Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2017 | May 01, 2017 | |
Document and Entity Information | ||
Document type | 10-Q | |
Amendment flag | false | |
Document period end date | Mar. 31, 2017 | |
Document fiscal year focus | 2,017 | |
Current fiscal year end date | --12-31 | |
Document fiscal period focus | Q1 | |
Entity registrant name | O REILLY AUTOMOTIVE INC | |
Entity central index key | 898,173 | |
Entity filer category | Large Accelerated Filer | |
Entity common stock, shares outstanding | 91,005,027 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) $ in Thousands | Mar. 31, 2017 | Dec. 31, 2016 | [1] |
Assets | |||
Cash and cash equivalents | $ 27,539 | $ 146,598 | |
Accounts receivable, net | 195,651 | 197,274 | |
Amounts receivable from suppliers | 71,157 | 82,105 | |
Inventory | 2,872,646 | 2,778,976 | |
Other current assets | 38,540 | 53,022 | |
Total current assets | 3,205,533 | 3,257,975 | |
Property and equipment, at cost | 4,935,126 | 4,832,342 | |
Less: accumulated depreciation and amortization | 1,760,476 | 1,708,911 | |
Net property and equipment | 3,174,650 | 3,123,431 | |
Goodwill | 785,568 | 785,399 | |
Other assets, net | 37,973 | 37,384 | |
Total assets | 7,203,724 | 7,204,189 | |
Liabilities and shareholders' equity | |||
Accounts payable | 2,987,996 | 2,936,656 | |
Self-insurance reserves | 70,479 | 67,921 | |
Accrued payroll | 75,762 | 71,717 | |
Accrued benefits and withholdings | 49,081 | 74,454 | |
Income taxes payable | 89,640 | 0 | |
Other current liabilities | 232,805 | 249,901 | |
Total current liabilities | 3,505,763 | 3,400,649 | |
Long-term debt | 1,977,539 | 1,887,019 | |
Deferred income taxes | 92,610 | 90,166 | |
Other liabilities | 205,216 | 199,219 | |
Shareholders' equity: | |||
Common stock, $0.01 par value: Authorized shares - 245,000,000; Issued and outstanding shares - 91,320,866 as of March 31, 2017, and 92,851,815 as of December 31, 2016 | 913 | 929 | |
Additional paid-in capital | 1,331,416 | 1,336,707 | |
Retained earnings | 90,267 | 289,500 | |
Total shareholders' equity | 1,422,596 | 1,627,136 | |
Total liabilities and shareholders' equity | $ 7,203,724 | $ 7,204,189 | |
[1] | The balance sheet at December 31, 2016, has been derived from the audited consolidated financial statements at that date, but does not include all of the information and footnotes required by United States generally accepted accounting principles for complete financial statements. |
Condensed Consolidated Balance3
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares | Mar. 31, 2017 | Dec. 31, 2016 |
Statement of Financial Position [Abstract] | ||
Common stock, par value | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 245,000,000 | 245,000,000 |
Common stock, shares issued | 91,320,866 | 92,851,815 |
Common stock, shares outstanding | 91,320,866 | 92,851,815 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Income - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Income Statement [Abstract] | ||
Sales | $ 2,156,259 | $ 2,096,150 |
Cost of goods sold, including warehouse and distribution expenses | 1,025,112 | 998,571 |
Gross profit | 1,131,147 | 1,097,579 |
Selling, general and administrative expenses | 727,990 | 678,953 |
Operating income | 403,157 | 418,626 |
Other income (expense): | ||
Interest expense | (19,404) | (14,821) |
Interest income | 706 | 752 |
Other, net | 765 | 1,017 |
Total other expense | (17,933) | (13,052) |
Income before income taxes | 385,224 | 405,574 |
Provision for income taxes | 120,290 | 150,200 |
Net income | $ 264,934 | $ 255,374 |
Earnings per share-basic: | ||
Earnings per share - basic | $ 2.88 | $ 2.63 |
Weighted-average common shares outstanding - basic | 92,001 | 97,140 |
Earnings per share-assuming dilution: | ||
Earnings per share - assuming dilution | $ 2.83 | $ 2.59 |
Weighted-average common shares outstanding - assuming dilution | 93,495 | 98,537 |
Condensed Consolidated Stateme5
Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 3 Months Ended | |||
Mar. 31, 2017 | Mar. 31, 2016 | |||
Operating activities: | ||||
Net income | $ 264,934 | $ 255,374 | ||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||
Depreciation and amortization of property, equipment and intangibles | 57,008 | 52,778 | ||
Amortization of debt discount and issuance costs | 642 | 546 | ||
Deferred income taxes | 2,611 | (3,322) | ||
Share-based compensation programs | 5,428 | 5,178 | ||
Other | 1,810 | 1,481 | ||
Changes in operating assets and liabilities: | ||||
Accounts receivable | 219 | (19,206) | ||
Inventory | (93,167) | (70,745) | ||
Accounts payable | 51,230 | 174,378 | ||
Income taxes payable | 116,009 | 127,638 | ||
Other | (30,024) | (20,979) | [1] | |
Net cash provided by operating activities | 376,700 | 503,121 | [1] | |
Investing activities: | ||||
Purchases of property and equipment | (110,632) | (103,974) | ||
Proceeds from sale of property and equipment | 245 | 864 | ||
Payments received on notes receivable | 0 | 1,047 | ||
Other | (636) | 0 | ||
Net cash used in investing activities | (111,023) | (102,063) | ||
Financing activities: | ||||
Proceeds from borrowings on revolving credit facility | 482,000 | 0 | ||
Payments on revolving credit facility | (392,000) | 0 | ||
Proceeds from the issuance of long-term debt | 0 | 499,160 | ||
Payments of debt issuance costs | 0 | (3,725) | ||
Repurchases of common stock | (490,330) | (312,656) | ||
Net proceeds from issuance of common stock | 15,750 | 16,074 | ||
Other | (156) | (204) | [1] | |
Net cash (used in) provided by financing activities | (384,736) | 198,649 | [1] | |
Net (decrease) increase in cash and cash equivalents | (119,059) | 599,707 | ||
Cash and cash equivalents at beginning of the period | 146,598 | [2] | 116,301 | |
Cash and cash equivalents at end of the period | 27,539 | 716,008 | ||
Supplemental disclosures of cash flow information: | ||||
Income taxes paid | 0 | 23,765 | ||
Interest paid, net of capitalized interest | $ 31,954 | $ 23,063 | ||
[1] | 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. | |||
[2] | The balance sheet at December 31, 2016, has been derived from the audited consolidated financial statements at that date, but does not include all of the information and footnotes required by United States generally accepted accounting principles for complete financial statements. |
Basis of Presentation
Basis of Presentation | 3 Months Ended |
Mar. 31, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of presentation | 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 months ended March 31, 2017 , are not necessarily indicative of the results that may be expected for the year ended December 31, 2017 . For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s 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 the condensed consolidated financial statements in this report for more information. Subsequent Event: On April 5, 2017, the Company entered into a new credit agreement for a new unsecured revolving credit facility and terminated its prior unsecured revolving credit facility dated January 14, 2011. |
Fair Value Measurements
Fair Value Measurements | 3 Months Ended |
Mar. 31, 2017 | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Abstract] | |
