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O’Reilly Automotive, Inc. Reports Fourth Quarter and Full-Year 2020 Results and Announces Additional $1.0 Billion Repurchase Authorization

 

  • Fourth quarter comparable store sales increase of 11.2%, full-year increase of 10.9%
  • 27% increase in fourth quarter diluted earnings per share to $5.40, full-year increase of 32% to $23.53
  • Full-year net cash provided by operating activities increased $1.13 billion, or 66.0%, to $2.84 billion

SPRINGFIELD, Mo., Feb. 10, 2021 (GLOBE NEWSWIRE) -- O’Reilly Automotive, Inc. (the “Company” or “O’Reilly”) (Nasdaq: ORLY), a leading retailer in the automotive aftermarket industry, today announced record revenue and earnings for its fourth quarter ended December 31, 2020. The results represent 28 consecutive years of comparable store sales growth and record revenue and operating income for O’Reilly since becoming a public company in April of 1993.

4th Quarter Financial Results
Greg Johnson, O’Reilly’s CEO and Co-President, commented, “We are extremely pleased to report another record-breaking quarter to finish out 2020, with the incredible performance by Team O’Reilly in the fourth quarter capping the best full-year financial results in our Company’s history. I would like to thank Team O’Reilly for the tremendous dedication and hard work they demonstrated time and again over the past year in one of the most difficult environments we have ever faced as a Company. Our top priority continues to be the protection of the health and safety of our Team Members and customers, and we are extremely proud of our Team’s continued outstanding service that has been so critical to our customers during the pandemic. This commitment drove our fourth quarter comparable store sales increase of 11.2% and full-year comparable store sales growth of 10.9%, which represents our highest full-year same store sales increase in the last 25 years.”

Sales for the fourth quarter ended December 31, 2020, increased $346 million, or 14%, to $2.83 billion from $2.48 billion for the same period one year ago. Gross profit for the fourth quarter increased 11% to $1.47 billion (or 52.0% of sales) from $1.32 billion (or 53.3% of sales) for the same period one year ago. Selling, general and administrative expenses (“SG&A”) for the fourth quarter increased 6% to $938 million (or 33.2% of sales) from $883 million (or 35.6% of sales) for the same period one year ago. Operating income for the fourth quarter increased 21% to $534 million (or 18.9% of sales) from $442 million (or 17.8% of sales) for the same period one year ago.

Net income for the fourth quarter ended December 31, 2020, increased $68 million, or 21%, to $393 million (or 13.9% of sales) from $325 million (or 13.1% of sales) for the same period one year ago. Diluted earnings per common share for the fourth quarter increased 27% to $5.40 on 73 million shares versus $4.25 on 76 million shares for the same period one year ago.

Full-Year Financial Results
Mr. Johnson further commented, “The robust sales volumes, combined with diligent expense control, drove another extremely profitable quarter, highlighted by a 21% increase in operating profit and a 27% increase in diluted earnings per share for the fourth quarter. For the full year, diluted earnings per share increased 32%, as Team O’Reilly generated an outstanding operating margin of 20.8%, which exceeded our previous record operating margin by over 100 basis points. The tireless efforts of our Team allowed us to produce these strong results even in the face of unprecedented challenges in 2020.”

Sales for the year ended December 31, 2020, increased $1.45 billion, or 14%, to $11.60 billion from $10.15 billion for the same period one year ago. Gross profit for the year ended December 31, 2020, increased 13% to $6.09 billion (or 52.4% of sales) from $5.39 billion (or 53.1% of sales) for the same period one year ago. SG&A for the year ended December 31, 2020, increased 6% to $3.67 billion (or 31.6% of sales) from $3.47 billion (or 34.2% of sales) for the same period one year ago. Operating income for the year ended December 31, 2020, increased 26% to $2.42 billion (or 20.8% of sales) from $1.92 billion (or 18.9% of sales) for the same period one year ago.

Net income for the year ended December 31, 2020, increased $361 million, or 26%, to $1.75 billion (or 15.1% of sales) from $1.39 billion (or 13.7% of sales) for the same period one year ago. Diluted earnings per common share for the year ended December 31, 2020, increased 32% to $23.53 on 74 million shares versus $17.88 on 78 million shares for the same period one year ago.

