%		750,000		750,000
4.350% Senior Notes due 2028, effective interest rate of 4.383%		500,000		500,000
3.900% Senior Notes due 2029, effective interest rate of 3.901%		500,000		500,000
4.200% Senior Notes due 2030, effective interest rate of 4.205%		500,000		500,000
1.750% Senior Notes due 2031, effective interest rate of 1.798%		500,000		500,000
4.700% Senior Notes due 2032, effective interest rate of 4.740%		850,000		850,000
Total principal amount of debt		5,317,000		5,600,900
Less: Unamortized discount and debt issuance costs		28,368		30,775
Total long-term debt	$	5,288,632	$	5,570,125

Unsecured revolving credit facility:

~~On April 5, 2017, the~~

The Company ~~entered into~~is party to a credit agreement dated June 15, 2021, as amended as of March 6, 2023 (the “Credit Agreement”). The Credit Agreement provides for a ~~$1.2~~five-year $1.8 billion unsecured revolving credit facility (the “Revolving Credit Facility”) arranged by JPMorgan Chase Bank, N.A., which is scheduled to mature in ~~April 2022.~~June of 2026. The Credit Agreement includes a $200 million sub-limit for the issuance of letters of credit and a $75 million sub-limit for swing line borrowings under the Revolving Credit Facility. As described in the Credit Agreement governing the Revolving Credit Facility, the Company may, from time to time, subject to certain conditions, increase the aggregate commitments under the Revolving Credit Facility by up to ~~$600~~$900 million, provided that the aggregate amount of the commitments does not exceed ~~$1.8~~$2.7 billion at any time.

In conjunction with the closing of the Credit Agreement, the Company’s previous credit agreement, which was originally entered into on January 14, 2011, as amended, was terminated (the “Terminated Credit Agreement”), and all outstanding loans and commitments, including the guarantees of each of the subsidiary guarantors, under the Terminated Credit Agreement were terminated and replaced by the loans and commitments under the Credit Agreement. None of the Company’s subsidiaries are guarantors or obligors under the Credit Agreement.

As of ~~September 30, 2017,~~March 31, 2024, and December 31, ~~2016,~~2023, the Company had outstanding letters of credit, primarily to support obligations related to workers’ compensation, general liability, and other insurance policies, under the Credit Agreement in the amounts of ~~$41.3~~$5.7 million and ~~$38.7~~$5.4 million, respectively, reducing the aggregate availability under the ~~credit agreements~~Credit Agreement by those amounts.

Substantially all of these outstanding letters of credit have a one-year term from the date of issuance.

Borrowings under the Revolving Credit Facility (other than swing line loans) bear interest, at the Company’s option, at either an Alternate Base Rate or an Adjusted ~~LIBO~~Term SOFR Rate (both as defined in the Credit Agreement) plus an applicable margin. Swing line loans made under the Revolving Credit Facility bear interest at an Alternate Base Rate plus the applicable margin for Alternate Base Rate loans. In addition, the Company pays a facility fee on the aggregate amount of the commitments under the Credit Agreement in an amount equal to a percentage of such commitments. The interest rate margins and facility fee are based upon the better of the ratings assigned to the Company’s debt by Moody’s Investor Service, Inc. and Standard & Poor’s Ratings Services, subject to limited exceptions. As of ~~September 30, 2017,~~March 31, 2024, based upon the Company’s current credit ratings, its margin for Alternate Base Rate loans was 0.000%, its margin for ~~Eurodollar~~Term Benchmark Revolving Loans was 0.900% and its facility fee was 0.100%.

The Credit Agreement contains certain covenants, including limitations on subsidiary indebtedness, a minimum consolidated fixed charge coverage ratio of 2.50:1.00 and a maximum consolidated leverage ratio of 3.50:1.00. The consolidated fixed charge coverage ratio includes a calculation of earnings before interest, taxes, depreciation, amortization, rent, and non-cash share-based compensation expense to fixed charges. Fixed charges include interest expense, capitalized interest, and rent expense. The consolidated leverage ratio includes a calculation of adjusted debt to earnings before interest, taxes, depreciation, amortization, rent, and non-cash share-based compensation expense. Adjusted debt includes outstanding debt, outstanding stand-by letters of credit, and similar instruments, five-times rent expense and excludes any premium or discount recorded in conjunction with the issuance of long-term debt. In the event that the Company should default on any covenant (subject to customary grace periods, cure rights, and materiality thresholds) contained in the Credit Agreement, certain actions may be taken, including, but not limited to, possible termination of commitments, immediate payment of outstanding principal amounts plus accrued interest and other amounts payable under the Credit Agreement, and litigation from lenders. As of ~~September 30, 2017,~~March 31, 2024, the Company remained in compliance with all covenants under the Credit Agreement.

In addition to the letters of credit issued under the Credit Agreement described above, as of March 31, 2024, and December 31, 2023, the Company had additional outstanding letters of credit, primarily to support obligations under workers’ compensation, general liability, and other insurance policies, in the amount of $132.1 million and $106.8 million, respectively. Substantially all of these letters of credit

~~Senior notes:~~

have a one-year term from the date of issuance and were not issued under the Company’s Credit Agreement or another committed facility.

Commercial paper program:

On August ~~17, 2017,~~9, 2023, the Company ~~issued $750 million~~established a commercial paper program (the “Program”) pursuant to which it may issue short-term, unsecured commercial paper notes (the “Notes”) under the exemption from registration contained in Section 4(a)(2) of the Securities Act of 1933, as amended. Amounts available under the Program may be borrowed, repaid, and re-borrowed from time to time, with the aggregate face or principal amount of the Notes outstanding under the Program at any time not to exceed $1.8 billion. The Notes will have maturities of up to 397 days from the date of issue. The Notes rank at least pari passu with all of the Company’s other unsecured ~~3.600% Senior~~and unsubordinated indebtedness. The Company plans to use its Revolving Credit Facility as a liquidity backstop for the repayment of Notes ~~due 2027 (“3.600% Senior~~outstanding under the Program. The Notes ~~due 2027”) at a price to~~issued under the ~~public of 99.840% of their face value with UMB Bank, N.A. (“UMB”) as trustee. Interest~~Program were included in “Long-term debt” on the ~~3.600%~~ accompanying Condensed Consolidated Balance Sheet as of March 31, 2024, as the Company has the ability and intent to refinance these Notes on a long-term basis.

Senior ~~Notes due 2027 is payable on~~notes:

As of March ~~1 and September 1 of each year, beginning on March 1, 2018, and is computed on~~31, 2024, the ~~basis of a 360-day year.~~

~~The~~ Company has issued and outstanding a cumulative ~~$2.7~~$4.9 billion aggregate principal amount of unsecured senior notes, which are due between ~~2021~~2026 and ~~2027,~~2032, with UMB Bank, N.A. and U.S. Bank Trust Company, National Association as ~~trustee.~~trustees. Interest on the senior notes, ranging from ~~3.550%~~1.750% to ~~4.875%~~5.750%, is payable semi-annually and is computed on the basis of a 360-day year. None of the Company’s subsidiaries is a guarantor under the senior notes. Each of the senior notes is subject to certain customary covenants, with which the Company complied as of ~~September 30, 2017.~~

In connection with entering into the Credit Agreement (under which none of the Company’s subsidiaries are guarantors or obligors), and upon termination of the Terminated Credit Agreement, the guarantees by the Company’s subsidiary guarantors with respect to all of the Company’s then outstanding senior notes were automatically released in accordance with the terms of the respective indentures governing these senior notes. The 3.600% Senior Notes due 2027 also are not guaranteed by any of the Company’s subsidiaries.

March 31, 2024.

NOTE 48 – WARRANTIES

The Company provides warranties on certain merchandise it sells with warranty periods ranging from 30 days to limited lifetime warranties. The risk of loss arising from warranty claims is typically the obligation of the Company’s suppliers. Certain suppliers provide upfront

allowances to the Company in lieu of accepting the obligation for warranty claims. For this merchandise, when sold, the Company bears the risk of loss associated with the cost of warranty claims. Differences between supplier allowances received by the Company, in lieu of warranty obligations and estimated warranty expense, are recorded as an adjustment to cost of sales. Estimated warranty costs, which are recorded as obligations at the time of sale, are based on the historical failure rate of each individual product line. The Company’s historical experience has been that failure rates are relatively consistent over time and that the ultimate cost of warranty claims to the Company has been driven by volume of units sold as opposed to fluctuations in failure rates or the variation of the cost of individual claims.

The Company’s product warranty liabilities are included in “Other current liabilities” on the accompanying Condensed Consolidated Balance Sheets as of ~~September 30, 2017,~~March 31, 2024, and December 31, ~~2016. The~~2023; the following table identifies the changes in the Company’s aggregate product warranty liabilities for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2024 (in thousands):

Warranty liabilities, balance at December 31, 2016 $ 36,623
Warranty claims (60,173 )
Warranty accruals 65,450
Warranty liabilities, balance at September 30, 2017 $ 41,900


Warranty liabilities, balance at December 31, 2023	$	117,895
Warranty claims		(44,585)
Warranty accruals		48,275
Foreign currency translation		14
Warranty liabilities, balance at March 31, 2024	$	121,599

NOTE 59 – SHARE REPURCHASE PROGRAM

In January of 2011, the Company’s Board of Directors approved a share repurchase program. Under the program, the Company may, from time to time, repurchase shares of its common stock, solely through open market purchases effected through a broker dealer at prevailing market prices, based on a variety of factors such as price, corporate trading policy requirements, and overall market conditions. The Company’s Board of Directors may increase or otherwise modify, renew, suspend, or terminate the share repurchase program at any time, without prior notice. As announced on May ~~10, 2017,~~23, 2023, and ~~September 1, 2017,~~November 16, 2023, the Company’s Board of Directors each time approved a resolution to increase the authorization amount under the share repurchase program by an additional ~~$1.0~~$2.0 billion, resulting in a cumulative authorization amount of ~~$9.8~~$25.8 billion. ~~Each~~The additional ~~authorization is~~authorizations are effective for ~~a three-year period,~~three years, beginning on its respective announcement date.

The following table identifies shares of the Company’s common stock that have been repurchased as part of the Company’s publicly announced share repurchase program for the three months ended March 31, 2024 and 2023 (in thousands, except per share data):

For the Three Months Ended
September 30, For the Nine Months Ended
September 30,
2017 2016 2017 2016
Shares repurchased 2,743
367
8,047
3,673
Average price per share $ 200.70
$ 281.04
$ 235.26
$ 261.32
Total investment $ 550,530
$ 102,941
$ 1,893,068
$ 959,743


	For the Three Months Ended
	March 31,
	2024		2023
Shares repurchased		262		1,357
Average price per share	$	1,029.24	$	819.06
Total investment	$	270,017	$	1,111,447

As of ~~September 30, 2017,~~March 31, 2024, the Company had ~~$994.8 million~~$2.3 billion remaining under its share repurchase ~~program.~~ authorization. Excise tax on shares repurchased, assessed at one percent of the fair market value of shares repurchased, was $2.7 million for the three months ended March 31, 2024.

Subsequent to the end of the ~~third~~first quarter and through ~~November 7, 2017,~~May 9, 2024, the Company repurchased an0.2 million additional ~~0.4 million~~ shares of its common stock under its share repurchase program, at an average price of ~~$209.61,~~$1,053.19, for a total investment of ~~$85.2~~$208.7 million. The Company has repurchased a total of ~~65.4~~94.5 million shares of its common stock under its share repurchase program since the inception of the program in January of 2011 and through ~~November 7, 2017,~~May 9, 2024, at an average price of ~~$135.17,~~$250.21, for a total aggregate investment of ~~$8.8~~$23.7 billion.

NOTE 10 – ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

Accumulated other comprehensive income (loss) includes adjustments for foreign currency translations. The tables below summarize activity for changes in accumulated other comprehensive income (loss) for the three months ended March 31, 2024 and 2023 (in thousands):


	Foreign		Total Accumulated Other
	Currency ⁽¹⁾		Comprehensive Income
Accumulated other comprehensive income, balance at December 31, 2023	$	39,388	$	39,388
Change in accumulated other comprehensive income		7,176		7,176
Accumulated other comprehensive income, balance at March 31, 2024	$	46,564	$	46,564


	Foreign		Total Accumulated Other
	Currency ⁽¹⁾		Comprehensive Income
Accumulated other comprehensive income, balance at December 31, 2022	$	2,996	$	2,996
Change in accumulated other comprehensive income		18,898		18,898
Accumulated other comprehensive income, balance at March 31, 2023	$	21,894	$	21,894

(1)	Foreign currency translation is not shown net of additional U.S. tax, as other basis differences of non-U.S. subsidiaries are intended to be permanently reinvested.

NOTE 11 – REVENUE

The table below identifies the Company’s revenues disaggregated by major customer type for the three months ended March 31, 2024 and 2023 (in thousands):


	For the Three Months Ended
	March 31,
	2024		2023
Sales to do-it-yourself customers	$	2,001,986	$	1,918,467
Sales to professional service provider customers		1,869,740		1,711,964
Other sales, sales adjustments, and sales from the acquired Vast Auto stores		104,514		77,433
Total sales	$	3,976,240	$	3,707,864

See Note 8 for information concerning the expected costs associated with the Company’s assurance warranty obligations.