Fair value measurements | NOTE 2 – 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. 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 under the Company’s nonqualified deferred compensation plan. See Note 6 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 March 31, 2017 , and December 31, 2016 . The Company recorded an increase in fair value related to its marketable securities in the amounts of $0.9 million and $0.1 million for the three months ended March 31, 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 March 31, 2017 , and December 31, 2016 (in thousands): March 31, 2017 Quoted Prices in Active Markets for Identical Instruments Significant Other Observable Inputs Significant Unobservable Inputs Total Marketable securities $ 22,438 $ — $ — $ 22,438 December 31, 2016 Quoted Prices in Active Markets for Identical Instruments Significant Other Observable Inputs Significant Unobservable Inputs Total Marketable securities $ 20,462 $ — $ — $ 20,462 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 March 31, 2017 , and December 31, 2016 , 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 are included in “Long-term debt” on the accompanying Condensed Consolidated Balance Sheets as of March 31, 2017 , and December 31, 2016 . See Note 3 for further information concerning the Company’s senior notes and unsecured revolving credit facility. The table below identifies the estimated fair value of the Company’s senior notes, using the market approach. The fair value as of March 31, 2017 , and December 31, 2016 , was determined by reference to quoted market prices of the same or similar instruments (Level 2) (in thousands): March 31, 2017 December 31, 2016 Carrying Amount Estimated Fair Value Carrying Amount Estimated Fair Value Senior Notes $ 1,887,539 $ 1,985,228 $ 1,887,019 $ 1,977,510 The carrying amount of the Company’s unsecured revolving credit facility approximates fair value, as borrowings under the facility bear variable interest at current market rates. 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. |
Financing
Financing | 3 Months Ended |
Mar. 31, 2017 | |
Debt Disclosure [Abstract] | |
Financing | NOTE 3 – FINANCING The following table identifies the amounts included in “Long-term debt” on the accompanying Condensed Consolidated Balance Sheets as of March 31, 2017 , and December 31, 2016 (in thousands): March 31, 2017 December 31, 2016 Revolving Credit Facility, average interest rate of 4.000% $ 90,000 $ — $500 million, 4.875% Senior Notes due 2021 (1) , effective interest rate of 4.959% 496,960 496,758 $300 million, 4.625% Senior Notes due 2021 (2) , effective interest rate of 4.646% 298,749 298,679 $300 million, 3.800% Senior Notes due 2022 (3) , effective interest rate of 3.845% 297,953 297,868 $300 million, 3.850% Senior Notes due 2023 (4) , effective interest rate of 3.851% 298,411 298,355 $500 million, 3.550% Senior Notes due 2026 (5) , effective interest rate of 3.570% 495,466 495,359 Long-term debt $ 1,977,539 $ 1,887,019 (1) Net of unamortized discount of $1.3 million as of March 31, 2017 , and $1.4 million as of December 31, 2016 , and debt issuance costs of $1.7 million as of March 31, 2017 , and $1.8 million as of December 31, 2016 . (2) Net of unamortized discount of $0.2 million as of March 31, 2017 , and December 31, 2016 , and debt issuance costs of $1.0 million as of March 31, 2017 , and $1.1 million as of December 31, 2016 . (3) Net of unamortized discount of $0.7 million as of March 31, 2017 , and December 31, 2016 , and debt issuance costs of $1.4 million as of March 31, 2017 , and $1.5 million as of December 31, 2016 . (4) Net of unamortized discount of less than $0.1 million as of March 31, 2017 , and December 31, 2016 , and debt issuance costs of $1.6 million as of March 31, 2017 , and December 31, 2016 . (5) Net of unamortized discount of $0.8 million as of March 31, 2017 , and December 31, 2016 , and debt issuance costs of $3.8 million as of March 31, 2017 , and $3.9 million as of December 31, 2016 . Unsecured revolving credit facility: On January 14, 2011, the Company entered into a credit agreement, as amended by Amendment No. 1 dated as of September 9, 2011, and as further amended by Amendment No. 2 dated as of July 2, 2013, and as further amended by Amendment No. 3 dated as of June 18, 2015 (the “Credit Agreement”). The Credit Agreement provides for a $600 million unsecured revolving credit facility (the “Revolving Credit Facility”) arranged by Bank of America, N.A., which is scheduled to mature in July 2018. 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 $200 million. As of March 31, 2017 , and December 31, 2016 , the Company had outstanding letters of credit, primarily to support obligations related to workers’ compensation, general liability and other insurance policies, in the amounts of $41.2 million and $38.7 million , respectively, reducing the aggregate availability under the Revolving Credit Facility by those amounts. Borrowings under the Revolving Credit Facility (other than swing line loans) bear interest, at the Company’s option, at the Base Rate or Eurodollar Rate (both as defined in the Credit Agreement) plus an applicable margin. Swing line loans made under the Revolving Credit Facility bear interest at the Base Rate plus the applicable margin for Base Rate loans. In addition, the Company pays a facility fee on the aggregate amount of the commitments 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 March 31, 2017 , based upon the Company’s credit ratings, its margin for Base Rate loans was 0.000% , its margin for Eurodollar Rate loans was 0.875% and its facility fee was 0.125% . 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 3.00:1.00. The consolidated fixed charge coverage ratio includes a calculation of earnings before interest, taxes, depreciation, amortization, rent and non-cash share-based compensation expense. 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, six-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 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 lenders. As of March 31, 2017, the Company remained in compliance with all covenants under the Credit Agreement. New unsecured revolving credit facility: On April 5, 2017, the Company entered into a new credit agreement (the “New Credit Agreement”). The New Credit Agreement provides for a $1.2 billion unsecured revolving credit facility (the “New Revolving Credit Facility”) arranged by JPMorgan Chase Bank, N.A., which is scheduled to mature in April 2022. The New 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 New Revolving Credit Facility. As described in the New Credit Agreement governing the New Revolving Credit Facility, the Company may, from time to time, subject to certain conditions, increase the aggregate commitments under the New Revolving Credit Facility by up to $600 million. In conjunction with the issuance of the New Credit Agreement, all outstanding loans and commitments, including the guarantees of each of the subsidiary guarantors, under the Credit Agreement dated January 14, 2011, were terminated and replaced by the loans and commitments under the New Credit Agreement. None of the Company’s subsidiaries are guarantors or obligors under the New Credit Agreement. Borrowings under the New 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 Rate (both as defined in the New Credit Agreement) plus an applicable margin. Swing line loans made under the New 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 New 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 April 5, 2017, with the New Credit Agreement, based upon the Company’s current credit ratings, its margin for Alternate Base Rate loans is 0.000% , its margin for Eurodollar Rate Loans is 0.900% and its facility fee is 0.100% . The New 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. 