O'Reilly Automotive, Inc. Reports Record 2005 Third Quarter Results
SPRINGFIELD, Mo.--Oct. 2, 20055, 2005--O'Reilly Automotive, Inc. ("O'Reilly" or "the Company") today announced record revenues and earnings for the third quarter of 2005, representing 48 quarters of record revenues and earnings for O'Reilly since becoming a public company in April 1993.Net income for the third quarter ended September 30, 2005, totaled $48.6 million, up 40.2% from $34.7 million for the same period in 2004. Diluted earnings per common share for the third quarter of 2005 increased 35.5% to $0.42 on 113.8 million shares compared to $0.31 for the third quarter of 2004 on 111.6 million shares, including a $0.05 benefit from the favorable resolution of prior tax uncertainties. On an adjusted basis excluding the favorable tax benefit, diluted earnings per common share for the third quarter of 2005 increased 19.4% to $0.37.
Product sales for the three months ended September 30, 2005, totaled $542.9 million, up 19.3% from $455.2 million for the same period a year ago. Gross profit for the third quarter of 2005 increased to $235.9 million (or 43.5% of product sales) from $198.2 million (or 43.5% of product sales) for the third quarter of 2004, representing an increase of 19.0%. Operating, Selling, General and Administrative ("OSG&A") expenses increased to $168.3 million (or 31.0% of product sales) for the third quarter of 2005 from $142.0 million (or 31.2% of product sales) for the third quarter of 2004, representing an increase of 18.5%. The reduction in the effective tax rate from 37.3% in the third quarter of 2004 to 27.5% in the third quarter of 2005 reflects a one-time benefit of $6.1 million from the favorable resolution of prior tax uncertainties.
Net income, before cumulative effect of accounting change, for the first nine months of 2005 totaled $124.8 million, up 30.4% from $95.7 million for the same period a year ago. Diluted earnings per common share, before cumulative effect of accounting change, for the first nine months of 2005 increased 27.9% to $1.10 on 113.2 million shares compared to $0.86 a year ago on 111.3 million shares, including a $0.05 benefit from the favorable resolution of prior tax uncertainties. On an adjusted basis excluding the favorable tax benefit, diluted earnings per common share, before cumulative effect of accounting change, for the first nine months of 2005 increased 22.1% to $1.05.
Product sales for the first nine months of 2005 totaled $1.53 billion, up 18.3% from $1.29 billion for the same period a year ago. Gross profit for the first nine months of 2005 increased to $661.1 million (or 43.2% of product sales) from $557.2 million (or 43.1% of product sales) for the same period a year ago, representing an increase of 18.6%. OSG&A expenses increased to $471.8 million (or 30.8% of product sales) for the first nine months of 2005 from $402.8 million (or 31.1% of product sales) for the same period a year ago, representing an increase of 17.1%. The reduction in the effective tax rate from 37.4% for the first nine months of 2004 to 33.7% in the first nine months of 2005 reflects a one time benefit of $6.1 million from the favorable resolution of prior tax uncertainties.
Comparable store product sales for stores open at least one year increased 6.1% and 7.6% for the third quarter and first nine months of 2005, respectively.
"We are pleased with our overall performance this quarter as we continue to establish new records for revenues and earnings," stated Greg Henslee, CEO and Co-President. "Comparable store sales of 6.1% and an operating margin of 12.4% highlighted this quarter's results. We are especially pleased with the outstanding response of Team O'Reilly to the challenging circumstances brought about by Hurricanes Katrina and Rita. The hard work and dedication of our team members have enabled us to continue providing excellent service to our customers. Although the storm inflicted some damage to stores in the affected regions, the hurricanes had no significant effect on third quarter financial results."
Ted Wise, COO and Co-President, stated, "We opened 33 new stores this quarter and are on track for 150 new stores in 2005. Also, we have continued to successfully integrate Midwest Auto Parts into our operations."
The Company will host a conference call Wednesday, October 26, 2005, at 10:00 a.m. Central time to discuss its results, as well as future expectations. Interested parties may listen to the conference call live on the Company's website, www.oreillyauto.com, by clicking "News." A replay will also be available on the website shortly after the call.
This release contains certain financial information not derived in accordance with United States generally accepted accounting principles (GAAP). The Company does not, and does not suggest investors should, consider such non-GAAP financial measures in isolation from, or as a substitute for, GAAP financial information. Whenever the Company uses such non-GAAP measures, it provides a reconciliation of such measures to the most closely applicable GAAP measure. The Company reports both GAAP and adjusted income and earnings per share amounts and comparisons to reflect what it believes are ongoing and/or comparable operating results excluding the one-time, non-cash tax benefit in the third quarter of 2005. The Company excludes this item in judging its performance and believes this non-GAAP information is useful to investors as well.