NOTE 612 – SHARE-BASED COMPENSATION AND BENEFIT PLANS

The Company recognizes share-based compensation expense based on the fair value of the grants, awards, or shares at the time of the grant, award, or issuance. Share-based compensation includes stock option awards, restricted stock awards, and stock appreciation rights issued under the Company’s ~~employee~~ incentive plans ~~and director stock plan, restricted stock awarded under the Company’s employee incentive plans and director stock plan~~ and stock issued through the Company’s employee stock purchase plan.

Stock options:

The Company’s ~~stock-based~~ incentive plans provide for the granting of stock options for the purchase of common stock of the Company to ~~directors and~~ certain key employees of the Company. ~~Options~~Employee stock options are granted at an exercise price that is equal to the closing market price of the Company’s common stock on the date of the grant. ~~Director~~Employee stock options granted under the plans expire after ~~seven years and are fully vested after six months. Employee options granted under the plans expire after ten~~10 years and typically vest 25% per year, over four years. The Company records compensation expense for the ~~grant-date~~grant date fair value of the option awards evenly over the vesting period or ~~the~~ minimum required service period.

The table below identifies stock option activity under these plans during the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2024 (in thousands, except per share data):

Shares
Weighted-Average
Exercise Price
Outstanding at December 31, 2016 2,800
$ 104.90
Granted 240
257.39
Exercised (483 ) 51.35
Forfeited (26 ) 207.45
Outstanding at September 30, 2017 2,531
$ 128.50
Exercisable at September 30, 2017 1,705
$ 75.65



	Shares	Weighted- Average
	(in thousands)	Exercise Price
Outstanding at December 31, 2023	884	$	428.50
Granted	54		1,069.20
Exercised	(165)		316.84
Forfeited or expired	(2)		641.53
Outstanding at March 31, 2024	771	$	496.55
Exercisable at March 31, 2024	545	$	369.68

The fair value of each stock option award is estimated on the date of the grant using the Black-Scholes option pricing model. The Black-Scholes model requires the use of assumptions, including the ~~risk free~~risk-free rate, expected life, expected volatility, and expected dividend yield.

~~Risk-free interest rate~~ ~~– The United States Treasury rates in effect at the time the options are granted for the options’ expected life.~~

~~Expected life~~ ~~– Represents the period of time that options granted are expected to be outstanding. The Company uses historical experience to estimate the expected life of options granted.~~

~~Expected volatility~~ ~~– Measure of the amount, by which the Company’s stock price is expected to fluctuate, based on a historical trend.~~

~~Expected dividend yield –~~ ~~The Company has not paid, nor does it have plans in the foreseeable future to pay, any dividends.~~

●

Risk-free interest rate – The United States Treasury rates in effect at the time the options are granted for the options’ expected life.

●

Expected life – Represents the period of time that options granted are expected to be outstanding. The Company uses historical experience to estimate the expected life of options granted.

●

Expected volatility – Measure of the amount, by which the Company’s stock price is expected to fluctuate, based on a historical trend.

●

Expected dividend yield – The Company has not paid, nor does it have plans in the foreseeable future to pay, any dividends.

The table below identifies the weighted-average assumptions used for grants awarded during the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2024 and ~~2016:~~

For the Nine Months Ended
September 30,
2017 2016
Risk free interest rate 1.98 % 1.45 %
Expected life 5.5 Years
5.6 Years
Expected volatility 22.2 % 22.4 %
Expected dividend yield — % — %

2023:


	March 31,
	2024		2023
Risk free interest rate	4.14	%	3.91	%
Expected life	6.6	Years	6.5	Years
Expected volatility	28.3	%	29.1	%
Expected dividend yield	—	%	—	%

The following table summarizes activity related to stock options awarded by the Company for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2024 and ~~2016~~2023 (in thousands, except per share data):

For the Three Months Ended
September 30, For the Nine Months Ended
September 30,
2017 2016 2017 2016
Compensation expense for stock options awarded $ 3,679
$ 3,653
$ 11,826
$ 11,793
Income tax benefit from compensation expense related to stock options 1,402
1,365
4,507
4,405

The weighted-average grant-date fair value of options granted during the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2024, was ~~$64.45~~$411.22, compared to ~~$64.00~~$318.08 for the ~~nine~~three months ended ~~September 30, 2016.~~March 31, 2023. The remaining unrecognized compensation expense related to unvested stock

option awards at ~~September 30, 2017,~~March 31, 2024, was ~~$28.6~~$55.5 million, and the weighted-average period of time over which this cost will be recognized is ~~2.6~~3.0 years.

Other share-based compensation plans:

The Company sponsors other share-based compensation plans: an employee stock purchase plan and incentive plans that provide for the awarding of shares of restricted stock to certain key employees and directors. The Company’s employee stock purchase plan (the “ESPP”)~~, which~~ permits ~~all~~ eligible employees to purchase shares of the Company’s common stock at 85% of the fair market value, and a director stock plan, which provides for the award of shares of restricted stock to the Company’s independent directors, that vest evenly over a three-year period and are held in escrow until such vesting has occurred.value. The fair value of shares issued under the ESPP is based on the average of the high and low market prices of the Company’s common stock during the offering periods, and compensation expense is recognized based on the discount

between the fair value and the employee purchase price for the shares sold to employees. Restricted stock awarded under the incentive plans to certain key employees and directors vests after one-year or evenly over a three-year period and is held in escrow until such vesting has occurred. The fair value of shares awarded under the ~~director stock plan~~incentive plans is based on the closing market price of the Company’s common stock on the date of the award, and compensation expense is recorded evenly over the vesting period or the minimum required service period.

The table below summarizes activity related to the Company’s other share-based compensation plans for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2024 and ~~2016~~2023 (in thousands):

For the Three Months Ended
September 30, For the Nine Months Ended
September 30,
2017 2016 2017 2016
Compensation expense for shares issued under the ESPP $ 545
$ 538
$ 1,659
$ 1,610
Income tax benefit from compensation expense related to shares issued under the ESPP 208
201
632
601
Compensation expense for restricted shares awarded 258
327
1,350
968
Income tax benefit from compensation expense related to restricted awards $ 98
$ 122
$ 515
$ 361


	For the Three Months Ended
	March 31,
	2024		2023
Compensation expense for shares issued under the ESPP	$	953	$	861
Income tax benefit from compensation expense related to shares issued under the ESPP		245		216
Compensation expense for restricted shares awarded		474		455
Income tax benefit from compensation expense related to restricted awards	$	122	$	114

Profit sharing and savings plan:

The Company sponsors a contributory profit sharing and savings plan (the “401(k) Plan”) that covers substantially all employees who are at least 21 years of ~~age and have completed one year of service.~~age. The Company makes matching contributions equal to 100% of the first 2% of each employee’s wages that are contributed and 25% of the next 4% of each employee’s wages that are contributed. An employee generally must be employed on December 31 to receive that year’s Company matching contribution, with the matching contribution funded annually at the beginning of the subsequent year following the year in which the matching contribution was earned. The Company may also make additional discretionary profit sharing contributions to the ~~plan~~401(k) Plan on an annual basis as determined by the Board of Directors. The Company did not make any discretionary contributions to the 401(k) Plan during the three ~~or nine~~ months ended ~~September 30, 2017~~March 31, 2024 or ~~2016.~~2023. The Company expensed matching contributions under the 401(k) Plan in the ~~amounts~~amount of ~~$5.7~~$13.8 million and ~~$5.3~~$9.6 million for the three months ended ~~September 30, 2017~~March 31, 2024 and ~~2016,~~2023, respectively, which were primarily included in “Selling, general and administrative expenses” on the accompanying Condensed Consolidated Statements of Income. The Company expensed matching contributions under the 401(k) Plan in the amounts of $17.0 million and $15.5 million for the nine months ended September 30, 2017 and 2016, respectively, which were included in “Selling, general and administrative expense” on the accompanying Condensed Consolidated Statements of Income.

Nonqualified deferred compensation plan:

The Company sponsors a nonqualified deferred compensation plan (the “Deferred Compensation Plan”) for highly compensated employees whose contributions to the 401(k) Plan are limited due to the application of the annual limitations under the Internal Revenue Code. The Deferred Compensation Plan provides these employees with the opportunity to defer the full 6% of matched compensation, including salary and incentive based compensation that was precluded under the Company’s 401(k) Plan,Code, which iscould then be matched by the Company using the same formula as the 401(k) Plan. An employee generally must be employed on December 31 to receive that year’s Company matching contribution, with the matching contribution funded annually at the beginning of the subsequent year following the year in which the matching contribution was earned.plan. In the event of bankruptcy, the assets of this plan are available to satisfy the claims of general creditors. The Company has an unsecured obligation to pay, in the future, the value of the deferred compensation and Company match, if applicable, adjusted to reflect the performance, whether positive or negative, of selected investment measurement options chosen by each participant during the deferral period. See Note 4 for further information concerning the Company’s marketable securities held to fulfill our future unsecured obligations under this plan.

The liability for compensation deferred under the Deferred Compensation Plan was ~~$24.5~~$62.2 million and ~~$20.5~~$59.5 million as of ~~September 30, 2017,~~March 31, 2024, and December 31, ~~2016,~~2023, respectively, which was included in “Other liabilities” on the accompanying Condensed Consolidated Balance Sheets. The Company expensed ~~matching~~ contributions under the Deferred Compensation Plan in the amount of $0.1 million and less than $0.1 million for each of the three months ended ~~September 30, 2017~~March 31, 2024 and ~~2016,~~2023, respectively, which were included in “Selling, general and administrative expenses” on the accompanying Condensed Consolidated Statements of Income.

Stock appreciation rights:

The Company’s incentive plans provide for the granting of stock appreciation rights, which expire after 10 years and vest 25% per year, over four years, and are settled in cash. As of March 31, 2024, and December 31, 2023, there were 14,204 and 13,079 stock appreciation rights outstanding, respectively. During the three months ended March 31, 2024, there were 1,125 stock appreciation rights granted and no stock appreciation rights exercised or forfeited. The liability for compensation to be paid for redeemed stock appreciation rights was $6.2 million and $4.5 million as of March 31, 2024, and December 31, 2023, respectively, which were included in “Other liabilities” on the Condensed Consolidated Balance Sheets. The Company ~~expensed matching contributions under the Deferred Compensation Plan~~recorded compensation expense for stock appreciation rights in the amount

of ~~$0.1~~$1.6 million and $0.3 million for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2024 and ~~2016,~~2023, respectively, which were included in “Selling, general and administrative expenses” on the accompanying Condensed Consolidated Statements of Income.

NOTE 13 – COMMITMENTS

The Company has entered into a conditional agreement to purchase federal renewable energy tax credits (“RETC”). As of March 31, 2024, the Company has committed to purchase approximately $375 million RETCs upon the credit transfer date, which is anticipated to occur by June of 2025.

NOTE 714 – EARNINGS PER SHARE

The following table illustrates the computation of basic and diluted earnings per share for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2024 and ~~2016~~2023 (in thousands, except per share data):


	For the Three Months Ended
	March 31,
	2024		2023
Numerator (basic and diluted):
Net income	$	547,238	$	516,885

Denominator:
Weighted-average common shares outstanding – basic		59,017		61,840
Effect of stock options ⁽¹⁾		437		558
Weighted-average common shares outstanding – assuming dilution		59,454		62,398

Earnings per share:
Earnings per share-basic	$	9.27	$	8.36
Earnings per share-assuming dilution	$	9.20	$	8.28

Antidilutive potential common shares not included in the calculation of diluted earnings per share:
Stock options ⁽¹⁾		119		149
Weighted-average exercise price per share of antidilutive stock options ⁽¹⁾	$	917.74	$	725.14

For the Three Months Ended
September 30, For the Nine Months Ended
September 30,
2017 2016 2017 2016
Numerator (basic and diluted):
Net income $ 283,734
$ 278,493
$ 831,489
$ 791,661

Denominator:
Weighted-average common shares outstanding – basic 86,947
94,891
89,641
95,994
Effect of stock options ⁽¹⁾
1,078
1,229
1,228
1,315
Weighted-average common shares outstanding – assuming dilution 88,025
96,120
90,869
97,309

Earnings per share:
Earnings per share-basic $ 3.26
$ 2.93
$ 9.28
$ 8.25
Earnings per share-assuming dilution $ 3.22
$ 2.90
$ 9.15
$ 8.14

Antidilutive potential common shares not included in the calculation of diluted earnings per share:
Stock options ⁽¹⁾
784
271
620
319
Weighted-average exercise price per share of antidilutive stock options ⁽¹⁾
$ 246.65
$ 267.66
$ 258.75
$ 264.88

(1)
⁽¹⁾	See Note 612 for further information concerning the terms of the Company’s share-based compensation plans.

For the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2024 and ~~2016,~~2023, the computation of diluted earnings per share did not include certain securities. These securities represent underlying stock options not included in the computation of diluted earnings per share, because the inclusion of such equity awards would have been antidilutive.

~~Subsequent to~~

See Note 9 for information concerning the ~~end of the third quarter and through November 7, 2017, the Company repurchased an additional 0.4 million shares of its common stock under its~~Company’s subsequent share ~~repurchase program, at an average price of $209.61, for a total investment of $85.2 million.~~

repurchases.