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 contained in the New 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 New Credit Agreement and litigation from lenders. Senior notes: The Company has issued a cumulative $1.9 billion aggregate principal amount of unsecured senior notes, which are due between January 2021 and March 2026, with United Missouri Bank 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. As of March 31, 2017, the senior notes were guaranteed on a senior unsecured basis by each of the Company’s subsidiaries (“Subsidiary Guarantors”) that incurs or guarantees obligations under the Company’s Credit Agreement or under other credit facility or capital markets debt of the Company’s or any of the Company’s Subsidiary Guarantors. The guarantees were joint and several and full and unconditional, subject to certain customary automatic release provisions, including release of the Subsidiary Guarantor’s guarantee under the Company’s Credit Agreement and certain other debt, or, in certain circumstances, the sale or other disposition of a majority of the voting power of the capital interest in, or of all or substantially all of the property of, the Subsidiary Guarantor. Each of the Subsidiary Guarantors is 100% owned, directly or indirectly, by the Company, and the Company has no independent assets or operations other than those of its subsidiaries. The only direct or indirect subsidiaries of the Company that would not be Subsidiary Guarantors would be minor subsidiaries. Neither the Company, nor any of its Subsidiary Guarantors, is subject to any material or significant restrictions on the Company’s ability to obtain funds from its subsidiaries by dividend or loan or to transfer assets from such subsidiaries, except as provided by applicable law. Each of the senior notes is subject to certain customary covenants, with which the Company complied as of March 31, 2017. |
Warranties
Warranties | 3 Months Ended |
Mar. 31, 2017 | |
Product Warranties Disclosures [Abstract] | |
Warranties | NOTE 4 – 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 March 31, 2017 , and December 31, 2016 . The following table identifies the changes in the Company’s aggregate product warranty liabilities for the three months ended March 31, 2017 (in thousands): Warranty liabilities, balance at December 31, 2016 $ 36,623 Warranty claims (17,493 ) Warranty accruals 16,967 Warranty liabilities, balance at March 31, 2017 $ 36,097 |
Share Repurchase Program
Share Repurchase Program | 3 Months Ended |
Mar. 31, 2017 | |
Proceeds from (Repurchase of) Equity [Abstract] | |
Share repurchase program | NOTE 5 – 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. The cumulative authorization amount under the Company’s Board-approved share repurchase program was $7.8 billion as of March 31, 2017 . 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 (in thousands, except per share data): For the Three Months Ended 2017 2016 Shares repurchased 1,829 1,231 Average price per share $ 268.09 $ 254.02 Total investment $ 490,312 $ 312,637 As of March 31, 2017 , the Company had $397.5 million remaining under its share repurchase program. Subsequent to the end of the first quarter and through May 8, 2017 , the Company repurchased an additional 0.6 million shares of its common stock under its share repurchase program, at an average price of $254.61 , for a total investment of $152.2 million . The Company has repurchased a total of 59.4 million shares of its common stock under its share repurchase program since the inception of the program in January of 2011 and through May 8, 2017 , at an average price of $126.40 , for a total aggregate investment of $7.5 billion . |
Share-Based Compensation and Be
Share-Based Compensation and Benefit Plans | 3 Months Ended |
Mar. 31, 2017 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Share-based compensation and benefit plans | NOTE 6 – 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 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, stock issued through the Company’s employee stock purchase plan and stock awarded to employees through other benefit programs. 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 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 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 years and typically vest 25% per year, over four years. The Company records compensation expense for the 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 three months ended March 31, 2017 (in thousands, except per share data): Shares Weighted-Average Exercise Price Outstanding at December 31, 2016 2,800 $ 104.90 Granted 177 266.53 Exercised (284 ) 44.69 Forfeited (6 ) 209.59 Outstanding at March 31, 2017 2,687 $ 121.71 Exercisable at March 31, 2017 1,910 $ 76.44 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 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. The table below identifies the weighted-average assumptions used for grants awarded during the three months ended March 31, 2017 and 2016 : For the Three Months Ended 2017 2016 Risk free interest rate 2.09 % 1.59 % Expected life 5.9 Years 5.9 Years Expected volatility 22.3 % 22.4 % Expected dividend yield — % — % The following table summarizes activity related to stock options awarded by the Company for the three months ended March 31, 2017 and 2016 (in thousands, except per share data): For the Three Months Ended 2017 2016 Compensation expense for stock options awarded $ 4,209 $ 4,336 Income tax benefit from compensation expense related to stock options 1,593 1,620 Weighted-average grant-date fair value of options awarded $ 70.34 $ 66.27 The remaining unrecognized compensation expense related to unvested stock option awards at March 31, 2017 , was $34.0 million , and the weighted-average period of time over which this cost will be recognized is 2.8 years . Other share-based compensation plans: The Company sponsors other share-based compensation plans: an 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 . 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. The fair value of shares awarded under the director stock plan 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 months ended March 31, 2017 and 2016 (in thousands): For the Three Months Ended 2017 2016 Compensation expense for shares issued under the ESPP $ 541 $ 523 Income tax benefit from compensation expense related to shares issued under the ESPP 205 195 Compensation expense for restricted shares awarded 678 319 Income tax benefit from compensation expense related to restricted awards $ 257 $ 119 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. 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 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 months ended March 31, 2017 or 2016 . The Company expensed matching contributions under the 401(k) Plan in the amounts of $5.5 million and $5.0 million for the three months ended March 31, 2017 and 2016 , respectively, which were included in “Selling, general and administrative expenses” 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, which is then 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. 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, adjusted to reflect the performance, whether positive or negative, of selected investment measurement options chosen by each participant during the deferral period. The liability for compensation deferred under the Deferred Compensation Plan was $22.4 million and $20.5 million as of March 31, 2017 , and December 31, 2016 , 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 less than $0.1 million for each of the three months ended March 31, 2017 and 2016 , respectively, which were included in “Selling, general and administrative expenses” on the accompanying Condensed Consolidated Statements of Income. |
