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O’Reilly Automotive, Inc. Reports First Quarter 2020 Results and Provides Business Update in Response to COVID-19

  • First quarter comparable store sales decrease of 1.9%, total sales growth of 2.7%

  • Full-year 2020 guidance withdrawn due to the uncertainty related to COVID-19

SPRINGFIELD, Mo., April 22, 2020 (GLOBE NEWSWIRE) -- O’Reilly Automotive, Inc. (the “Company” or “O’Reilly”) (Nasdaq: ORLY), a leading retailer in the automotive aftermarket industry, today announced results for its first quarter ended March 31, 2020, and provided a business update on the Company’s actions in response to the impact from the novel coronavirus (“COVID-19”).

COVID-19 Update
“Our customers and the communities we serve have been and continue to be severely impacted by COVID-19, and our top priority has been to protect the health and safety of our customers and our O’Reilly Team Members,” stated Greg Johnson, O’Reilly’s CEO and Co-President. “O’Reilly Auto Parts is an essential supplier to the communities we serve, as a key resource provider ensuring consistent and effective transportation for a wide range of essential industries, health care providers, emergency personnel, and consumers engaged in critical tasks, as well as meeting the automotive needs of everyday customers as they use their vehicles to meet basic needs, such as trips to the pharmacy or grocery store. Our experienced team of professional parts people has a long history of selflessly responding quickly in disaster situations to take care of our customers, and I’m extremely proud and grateful for the contributions of our entire Team to keep all of our stores open and operating to meet our customers’ critical needs in the face of the COVID-19 crisis.”

Mr. Johnson further commented, “In response to the COVID-19 crisis, we have taken many steps to promote the continued health and safety of our customers and team members in accordance with the evolving information and recommendations issued by the Centers for Disease Control and Prevention (CDC), World Health Organization (WHO), and state and local governmental agencies. Some of the initiatives we have implemented to serve our customers in the safest way possible include the implementation of curbside pickup for Buy Online, Pick Up In-Store orders and revised procedures for store services, including battery and check engine light testing. Our core Culture Value of excellent customer service remains as critical as ever, and we will continue to adapt to the ongoing challenges to safely take care of our customers and provide them the essential parts they need.”

Mr. Johnson continued, “The first two months of the quarter were below our expectations as the mild weather was a headwind to demand in our business, but with the onset of spring weather at the beginning of March sales performance strengthened. However, we began to see the significant, negative impact of COVID-19 in the middle of March, as our customers became subject to stay-at-home orders issued across all of our market areas. As a result of these factors, our first quarter comparable store sales decline of 1.9% did not achieve our comparable store sales guidance of growth of 2% to 4%. Due to the ongoing, negative impact of COVID-19, for the four-week period beginning in the middle of March and through the first two weeks of April, our comparable store sales decreased 13%.”

Mr. Johnson continued, “We have taken prudent steps to ensure the continued stability and financial flexibility of our Company. Our teams have taken appropriate actions to reduce costs and conserve cash, including reducing store operating hours and delaying discretionary capital investments, and we will continue to make adjustments as we navigate through the current environment. As we join with others in our communities in protective measures to limit the severity of the COVID-19 crisis, we are living in highly uncertain times and cannot predict how long the current crisis will last or how severe the impact will be to our customers and our business. As a result, we are withdrawing our 2020 operating, cash flow and capital expenditures guidance as we continue to evaluate and adjust the actions we are taking in response to the current environment. We remain highly confident in the strength of our team and the steps we have taken in these difficult circumstances to solidify our business and position us to return to our long track record of industry-leading, profitable growth post crisis.”

On March 25, 2020, the Company successfully issued $500 million aggregate principal amount of unsecured 4.200% Senior Notes due 2030. The notes issuance further strengthened the Company’s liquidity position, and at April 21, 2020, the Company had $1.1 billion in cash and unused capacity available on its existing revolving credit facility. The Company has also temporarily suspended its share repurchase program.

1st Quarter Financial Results
Sales for the first quarter ended March 31, 2020, increased $66 million, or 3%, to $2.48 billion from $2.41 billion for the same period one year ago. Gross profit for the first quarter increased 1% to $1.30 billion (or 52.3% of sales) from $1.28 billion (or 53.1% of sales) for the same period one year ago. Selling, general and administrative expenses for the first quarter increased 5% to $872 million (or 35.2% of sales) from $835 million (or 34.6% of sales) for the same period one year ago. Operating income for the first quarter decreased 5% to $424 million (or 17.1% of sales) from $445 million (or 18.5% of sales) for the same period one year ago.

Net income for the first quarter ended March 31, 2020, decreased $21 million, or 6%, to $300 million (or 12.1% of sales) from $321 million (or 13.3% of sales) for the same period one year ago. Diluted earnings per common share for the first quarter decreased 2% to $3.97 on 76 million shares versus $4.05 on 79 million shares for the same period one year ago.