NOTE 815 – LEGAL MATTERS

~~O’Reilly~~

The Company is currently involved in litigation incidental to the ordinary conduct of the Company’s business. ~~The~~Based on existing facts and historical patterns, the Company accrues for litigation losses in instances where ~~a material~~an adverse outcome is probable and the Company is able to reasonably estimate the probable ~~loss.~~loss in accordance with Accounting Standard Codification 450-20. The Company also accrues for an estimate of ~~material~~ legal costs to be incurred ~~in pending~~for litigation matters. Although the Company cannot ascertain the amount of liability that it may incur from ~~any of these~~legal matters, it does not currently believe that, in the aggregate, these matters, taking into account applicable insurance and accruals, will have a material adverse effect on its consolidated financial position, results of operations or cash flows in a particular quarter or annual period.

~~As previously reported, on June 18, 2015, a jury in Greene County, Missouri, returned an unfavorable verdict in a litigated contract dispute in the matter~~ ~~Meridian Creative Alliance vs. O’Reilly Automotive Stores, Inc. et. al.~~ in the amount of $12.5 million. As previously reported, the verdict was appealed, reversed in part and remanded to the trial court for a new trial. The matter has been set for trial to commence May 7, 2018, in the Circuit Court of Greene County, Missouri. The Company will continue to vigorously defend the matter. As of September 30, 2017, the Company had accrued $18.6 million with respect to this matter.

NOTE ~~9 -~~16 – RECENT ACCOUNTING PRONOUNCEMENTS

In ~~May~~November of ~~2014,~~2023, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standard Update (“ASU”) No. ~~2014-09, “Revenue from Contracts with Customers~~2023-07, “Segment Reporting (Topic ~~606)”~~280): Improvements to Reportable Segment Disclosures” (“ASU ~~2014-09”~~2023-07”). ASU 2023-07 increases the disclosures about a public entity’s reportable segments. Under ASU ~~2014-09, an~~2023-07, a public entity is required to follow a five-step process to determine the amount of revenue to recognize when promised goods or services are transferred to customers. ASU 2014-09 offers specific accounting guidance for costs to obtain or fulfill a contract with a customer. In addition, an entity iswould be required to disclose ~~sufficient information~~significant segment expenses that are regularly provided to ~~understand~~ the ~~nature, amount, timing,~~chief operating decision maker (“CODM”), a description of other segment items by reportable segment, annual disclosures about a reportable segment’s profit or loss and ~~uncertainty~~assets required by Topic 280 in interim periods, any additional measures of ~~revenue~~a segment’s profit or loss used by the CODM to allocate resources, and ~~cash flows arising from contracts with~~

~~customers. In August of 2015,~~ the ~~FASB issued ASU No. 2015-14, “Revenue from Contracts with Customers (Topic 606): Deferral~~title and position of the ~~Effective Date” (“~~CODM.

ASU 2015-14”), to defer the effective date of ASU 2014-09 by one year. For public companies, ASU 2015-14 changes ASU 2014-09 to be effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. These ASUs can be adopted retrospectively or as a cumulative-effective adjustment at the date of adoption, with early adoption allowed, but not before December 15, 2016. The Company will adopt this guidance beginning with its first quarter ending March 31, 2018. The Company has established a task force, composed of multiple functional groups inside of the Company, which is currently in the process of evaluating critical components of this new guidance and the potential impact of the guidance on the Company’s financial position, results of operations and cash flows. Based on the preliminary work completed, the Company is considering the potential implications of the new standard on the Company’s recognition of customer related accounts receivable, warranty costs that are not the responsibility of the Company’s suppliers, the application of the Company’s retail O’Rewards loyalty program and all applicable financial statement disclosures required by the new guidance. At this time, the task force has not completed its evaluation of the impact or means of adoption.

In February of 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)” (“ASU 2016-02”). Under ASU 2016-02, an entity will be required to recognize right-of-use assets and lease liabilities on its balance sheet and disclose key information about leasing arrangements. ASU 2016-02 offers specific accounting guidance for a lessee, a lessor and sale and leaseback transactions. Lessees and lessors are required to disclose qualitative and quantitative information about leasing arrangements to enable a user of the financial statements to assess the amount, timing and uncertainty of cash flows arising from leases. For public companies, ASU 2016-022023-07 is effective for annual reporting periods beginning after December 15, ~~2018, including~~2023, and interim periods within ~~that reporting period,~~fiscal years beginning after December 15, 2024. ASU 2023-07 allows for early adoption and requires ~~a modified~~ retrospective ~~adoption, with early adoption permitted.~~adoption. The Company will adopt this guidance beginning with its ~~first~~fourth quarter ending ~~March~~December 31, 2019. The Company has established a task force, composed of multiple functional groups inside of the Company, which is currently in the process of evaluating critical components of this new guidance and the potential impact of the guidance on the Company’s financial position, results of operations and cash flows. Based on the preliminary work completed, the Company is considering the potential implications of the new standard on determining the discount rate to be used in valuing new and existing leases, the treatment of existing favorable and unfavorable lease agreements acquired in connection with previous acquisitions, procedural and operational changes that may be necessary to comply with the provisions of the guidance and all applicable financial statement disclosures required by the new guidance, all of which are areas that could potentially be impacted by adoption of the guidance. At this time, the task force has not completed its full evaluation; however, the Company believes the adoption of the new guidance will have a material impact on the total assets and total liabilities reported on the Company’s consolidated balance sheets.

In March of 2016, the FASB issued ASU 2016-09, “Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting” (“ASU 2016-09”). Under ASU 2016-09, several aspects of the accounting for share-based payment transactions, including tax consequence, classification of awards as equity or liabilities, and classification on the statement of cash flows, were changed. The Company adopted this guidance with its first quarter ending March 31, 2017. Upon adoption of ASU 2016-09, the Company elected to change its accounting policy to account for forfeitures as they occur; this change was applied using the modified retrospective transition method with a cumulative effect adjustment of $0.3 million to opening “Retained earnings” on the accompanying Condensed Consolidated Balance Sheet as of September 30, 2017. The Company applied the amendments related to the presentation of tax withholdings on the statements of cash flows using the retrospective transition method, which resulted in $0.2 million of tax withholdings being reclassified from “Net cash provided by operating activities” to “Net cash used in financing activities” on the accompanying Condensed Consolidated Statement of Cash Flows for the nine months ended September 30, 2016. The Company elected to apply the amendments related to the presentation of excess tax benefits on the statements of cash flows using the retrospective transition method, which resulted in $46.0 million of excess tax benefits related to share-based compensation being reclassified from “Net cash used in financing activities” to “Net cash provided by operating activities” in the accompanying Condensed Consolidated Statement of Cash Flows for the nine months ended September 30, 2016. ASU 2016-09 amendments related to accounting for excess tax benefits in the income statement have been adopted prospectively, resulting in the reduction of $2.8 million and $35.3 million in “Provision for income taxes” in the accompanying Condensed Consolidated Statement of Income for the three and nine months ended September 30, 2017, respectively, which lowered the Company’s effective tax rate, increased dilutive shares outstanding and increased diluted earnings per share for the three and nine months ended September 30, 2017, by $0.02 and $0.35, respectively.

In June of 2016, the FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”). Under ASU 2016-13, businesses and other organizations are required to present financial assets, measured at amortized costs basis, at the net amount expected to be collected. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis, such as trade receivables. The measurement of expected credit loss will be based on historical experience, current conditions, and reasonable and supportable forecasts that affect the collectibility of the reported amount. For public companies, ASU 2016-13 is effective for annual reporting periods beginning after December 15, 2019, including interim periods within that reporting period, and requires a modified retrospective adoption, with early adoption permitted. The Company will adopt this guidance beginning with its first quarter ending March 31, 2020.2024. The application of this new guidance is not expected to have a material impact on the Company’s consolidated financial condition, results of operations, or cash ~~flows.~~

flows, as the guidance pertains to disclosure only.

In ~~August~~December of ~~2016, the~~2023, FASB issued Accounting Standard Update ASU No. ~~2016-15, “Statement of Cash Flows~~2023-09, “Income Taxes (Topic ~~230)~~740): ~~Classification of Certain Cash Receipts~~Improvements to Income Tax Disclosures” (“ASU 2023-09”). Under ASU 2023-09, a public entity will be required to disclose specific categories in the rate reconciliation and ~~Cash Payments (a consensus~~provide additional information for reconciling items that meet a quantitative threshold, such as if the effect of the FASB Emerging Issues Task Force)” (“ASU 2016-15”). ASU 2016-15 reduces the existing diversity in practice for eight specific parts on cash flow statement presentation and classification: debt prepaymentreconciling item is equal to or debt extinguishment costs; settlement of zero-coupon debt instruments; contingent consideration payments made after a business combination; proceeds from the settlement of insurance claims; proceeds from the settlement of corporate-owned life insurance (COLI) policies; distributions received from equity method investments; beneficial interests in securitization transactions; and separately identifiable cash flows and applicationgreater than five percent of the ~~predominance principle. For public companies,~~amount computed by multiplying pretax income/loss by the applicable statutory income tax rate. Entities would also have to disclose the amount of income taxes paid disaggregated by federal, state, and foreign taxes and the amount of income taxes paid disaggregated by individual jurisdictions in which income taxes paid is equal to or greater than five percent of total income taxes paid, along with income/loss from continuing operations before income tax expense disaggregated between domestic and foreign and income tax expense from continuing operations disaggregated by federal, state, and foreign. ASU ~~2016-15~~2023-09 is effective for annual reporting periods beginning after December 15, ~~2017, including interim periods within that reporting period, and requires retrospective adoption, with~~2024. ASU 2023-09 allows for early adoption ~~permitted.~~for annual financial statements that have not yet been issued and allows retrospective and prospective adoption. The Company will adopt this guidance beginning with its ~~first~~fourth quarter ending ~~March~~December 31, ~~2018.~~2025. The application of this new guidance is not expected to have a material impact on the Company’s consolidated financial condition, results of operations, or cash ~~flows.~~

In January of 2017, the FASB issued ASU No. 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business” (“ASU 2017-01”). ASU 2017-01 revises the definition of a business in the Accounting Standards Codification and clarifiesflows, as the guidance for determining whether the purchase or disposal of an asset or group of assets qualifies as the purchase or disposal of a business. For public companies, ASU 2017-01 is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period, and requires prospective adoption, with early adoption permitted with certain conditions. The Company will adopt this guidance beginning with its first quarter ending March 31, 2018. The application of this new guidance is not expectedpertains to ~~have a material impact on the Company’s consolidated financial condition, results of operations or cash flows.~~disclosure only.

In January of 2017, the FASB issued ASU No. 2017-04, “Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment” (“ASU 2017-04”). ASU 2017-04 eliminates the second step in the previous process for goodwill impairment testing; instead, the test is now a one-step process that calls for goodwill impairment loss to be measured as the excess of the reporting unit’s carrying amount over its fair value. For public companies, ASU 2017-04 is effective for annual reporting periods beginning after December 15, 2019, including interim periods within that reporting period, and requires prospective adoption, with early adoption after January 1, 2017. The Company will adopt this guidance beginning with its first quarter ending March 31, 2019. The application of this new guidance is not expected to have a material impact on the Company’s consolidated financial condition, results of operations or cash flows.

In May of 2017, the FASB issued ASU No. 2017-09, “Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting” (“ASU 2017-09”). ASU 2017-09 provides clarity and reduces both the diversity in practice and cost and complexity when applying stock compensation guidance to a change to the terms or conditions of a share-based payment award. For public companies, ASU 2017-09 is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period, and requires prospective adoption, with early adoption permitted. The Company will adopt this guidance beginning with its first quarter ending March 31, 2018. The application of this new guidance is not expected to have a material impact on the Company’s consolidated financial condition, results of operations or cash flows.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Unless otherwise indicated, “we,” “us,” ~~“our”~~“our,” and similar terms, as well as references to the “Company” or “O’Reilly,” refer to O’Reilly Automotive, Inc. and its subsidiaries.

In Management’s Discussion and Analysis, we provide a historical and prospective narrative of our general financial condition, results of operations, liquidity, and certain other factors that may affect our future results, including

~~an overview of the key drivers of the automotive aftermarket industry;~~

•~~our results of operations for the three and nine months ended September 30, 2017 and 2016;~~

~~our liquidity and capital resources;~~

~~any contractual obligations, to which we are committed;~~

~~our critical accounting estimates;~~

~~the inflation and seasonality of our business; and~~

•~~recent accounting pronouncements that may affect our Company.~~

●

an overview of the key drivers and other influences on the automotive aftermarket industry;

●

our results of operations for the three months ended March 31, 2024 and 2023;

●

our liquidity and capital resources;

●

our critical accounting estimates; and

●

recent accounting pronouncements that may affect our Company.

The review of Management’s Discussion and Analysis should be made in conjunction with our condensed consolidated financial statements, related notes and other financial information, forward-looking statements, and other risk factors included elsewhere in this quarterly report.