Earnings Per Share
Earnings Per Share | 3 Months Ended |
Mar. 31, 2017 | |
Earnings Per Share [Abstract] | |
Earnings per share | NOTE 7 – EARNINGS PER SHARE The following table illustrates the computation of basic and diluted earnings per share for the three months ended March 31, 2017 and 2016 (in thousands, except per share data): For the Three Months Ended 2017 2016 Numerator (basic and diluted): Net income $ 264,934 $ 255,374 Denominator: Weighted-average common shares outstanding – basic 92,001 97,140 Effect of stock options (1) 1,494 1,397 Weighted-average common shares outstanding – assuming dilution 93,495 98,537 Earnings per share: Earnings per share-basic $ 2.88 $ 2.63 Earnings per share-assuming dilution $ 2.83 $ 2.59 Antidilutive potential common shares not included in the calculation of diluted earnings per share: Stock options (1) 478 268 Weighted-average exercise price per share of antidilutive stock options (1) $ 266.71 $ 256.19 (1) See Note 6 for further information concerning the terms of the Company’s share-based compensation plans. For the three months ended March 31, 2017 and 2016 , 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 the end of the first quarter and through May 8, 2017 , the Company repurchased an additional 0.6 million shares of its common stock, at an average price of $254.61 , for a total investment of $152.2 million . |
Legal Matters
Legal Matters | 3 Months Ended |
Mar. 31, 2017 | |
Loss Contingency [Abstract] | |
Legal matters | NOTE 8 – LEGAL MATTERS O’Reilly is currently involved in litigation incidental to the ordinary conduct of the Company’s business. The Company accrues for litigation losses in instances where a material adverse outcome is probable and the Company is able to reasonably estimate the probable loss. The Company accrues for an estimate of material legal costs to be incurred in pending litigation matters. Although the Company cannot ascertain the amount of liability that it may incur from any of these 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 . The Company has vigorously challenged the verdict in the Court of Appeals and on March 24, 2017, the Court of Appeals reversed and affirmed the verdict in part and remanded to the trial court the cause of action that resulted in the $12.5 million verdict. On April 10, 2017, Meridian Creative Alliance (“Meridian”) filed a motion for rehearing in the Court of Appeals or, in the alternative, to transfer the case to the Missouri Supreme Court. On April 17, 2017, the Court of Appeals denied Meridian’s motion. On May 2, 2017, Meridian filed an application with the Missouri Supreme Court to accept transfer of the case. The Company will continue to vigorously defend the matter. As of March 31, 2017 , the Company had reserved $18.6 million with respect to this matter. |
Recent Accounting Pronouncement
Recent Accounting Pronouncements | 3 Months Ended |
Mar. 31, 2017 | |
New Accounting Pronouncements and Changes in Accounting Principles [Abstract] | |
Recent accounting pronouncements | NOTE 9 - RECENT ACCOUNTING PRONOUNCEMENTS In May of 2014, the 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 guidance 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. 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, that 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 2016-02 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. The Company will adopt this guidance beginning with its first quarter ending March 31, 2019. The Company has established a task force, composed of multiple functional groups inside of the Company, that 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 March 31, 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) provided by financing activities” on the accompanying Condensed Consolidated Statement of Cash Flows for the three months ended March 31, 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 $14.8 million of excess tax benefits related to share-based compensation being reclassified from “Net cash (used in) provided by financing activities” to “Net cash provided by operating activities” in the accompanying Condensed Consolidated Statement of Cash Flows for the three months ended March 31, 2016. ASU 2016-09 amendments related to accounting for excess tax benefits in the income statement have been adopted prospectively, resulting in the recognition of $23.3 million in “Provision for income taxes” in the accompanying Condensed Consolidated Statement of Income for the three months ended March 31, 2017, which lowered the Company’s effective tax rate, increased dilutive shares outstanding and increased diluted earnings per share for the three months ended March 31, 2017, by $0.23 . 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. 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 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. 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. 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. 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. 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. |
Fair Value Measurements (Polici
Fair Value Measurements (Policies) | 3 Months Ended |
Mar. 31, 2017 | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Abstract] | |
Fair value of financial instruments, policy | 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. |
Warranties (Policies)
Warranties (Policies) | 3 Months Ended |
Mar. 31, 2017 | |
Product Warranties Disclosures [Abstract] | |
Warranties, policy | 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. |
Recent Accounting Pronounceme17
Recent Accounting Pronouncements (Policies) | 3 Months Ended |
Mar. 31, 2017 | |
New Accounting Pronouncements and Changes in Accounting Principles [Abstract] | |