“As we look forward to 2021,” Mr. Johnson continued, “we remain optimistic about our prospects to generate continued strong financial results. We have seen a strong start to the year, with the continuation of robust sales volumes through the month of January, but we remain cautious as we plan for the coming year in light of the continued significant uncertainty related to the ongoing impact of the pandemic and the difficult comparisons we will face beginning in April, as we lap the surge of volume we experienced in 2020. As a result, our expectation is that comparable store sales will be in the range of down 2% to flat, versus 2020, but well above our historical trends on a two-year stack basis.”

4th Quarter and Full-Year Comparable Store Sales Results
Comparable store sales are calculated based on the change in sales for U.S. stores open at least one year and exclude sales of specialty machinery, sales to independent parts stores and sales to Team Members, as well as sales from Leap Day for the year ended December 31, 2020. Online sales, resulting from ship-to-home orders and pick-up-in-store orders, for U.S. stores open at least one year, are included in the comparable store sales calculation. Comparable store sales increased 11.2% for the fourth quarter ended December 31, 2020, on top of 4.4% for the same period one year ago. Comparable store sales increased 10.9% for the year ended December 31, 2020, on top of 4.0% for the same period one year ago.

Share Repurchase Program
During the fourth quarter ended December 31, 2020, the Company repurchased 2.2 million shares of its common stock, at an average price per share of $451.90, for a total investment of $993 million. During the year ended December 31, 2020, the Company repurchased 4.8 million shares of its common stock, at an average price per share of $431.93, for a total investment of $2.09 billion. Subsequent to the end of the fourth quarter and through the date of this release, the Company repurchased an additional 0.7 million shares of its common stock, at an average price per share of $447.40, for a total investment of $298 million. The Company has repurchased a total of 81.7 million shares of its common stock under its share repurchase program since the inception of the program in January of 2011 and through the date of this release, at an average price of $178.33, for a total aggregate investment of $14.57 billion.

Today, the Company also announced that its Board of Directors (the “Board”) approved a resolution to increase the authorization amount under its share repurchase program by an additional $1.0 billion, raising the aggregate authorization under the program to $15.75 billion. The additional $1.0 billion authorization is effective for a three-year period, beginning on February 10, 2021. Stock repurchases under the program may be made from time to time, as the Company deems appropriate, solely through open market repurchases effected through a broker dealer at prevailing market prices, based on a variety of factors such as price, corporate requirements and overall market conditions. There can be no assurance as to the number of shares the Company will purchase, if any. The share repurchase program may be increased or otherwise modified, renewed, suspended or terminated by the Company at any time, without prior notice. As of the date of this release, the Company had approximately $1.18 billion remaining under its current share repurchase authorizations.

Full-Year 2021 Guidance
The Company is reinstituting its practice of providing selected full-year guidance for 2021. The Company still anticipates potentially significant volatility in its results, driven by the ongoing uncertainty related to the pandemic, and will update full-year guidance during 2021, as appropriate. The table below outlines the Company’s guidance for selected full-year 2021 financial data:

  For the Year Ending
  December 31, 2021
Net, new store openings 165 to 175
Comparable store sales -2% to 0%
Total revenue $11.5 billion to $11.8 billion
Gross profit as a percentage of sales 52.2% to 52.7%
Operating income as a percentage of sales 19.0% to 19.5%
Effective income tax rate 23.0%
Diluted earnings per share (1) $22.70 to $22.90
Net cash provided by operating activities $1.7 billion to $2.2 billion
Capital expenditures $550 million to $650 million
Free cash flow (2) $1.0 billion to $1.3 billion

(1) Weighted-average shares outstanding, assuming dilution, used in the denominator of this calculation, includes share repurchases made by the Company through the date of this release.

(2) Free cash flow is a non-GAAP financial measure. The table below reconciles Free cash flow guidance to Net cash provided by operating activities guidance, the most directly comparable GAAP financial measure:

  For the Year Ending
(in millions) December 31, 2021
Net cash provided by operating activities $1,735 to $2,160
 Less:Capital expenditures  550 to  650
  Excess tax benefit from share-based compensation payments  5 to  10
  Investment in tax credit equity investments  180 to  200
Free cash flow $1,000 to $1,300
         

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

Earnings Conference Call Information
The Company will host a conference call on Thursday, February 11, 2021, at 10:00 a.m. Central Time to discuss its results as well as future expectations. Investors may listen to the conference call live on the Company’s website at www.OReillyAuto.com by clicking on “Investor Relations” and then “News Room.” Interested analysts are invited to join the call. The dial-in number for the call is (703) 375-5524; the conference call identification number is 4092338. A replay of the conference call will be available on the Company’s website through Thursday, February 10, 2022.