FORWARD-LOOKING STATEMENTS

We claim 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”~~“intend,” or similar words. In addition, statements contained within this quarterly report 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,~~general; inflation; consumer debt levels; product ~~demand,~~demand; a public health crisis; the market for auto ~~parts, competition, weather,~~parts; competition; weather; tariffs; availability of key products and supply chain disruptions; business interruptions, including terrorist activities, war and the threat of war; failure to protect our brand and reputation; challenges in international markets; volatility of the market price of our common stock; our increased debt levels; credit ratings on public debt; damage, failure, or interruption of information technology systems, including information security and cyber-attacks; historical growth rate sustainability; our ability to hire and retain qualified employees; risks associated with the performance of acquired ~~businesses, our ability to hire~~businesses; 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.~~regulations. Actual results may materially differ from anticipated results described or implied in these forward-looking statements. Please refer to the “Risk Factors” section of our annual report on Form 10-K for the year ended December 31, ~~2016,~~2023, and subsequent Securities and Exchange Commission filings, for additional factors that could materially affect our financial performance. Forward-looking statements speak only as of the date they were made, and we undertake 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.

OVERVIEW

We are a specialty retailer of automotive aftermarket parts, tools, supplies, equipment, and accessories in the United ~~States.~~States, Puerto Rico, Mexico, and Canada. We are one of the largest U.S. automotive aftermarket specialty retailers, selling our products to both ~~do-it-yourself (“DIY”)~~DIY customers and professional service providers – our “dual market strategy.” Our goal is to achieve growth in sales and profitability by capitalizing on our competitive advantages, such as our dual market strategy, superior customer service provided by well-trained and technically proficient Team Members, and strategic distribution and hub store network that provides same day and over-night inventory access for our stores ~~carry an~~to offer a broad selection of product offerings. The successful execution of our growth strategy includes aggressively opening new stores, growing sales in existing stores, continually enhancing merchandising and store layouts, and implementing our Omnichannel initiatives. As of March 31, 2024, we operated 6,131 stores in 48 U.S. states and Puerto Rico, 63 stores in Mexico, and 23 stores in Canada.

See Note 2 “Business Combination” to the Condensed Consolidated Financial Statements for further information concerning the Canada stores acquired through the recent Vast Auto acquisition.

The extensive product line ~~consisting~~offered in our stores consists of new and remanufactured automotive hard parts, maintenance items, accessories, a complete line of auto body paint and related materials, automotive tools, and professional service provider service equipment. Our extensive product line includes an assortment of products that are differentiated by quality and price for most of the product lines we offer. For many of our product offerings, this quality differentiation reflects “good,” “better,” and “best” alternatives.

Our sales and total gross ~~margin~~profit dollars are, generally, highest for the “best” quality category of products. Consumers’ willingness to select products at a higher point on the value spectrum is a driver of enhanced sales and profitability in our industry. We have ongoing initiatives focused on marketing and training to educate customers on the advantages of ongoing vehicle maintenance, as well as “purchasing up” on the value spectrum.

Our stores also offer enhanced services and programs to our customers, including used oil, oil filter, and battery recycling; battery, wiper, and bulb replacement; battery diagnostic testing; electrical and module testing; check engine light code extraction; loaner tool program; drum and rotor resurfacing; custom hydraulic hoses; professional paint shop mixing and related materials; and machine shops.

Our ~~strategy~~business is to open new stores to achieve greater penetration into existing markets and expansion into new, contiguous markets. We typically open new stores either by (i) constructing a new facility or renovating an existing one on property we purchase or lease and stocking the new store with fixtures and inventory; (ii) acquiring an independently owned auto parts store, typically by the purchase of substantially all of the inventory and other assets (other than realty) of such store; or (iii) purchasing multi-store chains. We plan to open 190 net, new stores in 2017, in addition to the conversion of 48 stores acquired from Bond Auto Parts (“Bond”) in December 2016, as previously announced, and plan to open 200 net, new stores in 2018. We believe our investment in store growth will be funded with the cash flows expected to be generated by our existing operations and through available borrowings under our existing unsecured revolving

credit facility. During the three months ended September 30, 2017, we opened 52 stores and closed two stores. During the nine months ended September 30, 2017, we opened 162 stores and closed seven stores and, as of that date, operated 4,984 stores in 47 states.

~~Operating within the retail industry, we are~~ influenced by a number of general macroeconomic factors that impact both our industry and consumers, including, but not limited to, inflation, including rising consumer staples; fuel ~~costs,~~and energy costs; unemployment ~~rates, consumer preferences~~trends; interest rates; and ~~spending habits,~~other economic factors. Future changes, such as continued broad-based inflation and ~~competition. We have ongoing initiatives aimed at tailoring~~rapid fuel cost increases that exceed wage growth, may negatively impact our ~~product offering to adjust to customers’ changing preferences,~~consumers’ level of disposable income, and we ~~also~~cannot predict the degree these changes, or other future changes, may have ~~initiatives focused~~ on ~~marketing and training to educate customers on the advantages of ongoing vehicle maintenance, as well as “purchasing up” on the value spectrum.~~

our business or industry.

We believe the key drivers of ~~current and future~~ demand over the long-term for the products sold within the automotive aftermarket include the number of U.S. miles driven, number of U.S. registered vehicles, ~~new~~annual rate of light vehicle ~~registrations,~~sales, and average vehicle ~~age and unemployment.~~

age.

Number of Miles Driven –

The number of total miles driven in the U.S. influences the demand for repair and maintenance products sold within the automotive aftermarket. In total, vehicles in the U.S. are driven approximately three trillion miles per year, resulting in ongoing wear and tear and a corresponding continued demand for the repair and maintenance products necessary to keep these vehicles in operation. According to the U.S. Department of Transportation, the number of total miles driven in the U.S. increased ~~2.4%, 3.5%~~0.9% and ~~1.8%~~2.1% in ~~2016, 2015~~2022 and ~~2014,~~2023, respectively, and year-to-date through ~~August~~February of ~~2017, year-to-date~~2024, miles driven have increased ~~1.4%~~0.6%. ~~We would expect~~Total miles driven can be impacted by macroeconomic factors, including rapid increases in fuel cost, but we are unable to ~~continue to see modest improvements in total~~predict the degree of impact these factors may have on miles driven in the ~~U.S., supported by an increasing number~~future.

Size and Age of ~~registered vehicles on~~ the ~~road, resulting in continued demand for automotive aftermarket products.~~

~~Number of U.S. Registered Vehicles, New Light~~ Vehicle ~~Registrations and Average Vehicle Age~~ – Fleet

The total number of vehicles on the road and the average age of the vehicle population heavily influence the demand for products sold within the automotive aftermarket industry. As reported by ~~The~~the Auto Care Association, the total number of registered vehicles increased 7%13.9% from ~~2006~~2012 to ~~2016,~~2022, bringing the number of light vehicles on the road to ~~264~~283 million by the end of ~~2016.~~2022. For the year ended December 31, ~~2016,~~2023, the seasonally adjusted annual rate of light vehicle sales in the U.S. (“SAAR”) was approximately ~~18.3~~15.8 million vehicles, and for ~~2017,~~2024, the SAAR is estimated to be approximately ~~18.5~~15.5 million vehicles, contributing to the continued growth in the total number of registered vehicles on the road. ~~In the past decade,~~From 2012 to 2022, vehicle scrappage rates have remained relatively stable, ranging from ~~4.3%~~4.1% to 5.7% annually. As a result, over the past decade, the average age of the U.S. vehicle population has increased, growing ~~22%~~9.9%, from ~~9.5~~11.1 years in ~~2006~~2012 to ~~11.6~~12.2 years in ~~2016.~~ 2022. While the annual changes to the vehicle population resulting from new vehicle sales and the fluctuation in vehicle scrappage rates in any given year represent a small percentage of the total light vehicle population and have a muted impact on the total number and average age of vehicles on the road over the short term, we believe our business benefits from the current environment of elevated new and used vehicle prices, as consumers are more willing to continue to invest in their current vehicle.

We believe ~~this~~the increase in average vehicle age over the long term can be attributed to better engineered and manufactured vehicles, which can be reliably driven at higher mileages due to better quality power trains, ~~and~~ interiors and exteriors, ~~and the consumer’s~~coupled with consumers’ willingness to invest in maintaining these higher-mileage, better built vehicles. As the average age of vehicles on the road increases, a larger percentage of miles are being driven by vehicles that are outside of a manufacturer warranty. These out-of-warranty, older vehicles generate strong demand for automotive aftermarket products as they go through more routine maintenance cycles, have more frequent mechanical failures, and generally require more maintenance than newer vehicles. We believe consumers will continue to invest in these reliable, higher-quality, higher-mileage vehicles, and these investments, along with an increasing total light vehicle fleet, will support continued demand for automotive aftermarket products.

~~Unemployment~~ ~~– Unemployment, underemployment,~~

Inflationary cost pressures impact our business; however, historically we have been successful, in many cases, in reducing the ~~threat~~effects of ~~future joblessness~~merchandise cost increases, principally by taking advantage of supplier incentive programs, economies of scale resulting from increased volume of purchases and selective forward buying. To the ~~uncertainty surrounding~~extent our acquisition costs increase due to base commodity price increases or other input cost increases affecting the ~~overall economic health~~entire industry, we have typically been able to pass along these cost increases through higher selling prices for the affected products. As a result, we do not believe inflation has had a material adverse effect on our operations.

To some extent, our business is seasonal, primarily as a result of the ~~U.S. have a negative~~ impact of weather conditions on ~~consumer confidence and the level of consumer discretionary spending. Long-term trends of high unemployment~~customer buying patterns. While we have historically ~~impeded~~realized operating profits in each quarter of the ~~growth of annual miles driven, as well as decrease consumer discretionary spending, both of which negatively impact demand for products sold~~year, our store sales and profits have historically been higher in the ~~automotive aftermarket industry. As of December 31, 2016, the U.S. unemployment rate was 4.7%,~~second and as of September 30, 2017, the U.S. unemployment rate was 4.2%. We believe total employment should remain at healthy levels with marginal improvements, and we would expect to see an increase in commuter traffic with a growing work force, further aiding the positive trend of growth of total miles driventhird quarters (April through September) than in the ~~U.S.~~first and ~~demand for automotive aftermarket products.~~fourth quarters (October through March) of the year.

We remain confident in our ability to gain market share in our existing markets and grow our business in new markets by focusing on our dual market strategy and the core O’Reilly values of hard work and excellent customer service.

RESULTS OF OPERATIONS

Sales:

Sales for the three months ended ~~September 30, 2017,~~March 31, 2024, increased ~~$119~~$268 million, or 7%, to ~~$2.34~~$3.98 billion from ~~$2.22~~$3.71 billion for the same period one year ago, representing an increase of 5%. Sales for the nine months ended September 30, 2017, increased $293 million to $6.79 billion from $6.49 billion for the same period one year ago, representing an increase of 5%.ago. Comparable store sales for stores open at least one year increased ~~1.8%~~3.4% and ~~4.2%~~10.8% for the three months ended ~~September 30, 2017~~March 31, 2024 and ~~2016, respectively. Comparable store sales for stores open at least one year increased 1.5% and 4.8% for the nine months ended September 30, 2017 and 2016,~~2023, respectively. Comparable store sales are calculated based on the change in sales offor U.S. 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 sales from Leap Day in the three months ended March 31, 2024. Online sales for ship-to-home orders and pickup in-store orders for U.S. stores open at least one year are included in the comparable store sales calculation. We opened 37 and 58 net, new stores during the ~~nine~~three months ended ~~September 30, 2016.~~

~~The following table presents~~March 31, 2024 and 2023, respectively. Additionally, we began operating 23 stores in Canada from the ~~components of~~Vast Auto acquisition during the three months ended March 31, 2024. We anticipate total new store growth to be 190 to 200 net, new store openings in 2024.

The increase in sales for the three ~~and nine~~ months ended ~~September 30, 2017 (in millions):~~

Increase in Sales for the Three Months Ended
September 30, 2017,
Compared to the Same Period in 2016 Increase in Sales for the Nine Months Ended
September 30, 2017,
Compared to the Same Period in 2016
Store sales:
Comparable store sales, including sales from the 48 acquired Bond stores $ 57
$ 144
Non-comparable store sales:
Sales for stores opened throughout 2016, excluding stores open at least one year that are included in comparable store sales 29
117
Sales for stores opened throughout 2017 35
63
Sales from Leap Day in 2016 —
(25 )
Sales in 2016 for stores that have closed (1 ) (4 )
Non-store sales:
Includes sales of machinery and sales to independent parts stores and Team Members (1 ) (2 )
Total increase in sales $ 119
$ 293

~~We believe the increased sales achieved by our stores are~~March 31, 2024, was primarily the result of the 3.4% increase in domestic comparable store ~~growth,~~sales, a $73 million increase in sales from new stores opened in 2023 and 2024 that are not considered comparable stores, sales from one additional day due to Leap Day, and sales from the 48 acquired Bond stores and the high levels of customer service provided by our well-trained and technically proficient Team Members, superior inventory availability, including same day and over-night access to inventory in our regional distribution centers, enhanced services and programs offered in our stores, a broader selection of product offerings in most stores with a dynamic catalog system to identify and source parts, a targeted promotional and advertising effort through a variety of media and localized promotional events, continued improvement in the merchandising and store layouts of our stores, compensation programs for all store Team Members that provide incentives for performance and our continued focus on serving both DIY and professional service provider customers.