Recent accounting pronouncements, policy | In May of 2014, the 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 guidance 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. 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, that 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 2016-02 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. The Company will adopt this guidance beginning with its first quarter ending March 31, 2019. The Company has established a task force, composed of multiple functional groups inside of the Company, that 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 March 31, 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) provided by financing activities” on the accompanying Condensed Consolidated Statement of Cash Flows for the three months ended March 31, 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 $14.8 million of excess tax benefits related to share-based compensation being reclassified from “Net cash (used in) provided by financing activities” to “Net cash provided by operating activities” in the accompanying Condensed Consolidated Statement of Cash Flows for the three months ended March 31, 2016. ASU 2016-09 amendments related to accounting for excess tax benefits in the income statement have been adopted prospectively, resulting in the recognition of $23.3 million in “Provision for income taxes” in the accompanying Condensed Consolidated Statement of Income for the three months ended March 31, 2017, which lowered the Company’s effective tax rate, increased dilutive shares outstanding and increased diluted earnings per share for the three months ended March 31, 2017, by $0.23 . 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. 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 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. 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. 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. 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. 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. |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Abstract] | |
Valuation of marketable securities | March 31, 2017 Quoted Prices in Active Markets for Identical Instruments Significant Other Observable Inputs Significant Unobservable Inputs Total Marketable securities $ 22,438 $ — $ — $ 22,438 December 31, 2016 Quoted Prices in Active Markets for Identical Instruments Significant Other Observable Inputs Significant Unobservable Inputs Total Marketable securities $ 20,462 $ — $ — $ 20,462 |
Valuation of senior notes | March 31, 2017 December 31, 2016 Carrying Amount Estimated Fair Value Carrying Amount Estimated Fair Value Senior Notes $ 1,887,539 $ 1,985,228 $ 1,887,019 $ 1,977,510 |
Financing (Tables)
Financing (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Debt Disclosure [Abstract] | |
Outstanding financing facilities | March 31, 2017 December 31, 2016 Revolving Credit Facility, average interest rate of 4.000% $ 90,000 $ — $500 million, 4.875% Senior Notes due 2021 (1) , effective interest rate of 4.959% 496,960 496,758 $300 million, 4.625% Senior Notes due 2021 (2) , effective interest rate of 4.646% 298,749 298,679 $300 million, 3.800% Senior Notes due 2022 (3) , effective interest rate of 3.845% 297,953 297,868 $300 million, 3.850% Senior Notes due 2023 (4) , effective interest rate of 3.851% 298,411 298,355 $500 million, 3.550% Senior Notes due 2026 (5) , effective interest rate of 3.570% 495,466 495,359 Long-term debt $ 1,977,539 $ 1,887,019 (1) Net of unamortized discount of $1.3 million as of March 31, 2017 , and $1.4 million as of December 31, 2016 , and debt issuance costs of $1.7 million as of March 31, 2017 , and $1.8 million as of December 31, 2016 . (2) Net of unamortized discount of $0.2 million as of March 31, 2017 , and December 31, 2016 , and debt issuance costs of $1.0 million as of March 31, 2017 , and $1.1 million as of December 31, 2016 . (3) Net of unamortized discount of $0.7 million as of March 31, 2017 , and December 31, 2016 , and debt issuance costs of $1.4 million as of March 31, 2017 , and $1.5 million as of December 31, 2016 . (4) Net of unamortized discount of less than $0.1 million as of March 31, 2017 , and December 31, 2016 , and debt issuance costs of $1.6 million as of March 31, 2017 , and December 31, 2016 . (5) Net of unamortized discount of $0.8 million as of March 31, 2017 , and December 31, 2016 , and debt issuance costs of $3.8 million as of March 31, 2017 , and $3.9 million as of December 31, 2016 . |
Warranties (Tables)
Warranties (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Product Warranties Disclosures [Abstract] | |
Product warranty liabilities | Warranty liabilities, balance at December 31, 2016 $ 36,623 Warranty claims (17,493 ) Warranty accruals 16,967 Warranty liabilities, balance at March 31, 2017 $ 36,097 |
Share Repurchase Program (Table
Share Repurchase Program (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Proceeds from (Repurchase of) Equity [Abstract] | |
Schedule of shares repurchased | For the Three Months Ended 2017 2016 Shares repurchased 1,829 1,231 Average price per share $ 268.09 $ 254.02 Total investment $ 490,312 $ 312,637 |
Share-Based Compensation and 22
Share-Based Compensation and Benefit Plans (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Restricted stock [Member] | |
Share-Based Compensation and Benefit Plans | |
Summary of activity of share-based compensation | For the Three Months Ended 2017 2016 Compensation expense for shares issued under the ESPP $ 541 $ 523 Income tax benefit from compensation expense related to shares issued under the ESPP 205 195 Compensation expense for restricted shares awarded 678 319 Income tax benefit from compensation expense related to restricted awards $ 257 $ 119 |
Stock option [Member] | |
Share-Based Compensation and Benefit Plans | |
Summary of stock options | Shares Weighted-Average Exercise Price Outstanding at December 31, 2016 2,800 $ 104.90 Granted 177 266.53 Exercised (284 ) 44.69 Forfeited (6 ) 209.59 Outstanding at March 31, 2017 2,687 $ 121.71 Exercisable at March 31, 2017 1,910 $ 76.44 |
Black-Scholes option pricing model | For the Three Months Ended 2017 2016 Risk free interest rate 2.09 % 1.59 % Expected life 5.9 Years 5.9 Years Expected volatility 22.3 % 22.4 % Expected dividend yield — % — % |
Summary of activity of share-based compensation | For the Three Months Ended 2017 2016 Compensation expense for stock options awarded $ 4,209 $ 4,336 Income tax benefit from compensation expense related to stock options 1,593 1,620 Weighted-average grant-date fair value of options awarded $ 70.34 $ 66.27 |
Earnings Per Share (Tables)
Earnings Per Share (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Earnings Per Share [Abstract] | |
Computation of basic and diluted earnings per share | For the Three Months Ended 2017 2016 Numerator (basic and diluted): Net income $ 264,934 $ 255,374 Denominator: Weighted-average common shares outstanding – basic 92,001 97,140 Effect of stock options (1) 1,494 1,397 Weighted-average common shares outstanding – assuming dilution 93,495 98,537 Earnings per share: Earnings per share-basic $ 2.88 $ 2.63 Earnings per share-assuming dilution $ 2.83 $ 2.59 Antidilutive potential common shares not included in the calculation of diluted earnings per share: Stock options (1) 478 268 Weighted-average exercise price per share of antidilutive stock options (1) $ 266.71 $ 256.19 (1) See Note 6 for further information concerning the terms of the Company’s share-based compensation plans. |
Basis of Presentation Basis of
Basis of Presentation Basis of Presentation (Narrative) (Details) | Apr. 05, 2017 |
Subsequent event [Member] | |
Subsequent event | |