About O’Reilly Automotive, Inc.
O’Reilly Automotive, Inc. was founded in 1957 by the O’Reilly family and is one of the largest specialty retailers of automotive aftermarket parts, tools, supplies, equipment and accessories in the United States, serving both the do-it-yourself and professional service provider markets. Visit the Company’s website at www.OReillyAuto.com for additional information about O’Reilly, including access to online shopping and current promotions, store locations, hours and services, employment opportunities and other programs. As of December 31, 2020, the Company operated 5,594 stores in 47 U.S. states and 22 stores in Mexico.

Forward-Looking Statements
The Company claims the protection of the safe-harbor for forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. You can identify these statements by forward-looking words such as “estimate,” “may,” “could,” “will,” “believe,” “expect,” “would,” “consider,” “should,” “anticipate,” “project,” “plan,” “intend” or similar words. In addition, statements contained within this press release that are not historical facts are forward-looking statements, such as statements discussing, among other things, expected growth, store development, integration and expansion strategy, business strategies, future revenues and future performance. These forward-looking statements are based on estimates, projections, beliefs and assumptions and are not guarantees of future events and results. Such statements are subject to risks, uncertainties and assumptions, including, but not limited to, the COVID-19 pandemic or other public health crisis, the economy in general, inflation, tariffs, product demand, the market for auto parts, competition, weather, risks associated with the performance of acquired businesses, our ability to hire and retain qualified employees, consumer debt levels, our increased debt levels, credit ratings on public debt, governmental regulations, information security and cyber-attacks, terrorist activities, war and the threat of war. Actual results may materially differ from anticipated results described or implied in these forward-looking statements. Please refer to the “Risk Factors” section of the annual report on Form 10-K for the year ended December 31, 2019, and subsequent Securities and Exchange Commission filings for additional factors that could materially affect the Company’s financial performance. Forward-looking statements speak only as of the date they were made and the Company undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.

For further information contact:Investor & Media Contacts
 Mark Merz (417) 829-5878
 Eric Bird (417) 868-4259


O’REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)

  December 31, 2020 December 31, 2019
  (Unaudited) (Note)
Assets      
Current assets:      
Cash and cash equivalents $ 465,640  $40,406 
Accounts receivable, net   229,679   214,915 
Amounts receivable from suppliers   100,615   79,492 
Inventory   3,653,195   3,454,092 
Other current assets   50,658   44,757 
Total current assets   4,499,787   3,833,662 
       
Property and equipment, at cost   6,559,911   6,191,427 
Less: accumulated depreciation and amortization   2,464,993   2,243,224 
Net property and equipment   4,094,918   3,948,203 
       
Operating lease, right-of-use assets   1,995,127   1,928,369 
Goodwill   881,030   936,814 
Other assets, net   125,780   70,112 
Total assets $ 11,596,642  $10,717,160 
       
Liabilities and shareholders’ equity      
Current liabilities:      
Accounts payable $ 4,184,662  $3,604,722 
Self-insurance reserves   109,199   79,079 
Accrued payroll   88,875   100,816 
Accrued benefits and withholdings   242,724   98,539 
Income taxes payable   16,786    
Current portion of operating lease liabilities   322,778   316,061 
Other current liabilities   297,393   270,210 
Total current liabilities   5,262,417   4,469,427 
       
Long-term debt   4,123,217   3,890,527 
Operating lease liabilities, less current portion   1,718,691   1,655,297 
Deferred income taxes   155,899   133,280 
Other liabilities   196,160   171,289 
       
Shareholders’ equity:      
Common stock, $0.01 par value:      
Authorized shares – 245,000,000 Issued and outstanding shares – 71,123,109 as of December 31, 2020, and 75,618,659 as of December 31, 2019   711   756 
Additional paid-in capital   1,280,841   1,280,760 
Retained deficit   (1,139,139)  (889,066)
Accumulated other comprehensive (loss) income   (2,155)  4,890 
Total shareholders’ equity   140,258   397,340 
       
Total liabilities and shareholders’ equity $ 11,596,642  $10,717,160 

Note: The balance sheet at December 31, 2019, has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by United States generally accepted accounting principles for complete financial statements.