Vast Auto stores. Our comparable store sales ~~increases~~increase for the three ~~and nine~~ months ended ~~September 30, 2017, were~~March 31, 2024, was driven by ~~increases~~an increase in average ticket values for both ~~DIY and~~ professional service provider and DIY customers ~~partially offset by negative customer~~and positive transaction counts from both ~~our DIY and~~ professional service provider and DIY customers. ~~The improvements~~Average ticket values benefited from inflationary increases in average selling prices, as compared to the same period in 2023. Average ticket values ~~were the result of~~also continue to be positively impacted by the increasing complexity and cost of replacement parts necessary to maintain the current population of ~~better engineered~~better-engineered and more technically advanced vehicles. These ~~better engineered,~~better-engineered, more technically advanced vehicles require less frequent repairs, as the component parts are more durable and last for longer periods of time. ~~When~~The resulting decrease in repair frequency creates pressure on customer transaction counts; however, when repairs are needed, the cost of replacement parts is, on average, greater, which is a benefit to average ticket ~~values; however, the decrease~~values. The increases in ~~repair frequency creates pressure on customer transaction counts. Customer~~ transaction counts ~~during the current periods~~ were ~~also negatively impacted~~driven by ~~softer industry demand, resulting, in part, from the second consecutive, unseasonably mild winter weather and a cool, wet summer in many~~consistently exceptional execution of our ~~markets. The mild winter~~strategies surrounding superior service, inventory availability, and competitive pricing, partially offset by pressure from unfavorably cool and wet spring weather did not stress vehicle components to the degree more typical harsh winter weather would, which resulted in a lower level of automobile parts breakage and associated demand for our products. The cool, wet summerconditions in many of our markets ~~resulted in a lower level of demand, as the absence of typical seasonally high temperatures resulted in fewer temperature related vehicle repairs.~~

~~We opened 50 and 155 net, new stores~~ during the three ~~and nine~~ months ended September 30, 2017, respectively, compared to 52 and 141 net, new stores for the three and nine months ended September 30, 2016, respectively. As of September 30, 2017, we operated 4,984 stores in 47 states compared to 4,712 stores in 45 states at September 30, 2016. We anticipate total new store growth to be 190 net, new store openings in 2017, slightly below the 2016 net, new store openings dueMarch 31, 2024.

See Note 11 “Revenue” to the ~~resources necessary~~Condensed Consolidated Financial Statements for further information concerning the Company’s sales. See Note 2 “Business Combination” to ~~convert~~ the ~~48 Bond stores~~Condensed Consolidated Financial Statements for further information concerning the acquired ~~in December 2016 to our systems, inventory selection and décor packages during 2017, and 200 net, new store openings in 2018.~~

Vast Auto stores.

Gross profit:

Gross profit for the three months ended ~~September 30, 2017,~~March 31, 2024, increased 8% to ~~$1.23~~$2.03 billion (or ~~52.6%~~51.2% of sales) from ~~$1.17~~$1.89 billion (or ~~52.7%~~51.0% of sales) for the same period one year ago, representing an increase of 5%. Gross profit for the nine months ended September 30, 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%.ago. The increase in gross profit dollars for the three months ended ~~September 30, 2017,~~March 31, 2024, was primarily the result of ~~sales from new stores,~~ the increase in comparable store sales at existing stores, ~~and sales from the 48 acquired Bond stores. The increase in gross profit dollars for the nine months ended September 30, 2017, was the result of~~ sales from new ~~stores, the increase in comparable store sales at existing~~and acquired stores, and ~~sales from the 48 acquired Bond stores, partially offset by prior year gross profit dollars generated from~~ one additional day due to Leap Day. The ~~decrease~~increase in gross profit as a percentage of sales for the three months ended ~~September 30, 2017,~~March 31, 2024, was primarily

due to ~~lower merchandise margin, higher inventory shrinkage and deleverage of fixed~~improved acquisition costs, partially offset by ~~a smaller non-cash last-in, first-out (“LIFO”) impact. The~~the inclusion of the lower ~~merchandise~~gross margin ~~was primarily~~sales from the result of merchandise mix, driven by the unfavorable weather conditions during the three months ended September 30, 2017. The higher inventory shrinkage was primarily cyclical in nature, following a period of lower than average shrinkage trends. The deleverage of fixed costs was the result of soft comparable store sales during the three months ended September 30, 2017. The smaller non-cash LIFO impact is the result of fewer product acquisition cost improvements during the three months ended September 30, 2017, as compared to the same period in the prior year. Our policy is to not write up inventory in excess of replacement cost, and accordingly, we are effectively valuing our inventory at replacement cost. During the three months ended September 30, 2017 and 2016, our LIFO costs were written down by approximately $3 million and $10 million, respectively, to reflect replacement cost. The increase in gross profit as a percentage of sales for the nine months ended September 30, 2017, was primarily due to a smaller LIFO impact, partially offset by lower merchandise margin and deleverage of fixed costs. During the nine months ended September 30, 2017 and 2016, our LIFO costs were written down by approximately $20 million and $47 million, respectively, to reflect replacement cost. The lower merchandise margin was primarily the result of merchandise mix, driven by the unfavorable weather conditions during the nine months ended September 30, 2017. The deleverage of fixed costs was the result of soft comparable store sales during the nine months ended September 30, 2017.

acquired Vast Auto business.

Selling, general and administrative expenses:

Selling, general and administrative expenses (“SG&A”) for the three months ended ~~September 30, 2017,~~March 31, 2024, increased 9% to ~~$768 million~~$1.28 billion (or ~~32.8%~~32.2% of sales) from ~~$722 million~~$1.17 billion (or ~~32.5%~~31.7% of sales) for the same period one year ago, representing an increase of 6%. SG&A for the nine months ended September 30, 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%.ago. The increase in total SG&A dollars for the three months ended ~~September 30, 2017,~~March 31, 2024, was primarily the result of additional Team Members facilities and vehicles to support our increased sales and store count. The increase in total SG&A dollars for the nine months ended September 30, 2017, was primarily the result of additional Team Members, facilities and vehicles to support our increased sales and store count, partially offset by a $9.1 million benefit from the reduction in our legal accrual following the expiration of the statute of limitations related to a legacy claim and prior year incremental SG&A expenses incurred from one additional day due to Leap ~~Day.~~Day, and SG&A associated with the Vast Auto acquisition and operations. The ~~increases~~increase in SG&A as a percentage of sales for the three ~~and nine~~ months ended ~~September 30, 2017, were primarily~~March 31, 2024, was principally due to ~~deleverage~~depreciation costs on accelerated refreshment of store ~~operating costs on soft comparable store sales during~~delivery fleet, investment initiatives aimed at refreshing the ~~current periods.~~

image and appearance of our stores, and continued information technology investments.

Operating income:

As a result of the impacts discussed above, operating income for the three months ended ~~September 30, 2017,~~March 31, 2024, increased 5% to ~~$462~~$752 million (or ~~19.7%~~18.9% of sales) from ~~$448~~$717 million (or ~~20.2%~~19.3% of sales) for the same period one year ~~ago, representing an increase of 3%. As a result of the impacts discussed above, operating~~ago.

Other income and expense:

Total other expense for the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2024, increased 33% to ~~$1.32 billion~~$52 million (or ~~19.5%~~1.3% of sales) from ~~$1.29 billion~~$39 million (or ~~19.9%~~1.1% of sales) for the same period one year ~~ago, representing an~~ago. The increase ~~of 2%.~~

~~Other income and expense:~~

~~Total~~in total other expense for the three months ended September 30, 2017, increased to $22 million (or 1.0% of sales) from $16 million (or 0.7% of sales) for the same period one year ago, representing an increase of 41%. Total other expense for the nine months ended September 30, 2017, increased to $61 million (or 0.9% of sales) from $45 million (or 0.7% of sales) for the same period one year ago, representing an increase of 36%. The increases in total other expense for the three and nine months ended September 30, 2017, were primarily March 31, 2024, was

the result of increased interest expense on higher average outstanding ~~borrowings and increased amortization of debt issuance costs.~~

borrowings. See Note 7 “Financing” to the Condensed Consolidated Financial Statements for further information concerning the Company’s borrowings.

Income taxes:

Our provision for income taxes for the three months ended ~~September 30, 2017, increased~~March 31, 2024, decreased 5% to ~~$156 million (or 6.7% of sales) from~~ $153 million ~~(or 6.9% of sales)~~(21.9% effective tax rate) from $161 million (23.7% effective tax rate) for the same period one year ~~ago, representing an increase of 2%. Our~~ago. The decreases in our provision for income taxes ~~for the nine months ended September 30, 2017, decreased to $430 million (or 6.3% of sales) from $455 million (or 7.0% of sales) for the same period one year ago, representing a decrease of 6%. Our~~and our effective tax rate for the three months ended ~~September 30, 2017, was 35.4%~~March 31, 2024, were the result of ~~income before income taxes,~~higher excess tax benefits from share-based compensation in the current period, as compared to ~~35.5% for~~ the same period one year ago. Our effective tax rate for the nine months ended September 30, 2017, was 34.1% of income before income taxes, compared to 36.5% for the same period one year ago. The increase in our provision for income taxes for the three months ended September 30, 2017, was primarily the result of higher taxable income in the three months ended September 30, 2017, partially offset by the adoption of Accounting Standard Update No. 2016-09, which provided a benefit of $3 million to the provision for income taxes. The decrease in our provision for income taxes for the nine months ended September 30, 2017, was primarily the result of the adoption of Accounting Standard Update No. 2016-09 in 2017, which provided a benefit of $35 million to the provision for income taxes, partially offset by higher taxable income. The decreases in our effective tax rate for the three and nine months ended September 30, 2017, were primarily the result of the adoption of Accounting Standard Update No. 2016-09 in 2017, which provided a benefit of 63 basis points and 279 basis points to the effective tax rate for the three and nine months ended September 30, 2017, respectively.

Net income:

As a result of the impacts discussed above, net income for the three months ended ~~September 30, 2017,~~March 31, 2024, increased 6% to ~~$284~~$547 million (or ~~12.1%~~13.8% of sales) from ~~$278~~$517 million (or ~~12.5%~~13.9% of sales) for the same period one year ago, representing an increase of 2%. As a result of the impacts discussed above, net income for the nine months ended September 30, 2017, increased to $831 million (or 12.3% of sales) from $792 million (or 12.2% of sales) for the same period one year ago, representing an increase of 5%.

ago.

Earnings per share:

Our diluted earnings per common share for the three months ended ~~September 30, 2017,~~March 31, 2024, increased 11% to ~~$3.22~~$9.20 on 8859 million shares from ~~$2.90~~$8.28 on 9662 million shares for the same period one year ago. Our diluted earnings per common share for the nine months ended September 30, 2017, increased 12% to $9.15 on 91 million shares from $8.14 on 97 million shares for the same period one year ago. Due to the adoption of Accounting Standard Update No. 2016-09, our diluted earnings per common share for the three and nine months ended September 30, 2017, included a benefit of $0.02 and $0.35, respectively, comprised of a $0.03 and $0.39 earnings per share increase, respectively, 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.

LIQUIDITY AND CAPITAL RESOURCES

Our long-term business strategy requires capital to maintain and enhance our existing stores, invest to open new stores, fund strategic acquisitions, expand distribution infrastructure, ~~operate~~develop enhanced information technology systems and ~~maintain existing stores~~tools, and may include the opportunistic repurchase of shares of our common stock through our Board-approved share repurchase program. ~~The~~Our material cash requirements necessary to maintain the current operations of our long-term business strategy include, but are not limited to, inventory purchases; human capital obligations, including payroll and benefits; contractual obligations, including debt and interest obligations; capital expenditures; payment of income taxes; and other operational priorities. We expect to fund our short- and long-term cash and capital requirements with our primary sources of ~~our~~ liquidity, ~~are~~which include funds generated from the normal course of our business operations, ~~and borrowed~~borrowings under our unsecured revolving credit ~~facility. Decreased~~facility and our commercial paper program, and senior note offerings. However, there can be no assurance that we will continue to generate cash flows or maintain liquidity at or above recent levels, as we are unable to predict decreased demand for our products or changes in customer buying ~~patterns~~patterns. Additionally, these factors could ~~negatively impact our ability to generate funds from operations. Additionally, decreased demand or changes in buying patterns could~~also impact our ability to meet the debt covenants of our credit agreement and, therefore, negatively impact the funds available under our unsecured revolving credit facility. ~~We believe that cash expected~~

Other than the commitment discussed in Note 13 “Commitments” to ~~be provided by operating activities and availability under~~the Condensed Consolidated Financial Statements, there have been no material changes to the contractual obligations, to which we are committed, since those discussed in our ~~unsecured revolving credit facility will be sufficient to fund both our short-term and long-term capital and liquidity needs~~annual report on Form 10-K for the ~~foreseeable future. However, there can be no assurance that we will continue to generate cash flows at or above recent levels.~~

year ended December 31, 2023.

