Exhibit 99.1
FOR IMMEDIATE RELEASE
O’REILLY AUTOMOTIVE, INC. REPORTS SECOND QUARTER 2013 RESULTS
· | 37% increase in second quarter diluted earnings per share to $1.58 |
· | Second quarter comparable store sales increase of 6.5% |
· | Operating margin for the second quarter increases 170 bps to 17.3% |
Springfield, MO, July 24, 2013 – O’Reilly Automotive, Inc. (the “Company” or “O’Reilly”) (Nasdaq: ORLY), a leading retailer in the automotive aftermarket industry, today announced record revenues and earnings for its second quarter ended June 30, 2013.
2nd Quarter Financial Results
Sales for the second quarter ended June 30, 2013, increased $152 million, or 10%, to $1.71 billion from $1.56 billion for the same period one year ago. Gross profit for the second quarter increased to $872 million (or 50.8% of sales) from $780 million (or 49.9% of sales) for the same period one year ago, representing an increase of 12%. Selling, general and administrative expenses (“SG&A”) for the second quarter increased to $576 million (or 33.6% of sales) from $536 million (or 34.3% of sales) for the same period one year ago, representing an increase of 7%. Operating income for the second quarter increased to $296 million (or 17.3% of sales) from $244 million (or 15.6% of sales) for the same period one year ago, representing an increase of 22%.
Net income for the second quarter ended June 30, 2013, increased $31 million, or 21%, to $177 million (or 10.3% of sales) from $146 million (or 9.3% of sales) for the same period one year ago. Diluted earnings per common share for the second quarter increased 37% to $1.58 on 112 million shares versus $1.15 for the same period one year ago on 127 million shares.
“We are very pleased to again report another record breaking quarter highlighted by a 37% increase in diluted earnings per share to $1.58, representing our 18th consecutive quarter of 15% or greater adjusted diluted earnings per share growth,” commented Greg Henslee, President and CEO. “We generated an impressive 6.5% increase in comparable store sales, which exceeded the top end of our quarterly guidance range of 4% to 6%. Our unwavering commitment to providing consistent, excellent customer service drove outstanding sales results across all of our markets. We achieved a record quarterly gross margin of 50.8%, primarily driven by improvements in acquisition costs, product mix and pricing management. Our relentless focus on expense control, along with our strong gross margin results, generated a record quarterly operating margin of 17.3%, which was a 170 basis point improvement over the prior year. We continue to believe in the strength of the long-term demand drivers in our industry, and we are establishing our third quarter comparable store sales guidance at 4% to 6% and reiterating our full-year comparable store sales guidance of 3% to 5%. I would like to take this opportunity to thank each of our 60,000 Team Members for their hard work and commitment to O’Reilly’s continued success.”
Year-to-Date Financial Results
Sales for the first six months of 2013 increased $208 million, or 7%, to $3.30 billion from $3.09 billion for the same period one year ago. Gross profit for the first six months of 2013 increased to $1.67 billion (or 50.6% of sales) from $1.54 billion (or 49.9% of sales) for the same period one year ago, representing an increase of 8%. SG&A for the first six months of 2013 increased to $1.12 billion (or 34.0% of sales) from $1.05 billion (or 34.0% of sales) for the same period one year ago, representing an increase of 7%. Operating income for the first six months of 2013 increased to $547 million
(or 16.6% of sales) from $491 million (or 15.9% of sales) for the same period one year ago, representing an increase of 11%.
Net income for the first six months of 2013 increased $38 million, or 13%, to $331 million (or 10.0% of sales) from $294 million (or 9.5% of sales) for the same period one year ago. Diluted earnings per common share for the first six months of 2013 increased 28% to $2.94 on 113 million shares versus $2.29 for the same period one year ago on 128 million shares.
Mr. Henslee continued, “We are on track to meet our goal of 190 net, new stores in 2013 with the opening of 111 net, new stores across 30 states in the first half of the year. In June, we issued $300 million of ten-year senior notes, representing another measured step to reaching our targeted leverage range of 2.00 to 2.25 times adjusted debt to adjusted EBITDAR, and we remain very focused on maintaining or improving our investment grade credit ratings.”