O’REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)

  For the Three Months Ended  For the Year Ended
  December 31,  December 31, 
  2020 2019 2020 2019
   (Unaudited)  (Unaudited)  (Unaudited)  (Note)
Sales $ 2,828,773  $2,482,975  $ 11,604,493  $10,149,985 
Cost of goods sold, including warehouse and distribution expenses   1,356,635   1,158,391    5,518,801   4,755,294 
Gross profit   1,472,138   1,324,584    6,085,692   5,394,691 
             
Selling, general and administrative expenses   937,866   883,081    3,666,356   3,473,965 
Operating income   534,272   441,503    2,419,336   1,920,726 
             
Other income (expense):            
Interest expense   (38,349)  (35,288)   (161,126)  (139,975)
Interest income   599   732    2,491   2,545 
Other, net   3,407   2,366    5,704   7,033 
Total other expense   (34,343)  (32,190)   (152,931)  (130,397)
             
Income before income taxes   499,929   409,313    2,266,405   1,790,329 
Provision for income taxes   106,984   84,397    514,103   399,287 
Net income $ 392,945  $324,916  $ 1,752,302  $1,391,042 
             
Earnings per share-basic:            
Earnings per share $ 5.45  $4.29  $ 23.74  $18.07 
Weighted-average common shares outstanding – basic   72,143   75,713    73,817   76,985 
             
Earnings per share-assuming dilution:            
Earnings per share $ 5.40  $4.25  $ 23.53  $17.88 
Weighted-average common shares outstanding – assuming dilution   72,771   76,495    74,462   77,788 

Note: The income statement for the year ended December 31, 2019, has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by United States generally accepted accounting principles for complete financial statements.


O’REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

  For the Year Ended
  December 31, 
  2020 2019
  (Unaudited) (Note)
Operating activities:      
Net income $ 1,752,302  $1,391,042 
Adjustments to reconcile net income to net cash provided by operating activities:      
Depreciation and amortization of property, equipment and intangibles   314,635   270,875 
Amortization of debt discount and issuance costs   4,580   3,916 
Deferred income taxes   12,381   21,158 
Share-based compensation programs   22,747   21,921 
Other   4,686   7,529 
Changes in operating assets and liabilities:      
Accounts receivable   (20,515)  (15,577)
Inventory   (198,864)  (239,912)
Accounts payable   580,608   213,423 
Income taxes payable   197,739   (20,139)
Other   166,304   54,243 
Net cash provided by operating activities   2,836,603   1,708,479 
       
Investing activities:      
Purchases of property and equipment   (465,579)  (628,057)
Proceeds from sale of property and equipment   15,770   7,118 
Investment in tax credit equity investments   (164,111)  (33,781)
Other   (975)  (142,026)
Net cash used in investing activities   (614,895)  (796,746)
       
Financing activities:      
Proceeds from borrowings on revolving credit facility   1,162,000   2,708,000 
Payments on revolving credit facility   (1,423,000)  (2,734,000)
Proceeds from the issuance of long-term debt   997,515   499,955 
Repayment of long-term debt   (500,000)   
Payment of debt issuance costs   (7,929)  (3,990)
Repurchases of common stock   (2,087,194)  (1,432,791)
Net proceeds from issuance of common stock   62,284   60,206 
Other   (253)  (191)
Net cash used in financing activities   (1,796,577)  (902,811)
       
Effect of exchange rate changes on cash   103   169 
Net increase in cash and cash equivalents   425,234   9,091 
Cash and cash equivalents at beginning of the year   40,406   31,315 
Cash and cash equivalents at end of the year $ 465,640  $40,406 
       
Supplemental disclosures of cash flow information:      
Income taxes paid $ 305,087  $394,931 
Interest paid, net of capitalized interest   159,717   134,634 

Note: The cash flow statement for the year ended December 31, 2019, has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by United States generally accepted accounting principles for complete financial statements.