1st Quarter 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 in the three months ended March 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 decreased 1.9% for the first quarter ended March 31, 2020, versus an increase of 3.2% for the same period one year ago.

Share Repurchase Program
During the first quarter ended March 31, 2020, the Company repurchased 1.5 million shares of its common stock, at an average price per share of $386.71, for a total investment of $574 million and suspended its share repurchase program on March 16, 2020, to conserve liquidity in response to COVID-19. The Company has repurchased a total of 77.7 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 $164.22, for a total aggregate investment of $12.76 billion. As of the date of this release, the Company had approximately $995 million remaining under its current share repurchase authorization and will continue to evaluate conditions of the business and resume its share repurchase program when appropriate.

Withdraw Previously Issued 2020 Guidance
Given the unprecedented and rapidly evolving uncertainty related to COVID-19, the Company is withdrawing all previously issued 2020 guidance.

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 selected financial information below.

Earnings Conference Call Information
The Company will host a conference call on Thursday, April 23, 2020, 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 6078737. A replay of the conference call will be available on the Company’s website through Thursday, April 22, 2021.

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 March 31, 2020, the Company operated 5,512 stores in 47 U.S. states and 21 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)

March 31, 2020

March 31, 2019

December 31, 2019

(Unaudited)

(Unaudited)

(Note)

Assets

Current assets:

Cash and cash equivalents

$

287,067

$

56,717

$

40,406

Accounts receivable, net

221,167

250,680

214,915

Amounts receivable from suppliers

83,446

66,452

79,492

Inventory

3,556,723

3,228,901

3,454,092

Other current assets

53,397

46,896

44,757

Total current assets

4,201,800

3,649,646

3,833,662

Property and equipment, at cost

6,314,339

5,761,729

6,191,427

Less: accumulated depreciation and amortization

2,305,695

2,085,019

2,243,224

Net property and equipment

4,008,644

3,676,710

3,948,203

Operating lease, right-of-use assets

1,935,295

1,886,364

1,928,369

Goodwill

910,141

808,717

936,814

Other assets, net

52,982

40,125

70,112

Total assets

$

11,108,862

$

10,061,562

$

10,717,160

Liabilities and shareholders’ equity

Current liabilities:

Accounts payable

$

3,758,199

$

3,438,679

$

3,604,722

Self-insurance reserves

83,262

77,359

79,079

Accrued payroll

103,804

94,192

100,816

Accrued benefits and withholdings

72,561

65,106

98,539

Income taxes payable

12,884

92,816

Current portion of operating lease liabilities

316,932

296,605

316,061

Other current liabilities

277,290

261,575

270,210

Total current liabilities

4,624,932

4,326,332

4,469,427

Long-term debt

4,471,248

3,460,921

3,890,527

Operating lease liabilities, less current portion

1,661,991

1,629,311

1,655,297

Deferred income taxes

73,212

109,480

133,280

Other liabilities

168,635

163,153

171,289

Shareholders’ equity:

Common stock, $0.01 par value:

Authorized shares – 245,000,000

Issued and outstanding shares –

74,199,261 as of March 31, 2020,

78,262,099 as of March 31, 2019, and

75,618,659 as of December 31, 2019

742

783

756

Additional paid-in capital

1,271,250

1,268,032

1,280,760

Retained deficit

(1,137,392

)

(896,450

)

(889,066

)

Accumulated other comprehensive (loss) income

(25,756

)

4,890

Total shareholders’ equity

108,844

372,365

397,340

Total liabilities and shareholders’ equity

$

11,108,862

$

10,061,562

$

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

March 31,

2020

2019

Sales

$

2,476,487

$

2,410,608

Cost of goods sold, including warehouse and distribution expenses

1,180,581

1,131,318

Gross profit

1,295,906

1,279,290

Selling, general and administrative expenses

872,345

834,504

Operating income

423,561

444,786

Other income (expense):

Interest expense

(39,386

)

(34,291

)

Interest income

675

554

Other, net

(5,190

)

3,103

Total other expense

(43,901

)

(30,634

)

Income before income taxes

379,660

414,152

Provision for income taxes

79,222

93,000

Net income

$

300,438

$

321,152

Earnings per share-basic:

Earnings per share

$

4.00

$

4.09

Weighted-average common shares outstanding – basic

75,022

78,484

Earnings per share-assuming dilution:

Earnings per share

$

3.97

$

4.05

Weighted-average common shares outstanding – assuming dilution

75,663

79,297



O’REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

For the Three Months Ended

March 31,

2020

2019

Operating activities:

Net income

$

300,438

$

321,152

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization of property, equipment and intangibles

73,963

63,964

Amortization of debt discount and issuance costs

1,035

918

Deferred income taxes

(58,732

)