The following table identifies cash provided by/(used in) our operating, investing and financing activities for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2024 and ~~2016~~2023 (in thousands):


	For the Three Months Ended
	March 31,
Liquidity:	2024		2023
Total cash provided by/(used in):
Operating activities	$	704,215	$	713,764
Investing activities		(400,753)		(221,520)
Financing activities		(493,578)		(541,669)
Effect of exchange rate changes on cash		248		714
Net decrease in cash and cash equivalents	$	(189,868)	$	(48,711)

Capital expenditures	$	249,240	$	223,268
Free cash flow ⁽¹⁾		438,855		486,118

For the Nine Months Ended
September 30,
Liquidity: 2017 2016
Total cash provided by/(used in):
Operating activities ⁽¹⁾
$ 1,087,419
$ 1,214,259
Investing activities (347,922 ) (352,698 )
Financing activities ⁽¹⁾
(848,808 ) (417,542 )
Net (decrease) increase in cash and cash equivalents $ (109,311 ) $ 444,019

Capital expenditures $ 347,756
$ 356,234
Free cash flow ⁽²⁾
$ 704,381
$ 811,991

(1)
⁽¹⁾	~~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.~~


⁽²⁾	Calculated as net cash provided by operating activities, less capital expenditures, ~~and~~ excess tax benefit from share-based compensation payments, and investment in tax credit equity investments for the period. See page 22 for the reconciliation of the calculation of free cash flow.

Operating activities:

The decrease in net cash provided by operating activities during the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2024, compared to the same period in ~~2016,~~2023, was primarily due to a ~~smaller decrease~~larger increase in ~~our~~ net inventory investment and an increase in accounts receivable, partially offset by an increase in net income and a ~~larger~~decrease in accrued benefits payments during the three months ended March 31, 2023. The increase in ~~deferred income taxes.~~

accounts receivable is timing in nature, as the current period ended on a weekend, resulting in a high credit card receivable balance. The ~~smaller~~ decrease in ~~our net inventory investment is primarily the result of fewer new suppliers entering our supplier financing programs~~accrued benefits and withholdings was due to a decrease in 2017, as compared to 2016. The larger increase in deferred income taxes is primarily the result of additional depreciation recognized for income tax purposes, as compared to the same period in the prior year.

accrued benefit payments.

Investing activities:

The ~~decrease~~increase in net cash used in investing activities during the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2024, compared to the same period in ~~2016,~~2023, was ~~primarily~~ the result of ~~a decrease~~the acquisition of Vast Auto and an increase in capital expenditures. The ~~decrease~~increase in capital expenditures was primarily ~~related~~due to ~~the~~

~~timing of property acquisitions, closings, construction costs for new stores~~an increase in distribution enhancement and expansion projects, as well as an increase in the ~~mix~~number of owned ~~versus leased stores opened during the current period, as compared to the same period in the prior year.~~

new store openings.

Financing activities:

The ~~increase~~decrease in net cash used in financing activities during the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2024, compared to the same period in ~~2016,~~2023, was ~~primarily~~ attributable to ~~an increase in~~a lower level of repurchases of our common stock ~~during~~in the current period, ~~as compared to~~partially offset by a net paydown on the Company’s commercial paper issuances in the current period versus net borrowings on the Company’s revolving credit facility during the same period in ~~the prior year, partially offset by a higher level of net borrowings during the current period, as compared~~2023.

Debt instruments:

See Note 7 “Financing” to the ~~same period in~~Condensed Consolidated Financial Statements for information concerning the ~~prior year.~~

~~Unsecured revolving~~Company’s credit ~~facility:~~

~~On April 5, 2017, the Company entered into a credit~~ agreement, ~~(the “Credit Agreement”). The Credit Agreement provides for a five-year $1.20 billion~~ unsecured revolving credit facility, (the “Revolving Credit Facility”) arranged by JPMorgan Chase Bank, N.A., which is scheduled to mature in April 2022. The Credit Agreement includes a $200 million sub-limit for the issuance of letters of credit and a $75 million sub-limit for swing line borrowings. As described in the Credit Agreement governing the Revolving Credit Facility, the Company may, from time to time, subject to certain conditions, increase the aggregate commitments under the Revolving Credit Facility by up to $600 million, provided that the aggregate amount of the commitments does not exceed $1.80 billion at any time.

In conjunction with the closing of the Credit Agreement, the Company’s previous credit agreement, which was originally entered into on January 14, 2011, as amended, was terminated (the “Terminated Credit Agreement”), and all outstanding loans and commitments, including the guarantees of each of the subsidiary guarantors, under the Terminated Credit Agreement were terminated and replaced by the loans and commitments under the Credit Agreement. None of our subsidiaries are guarantors or obligors under the Credit Agreement.

~~As of September 30, 2017, we had~~ outstanding letters of credit, ~~primarily to support obligations related to workers’ compensation, general liability~~commercial paper program, and other insurance policies, in the amount of $41 million, reducing the aggregate availability under the Credit Agreement by that amount. As of September 30, 2017, we had outstanding borrowings under the Revolving Credit Facility in the amount of $269 million.

~~Senior Notes:~~

On August 17, 2017, we issued $750 million aggregate principal amount of unsecured 3.600% Senior Notes due 2027 (“3.600% Senior Notes due 2027”) at a price to the public of 99.840% of their face value with UMB Bank, N.A. (“UMB”) as trustee. Interest on the 3.600% Senior Notes due 2027 is payable on March 1 and September 1 of each year, beginning on March 1, 2018, and is computed on the basis of a 360-day year.

~~We have issued a cumulative $2.65 billion aggregate principal amount of~~ unsecured senior notes, which are due between 2021 and 2027, with UMB as trustee. Interest on the senior notes, ranging from 3.550% to 4.875%, is payable semi-annually and is computed on the basis of a 360-day year. None of our subsidiaries are guarantors under the Senior Notes.

notes.

Debt covenants:

The indentures governing our senior notes contain covenants that limit our ability and the ability of certain of our subsidiaries to, among other things, create certain liens on assets to secure certain debt and enter into certain sale and leaseback transactions, and limit our ability to merge or consolidate with another company or transfer all or substantially all of our property, in each case as set forth in the indentures. These covenants are, however, subject to a number of important limitations and exceptions. As of ~~September 30, 2017,~~March 31, 2024, we were in compliance with the covenants applicable to our senior notes.

The Credit Agreement contains certain covenants, including limitations on indebtedness, a minimum consolidated fixed charge coverage ratio of 2.50:1.00 and a maximum consolidated leverage ratio of 3.50:1.00. The consolidated fixed charge coverage ratio includes a calculation of earnings before interest, taxes, depreciation, amortization, rent, and non-cash share-based compensation expense to fixed charges. Fixed charges include interest expense, capitalized interest, and rent expense. The consolidated leverage ratio includes a calculation of adjusted debt to earnings before interest, taxes, depreciation, amortization, rent, and non-cash share-based compensation expense. Adjusted debt includes outstanding debt, outstanding stand-by letters of credit, and similar instruments, five-times rent expense and excludes any premium or discount recorded in conjunction with the issuance of long-term debt. In the event that we should default on any covenant contained within the Credit Agreement, certain actions may be taken, including, but not limited to, possible termination of commitments, immediate payment of outstanding principal amounts plus accrued interest and other amounts payable under the Credit Agreement, and litigation from our lenders.

We had a consolidated fixed charge coverage ratio of ~~5.90~~6.31 times and ~~6.14~~6.64 times as of ~~September 30, 2017~~March 31, 2024 and ~~2016,~~2023, respectively, and a consolidated leverage ratio of ~~1.95~~1.84 times and ~~1.53~~1.86 times as of ~~September 30, 2017~~March 31, 2024 and ~~2016,~~2023, respectively, remaining in compliance with all covenants related to the borrowing arrangements.

The table below outlines the calculations of the consolidated fixed charge coverage ratio and consolidated leverage ratio covenants, as defined in the Credit Agreement governing the Revolving Credit Facility, for the twelve months ended ~~September 30, 2017~~March 31, 2024 and ~~2016~~2023 (dollars in thousands):


		For the Twelve Months Ended
		March 31,
		2024		2023
GAAP net income		$	2,376,934	$	2,207,655
Add:	Interest expense		214,244		167,451
	Rent expense ⁽¹⁾		431,176		400,831
	Provision for income taxes		650,786		635,159
	Depreciation expense		421,444		363,811
	Amortization expense		3,518		4,946
	Non-cash share-based compensation		27,098		27,360
Non-GAAP EBITDAR		$	4,125,200	$	3,807,213

	Interest expense	$	214,244	$	167,451
	Capitalized interest		8,718		5,259
	Rent expense ⁽¹⁾		431,176		400,831
Total fixed charges		$	654,138	$	573,541

Consolidated fixed charge coverage ratio			6.31		6.64

GAAP debt		$	5,288,632	$	4,927,678
Add:	Stand-by letters of credit		137,848		116,688
	Unamortized discount and debt issuance costs		28,368		27,322
	Five-times rent expense		2,155,880		2,004,155
Non-GAAP adjusted debt		$	7,610,728	$	7,075,843

Consolidated leverage ratio			1.84		1.86

(1)	The table below outlines the calculation of Rent expense and reconciles Rent expense to Total lease cost, per Accounting Standard Codification 842 (“ASC 842”) the most directly comparable GAAP financial measure, for the twelve months ended March 31, 2024 and 2023 (in thousands):


		For the Twelve Months Ended
		March 31,
		2024		2023
Total lease cost, per ASC 842		$	510,208	$	476,439
Less:	Variable non-contract operating lease components, related to property taxes and insurance		79,032		75,608
Rent expense		$	431,176	$	400,831

For the Twelve Months Ended
September 30,
2017 2016
GAAP net income $ 1,077,519
$ 1,010,237
Add: Interest expense 83,258
66,340
Rent expense 295,083
279,863
Provision for income taxes 574,491
585,650
Depreciation expense 228,815
212,208
Amortization expense 1,104
1,430
Non-cash share-based compensation 19,323
19,614
Non-GAAP EBITDAR $ 2,279,593
$ 2,175,342

Interest expense $ 83,258
$ 66,340
Capitalized interest 8,298
7,976
Rent expense 295,083
279,863
Total fixed charges $ 386,639
$ 354,179

Consolidated fixed charge coverage ratio 5.90 6.14

GAAP debt $ 2,900,816
$ 1,886,501
Stand-by letters of credit 41,258
38,618
Discount on senior notes 3,894
3,295
Debt issuance costs 14,290
10,204
Five-times rent expense 1,475,415
1,399,315
Non-GAAP adjusted debt $ 4,435,673
$ 3,337,933

Consolidated leverage ratio 1.95 1.53

The table below outlines the calculation of Free cash flow and reconciles Free cash flow to Net cash provided by operating activities, the most directly comparable GAAP financial measure, for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2024 and ~~2016~~2023 (in thousands):

For the Nine Months Ended
September 30,
2017 2016
Cash provided by operating activities ⁽¹⁾
$ 1,087,419
$ 1,214,259
Less: Capital expenditures 347,756
356,234
Excess tax benefit from share-based compensation 35,282
46,034
Free cash flow $ 704,381
$ 811,991


⁽¹⁾	~~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.~~


		For the Three Months Ended
		March 31,
		2024		2023
Cash provided by operating activities		$	704,215	$	713,764
Less:	Capital expenditures		249,240		223,268
	Excess tax benefit from share-based compensation payments		16,120		4,378
Free cash flow		$	438,855	$	486,118

Free cash flow, the consolidated fixed charge coverage ratio, and the consolidated leverage ratio discussed and presented in the tables above are not derived in accordance with United States generally accepted accounting principles (“GAAP”). We do not, nor do we suggest investors should, consider such non-GAAP financial measures in isolation from, or as a substitute for, GAAP financial information. We believe that the presentation of our free cash flow, consolidated fixed charge coverage ratio, and consolidated leverage ratio provides meaningful supplemental information to both management and investors and reflects the required covenants under the Credit Agreement. We include these items in judging our performance and believe this non-GAAP information is useful to investors as well. Material limitations of these non-GAAP measures are that such measures do not reflect actual GAAP amounts. We compensate for such limitations by presenting, in the tables above, a reconciliation to the most directly comparable GAAP measures.

Share repurchase program:

~~In January of 2011, our Board of Directors approved a share repurchase program. Under~~

See Note 9 “Share Repurchase Program” to the ~~program, we may, from time to time, repurchase shares of our common stock, solely through open market purchases effected through a broker dealer at prevailing market prices, based~~Consolidated Financial Statements for information on a variety of factors such as price, corporate trading policy requirements and overall market conditions. Our Board of Directors may increase or otherwise modify, renew, suspend or terminate the share repurchase program at any time, without prior notice. As announced on May 10, 2017, and September 1, 2017, our Board of Directors each time approved a resolution to increase the authorization amount under our share repurchase program by an additional $1.00 billion, resulting in a cumulative authorization amount of $9.75 billion. Each additional authorization is effective for a three-year period, beginning on its respective announcement date.

~~The following table identifies shares of our common stock that have been repurchased as part of our publicly announced share repurchase program (in thousands, except per share data):~~

~~As of September 30, 2017, we had $995 million remaining under~~ our share repurchase program. Subsequent to the end of the third quarter and through November 7, 2017, we repurchased 0.4 million additional shares of our common stock under our share repurchase program, at an average price of $209.61, for a total investment of $85 million. We have repurchased a total of 65.4 million shares of our common stock under our share repurchase program since the inception of the program in January of 2011 and through November 7, 2017, at an average price of $135.17, for a total aggregate investment of $8.84 billion.