O'Reilly Automotive, Inc. is one of the largest specialty retailers of automotive aftermarket parts, tools, supplies, equipment and accessories in the United States, serving both the do-it-yourself and professional installer markets. Founded in 1957 by the O'Reilly family, the Company operated 1,432 stores within the states of Alabama, Arkansas, Florida, Georgia, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Minnesota, Mississippi, Missouri, Montana, Nebraska, North Carolina, North Dakota, Oklahoma, South Carolina, South Dakota, Tennessee, Texas, Virginia, Wisconsin and Wyoming as of September 30, 2005.
O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, December 31,
2005 2004
---------------- ----------------
(Unaudited) (Note)
(In thousands, except share data)
Assets
Current assets:
Cash and cash equivalents $ 51,591 $ 69,028
Accounts receivable, net 72,791 60,928
Amounts receivable from vendors,
net 38,458 52,976
Inventory 715,257 625,320
Deferred income taxes 4,783 -
Other current assets 12,533 5,225
---------------- ----------------
Total current assets 895,413 813,477
Property and equipment, at cost 941,043 791,794
Accumulated depreciation and
amortization 262,011 224,301
---------------- ----------------
Net property and equipment 679,032 567,493
Notes receivable, less current
portion 30,197 21,690
Other assets, net 57,368 29,697
---------------- ----------------
Total assets $ 1,662,010 $ 1,432,357
================ ================
Liabilities and shareholders' equity
Current liabilities:
Income taxes payable $ 2,790 $ 9,736
Accounts payable 287,851 240,548
Accrued payroll 18,762 15,130
Accrued benefits and withholdings 46,025 35,794
Deferred income taxes - 7,198
Other current liabilities 54,532 24,817
Current portion of long-term debt 75,444 592
---------------- ----------------
Total current liabilities 485,404 333,815
Long-term debt, less current portion 25,468 100,322
Deferred income taxes 39,517 38,440
Other liabilities 13,943 11,963
Shareholders' equity:
Common stock, $0.01 par value:
Authorized shares - 245,000,000
Issued and outstanding shares -
112,079,344 at September 30,
2005, and 55,377,130 at
December 31, 2004 1,121 554
Additional paid-in capital 351,744 326,650
Retained earnings 744,813 620,613
---------------- ----------------
Total shareholders' equity 1,097,678 947,817
---------------- ----------------
Total liabilities and shareholders'
equity $ 1,662,010 $ 1,432,357
================ ================
Note: The balance sheet at December 31, 2004, has been derived from
the audited 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
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- -----------------------
2005 2004 2005 2004
--------- --------- ----------- -----------
(In thousands, except
per share data)
Product sales $542,906 $455,162 $1,530,354 $1,293,623
Cost of goods sold,
including warehouse and
distribution
expenses 306,990 256,993 869,299 736,426
--------- --------- ----------- -----------
Gross Profit 235,916 198,169 661,055 557,197
Operating, selling, general
and administrative
expenses 168,331 142,039 471,762 402,798
--------- --------- ----------- -----------
Operating income 67,585 56,130 189,293 154,399
Other expense, net (561) (791) (1,034) (1,675)
--------- --------- ----------- -----------
Income before income taxes
and cumulative effect of
accounting change 67,024 55,339 188,259 152,724
Provision for income taxes 18,401 20,652 63,500 57,057
--------- --------- ----------- -----------
Income before cumulative
effect of accounting
change 48,623 34,687 124,759 95,667
Cumulative effect of
accounting change, net of
tax - - - 21,892
--------- --------- ----------- -----------
Net income $ 48,623 $ 34,687 $ 124,759 $ 117,559
========= ========= =========== ===========
Net income per common
share: (1)
Income before cumulative
effect of accounting
change $ 0.43 $ 0.31 $ 1.12 $ 0.87
Cumulative effect of
accounting change, net
of tax - - - 0.20
--------- --------- ----------- -----------
Net income $ 0.43 $ 0.31 $ 1.12 $ 1.07
========= ========= =========== ===========
Net income per common share
- assuming dilution: (1)
Income before cumulative
effect of accounting
change $ 0.42 $ 0.31 $ 1.10 $ 0.86
Cumulative effect of
accounting change, net
of tax - - - 0.20
--------- --------- ----------- -----------
Net income $ 0.42 $ 0.31 $ 1.10 $ 1.06
========= ========= =========== ===========
Weighted-average common
shares outstanding - basic
(1) 111,911 110,280 111,423 109,847
========= ========= =========== ===========
Adjusted weighted-average
common shares outstanding
- assuming dilution (1) 113,830 111,556 113,164 111,254
========= ========= =========== ===========
(1) On June 15, 2005, the Company completed a two-for-one split of its
common stock. All share and per share amounts for the periods
presented have been adjusted to reflect the effect of the stock
split.