Share Repurchase Program
As previously announced, on May 29, 2013, the Company’s Board of Directors approved a resolution to increase the authorization under the Company’s share repurchase program by an additional $500 million, raising the cumulative authorization under the share repurchase program to $3.5 billion. During the second quarter ended June 30, 2013, the Company repurchased 2.5 million shares of its common stock at an average price per share of $107.61 for a total investment of $274 million. During the six months ended June 30, 2013, the Company repurchased 5.0 million shares of its common stock at an average price per share of $100.10 for a total investment of $502 million. Subsequent to the end of the second quarter and through the date of this release, the Company repurchased an additional 0.5 million shares of its common stock at an average price per share of $113.66 for a total investment of $56 million. The Company has repurchased a total of 37.6 million shares of its common stock under its share repurchase program since the inception of the program in January of 2011 and through the date of this release, at an average price of $79.27, for a total aggregate investment of $2.98 billion. As of the date of this release, the Company had approximately $521 million remaining under its current share repurchase authorizations.
2nd Quarter and Year-to-Date Comparable Store Sales Results
Comparable store sales are calculated based on the change in sales for stores open at least one year and exclude sales of specialty machinery, sales to independent parts stores, sales to Team Members and sales from the acquired VIP stores, due to the significant change in the business model and lack of historical data. Comparable store sales increased 6.5% for the second quarter ended June 30, 2013, versus 2.5% for the same period one year ago. Comparable store sales increased 3.6% for the first six months of 2013, versus 4.9% for the same period one year ago.
3rd Quarter and Updated Full-Year 2013 Guidance
The table below outlines the Company’s guidance for selected third quarter and updated full-year 2013 financial data:
| | | | |
| | | | |
| | For the Three Months Ending | | For the Year Ending |
| | September 30, 2013 | | December 31, 2013 |
Comparable store sales | 4% to 6% | | 3% to 5% |
Total revenue | | | $6.6 billion to $6.7 billion |
Gross profit as a percentage of sales | | | 50.3% to 50.7% |
Operating profit as a percentage of sales | | | 16.0% to 16.4% |
Diluted earnings per share (1) | $1.60 to $1.64 | | $5.79 to $5.89 |
Capital expenditures | | | $385 million to $415 million |
Free cash flow (2) | | | $450 million to $500 million |
| | | | |
| (1) | Weighted-average shares outstanding, assuming dilution, used in the denominator of this calculation, includes share repurchases made by the Company through the date of this release. |
| (2) | Calculated as net cash flows provided by operating activities less capital expenditures for the period. |
Non-GAAP Information
This release contains certain financial information not derived in accordance with United States generally accepted accounting principles (“GAAP”). These items include adjusted net income, rent-adjusted debt to adjusted earnings before interest, taxes, depreciation, amortization, share-based compensation and rent (“EBITDAR”) and free cash flow. The Company does not, nor does it suggest investors should, consider such non-GAAP financial measures in isolation from, or as a substitute for, GAAP financial information. The Company believes that the presentation of financial results and estimates excluding the impact of the former CSK Auto Corporation (“CSK”) officer clawback, as well as the
presentation of adjusted debt to adjusted EBITDAR and free cash flow provide meaningful supplemental information to both management and investors that is indicative of the Company’s core operations. The Company excludes this item in judging its performance and believes this non-GAAP information is useful to investors as well. The Company has included a reconciliation of this additional information to the most comparable GAAP measure in the selected financial information below.
Earnings Conference Call Information
The Company will host a conference call on Thursday, July 25, 2013, at 10:00 a.m. central time to discuss its results as well as future expectations. Investors may listen to the conference call live on the Company’s website at www.oreillyauto.com by clicking on “Investor Relations” and then “News Room”. Interested analysts are invited to join the call. The dial-in number for the call is (847) 585-4405; the conference call identification number is 35211264. A replay of the call will be available on the Company’s website following the conference call.