~~CONTRACTUAL OBLIGATIONS~~

~~There have been no material changes to the contractual obligations, to which we are committed, since those discussed in our Annual Report on Form 10-K for the year ended December 31, 2016.~~

CRITICAL ACCOUNTING ESTIMATES

The preparation of our financial statements in accordance with GAAP requires the application of certain estimates and judgments by management. Management bases its assumptions, estimates, and adjustments on historical experience, current trends and other factors believed to be relevant at the time the condensed consolidated financial statements are prepared. There have been no material changes in the critical accounting estimates since those discussed in our ~~Annual Report~~annual report on Form 10-K for the year ended December 31, ~~2016.~~

2023.

~~INFLATION AND SEASONALITY~~

We have been successful, in many cases, in reducing the effects of merchandise cost increases principally by taking advantage of supplier incentive programs, economies of scale resulting from increased volume of purchases and selective forward buying. To the extent our acquisition costs increased due to base commodity price increases industry-wide, we have typically been able to pass along these increased costs through higher retail prices for the affected products. As a result, we do not believe inflation has had a material adverse effect on our operations.

To some extent, our business is seasonal primarily as a result of the impact of weather conditions on customer buying patterns. While we have historically realized operating profits in each quarter of the year, our store sales and profits have historically been higher in the second and third quarters (April through September) than in the first and fourth quarters (October through March) of the year.

RECENT ACCOUNTING PRONOUNCEMENTS

~~In May of 2014,~~

See Note 16 “Recent Accounting Pronouncements” to the Condensed Consolidated Financial Accounting Standards Board (the “FASB”) issued Accounting Standard Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”). Under ASU 2014-09, an entity is required to follow a five-step process to determine the amount of revenue to recognize when promised goods or services are transferred to customers. ASU 2014-09 offers specific accounting guidanceStatements for costs to obtain or fulfill a contract with a customer. In addition, an entity is required to disclose sufficient information to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. In August of 2015, the FASB issued ASU No. 2015-14, “Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date” (“ASU 2015-14”), to defer the effective date of ASU 2014-09 by one year. For public companies, ASU 2015-14

changes ASU 2014-09 to be effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. These ASUs can be adopted retrospectively or as a cumulative-effective adjustment at the date of adoption, with early adoption allowed, but not before December 15, 2016. We will adopt this guidance beginning with our first quarter ending March 31, 2018. We have established a task force, composed of multiple functional groups inside of the Company, which is currently in the process of evaluating critical components of this new guidance and the potential impact of the guidance on our financial position, results of operations and cash flows. Based on the preliminary work completed, we are considering the potential implications of the new standard on our recognition of customer related accounts receivable, warranty costs that are not the responsibility of our suppliers, the application of the Company’s retail O’Rewards loyalty program and all applicable financial statement disclosures required by the new guidance. At this time, the task force has not completed its evaluation of the impact or means of adoption.

In February of 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)” (“ASU 2016-02”). Under ASU 2016-02, an entity will be required to recognize right-of-use assets and lease liabilities on its balance sheet and disclose key information about ~~leasing arrangements. ASU 2016-02 offers specific~~recent accounting guidance for a lessee, a lessor and sale and leaseback transactions. Lessees and lessors are required to disclose qualitative and quantitative information about leasing arrangements to enable a user of the financial statements to assess the amount, timing and uncertainty of cash flows arising from leases. For public companies, ASU 2016-02 is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period, and requires a modified retrospective adoption, with early adoption permitted. We will adopt this guidance beginning with our first quarter ending March 31, 2019. We have established a task force, composed of multiple functional groups inside of the Company, which is currently in the process of evaluating critical components of this new guidance and the potential impact of the guidance on our financial position, results of operations and cash flows. Based on the preliminary work completed, we are considering the potential implications of the new standard on determining the discount rate to be used in valuing new and existing leases, the treatment of existing favorable and unfavorable lease agreements acquired in connection with previous acquisitions, procedural and operational changes that may be necessary to comply with the provisions of the guidance and all applicable financial statement disclosures required by the guidance, all of which are areas that could potentially be impacted by adoption of the guidance. At this time, the task force has not completed its full evaluation; however, we believe the adoption of the new guidance will have a material impact on the total assets and total liabilities reported on our consolidated balance sheets.

In March of 2016, the FASB issued ASU 2016-09, “Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting” (“ASU 2016-09”). Under ASU 2016-09, several aspects of the accounting for share-based payment transactions, including tax consequence, classification of awards as equity or liabilities, and classification on the statement of cash flows, were changed. We adopted this guidance with our first quarter ending March 31, 2017. Upon adoption of ASU 2016-09, we elected to change our accounting policy to account for forfeitures as they occur; this change was applied using the modified retrospective transition method with a cumulative effect adjustment of $0.3 million to opening “Retained earnings” on the accompanying Condensed Consolidated Balance Sheet as of September 30, 2017. We applied the amendments related to the presentation of tax withholdings on the statements of cash flows using the retrospective transition method, which resulted in $0.2 million of tax withholdings being reclassified from “Net cash provided by operating activities” to “Net cash used in financing activities” on the accompanying Condensed Consolidated Statement of Cash Flows for the nine months ended September 30, 2016. We elected to apply the amendments related to the presentation of excess tax benefits on the statements of cash flows using the retrospective transition method, which resulted in $46 million of excess tax benefits related to share-based compensation being reclassified from “Net cash used in financing activities” to “Net cash provided by operating activities” in the accompanying Condensed Consolidated Statement of Cash Flows for the nine months ended September 30, 2016. ASU 2016-09 amendments related to accounting for excess tax benefits in the income statement have been adopted prospectively, resulting in the reduction of $3 million and $35 million in “Provision for income taxes” in the accompanying Condensed Consolidated Statement of Income for the three and nine months ended September 30, 2017, respectively, which lowered our effective tax rate, increased dilutive shares outstanding and increased diluted earnings per share for the three and nine months ended September 30, 2017, by $0.02 and $0.35, respectively.

In June of 2016, the FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”). Under ASU 2016-13, businesses and other organizations are required to present financial assets, measured at amortized costs basis, at the net amount expected to be collected. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis, such as trade receivables. The measurement of expected credit loss will be based on historical experience, current conditions, and reasonable and supportable forecasts that affect the collectibility of the reported amount. For public companies, ASU 2016-13 is effective for annual reporting periods beginning after December 15, 2019, including interim periods within that reporting period, and requires a modified retrospective adoption, with early adoption permitted. We will adopt this guidance beginning with our first quarter ending March 31, 2020. The application of this new guidance is not expected to have a material impact on our consolidated financial condition, results of operations or cash flows.

In August of 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (a consensus of the FASB Emerging Issues Task Force)” (“ASU 2016-15”). ASU 2016-15 reduces the existing diversity in practice for eight specific parts on cash flow statement presentation and classification: debt prepayment or debt extinguishment

costs; settlement of zero-coupon debt instruments; contingent consideration payments made after a business combination; proceeds from the settlement of insurance claims; proceeds from the settlement of corporate-owned life insurance (COLI) policies; distributions received from equity method investments; beneficial interests in securitization transactions; and separately identifiable cash flows and application of the predominance principle. For public companies, ASU 2016-15 is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period, and requires retrospective adoption, with early adoption permitted. We will adopt this guidance beginning with our first quarter ending March 31, 2018. The application of this new guidance is not expected to have a material impact on our consolidated financial condition, results of operations or cash flows.

In January of 2017, the FASB issued ASU No. 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business” (“ASU 2017-01”). ASU 2017-01 revises the definition of a business in the Accounting Standards Codification and clarifies the guidance for determining whether the purchase or disposal of an asset or group of assets qualifies as the purchase or disposal of a business. For public companies, ASU 2017-01 is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period, and requires prospective adoption, with early adoption permitted with certain conditions. We will adopt this guidance beginning with our first quarter ending March 31, 2018. The application of this new guidance is not expected to have a material impact on our consolidated financial condition, results of operations or cash flows.

In January of 2017, the FASB issued ASU No. 2017-04, “Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment” (“ASU 2017-04”). ASU 2017-04 eliminates the second step in the previous process for goodwill impairment testing; instead, the test is now a one-step process that calls for goodwill impairment loss to be measured as the excess of the reporting unit’s carrying amount over its fair value. For public companies, ASU 2017-04 is effective for annual reporting periods beginning after December 15, 2019, including interim periods within that reporting period, and requires prospective adoption, with early adoption after January 1, 2017. We will adopt this guidance beginning with our first quarter ending March 31, 2019. The application of this new guidance is not expected to have a material impact on our consolidated financial condition, results of operations or cash flows.

In May of 2017, the FASB issued ASU No. 2017-09, “Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting” (“ASU 2017-09”). ASU 2017-09 provides clarity and reduces both the diversity in practice and cost and complexity when applying stock compensation guidance to a change to the terms or conditions of a share-based payment award. For public companies, ASU 2017-09 is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period, and requires prospective adoption, with early adoption permitted. We will adopt this guidance beginning with our first quarter ending March 31, 2018. The application of this new guidance is not expected to have a material impact on our consolidated financial condition, results of operations or cash flows.

pronouncements.

~~INTERNET ADDRESS AND ACCESS TO SEC FILINGS~~

~~Our Internet address is~~ ~~www.oreillyauto.com~~. Interested readers can access, free of charge, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, through the Securities and Exchange Commission’s (“SEC”) website at ~~www.sec.gov~~ and searching with our ticker symbol “ORLY.” Such reports are generally available the day they are filed. Upon request, we will furnish interested readers a paper copy of such reports free of charge.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

~~Unless otherwise indicated, “we,” “us,” “our” and similar terms, as well as references to the “Company” or “O’Reilly,” refer to O’Reilly Automotive, Inc. and its subsidiaries.~~

Interest rate risk:

We are subject to interest rate risk to the extent we borrow against our unsecured revolving credit facility (the “Revolving Credit Facility”) with variable interest rates based on either aan Alternative Base Rate or ~~Eurodollar~~Adjusted Term SOFR Rate, as defined in the credit agreement governing the Revolving Credit Facility. As of ~~September 30, 2017,~~March 31, 2024, we had outstanding borrowings under our Revolving Credit Facility in the amount of ~~$269~~$30.0 million, at the weighted-average variable interest rate of ~~2.283%~~8.500%. At this borrowing level, a ~~0.25%~~10% increase in interest rates would have had an unfavorable annual impact on our pre-tax earnings and cash flows in the amount of ~~$0.7~~$0.2 million.

We are also subject to interest rate risk to the extent we issue short-term, unsecured commercial paper notes under our commercial paper program (the “Program”) with variable interest rates. As of March 31, 2024, we had outstanding borrowings under the Program in the amount of $437.0 million, at the weighted-average variable interest rate of 5.527%. At this borrowing level, a 10% increase in interest rates would have had an unfavorable annual impact on our pre-tax earnings and cash flows in the amount of $2.4 million.

Cash equivalents risk:

We invest certain of our excess cash balances in short-term, highly-liquid instruments with maturities of 90 days or less. We do not expect any material losses from our invested cash balances and we believe that our interest rate exposure is minimal. As of ~~September 30, 2017,~~March 31, 2024, our cash and cash equivalents totaled ~~$37~~$89.3 million.

Foreign currency risk:

Foreign currency exposures arising from transactions include firm commitments and anticipated transactions denominated in a currency other than our entities’ functional currencies. To minimize our risk, we generally enter into transactions denominated in the respective functional currencies. Our foreign currency exposure arises from Mexican peso-denominated and Canadian dollar-denominated revenues and profits and their respective translations into U.S. dollars.

We view our investments in Mexican subsidiaries as long-term. The net asset exposure in the Mexican subsidiaries translated into U.S. dollars using the period-end exchange rates was $368.1 million at March 31, 2024. The period-end exchange rate of the Mexican peso, relative to the U.S. dollar, strengthened by approximately 2.4% from December 31, 2023. The potential loss in value of our net assets in the Mexican subsidiaries resulting from a 10% change in quoted foreign currency exchange rates at March 31, 2024, would be approximately $33.5 million. Any changes in our net assets in the Mexican subsidiaries relating to foreign currency exchange rates would be reflected in the financial statements through the foreign currency translation component of accumulated other comprehensive income, unless the Mexican subsidiaries are sold or otherwise disposed. A 10% change in average exchange rates would not have had a material impact on our results of operations.

We view our investments in Canadian subsidiaries as long-term. The net asset exposure in the Canadian subsidiaries translated into U.S. dollars using the period-end exchange rates was $168.7 million at March 31, 2024. The period-end exchange rate of the Canadian dollar, relative to the U.S. dollar, weakened by approximately 2.2% from December 31, 2023. The potential loss in value of our net assets in the Canadian subsidiaries resulting from a 10% change in quoted foreign currency exchange rates at March 31, 2024, would be approximately $15.3 million. Any changes in our net assets in the Canadian subsidiaries relating to foreign currency exchange rates would be reflected in the financial statements through the foreign currency translation component of accumulated other comprehensive income, unless the Canadian subsidiaries are sold or otherwise disposed. A 10% change in average exchange rates would not have had a material impact on our results of operations.

Our market risks have not materially changed since those discussed in our ~~Annual Report~~annual report on Form 10-K for the year ended December 31, ~~2016.~~

2023.