Subsequent event, description | On April 5, 2017, the Company entered into a new credit agreement for a new unsecured revolving credit facility and terminated its prior unsecured revolving credit facility dated January 14, 2011. |
Fair Value Measurements (Narrat
Fair Value Measurements (Narrative) (Details) - USD ($) $ in Millions | 3 Months Ended | ||
Mar. 31, 2017 | Mar. 31, 2016 | Dec. 31, 2016 | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Abstract] | |||
Increase in fair value of marketable securities | $ 0.9 | $ 0.1 | |
Non-financial assets and liabilities measured at fair value on a nonrecurring basis | $ 0 | $ 0 |
Fair Value Measurements (Fair V
Fair Value Measurements (Fair Value of Marketable Securities) (Details) - USD ($) $ in Thousands | Mar. 31, 2017 | Dec. 31, 2016 |
Fair Value Measurements | ||
Estimated fair value of marketable securities | $ 22,438 | $ 20,462 |
Fair value, inputs, Level 1 [Member] | ||
Fair Value Measurements | ||
Estimated fair value of marketable securities | 22,438 | 20,462 |
Fair value, inputs, Level 2 [Member] | ||
Fair Value Measurements | ||
Estimated fair value of marketable securities | 0 | 0 |
Fair value, inputs, Level 3 [Member] | ||
Fair Value Measurements | ||
Estimated fair value of marketable securities | $ 0 | $ 0 |
Fair Value Measurements (Fair27
Fair Value Measurements (Fair Value of Senior Notes) (Details) - USD ($) $ in Thousands | Mar. 31, 2017 | Dec. 31, 2016 |
Fair Value Measurements | ||
Carrying amount of senior notes | $ 1,887,539 | $ 1,887,019 |
Fair value, inputs, Level 2 [Member] | ||
Fair Value Measurements | ||
Estimated fair value of senior notes | $ 1,985,228 | $ 1,977,510 |
Financing (Unsecured Revolving
Financing (Unsecured Revolving Credit Facility) (Narrative) (Details) - Line of credit facility [Member] - Unsecured debt [Member] - USD ($) $ in Millions | Apr. 05, 2017 | Mar. 31, 2017 | Dec. 31, 2016 |
Unsecured Revolving Credit Facility | |||
Credit agreement description | On January 14, 2011, the Company entered into a credit agreement, as amended by Amendment No. 1 dated as of September 9, 2011, and as further amended by Amendment No. 2 dated as of July 2, 2013, and as further amended by Amendment No. 3 dated as of June 18, 2015 (the “Credit Agreement”). The Credit Agreement provides for a $600 million unsecured revolving credit facility (the “Revolving Credit Facility”) arranged by Bank of America, N.A., which is scheduled to mature in July 2018. 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 $200 million. | ||
Credit agreement inception date | Jan. 14, 2011 | ||
Current maximum borrowing capacity under credit facility | $ 600 | ||
Line of credit facility expiration date | Jul. 2, 2018 | ||
Maximum aggregate increase to credit facility allowable | $ 200 | ||
Letters of credit | $ 41.2 | $ 38.7 | |
Covenant description for debt instrument | 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 3.00:1.00. The consolidated fixed charge coverage ratio includes a calculation of earnings before interest, taxes, depreciation, amortization, rent and non-cash share-based compensation expense. 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, six-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 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 lenders. | ||
Line of credit facility fee percentage | 0.125% | ||
Line of credit facility covenant compliance | As of March 31, 2017, the Company remained in compliance with all covenants under the Credit Agreement. | ||
Subsequent event [Member] | |||
Unsecured Revolving Credit Facility | |||
Credit agreement description | On April 5, 2017, the Company entered into a new credit agreement (the “New Credit Agreement”). The New Credit Agreement provides for a $1.2 billion unsecured revolving credit facility (the “New Revolving Credit Facility”) arranged by JPMorgan Chase Bank, N.A., which is scheduled to mature in April 2022. The New 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 New Revolving Credit Facility. As described in the New Credit Agreement governing the New Revolving Credit Facility, the Company may, from time to time, subject to certain conditions, increase the aggregate commitments under the New Revolving Credit Facility by up to $600 million. | ||
Credit agreement inception date | Apr. 5, 2017 | ||
Current maximum borrowing capacity under credit facility | $ 1,200 | ||
Line of credit facility expiration date | Apr. 5, 2022 | ||
Maximum aggregate increase to credit facility allowable | $ 600 | ||
Covenant description for debt instrument | The New 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. 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 contained in the New 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 New Credit Agreement and litigation from lenders. | ||
Line of credit facility fee percentage | 0.10% | ||
Spread over Base rate [Member] | |||
Unsecured Revolving Credit Facility | |||
Line of credit current interest rate | 0.00% | ||
Spread over Base rate [Member] | Subsequent event [Member] | |||
Unsecured Revolving Credit Facility | |||
Line of credit current interest rate | 0.00% | ||
Spread over Eurodollar rate [Member] | |||
Unsecured Revolving Credit Facility | |||
Line of credit current interest rate | 0.875% | ||
Spread over Eurodollar rate [Member] | Subsequent event [Member] | |||
Unsecured Revolving Credit Facility | |||
Line of credit current interest rate | 0.90% | ||
Through maturity [Member] | |||
Unsecured Revolving Credit Facility | |||
Minimum debt instrument consolidated fixed charge coverage ratio covenant | 250.00% | ||
Maximum debt instrument consolidated leverage ratio covenant | 300.00% | ||
Through maturity [Member] | Subsequent event [Member] | |||
Unsecured Revolving Credit Facility | |||
Minimum debt instrument consolidated fixed charge coverage ratio covenant | 250.00% | ||
Maximum debt instrument consolidated leverage ratio covenant | 350.00% | ||
Amendment one [Member] | |||
Unsecured Revolving Credit Facility | |||
Credit agreement amendment date | Sep. 9, 2011 | ||
Amendment two [Member] | |||
Unsecured Revolving Credit Facility | |||
Credit agreement amendment date | Jul. 2, 2013 | ||
Amendment three [Member] | |||
Unsecured Revolving Credit Facility | |||
Credit agreement amendment date | Jun. 18, 2015 | ||
Letter of credit [Member] | |||
Unsecured Revolving Credit Facility | |||
Line of credit facility sublimit | $ 200 | ||
Letter of credit [Member] | Subsequent event [Member] | |||
Unsecured Revolving Credit Facility | |||
Line of credit facility sublimit | $ 200 | ||
Swing line revolver [Member] | |||
Unsecured Revolving Credit Facility | |||
Line of credit facility sublimit | $ 75 | ||
Swing line revolver [Member] | Subsequent event [Member] | |||
Unsecured Revolving Credit Facility | |||
Line of credit facility sublimit | $ 75 |
Financing (Senior Notes) (Narra
Financing (Senior Notes) (Narrative) (Details) $ in Billions | 3 Months Ended |
Mar. 31, 2017USD ($)dRate | |
Financing | |
Unsecured senior notes description | The Company has issued a cumulative $1.9 billion aggregate principal amount of unsecured senior notes, which are due between January 2021 and March 2026, with United Missouri Bank 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. |