About O’Reilly Automotive, Inc.
O’Reilly Automotive, Inc. is one of the largest specialty retailers of automotive aftermarket parts, tools, supplies, equipment and accessories in the United States, serving both the do-it-yourself and professional service provider markets. Founded in 1957 by the O’Reilly family, the Company operated 4,087 stores in 42 states as of June 30, 2013.
Forward-Looking Statements
The Company claims the protection of the safe-harbor for forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. You can identify these statements by forward-looking words such as “expect,” “believe,” “anticipate,” “should,” “plan,” “intend,” “estimate,” “project,” “will” or similar words. In addition, statements contained within this press release that are not historical facts are forward-looking statements, such as statements discussing among other things, expected growth, store development, integration and expansion strategy, business strategies, future revenues and future performance. These forward-looking statements are based on estimates, projections, beliefs and assumptions and are not guarantees of future events and results. Such statements are subject to risks, uncertainties and assumptions, including, but not limited to, competition, product demand, the market for auto parts, the economy in general, inflation, consumer debt levels, governmental regulations, the Company’s increased debt levels, credit ratings on public debt, the Company’s ability to hire and retain qualified employees, risks associated with the performance of acquired businesses, weather, terrorist activities, war and the threat of war. Actual results may materially differ from anticipated results described or implied in these forward-looking statements. Please refer to the “Risk Factors” section of the annual report on Form 10-K for the year ended December 31, 2012, for additional factors that could materially affect the Company’s financial performance. Forward-looking statements speak only as of the date they were made and the Company undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.
| |
For further information contact: | Investor & Media Contact |
| Mark Merz (417) 829-5878 |
O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
| | | | | | | | |
| | | | | | | | |
| June 30, 2013 | | June 30, 2012 | | December 31, 2012 |
| (Unaudited) | | (Unaudited) | | (Note) |
Assets | | | | | | | | |
Current assets: | | | | | | | | |
Cash and cash equivalents | $ | 365,930 | | $ | 367,717 | | $ | 248,128 |
Accounts receivable, net | | 175,877 | | | 151,936 | | | 122,989 |
Amounts receivable from vendors | | 82,235 | | | 61,709 | | | 58,185 |
Inventory | | 2,345,377 | | | 2,145,339 | | | 2,276,331 |
Other current assets | | 35,738 | | | 37,291 | | | 27,315 |
Total current assets | | 3,005,157 | | | 2,763,992 | | | 2,732,948 |
| | | | | | | | |
Property and equipment, at cost | | 3,431,756 | | | 3,166,389 | | | 3,269,570 |
Less: accumulated depreciation and amortization | | 1,129,485 | | | 1,013,604 | | | 1,057,980 |
Net property and equipment | | 2,302,271 | | | 2,152,785 | | | 2,211,590 |
| | | | | | | | |
Notes receivable, less current portion | | 16,295 | | | 7,404 | | | 5,347 |
Goodwill | | 758,537 | | | 744,131 | | | 758,410 |
Other assets, net | | 41,386 | | | 41,780 | | | 40,892 |
Total assets | $ | 6,123,646 | | $ | 5,710,092 | | $ | 5,749,187 |
| | | | | | | | |
Liabilities and shareholders’ equity | | | | | | | | |
Current liabilities: | | | | | | | | |
Accounts payable | $ | 2,058,859 | | $ | 1,699,817 | | $ | 1,929,112 |
Self-insurance reserves | | 56,726 | | | 55,895 | | | 54,190 |