Item 4. Controls and Procedures

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

As of the end of the period covered by this report, the management of ~~O’Reilly Automotive, Inc. and Subsidiaries (the “Company”),~~the Company, under the supervision and with the participation of its Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Rule 13a-15(b) and as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended (“the Exchange Act”). Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that the Company’s disclosure controls and procedures as of the end of the period covered by this report are functioning effectively to provide reasonable assurance that the information required to be disclosed by the Company, including its consolidated subsidiaries, in reports filed under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and is accumulated and communicated to management, including the Company’s Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

CHANGES IN INTERNAL CONTROLS

There were no changes in the Company’s internal control over financial reporting during the fiscal quarter ended ~~September 30, 2017,~~March 31, 2024, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

~~O’Reilly Automotive, Inc. and its subsidiaries (the “Company” or “O’Reilly”)~~

Item 1A. Risk Factors

As of ~~September 30, 2017,~~March 31, 2024, there have been no material changes ~~in O’Reilly Automotive, Inc. and its subsidiaries’~~to the risk factors ~~since those discussed~~set forth in our ~~Annual Report~~annual report on Form 10-K for the year ended December 31, ~~2016.~~

2023.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

~~O’Reilly Automotive, Inc. and its subsidiaries (the “Company”)~~

The Company had no sales of unregistered securities during the ~~nine~~three months ended ~~September 30, 2017.~~March 31, 2024. The following table identifies all repurchases during the three months ended ~~September 30, 2017,~~March 31, 2024, of any of the Company’s securities registered under Section 12 of the Securities Exchange Act of 1934, as amended, by or on behalf of the Company or any affiliated purchaser (in thousands, except per share data):


				Total Number of	Maximum Dollar Value
	Total	Average		Shares Purchased as	of Shares that May Yet
	Number of	Price Paid		Part of Publicly	Be Purchased Under the
Period	Shares Purchased	per Share		Announced Programs	Programs ⁽¹⁾
January 1, 2024, to January 31, 2024	93	$	958.52	93	$	2,482,988
February 1, 2024, to February 29, 2024	96		1,045.55	96		2,382,822
March 1, 2024, to March 31, 2024	73		1,097.57	73	$	2,302,184
Total as of March 31, 2024	262	$	1,029.24	262

Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Programs
Maximum Dollar Value of Shares that May Yet Be Purchased Under the Programs ⁽¹⁾
July 1, 2017, through July 31, 2017 —
$ —
—
$ 545,288
August 1, 2017, through August 31, 2017 1,999
200.82
1,999
143,757
September 1, 2017, through September 30, 2017 744
200.38
744
$ 994,758
Total as of September 30, 2017 2,743
$ 200.70
2,743

(1)

⁽¹⁾

Under the Company’s share repurchase program, as approved by its Board of Directors, the Company may, from time to time, repurchase shares of its common stock, solely through open market purchases effected through a broker dealer at prevailing market prices, based on a variety of factors such as price, corporate trading policy requirements and overall market conditions. The Company’s Board of Directors may increase or otherwise modify, renew, suspend or terminate the share repurchase program at any time, without prior notice. As announced on May 10, 2017, and September 1, 2017, the Company’s Board of Directors each time approved a resolution to increase the authorization amount under the share repurchase program by an additional $1.0 billion, resulting in a cumulative authorization amount of $9.8 billion. Each additional authorization is effective for a three-year period, beginning on its respective announcement date. The authorizationauthorizations under the share repurchase program that currently has capacity is scheduled to expire on ~~September 1, 2020.~~May 23, 2026, and November 16, 2026. No other share repurchase programs existed during the ~~nine~~three months ended ~~September 30, 2017.~~March 31, 2024. See Note 9 “Share Repurchase Program” to the Condensed Consolidated Financial Statements for further information on our share repurchases.

~~Subsequent to~~

Item 5. Other Information

During the ~~end~~Company’s fiscal quarter ended March 31, 2024, Chris Mancini, Senior Vice President of Central Store Operations of the ~~third quarter~~Company, terminated a Rule 10b5-1 trading plan that was originally established on August 23, 2023. The plan was terminated during the Company’s unrestricted trading window and ~~through November 7, 2017,~~at a time when Mr. Mancini was not in possession of material, non-public information about the Company repurchased an additional 0.4 million shares of its common stock under its share repurchase program, at an average price of $209.61, for a total investment of $85.2 million. The Company has repurchased a total of 65.4 million shares of its common stock under its share repurchase program since the inceptionCompany.

None of the ~~program~~Company’s other Directors or Officers adopted, modified, or terminated a Rule 10b5-1 trading agreement or a non-Rule 10b5-1 trading agreement, as defined in ~~January~~Item 408(c) of ~~2011 and through November 7, 2017, at an average price of $135.17, for a total aggregate investment of $8.8 billion.~~Regulation S-K, during the Company’s fiscal quarter ended March 31, 2024.

Item 6. Exhibits

Exhibit No.		Description
3.1
~~Exhibit No.~~	~~Description~~
~~3.1~~	Second Amended and Restated Articles of Incorporation of the Registrant, filed as Exhibit 3.1 to the Registrant’s Current Report on Form 8-K dated May ~~9, 2013,~~19, 2020, is incorporated herein by this reference.
3.2		Fourth Amended and Restated Bylaws of the Registrant, filed as Exhibit ~~3.1~~3.3 to the Registrant’s Current Report on Form 8-K dated ~~November 29, 2016,~~May 19, 2020, is incorporated herein by this reference.
~~4.1~~ 21.1		~~Second Supplemental Indenture, dated as~~Subsidiaries of ~~August 17, 2017, by and between O’Reilly Automotive, Inc. and UMB Bank N.A., as Trustee,~~the Registrant, filed ~~as Exhibit 4.1 to the Registrant’s Current Report on Form 8-K dated August 17, 2017, is incorporated herein by this reference.~~herewith.
~~4.2~~ 31.1	~~Form of Note for 3.600% Senior Notes due 2027, included in Exhibit 4.1 to the Registrant’s Current Report on Form 8-K dated August 17, 2017, is incorporated herein by this reference.~~
~~10.1~~	Form of Stock Option Grant Notice and Agreement, dated as of July 10, 2017, filed as Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q dated August 7, 2017, is incorporated herein by this reference.
~~31.1~~	Certificate of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith.
31.2		Certificate of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith.
32.1 *		Certificate of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, furnished ~~herewith~~herewith..
32.2 *		Certificate of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, furnished herewith.
101.INS	~~XBRL~~	iXBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH	~~XBRL~~	iXBRL Taxonomy Extension ~~Schema~~Schema.
101.CAL	~~XBRL~~	iXBRL Taxonomy Extension Calculation ~~Linkbase~~Linkbase.
101.DEF	~~XBRL~~	iXBRL Taxonomy Extension Definition ~~Linkbase~~Linkbase.
101.LAB	~~XBRL~~	iXBRL Taxonomy Extension Label ~~Linkbase~~Linkbase.
101.PRE	~~XBRL~~	iXBRL Taxonomy Extension Presentation ~~Linkbase~~Linkbase.
* 104		Cover Page Interactive Data File, formatted as Inline XBRL, contained in Exhibit 101 attachments.

(a)		Management contract or compensatory plan or arrangement
*		Furnished (and not filed) herewith pursuant to Item 601(b)(32)(ii) of Regulation S-K.

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, thereunto duly authorized.



	O’REILLY AUTOMOTIVE, INC.

~~November 7, 2017~~ May 9, 2024	/s/	~~Greg L. Henslee~~ Brad Beckham
Date	~~Greg L. Henslee~~ Brad Beckham
	Chief Executive Officer
	(Principal Executive Officer)

May 9, 2024	/s/	Jeremy A. Fletcher
~~November 7, 2017~~ Date	~~/s/~~ Jeremy A. Fletcher		~~Thomas McFall~~
~~Date~~	~~Thomas McFall~~
	Executive Vice President and Chief Financial Officer
	(Principal Financial and Accounting Officer)



~~Missouri~~	~~000-21318~~	~~27-4358837~~
(State or other jurisdiction of	Commission file number	(I.R.S. Employer Identification No.)
of incorporation or organization)	~~number~~	~~Identification No.)~~


Title of Each Class		Trading Symbol(s)	Name of Each Exchange on which Registered
Common Stock,	$0.01 par value	ORLY	The Nasdaq Stock Market LLC
			(Nasdaq Global Select Market)



Large accelerated filerx	☒	Accelerated filer¨	☐	Emerging growth company	☐
Non-accelerated filer¨ ~~(Do not check if a smaller reporting company)~~	☐	Smaller reporting company¨
~~Emerging growth company~~ ¨	☐

		Page

	~~Page~~

PART I - FINANCIAL INFORMATION		2

ITEM 1 - FINANCIAL STATEMENTS (UNAUDITED)		2
Condensed Consolidated Balance Sheets		2
Condensed Consolidated Statements of Income		3
Condensed Consolidated Statements of Comprehensive Income		4
Condensed Consolidated Statements of Shareholders’ Equity (Deficit)		5
Condensed Consolidated Statements of Cash Flows	4	6
Notes to Condensed Consolidated Financial Statements	5	7

ITEM 2 - ~~MANAGEMENT'S~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	14	17

ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		23

ITEM 4 - CONTROLS AND PROCEDURES		24

PART II - OTHER INFORMATION		25

ITEM 1 - LEGAL PROCEEDINGS		25

ITEM 1A - RISK FACTORS		25

ITEM 2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS		25
ITEM 5 - OTHER INFORMATION		25
ITEM 6 - EXHIBITS		26

SIGNATURE PAGES		27



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


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



	September 30, 2017			December 31, 2016
	(Unaudited)			(Note)
Assets
Current assets:
Cash and cash equivalents	$	37,287		$	146,598
Accounts receivable, net	219,631			197,274
Amounts receivable from suppliers	79,491			82,105
Inventory	2,987,592			2,778,976
Other current assets	34,480			53,022
Total current assets	3,358,481			3,257,975

Property and equipment, at cost	5,114,804			4,832,342
Less: accumulated depreciation and amortization	1,822,123			1,708,911
Net property and equipment	3,292,681			3,123,431

Goodwill	787,210			785,399
Other assets, net	40,956			37,384
Total assets	$	7,479,328		$	7,204,189

Liabilities and shareholders’ equity
Current liabilities:
Accounts payable	$	3,154,250		$	2,936,656
Self-insurance reserves	72,223			67,921
Accrued payroll	80,953			71,717
Accrued benefits and withholdings	65,574			74,454
Income taxes payable	6,175			—
Other current liabilities	249,325			249,901
Total current liabilities	3,628,500			3,400,649

Long-term debt	2,900,816			1,887,019
Deferred income taxes	131,847			90,166
Other liabilities	203,986			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, and
92,851,815 as of December 31, 2016	853			929
Additional paid-in capital	1,267,810			1,336,707
Retained (deficit) earnings	(654,484		)	289,500
Total shareholders’ equity	614,179			1,627,136

Total liabilities and shareholders’ equity	$	7,479,328		$	7,204,189



	For the Three Months Ended September 30,						For the Nine Months Ended 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



	September 30, 2017
	Quoted Prices in Active Markets for Identical Instruments (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Marketable securities	$	24,528	$	—	$	—	$	24,528



Warranty liabilities, balance at December 31, 2016	$	36,623
Warranty claims	(60,173		)
Warranty accruals	65,450
Warranty liabilities, balance at September 30, 2017	$	41,900



	Shares		Weighted-Average Exercise Price
Outstanding at December 31, 2016	2,800		$	104.90
Granted	240		257.39
Exercised	(483	)	51.35
Forfeited	(26	)	207.45
Outstanding at September 30, 2017	2,531		$	128.50
Exercisable at September 30, 2017	1,705		$	75.65



	Increase in Sales for the Three Months Ended September 30, 2017, Compared to the Same Period in 2016			Increase in Sales for the Nine Months Ended September 30, 2017, Compared to the Same Period in 2016
Store sales:
Comparable store sales, including sales from the 48 acquired Bond stores	$	57		$	144
Non-comparable store sales:
Sales for stores opened throughout 2016, excluding stores open at least one year that are included in comparable store sales	29			117
Sales for stores opened throughout 2017	35			63
Sales from Leap Day in 2016	—			(25		)
Sales in 2016 for stores that have closed	(1		)	(4		)
Non-store sales:
Includes sales of machinery and sales to independent parts stores and Team Members	(1		)	(2		)
Total increase in sales	$	119		$	293



	For the Nine Months Ended September 30,
Liquidity:	2017			2016
Total cash provided by/(used in):
Operating activities ⁽¹⁾	$	1,087,419		$	1,214,259
Investing activities	(347,922		)	(352,698		)
Financing activities ⁽¹⁾	(848,808		)	(417,542		)
Net (decrease) increase in cash and cash equivalents	$	(109,311	)	$	444,019

Capital expenditures	$	347,756		$	356,234
Free cash flow ⁽²⁾	$	704,381		$	811,991



Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Programs	Maximum Dollar Value of Shares that May Yet Be Purchased Under the Programs ⁽¹⁾
July 1, 2017, through July 31, 2017	—	$	—	—	$	545,288
August 1, 2017, through August 31, 2017	1,999	200.82		1,999	143,757
September 1, 2017, through September 30, 2017	744	200.38		744	$	994,758
Total as of September 30, 2017	2,743	$	200.70	2,743

Missouri	000-21318	27-4358837

For the Three Months Ended

March 31,

Compensation expense for stock options awarded

Income tax benefit from compensation expense related to stock options