Debt instrument covenant description | Each of the senior notes is subject to certain customary covenants, with which the Company complied as of March 31, 2017. |
Senior notes [Member] | |
Financing | |
Aggregate principle of unsecured senior notes | $ | $ 1.9 |
Maturity date range, minimum | Jan. 14, 2021 |
Maturity date range, maximum | Mar. 8, 2026 |
Number of days in annual interest calculation period | d | 360 |
Minimum [Member] | Senior notes [Member] | |
Financing | |
Interest rate of senior notes | 3.55% |
Maximum [Member] | Senior notes [Member] | |
Financing | |
Interest rate of senior notes | 4.875% |
Financing (Outstanding Financin
Financing (Outstanding Financing Facilities) (Details) - USD ($) $ in Thousands | Mar. 31, 2017 | Dec. 31, 2016 | ||
Financing | ||||
Senior notes | $ 1,887,539 | $ 1,887,019 | ||
Long-term debt | 1,977,539 | 1,887,019 | [1] | |
$500 million, 4.875% Senior Notes due 2021 [Member] | ||||
Financing | ||||
Senior notes | [2] | 496,960 | 496,758 | |
Senior notes, unamortized discount | 1,300 | 1,400 | ||
Senior notes, unamortized debt issuance costs | $ 1,700 | 1,800 | ||
Senior notes, effective interest rate | 4.959% | |||
$300 million, 4.625% Senior Notes due 2021 [Member] | ||||
Financing | ||||
Senior notes | [3] | $ 298,749 | 298,679 | |
Senior notes, unamortized discount | 200 | 200 | ||
Senior notes, unamortized debt issuance costs | $ 1,000 | 1,100 | ||
Senior notes, effective interest rate | 4.646% | |||
$300 million, 3.800% Senior Notes due 2022 [Member] | ||||
Financing | ||||
Senior notes | [4] | $ 297,953 | 297,868 | |
Senior notes, unamortized discount | 700 | 700 | ||
Senior notes, unamortized debt issuance costs | $ 1,400 | 1,500 | ||
Senior notes, effective interest rate | 3.845% | |||
$300 million, 3.850% Senior Notes due 2023 [Member] | ||||
Financing | ||||
Senior notes | [5] | $ 298,411 | 298,355 | |
Senior notes, unamortized discount | 100 | 100 | ||
Senior notes, unamortized debt issuance costs | $ 1,600 | 1,600 | ||
Senior notes, effective interest rate | 3.851% | |||
$500 million, 3.550% Senior Notes due 2026 [Member] | ||||
Financing | ||||
Senior notes | [6] | $ 495,466 | 495,359 | |
Senior notes, unamortized discount | 800 | 800 | ||
Senior notes, unamortized debt issuance costs | $ 3,800 | 3,900 | ||
Senior notes, effective interest rate | 3.57% | |||
Revolving Credit Facility [Member] | ||||
Financing | ||||
Unsecured revolving credit facility | $ 90,000 | 0 | ||
Unsecured revolving credit facility, average interest rate | 4.00% | |||
Senior notes [Member] | $500 million, 4.875% Senior Notes due 2021 [Member] | ||||
Financing | ||||
Senior notes, face amount | $ 500,000 | 500,000 | ||
Senior notes [Member] | $300 million, 4.625% Senior Notes due 2021 [Member] | ||||
Financing | ||||
Senior notes, face amount | 300,000 | 300,000 | ||
Senior notes [Member] | $300 million, 3.800% Senior Notes due 2022 [Member] | ||||
Financing | ||||
Senior notes, face amount | 300,000 | 300,000 | ||
Senior notes [Member] | $300 million, 3.850% Senior Notes due 2023 [Member] | ||||
Financing | ||||
Senior notes, face amount | 300,000 | 300,000 | ||
Senior notes [Member] | $500 million, 3.550% Senior Notes due 2026 [Member] | ||||
Financing | ||||
Senior notes, face amount | $ 500,000 | $ 500,000 | ||
[1] | The balance sheet at December 31, 2016, has been derived from the audited consolidated financial statements at that date, but does not include all of the information and footnotes required by United States generally accepted accounting principles for complete financial statements. | |||
[2] | Net of unamortized discount of $1.3 million as of March 31, 2017, and $1.4 million as of December 31, 2016, and debt issuance costs of $1.7 million as of March 31, 2017, and $1.8 million as of December 31, 2016. | |||
[3] | Net of unamortized discount of $0.2 million as of March 31, 2017, and December 31, 2016, and debt issuance costs of $1.0 million as of March 31, 2017, and $1.1 million as of December 31, 2016. | |||
[4] | Net of unamortized discount of $0.7 million as of March 31, 2017, and December 31, 2016, and debt issuance costs of $1.4 million as of March 31, 2017, and $1.5 million as of December 31, 2016. | |||
[5] | Net of unamortized discount of less than $0.1 million as of March 31, 2017, and December 31, 2016, and debt issuance costs of $1.6 million as of March 31, 2017, and December 31, 2016. | |||
[6] | Net of unamortized discount of $0.8 million as of March 31, 2017, and December 31, 2016, and debt issuance costs of $3.8 million as of March 31, 2017, and $3.9 million as of December 31, 2016. |
Warranties (Product Warranty Li
Warranties (Product Warranty Liabilities) (Details) $ in Thousands | 3 Months Ended |
Mar. 31, 2017USD ($) | |
Product Warranties Disclosures [Abstract] | |
Warranty liabilities, beginning balance | $ 36,623 |
Warranty claims | (17,493) |
Warranty accruals | 16,967 |
Warranty liabilities, ending balance | $ 36,097 |
Share Repurchase Program (Narra
Share Repurchase Program (Narrative) (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 1 Months Ended | 3 Months Ended | 76 Months Ended | |
May 08, 2017 | Mar. 31, 2017 | Mar. 31, 2016 | May 08, 2017 | |
Share Repurchase Program | ||||
Cumulative authorized amount | $ 7,800,000 | |||
Remaining balance under share repurchase program | $ 397,500 | |||
Common stock repurchased, shares | 1,829 | 1,231 | ||
Common stock repurchased, average price per share | $ 268.09 | $ 254.02 | ||
Common stock repurchased, value | $ 490,312 | $ 312,637 | ||
Subsequent event [Member] | ||||
Share Repurchase Program | ||||
Common stock repurchased, shares | 600 | 59,400 | ||
Common stock repurchased, average price per share | $ 254.61 | $ 126.40 | ||
Common stock repurchased, value | $ 152,200 | $ 7,500,000 |
Share Repurchase Program (Sched
Share Repurchase Program (Schedule Of Shares Repurchased) (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Proceeds from (Repurchase of) Equity [Abstract] | ||
Shares repurchased | 1,829 | 1,231 |
Average price per share | $ 268.09 | $ 254.02 |
Total investment | $ 490,312 | $ 312,637 |
Share-Based Compensation and 34
Share-Based Compensation and Benefit Plans (Stock Options) (Narrative) (Details) - Stock option [Member] $ in Millions | 3 Months Ended |
Mar. 31, 2017USD ($)Rate | |
Share-Based Compensation and Benefit Plans | |
Vesting of options, description | 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 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 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 years and typically vest 25% per year, over four years. The Company records compensation expense for the grant-date fair value of the option awards evenly over the vesting period or the minimum required service period. |
Remaining unrecognized compensation expense | $ | $ 34 |
Weighted-average period for cost recognition | 2 years 9 months 16 days |
Employee stock option [Member] | |
Share-Based Compensation and Benefit Plans | |
Options expiration period | 10 years |
Vesting period | 4 years |
Option vesting rate per year | Rate | 25.00% |
Director [Member] | |
Share-Based Compensation and Benefit Plans | |
Options expiration period | 7 years |
Vesting period | 6 months |
Share-Based Compensation and 35
Share-Based Compensation and Benefit Plans (Other Share-Based Compensation) (Narrative) (Details) | 3 Months Ended |
