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O'Reilly Issues $300 Million Notes

Zacks Equity Research

O’Reilly Automotive Inc. (ORLY) declared earlier this week the pricing of $300 million of 3.850% senior notes, due in 2023, at 99.992% of their face value. O’Reilly had said that the offering was expected to close on Jun 20 and Merrill Lynch, Pierce, Fenner & Smith Inc. and Wells Fargo Securities, LLC were appointed the joint book running managers for the offering.

O’Reilly will utilize the proceeds from this offering for general corporate purposes, including a hike in the working capital along with share repurchases and repayment of debt. The remaining amount will be used for investment in other business opportunities like acquisitions and for payment of related fees and expenses.

O’Reilly had cash and cash equivalents of $205.4 million as of Mar 31, 2013, which more contracted by over 50% from $575.2 million as of Mar 31, 2011. Long-term debt increased to $1.1 billion as of Mar 31, 2013 from $797.5 million as of Mar 31, 2012. This translated into a higher long-term debt-to-capitalization ratio of 34.6% as of Mar 31, 2013 compared with 21.7% as of Mar 31, 2012.

In the first quarter of 2013, net cash flow from operations declined 45.4% to $226.3 million from $414.5 million in the previous-year quarter. The decrease in cash flow was primarily attributable to higher accounts receivable.

In Aug 2012, the company had offered $300 million of 3.800% senior notes due 2022. The 3.800% senior notes were priced at 99.627% of their face value. The proceeds from this offering were used for general corporate purposes, incorporating a hike in the working capital along with share repurchases, repayment of debt and investment in other business opportunities. The proceeds will also be used for the payment of fees and expenses related to the offering.

O'Reilly Automotive is the third-largest specialty retailer of automotive aftermarket parts, tools, supplies, equipment, and accessories in the U.S., selling products to both Do-it-Yourself (:DIY) customers and Do-it-for-Me (:DIFM) or professional installers.

O’Reilly posted a 19.3% increase in earnings to $1.36 per share in the first quarter of 2013 compared with $1.14 in the year-ago quarter, slivering past the Zacks Consensus Estimate by a penny. Revenues during the quarter climbed 4% to $1.59 billion from $1.53 billion in the same period a year ago.

Currently, shares of O’Reilly Automotive retain a Zacks Rank #3 (Hold). Some other stocks that are also performing well in the broader industry where ORLY operates include Lear Corp. (LEA), Magna International, Inc. (MGA) and Visteon Corp. (VC). All these companies carry a Zacks Rank #1 (Strong Buy).

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