Accrued payroll | | 60,687 | | | 56,191 | | | 60,120 |
Accrued benefits and withholdings | | 41,273 | | | 41,332 | | | 42,417 |
Deferred income taxes | | 12,082 | | | 1,516 | | | 19,472 |
Income taxes payable | | 11,075 | | | - | | | 5,932 |
Other current liabilities | | 189,527 | | | 157,625 | | | 161,400 |
Current portion of long-term debt | | 69 | | | 522 | | | 222 |
Total current liabilities | | 2,430,298 | | | 2,012,898 | | | 2,272,865 |
| | | | | | | | |
Long-term debt, less current portion | | 1,395,922 | | | 796,884 | | | 1,095,734 |
Deferred income taxes | | 86,854 | | | 93,713 | | | 79,544 |
Other liabilities | | 204,429 | | | 193,945 | | | 192,737 |
| | | | | | | | |
Shareholders’ equity: | | | | | | | | |
Common stock, $0.01 par value: | | | | | | | | |
Authorized shares – 245,000,000 | | | | | | | | |
Issued and outstanding shares – | | | | | | | | |
108,886,775 as of June 30, 2013, | | | | | | | | |
122,014,308 as of June 30, 2012, and | | | | | | | | |
112,963,413 as of December 31, 2012 | | 1,089 | | | 1,220 | | | 1,130 |
Additional paid-in capital | | 1,102,900 | | | 1,122,014 | | | 1,083,910 |
Retained earnings | | 902,154 | | | 1,489,418 | | | 1,023,267 |
Total shareholders’ equity | | 2,006,143 | | | 2,612,652 | | | 2,108,307 |
Total liabilities and shareholders’ equity | $ | 6,123,646 | | $ | 5,710,092 | | $ | 5,749,187 |
Note: The balance sheet at December 31, 2012, has been derived from the audited consolidated financial statements at that date, but does not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements.
O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share data)
| | | | | | | | | | | |
| | | | | | | | | | | |
| For the Three Months Ended | | For the Six Months Ended |
| June 30, | | June 30, |
| 2013 | | 2012 | | 2013 | | 2012 |
Sales | $ | 1,714,969 | | $ | 1,562,849 | | $ | 3,299,978 | | $ | 3,092,241 |
Cost of goods sold, including warehouse and distribution expenses | | 843,094 | | | 782,988 | | | 1,629,440 | | | 1,550,700 |
Gross profit | | 871,875 | | | 779,861 | | | 1,670,538 | | | 1,541,541 |
| | | | | | | | | | | |
Selling, general and administrative expenses | | 575,614 | | | 536,258 | | | 1,123,193 | | | 1,050,437 |
Operating income | | 296,261 | | | 243,603 | | | 547,345 | | | 491,104 |
| | | | | | | | | | | |
Other income (expense): | | | | | | | | | | | |
Interest expense | | (11,467) | | | (9,140) | | | (22,867) | | | (18,271) |
Interest income | | 469 | | | 658 | | | 946 | | | 1,285 |
Other, net | | 864 | | | (51) | | | 1,332 | | | 744 |
Total other expense | | (10,134) | | | (8,533) | | | (20,589) | | | (16,242) |
| | | | | | | | | | | |
Income before income taxes | | 286,127 | | | 235,070 | | | 526,756 | | | 474,862 |
Provision for income taxes | | 109,000 | | | 88,950 | | | 195,300 | | | 181,250 |
Net income | $ | 177,127 | | $ | 146,120 | | $ | 331,456 | | $ | 293,612 |
| | | | | | | | | | | |
Earnings per share-basic: | | | | | | | | | | | |
Earnings per share | $ | 1.61 | | $ | 1.17 | | $ | 2.99 | | $ | 2.33 |
Weighted-average common shares outstanding – basic | | 110,278 | | | 124,870 | | | 110,914 | | | 125,920 |
| | | | | | | | | | | |
Earnings per share-assuming dilution: | | | | | | | | | | | |
Earnings per share | $ | 1.58 | | $ | 1.15 | | $ | 2.94 | | $ | 2.29 |
Weighted-average common shares outstanding – assuming dilution | | 112,079 | | | 127,188 | | | 112,736 | | | 128,261 |
O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
| | | | | |
| | | | | |
| For the Six Months Ended |
| June 30, |
| 2013 | | 2012 |
Operating activities: | | | | | |
Net income | $ | 331,456 | | $ | 293,612 |
Adjustments to reconcile net income to net cash | | | | | |