Mar. 31, 2017Rate | |
Restricted stock [Member] | Director [Member] | |
Share-Based Compensation and Benefit Plans | |
Other employee benefit plan, description | 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 |
Vesting period | 3 years |
Employee stock purchase plan [Member] | |
Share-Based Compensation and Benefit Plans | |
Other employee benefit plan, description | an 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 |
Employee stock purchase plan, stock purchase percentage | 85.00% |
Share-Based Compensation and 36
Share-Based Compensation and Benefit Plans (Profit Sharing and Savings Plan) (Narrative) (Details) - Profit sharing and savings plan [Member] - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Share-Based Compensation and Benefit Plans | ||
Profit sharing and savings plan, description | 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. 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. | |
Profit sharing and savings plan, employer discretionary contribution | $ 0 | $ 0 |
Profit sharing and savings plan, cost recognized | $ 5.5 | $ 5 |
Employee's first 2% of contributed wages [Member] | ||
Share-Based Compensation and Benefit Plans | ||
Profit sharing and savings plan, Company match | 100.00% | |
Employee's next 4% of contributed wages [Member] | ||
Share-Based Compensation and Benefit Plans | ||
Profit sharing and savings plan, Company match | 25.00% |
Share-Based Compensation and 37
Share-Based Compensation and Benefit Plans (Nonqualified Deferred Compensation Plan) (Narrative) (Details) - Nonqualified deferred compensation plan [Member] - USD ($) $ in Millions | 3 Months Ended | ||
Mar. 31, 2017 | Mar. 31, 2016 | Dec. 31, 2016 | |
Share-Based Compensation and Benefit Plans | |||
Deferred compensation plan, description | 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, which is then matched by the Company using the same formula as the 401(k) Plan. | ||
Deferred compensation plan, obligation | $ 22.4 | $ 20.5 | |
Deferred compensation plan, cost recognized | $ 0.1 | $ 0.1 |
Share-Based Compensation and 38
Share-Based Compensation and Benefit Plans (Summary Of Stock Options) (Details) - Stock option [Member] shares in Thousands | 3 Months Ended |
Mar. 31, 2017$ / sharesshares | |
Share-Based Compensation and Benefit Plans | |
Outstanding at December 31, 2016, shares | shares | 2,800 |
Outstanding at December 31, 2016, weighted-average exercise price | $ / shares | $ 104.90 |
Granted, shares | shares | 177 |
Granted, weighted-average exercise price | $ / shares | $ 266.53 |
Exercised, shares | shares | (284) |
Exercised, weighted-average exercise price | $ / shares | $ 44.69 |
Forfeited, shares | shares | (6) |
Forfeited, weighted-average exercise price | $ / shares | $ 209.59 |
Outstanding at March 31, 2017, shares | shares | 2,687 |
Outstanding at March 31, 2017, weighted-average exercise price | $ / shares | $ 121.71 |
Exercisable at March 31, 2017, shares | shares | 1,910 |
Exercisable at March 31, 2017, weighted-average exercise price | $ / shares | $ 76.44 |
Share-Based Compensation and 39
Share-Based Compensation and Benefit Plans (Black-Scholes Option Pricing Model) (Details) - Stock option [Member] | 3 Months Ended | |
Mar. 31, 2017Rate | Mar. 31, 2016Rate | |
Share-Based Compensation and Benefit Plans | ||
Risk-free interest rate | 2.09% | 1.59% |
Expected life | 5 years 11 months 9 days | 5 years 10 months 22 days |
Expected volatility | 22.30% | 22.40% |
Expected dividend yield | 0.00% | 0.00% |
Share-Based Compensation and 40
Share-Based Compensation and Benefit Plans (Stock Option Activity) (Details) - Stock option [Member] - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Share-Based Compensation and Benefit Plans | ||
Compensation expense for share-based compensation | $ 4,209 | $ 4,336 |
Income tax benefit from compensation expense for share-based compensation | $ 1,593 | $ 1,620 |
Weighted-average grant-date fair value of options awarded | $ 70.34 | $ 66.27 |
Share-Based Compensation and 41
Share-Based Compensation and Benefit Plans (Other Share-Based Compensation Activity) (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Employee stock purchase plan [Member] | ||
Share-Based Compensation and Benefit Plans | ||
Compensation expense for share-based compensation | $ 541 | $ 523 |
Income tax benefit from compensation expense for share-based compensation | 205 | 195 |
Restricted stock [Member] | ||
Share-Based Compensation and Benefit Plans | ||
Compensation expense for share-based compensation | 678 | 319 |
Income tax benefit from compensation expense for share-based compensation | $ 257 | $ 119 |
Earnings Per Share (Narrative)
Earnings Per Share (Narrative) (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 1 Months Ended | 3 Months Ended | 76 Months Ended | |
May 08, 2017 | Mar. 31, 2017 | Mar. 31, 2016 | May 08, 2017 | |
Earnings Per Share | ||||
Common stock repurchased, shares | 1,829 | 1,231 | ||
Common stock repurchased, average price per share | $ 268.09 | $ 254.02 | ||
Common stock repurchased, value | $ 490,312 | $ 312,637 | ||
Subsequent event [Member] | ||||
Earnings Per Share | ||||
Common stock repurchased, shares | 600 | 59,400 | ||
Common stock repurchased, average price per share | $ 254.61 | $ 126.40 | ||
Common stock repurchased, value | $ 152,200 | $ 7,500,000 |
Earnings Per Share (Computation
Earnings Per Share (Computation of Basic and Diluted Earnings Per Share) (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | ||
Mar. 31, 2017 | Mar. 31, 2016 | ||
Numerator (basic and diluted): | |||
Net income | $ 264,934 | $ 255,374 | |
Denominator: | |||
Weighted-average common shares outstanding - basic | 92,001 | 97,140 | |
Effect of stock options | [1] | 1,494 | 1,397 |
Weighted-average common shares outstanding - assuming dilution | 93,495 | 98,537 | |
Earnings per share - basic | $ 2.88 | $ 2.63 | |
Earnings per share - assuming dilution | $ 2.83 | $ 2.59 | |
Antidilutive stock options | [1] | 478 | 268 |
Weighted-average exercise price | [1] | $ 266.71 | $ 256.19 |
[1] | See Note 6 for further information concerning the terms of the Company’s share-based compensation plans. |
Legal Matters (Narrative) (Deta
Legal Matters (Narrative) (Details) $ in Millions | 3 Months Ended |
Mar. 31, 2017USD ($) | |
Loss Contingency [Abstract] | |
Name of plaintiff | Meridian Creative Alliance |
Awarded to plaintiff | $ 12.5 |
Loss contingency accrual, provision | $ 18.6 |
Recent Accounting Pronounceme45
Recent Accounting Pronouncements Recent Accounting Pronouncements (Narrative) (Details) - Adoption of ASU 2016-09 [Member] - USD ($) $ / shares in Units, $ in Millions | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Recent Accounting Pronouncements | ||
Change in accounting policy, description | 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 | |
Excess tax benefit from share-based compensation | $ 23.3 | |
Reclassification or adjustment due to the adoption of a accounting pronouncement [Member] | ||
Recent Accounting Pronouncements | ||
Cumulative effect adjustment to opening Retained earnings | $ (0.3) | |
Tax withholdings for share-based compensation | $ 0.2 | |
Excess tax benefit from share-based compensation | $ 14.8 | |
Effect on diluted earnings per share | $ 0.23 |