O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
SELECTED FINANCIAL INFORMATION
(Unaudited)
September 30,
-----------------------
2005 2004
----------- -----------
Inventory turnover (1) 1.66 1.63
Inventory turnover, net of payables (2) 2.74 2.47
AP to inventory (3) 40.2% 38.2%
Debt-to-capital (4) 8.4% 9.9%
Return on equity (5) 14.0% 14.3%
Return on assets (6) 9.2% 9.4%
Square footage (in thousands) 9,511 8,016
Store count:
New stores, net (three months ended) 33 35
Total stores 1,432 1,205
Total employment 19,629 17,320
Three Months Ended
September 30,
-----------------------
2005 2004
----------- -----------
Other information (in thousands):
Capital expenditures $47,107 $44,472
Depreciation & amortization $15,227 $12,512
Interest expense $1,463 $1,967
Lease & rental expense $11,504 $8,478
Sales per weighted-average square foot (7) $56.34 $56.65
Sales per weighted-average store (in thousands)
(8) $375 $376
(1) Calculated as cost of sales for the last 12 months divided by
average inventory. Average inventory is calculated as the simple
average of beginning and ending inventory for the same period used
in determining the numerator.
(2) Calculated as cost of sales divided by average inventory less
accounts payable. Average inventory is calculated as the simple
average of beginning and ending inventory for the same period used
in determining the numerator.
(3) Accounts payable divided by inventory.
(4) The sum of long-term debt and current portion of long-term debt,
divided by the sum of long-term debt, current portion of long-term
debt and total shareholders' equity.
(5) Last 12 months net income, before cumulative effect of accounting
change and one-time tax benefit, divided by average shareholders'
equity. Average shareholders' equity is calculated by taking a
simple average of the beginning and ending shareholders' equity
for the same period used in determining the numerator.
(6) Last 12 months net income, before cumulative effect of accounting
change and one-time tax benefit, divided by average total assets.
Average total assets is calculated by taking a simple average of
the beginning and ending total assets for the same period used in
determining the numerator.
(7) Total sales less jobber sales, divided by weighted-average square
feet. Weighted-average sales per square foot is weighted to
consider the approximate dates of store openings or expansions.
(8) Total sales less jobber sales, divided by weighted-average stores.
Weighted-average sales per store is weighted to consider the
approximate dates of store openings or expansions.
O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO
COMPARABLE GAAP MEASURES
(Unaudited)
Three months ended September 30,
----------------------------------------
2005 2004
------------------------------ ---------
GAAP Adjustment GAAP
Results (1) Adjusted Results
--------- ---------- --------- ---------
(In thousands, except per share data)
Income before income taxes and
cumulative effect of
accounting change $ 67,024 $ - $ 67,024 $ 55,339
Provision for income taxes 18,401 6,057 24,458 20,652
--------- ---------- --------- ---------
Net income $ 48,623 $ (6,057) $ 42,566 $ 34,687
========= ========== ========= =========
Net income per common share
(2) $ 0.43 $ (0.05) $ 0.38 $ 0.31
========= ========== ========= =========
Net income per common share -
assuming dilution (2) $ 0.42 $ (0.05) $ 0.37 $ 0.31
========= ========== ========= =========
Weighted-average common shares
outstanding - basic (2) 111,911 111,911 111,911 110,280
========= ========== ========= =========
Adjusted weighted-average
common shares
outstanding - assuming
dilution (2) 113,830 113,830 113,830 111,556
========= ========== ========= =========
Nine months ended September 30,
----------------------------------------
2005 2004
------------------------------ ---------
GAAP Adjustment GAAP
Results (1) Adjusted Results
--------- ---------- --------- ---------
(In thousands, except per share data)
Income before income taxes and
cumulative effect of
accounting change $188,259 $ - $188,259 $152,724
Provision for income taxes 63,500 6,057 69,557 57,057
--------- ---------- --------- ---------
Income before cumulative
effect of accounting change 124,759 (6,057) 118,702 95,667
Cumulative effect of
accounting change, net of tax - - - 21,892
--------- ---------- --------- ---------
Net income $124,759 $ (6,057) $118,702 $117,559
========= ========== ========= =========
Net income per common share:
(2)
Income before cumulative
effect of accounting
change $ 1.12 $ (0.05) $ 1.07 $ 0.87
Cumulative effect of
accounting change, net of
tax - - - 0.20
--------- ---------- --------- ---------
Net income $ 1.12 $ (0.05) $ 1.07 $ 1.07
========= ========== ========= =========
Net income per common share -
assuming dilution: (2)
Income before cumulative
effect of accounting
change $ 1.10 $ (0.05) $ 1.05 $ 0.86
Cumulative effect of
accounting change, net of
tax - - - 0.20
--------- ---------- --------- ---------
Net income $ 1.10 $ (0.05) $ 1.05 $ 1.06
========= ========== ========= =========
Weighted-average common shares
outstanding - basic (2) 111,423 111,423 111,423 109,847
========= ========== ========= =========
Adjusted weighted-average
common shares
outstanding - assuming
dilution (2) 113,164 113,164 113,164 111,254
========= ========== ========= =========
(1) Third quarter 2005 income taxes include a benefit of $6.1 million
resulting from the favorable resolution of prior tax
uncertainties. Due to the one-time nature of the tax benefit, this
adjustment is made to provide comparable results.
(2) On June 15, 2005, the Company completed a two-for-one split of its
common stock. All share and per share amounts for the periods
presented have been adjusted to reflect the effect of the stock
split.