provided by operating activities: | | | | | |
Depreciation and amortization of property, equipment and intangibles | | 89,682 | | | 88,230 |
Amortization of debt discount and issuance costs | | 1,000 | | | 837 |
Excess tax benefit from stock options exercised | | (18,681) | | | (23,692) |
Deferred income taxes | | (80) | | | 4,375 |
Share-based compensation programs | | 11,174 | | | 10,891 |
Other | | 3,117 | | | 4,075 |
Changes in operating assets and liabilities: | | | | | |
Accounts receivable | | (56,681) | | | (20,802) |
Inventory | | (69,046) | | | (159,591) |
Accounts payable | | 129,747 | | | 420,554 |
Income taxes payable | | 23,823 | | | 47,159 |
Other | | (6,099) | | | 25,810 |
Net cash provided by operating activities | | 439,412 | | | 691,458 |
| | | | | |
Investing activities: | | | | | |
Purchases of property and equipment | | (176,577) | | | (151,327) |
Proceeds from sale of property and equipment | | 678 | | | 2,071 |
Payments received on notes receivable | | 2,166 | | | 2,100 |
Net cash used in investing activities | | (173,733) | | | (147,156) |
| | | | | |
Financing activities: | | | | | |
Proceeds from the issuance of long-term debt | | 299,976 | | | - |
Payment of debt issuance costs | | (1,879) | | | - |
Principal payments on capital leases | | (189) | | | (367) |
Repurchases of common stock | | (501,914) | | | (594,450) |
Excess tax benefit from stock options exercised | | 18,681 | | | 23,692 |
Net proceeds from issuance of common stock | | 37,448 | | | 32,988 |
Net cash used in financing activities | | (147,877) | | | (538,137) |
| | | | | |
Net increase in cash and cash equivalents | | 117,802 | | | 6,165 |
Cash and cash equivalents at beginning of period | | 248,128 | | | 361,552 |
Cash and cash equivalents at end of period | $ | 365,930 | | $ | 367,717 |
| | | | | |
Supplemental disclosures of cash flow information: | | | | | |
Income taxes paid | $ | 170,100 | | $ | 125,575 |
Interest paid, net of capitalized interest | | 21,706 | | | 17,718 |
O’REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
SELECTED FINANCIAL INFORMATION
(Unaudited)
| | | | | | |
| | | | | | |
| | For the Twelve Months Ended |
Adjusted Debt to Adjusted EBITDAR: | June 30, |
(In thousands, except adjusted debt to adjusted EBITDAR ratio) | 2013 | | 2012 |
GAAP debt | $ | 1,395,991 | | $ | 797,406 |
Add: | Letters of credit | | 51,849 | | | 57,773 |
| Discount on senior notes | | 4,141 | | | 3,483 |
| Rent times six | | 1,495,794 | | | 1,413,048 |
Non-GAAP adjusted debt | $ | 2,947,775 | | $ | 2,271,710 |
| | | | | | |
GAAP net income | $ | 623,590 | | $ | 565,039 |
Add: | Former CSK officer clawback, net of tax | | - | | | (1,741) |
Non-GAAP adjusted net income | | 623,590 | | | 563,298 |
Add: | Interest expense | | 44,796 | | | 34,942 |
| Taxes, net of impact of former CSK officer clawback | | 369,825 | | | 341,383 |
| Depreciation and amortization | | 178,558 | | | 173,996 |
| Share-based compensation expense | | 22,309 | | | 20,937 |
| Rent expense | | 249,299 | | | 235,508 |
Adjusted EBITDAR | $ | 1,488,377 | | $ | 1,370,064 |
| | | | | | |
Adjusted debt to adjusted EBITDAR | | 1.98 | | | 1.66 |
| | | | | |
| | | | | |
| June 30, |
| 2013 | | 2012 |
Selected Balance Sheet Ratios: | | | | | |
Inventory turnover (1) | | 1.4 | | | 1.5 |
Inventory turnover, net of payables (2) | | 9.7 | | | 4.8 |
Average inventory per store (in thousands) (3) | $ | 574 | | $ | 556 |
Accounts payable to inventory (4) | | 87.8% | | | 79.2% |
Return on equity (5) | | 29.5% | | | 20.2% |
Return on assets (6) | | 10.6% | | | 10.1% |
| | | | | | | | | | | |
| | | | | | | | | | | |