4,312

Share-based compensation programs

5,875

5,424

Other

1,739

2,245

Changes in operating assets and liabilities:

Accounts receivable

(12,208

)

(60,914

)

Inventory

(106,937

)

(35,405

)

Accounts payable

156,584

60,918

Income taxes payable

131,949

82,476

Other

(34,613

)

(4,468

)

Net cash provided by operating activities

459,093

440,622

Investing activities:

Purchases of property and equipment

(133,284

)

(152,914

)

Proceeds from sale of property and equipment

1,901

1,811

Investment in tax credit equity investments

(95,259

)

Other

(295

)

Net cash used in investing activities

(226,642

)

(151,398

)

Financing activities:

Proceeds from borrowings on revolving credit facility

1,052,000

874,000

Payments on revolving credit facility

(969,000

)

(831,000

)

Proceeds from the issuance of long-term debt

499,795

Payment of debt issuance costs

(2,990

)

Repurchases of common stock

(574,052

)

(321,856

)

Net proceeds from issuance of common stock

9,800

15,224

Other

(253

)

(190

)

Net cash provided by (used in) financing activities

15,300

(263,822

)

Effect of exchange rate changes on cash

(1,090

)

Net increase in cash and cash equivalents

246,661

25,402

Cash and cash equivalents at beginning of the year

40,406

31,315

Cash and cash equivalents at end of the year

$

287,067

$

56,717

Supplemental disclosures of cash flow information:

Income taxes paid

$

4,975

$

5,335

Interest paid, net of capitalized interest

46,282

47,796



O’REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
SELECTED FINANCIAL INFORMATION
(Unaudited)

For the Twelve Months Ended

March 31,

Adjusted Debt to EBITDAR:

2020

2019

(In thousands, except adjusted debt to EBITDAR ratio)

GAAP debt

$

4,471,248

$

3,460,921

Add:

Letters of credit

39,083

39,201

Discount on senior notes

3,510

4,090

Debt issuance costs

19,242

14,989

Six-times rent expense

2,057,448

1,937,286

Adjusted debt

$

6,590,531

$

5,456,487

GAAP net income

$

1,370,328

$

1,340,733

Add:

Interest expense

145,070

128,203

Provision for income taxes

385,509

372,100

Depreciation and amortization

280,874

252,981

Share-based compensation expense

22,372

20,424

Rent expense (i)

342,908

322,881

EBITDAR

$

2,547,061

$

2,437,322

Adjusted debt to EBITDAR

2.59

2.24

(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 twelve months ended March 31, 2020 and 2019 (in thousands):

Total lease cost, per ASC 842, for the twelve months ended March 31, 2020

$

404,138

Less:

Variable non-contract operating lease components, related to property taxes and insurance, for the twelve
months ended March 31, 2020

61,230

Rent expense for the twelve months ended March 31, 2020

$

342,908

Total lease cost, per ASC 842, for the three months ended March 31, 2019

$

98,293

Less:

Variable non-contract operating lease components, related to property taxes and insurance, for the three
months ended March 31, 2019

14,567

Rent expense for the three months ended March 31, 2019

83,726

Add:

Rent expense for the nine months ended December 31, 2019, as previously reported prior to the adoption
of ASC 842

239,155

Rent expense for the twelve months ended March 31, 2019

$

322,881



March 31,

2020

2019

Selected Balance Sheet Ratios:

Inventory turnover (1)

1.4

1.4

Average inventory per store (in thousands) (2)

$

643

$

609

Accounts payable to inventory (3)

105.7%

106.5%


For the Three Months Ended

March 31,

2020

2019

Reconciliation of Free Cash Flow (in thousands):

Net cash provided by operating activities

$

459,093

$

440,622

Less:

Capital expenditures

133,284

152,914

Excess tax benefit from share-based compensation payments

3,380

8,513

Investment in tax credit equity investments

95,259

Free cash flow

$

227,170

$

279,195


For the Three Months Ended

For the Twelve Months Ended

March 31,

March 31,

2020

2019

2020

2019

Store Count:

Beginning store count

5,439

5,219

5,306

5,097

New stores opened

76

64

214

192

Bennett stores acquired, net of stores merged (4)

25

(5

)

25

Stores closed

(3

)

(2

)

(3

)

(8

)

Ending domestic store count

5,512

5,306

5,512

5,306

Mexico stores (5)

21

21

Ending total store count

5,533

5,306

5,533

5,306


For the Three Months Ended

For the Twelve Months Ended

March 31,

March 31,

2020

2019

2020

2019

Store and Team Member Information: (6)

Total employment

79,778

80,366

Square footage (in thousands)

40,908

39,110

Sales per weighted-average square foot (7)

$

59.82

$

61.41

$

253.12

$

251.29

Sales per weighted-average store (in thousands) (8)

$

443

$

452

$

1,871

$

1,847

(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.