O’REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES

SELECTED FINANCIAL INFORMATION
(Unaudited)

  For the Year Ended
  December 31, 
Adjusted Debt to EBITDAR: 2020 2019
(In thousands, except adjusted debt to EBITDAR ratio)        
GAAP debt $ 4,123,217  $3,890,527 
Add:Letters of credit   66,427   38,870 
 Discount on senior notes   5,071   3,515 
 Debt issuance costs   21,712   16,958 
 Six-times rent expense   2,125,896   2,032,182 
Adjusted debt $ 6,342,323  $5,982,052 
         
GAAP net income $ 1,752,302  $1,391,042 
Add:Interest expense   161,126   139,975 
 Provision for income taxes   514,103   399,287 
 Depreciation and amortization   314,635   270,875 
 Share-based compensation expense   22,747   21,921 
 Rent expense (i)   354,316   338,697 
EBITDAR $ 3,119,229  $2,561,797 
         
Adjusted debt to EBITDAR   2.03   2.34 

(i) The table below outlines the calculation of Rent expense and reconciles Rent expense to Total lease cost, per ASC 842, the most directly comparable GAAP financial measure, for the year ended December 31, 2020 and 2019 (in thousands):

Total lease cost, per ASC 842, for the year ended December 31, 2020 $420,365 
 Less:Variable non-contract operating lease components, related to property taxes and insurance, for the year ended December 31, 2020  66,049 
Rent expense for the year ended December 31, 2020 $354,316 
       
Total lease cost, per ASC 842, for the year ended December 31, 2019 $398,294 
 Less:Variable non-contract operating lease components, related to property taxes and insurance, for the year ended December 31, 2019  59,597 
Rent expense for the year ended December 31, 2019 $338,697 
     


  December 31, 
  2020 2019
Selected Balance Sheet Ratios:        
Inventory turnover (1)   1.5   1.4 
Average inventory per store (in thousands) (2) $ 650  $633 
Accounts payable to inventory (3)   114.5%  104.4%


   For the Three Months Ended  For the Year Ended
   December 31,  December 31, 
   2020 2019 2020 2019
Reconciliation of Free Cash Flow (in thousands):                
Net cash provided by operating activities $ 487,474  $218,803  $ 2,836,603  $1,708,479 
Less:Capital expenditures   102,154   146,850    465,579   628,057 
 Excess tax benefit from share-based compensation payments   2,132   12,933    16,918   25,992 
 Investment in tax credit equity investments   68,819   15,793    164,111   33,781 
Free cash flow $ 314,369  $43,227  $ 2,189,995  $1,020,649 


  For the Three Months Ended  For the Year Ended
  December 31,  December 31, 
  2020 2019 2020 2019
Store Count:          
Beginning store count   5,592   5,420    5,439   5,219 
New stores opened   5   19    167   202 
Bennett stores acquired, net of stores merged (4)           20 
Stores closed   (3)      (12)  (2)
Ending domestic store count   5,594   5,439    5,594   5,439 
           
Mexico stores (5)   22   21    22   21 
Ending total store count   5,616   5,460    5,616   5,460 


  For the Three Months Ended  For the Year Ended
  December 31,  December 31, 
  2020 2019 2020 2019
Store and Team Member Information: (6)                
Total employment   76,257   81,223         
Square footage (in thousands)   41,668   40,227         
Sales per weighted-average square foot (7) $ 66.70  $61.15  $ 276.96  $254.81 
Sales per weighted-average store (in thousands) (8) $ 497  $452  $ 2,057  $1,881 

(1) Calculated as cost of goods sold for the last 12 months divided by average inventory. Average inventory is calculated as the average of inventory for the trailing four quarters used in determining the denominator.
(2) Calculated as inventory divided by store count at the end of the reported period.
(3) Calculated as accounts payable divided by inventory.
(4) O’Reilly acquired 33 Bennett Auto Supply, Inc. (“Bennett”) stores after the close of business on December 31, 2018, which were not included in the December 31, 2018, store count, as they were not operated by the Company for any portion of 2018. During the first quarter ended March 31, 2019, O’Reilly merged eight of the acquired Bennett stores into existing O’Reilly locations, and during the second quarter ended June 30, 2019, O’Reilly merged an additional five acquired Bennett stores into existing O’Reilly locations.
(5) O’Reilly acquired Mayoreo de Autopartes y Aceites, S.A. de C.V. (“Mayasa”), headquartered in Guadalajara, Jalisco, Mexico, after the close of business on November 29, 2019.
(6) Represents O’Reilly’s U.S. operations only.
(7) Calculated as sales less jobber sales, divided by weighted-average square footage. Weighted-average square footage is determined by weighting store square footage based on the approximate dates of store openings, acquisitions, expansions or closures.
(8) Calculated as sales less jobber sales, divided by weighted-average stores. Weighted-average stores is determined by weighting stores based on their approximate dates of openings, acquisitions or closures.


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