| For the Three Months Ended | | For the Six Months Ended |
| June 30, | | June 30, |
| 2013 | | 2012 | | 2013 | | 2012 |
Selected Financial Information (in thousands): | | | | | | | | | | | |
Capital expenditures | $ | 103,093 | | $ | 75,870 | | $ | 176,577 | | $ | 151,327 |
Free cash flow (7) | $ | 109,975 | | $ | 201,060 | | $ | 262,835 | | $ | 540,131 |
Depreciation and amortization | $ | 45,503 | | $ | 44,397 | | $ | 89,682 | | $ | 88,230 |
Interest expense | $ | 11,467 | | $ | 9,140 | | $ | 22,867 | | $ | 18,271 |
Lease and rental expense | $ | 64,457 | | $ | 60,065 | | $ | 127,354 | | $ | 118,924 |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Store and Team Member Information: | | | | | | | | | | | | | | |
| For the Three Months Ended | | For the Six Months Ended | | For the Twelve Months Ended |
| June 30, | | June 30, | | June 30, |
| 2013 | | 2012 | | 2013 | | 2012 | | 2013 | | 2012 |
Beginning store count | | 4,041 | | | 3,809 | | | 3,976 | | | 3,740 | | | 3,859 | | | 3,657 |
New stores opened | | 47 | | | 50 | | | 113 | | | 123 | | | 175 | | | 207 |
Stores acquired | | - | | | - | | | - | | | - | | | 56 | | | - |
Stores closed | | (1) | | | - | | | (2) | | | (4) | | | (3) | | | (5) |
Ending store count | | 4,087 | | | 3,859 | | | 4,087 | | | 3,859 | | | 4,087 | | | 3,859 |
| | | | | | | | | | | |
| | | | | | | | | | | |
| For the Three Months Ended | | For the Twelve Months Ended |
| June 30, | | June 30, |
| 2013 | | 2012 | | 2013 | | 2012 |
Total employment | | 60,035 | | | 52,254 | | | | | | |
Square footage (in thousands) | | 29,435 | | | 27,421 | | | | | | |
Sales per weighted-average square foot (8) | $ | 58.16 | | $ | 56.82 | | $ | 222.96 | | $ | 223.45 |
Sales per weighted-average store (in thousands) (9) | $ | 419 | | $ | 404 | | $ | 1,597 | | $ | 1,586 |
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| |
(1) | Calculated as cost of goods sold for the last 12 months divided by average inventory. Average inventory is calculated as the average of inventory for the trailing four quarters used in determining the denominator. |
(2) | Calculated as cost of goods sold for the last 12 months divided by average net inventory. Average net inventory is calculated as the average of inventory less accounts payable for the trailing four quarters used in determining the denominator. |
(3) | Calculated as inventory divided by store count at the end of the reported period. |
(4) | Calculated as accounts payable divided by inventory. |
(5) | Calculated as the last 12 months adjusted net income, adjusted to exclude the benefit related to the former CSK officer clawback in the amount of $3 million ($2 million, net of tax), divided by average total shareholders' equity. Average total shareholders' equity is calculated as the average of total shareholders' equity for the trailing four quarters used in determining the denominator. |
(6) | Calculated as the last 12 months adjusted net income, adjusted for the item discussed in footnote (5), divided by average total assets. Average total assets are calculated as the average total assets for the trailing four quarters used in determining the denominator. |
(7) | Calculated as net cash provided by operating activities less capital expenditures for the period. |
(8) | Calculated as sales less jobber sales, divided by weighted-average square foot. Weighted-average sales per square foot are weighted to consider the approximate dates of store openings or expansions. |
(9) | Calculated as sales less jobber sales, divided by weighted-average stores. Weighted-average sales per store are weighted to consider the approximate dates of store openings or expansions. |
