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O’Reilly Automotive, Inc. Reports Third Quarter 2021 Results

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  • Third quarter comparable store sales increase of 6.7%, year-to-date increase of 12.9%

  • 14% increase in third quarter diluted earnings per share, year-to-date increase of 29%

  • $2.6 billion net cash provided by operating activities year-to-date

SPRINGFIELD, Mo., Oct. 27, 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 third quarter ended September 30, 2021.

3rd Quarter Financial Results
Greg Johnson, O’Reilly’s CEO and Co-President, commented, “We are pleased to once again report another very profitable quarter, highlighted by a 6.7% increase in third quarter comparable store sales, on top of the incredibly strong 16.9% increase we generated in the prior year, and an impressive 14% increase in diluted earnings per share to $8.07. This represents the sixth consecutive quarter our Team has delivered double-digit diluted earnings per share growth. Team O’Reilly’s continued commitment to providing consistently excellent customer service, while diligently executing our safety protocols in the midst of the ongoing pandemic, is truly remarkable, and I would like to thank each member of our Team for their extraordinary dedication and hard work.”

Sales for the third quarter ended September 30, 2021, increased $272 million, or 8%, to $3.48 billion from $3.21 billion for the same period one year ago. Gross profit for the third quarter increased 8% to $1.82 billion (or 52.3% of sales) from $1.68 billion (or 52.4% of sales) for the same period one year ago. Selling, general and administrative expenses (“SG&A”) for the third quarter increased 11% to $1.06 billion (or 30.6% of sales) from $955 million (or 29.8% of sales) for the same period one year ago. Operating income for the third quarter increased 4% to $755 million (or 21.7% of sales) from $725 million (or 22.6% of sales) for the same period one year ago.

Net income for the third quarter ended September 30, 2021, increased $31 million, or 6%, to $559 million (or 16.1% of sales) from $527 million (or 16.4% of sales) for the same period one year ago. Diluted earnings per common share for the third quarter increased 14% to $8.07 on 69 million shares versus $7.07 on 75 million shares for the same period one year ago.

Year-to-Date Financial Results
Mr. Johnson continued, “The top-line strength we experienced through the first three quarters of the year has continued thus far in October, and we expect to generate continued solid sales volumes as we finish out 2021. Our performance is a testament to the value proposition delivered by our dedicated Team, and we are confident in Team O’Reilly’s ability to provide excellent customer service and drive continued outstanding results; as a result, we are increasing our full-year 2021 comparable store sales guidance to a range of 10% to 12%, which reflects our strong year-to-date performance and our expectations for the remainder of the fourth quarter.”

Mr. Johnson concluded, “Through the first nine months of 2021, we continued to build our brand with the addition of 146 net, new stores across 40 U.S. states, and we continue to be very pleased with the performance of our new stores. Based on our favorable outlook of the long-term demand drivers within our industry and, most importantly, our confidence in our Team’s ability to execute our business model, we are pleased to announce our plans to increase our new store openings to a range of 175 to 185 net, new stores in 2022.”

Sales for the first nine months of 2021 increased $1.26 billion, or 14%, to $10.04 billion from $8.78 billion for the same period one year ago. Gross profit for the first nine months of 2021 increased 15% to $5.29 billion (or 52.7% of sales) from $4.61 billion (or 52.6% of sales) for the same period one year ago. SG&A for the first nine months of 2021 increased 12% to $3.04 billion (or 30.3% of sales) from $2.73 billion (or 31.1% of sales) for the same period one year ago. Operating income for the first nine months of 2021 increased 19% to $2.24 billion (or 22.3% of sales) from $1.89 billion (or 21.5% of sales) for the same period one year ago.

Net income for the first nine months of 2021 increased $286 million, or 21%, to $1.65 billion (or 16.4% of sales) from $1.36 billion (or 15.5% of sales) for the same period one year ago. Diluted earnings per common share for the first nine months of 2021 increased 29% to $23.45 on 70 million shares versus $18.12 on 75 million shares for the same period one year ago.

3rd 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 for the nine months ended September 30, 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 6.7% for the third quarter ended September 30, 2021, on top of 16.9% for the same period one year ago. Comparable stores sales increased 12.9% for the nine months ended September 30, 2021, on top of 10.7% for the same period one year ago.

Share Repurchase Program
During the third quarter ended September 30, 2021, the Company repurchased 1.6 million shares of its common stock, at an average price per share of $595.96, for a total investment of $943 million. During the first nine months of 2021, the Company repurchased 3.8 million shares of its common stock, at an average price per share of $528.09, for a total investment of $2.01 billion. Subsequent to the end of the third quarter and through the date of this release, the Company repurchased an additional 0.3 million shares of its common stock, at an average price per share of $615.41, for a total investment of $188 million. The Company has repurchased a total of 85.1 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 $193.41, for a total aggregate investment of $16.46 billion. As of the date of this release, the Company had approximately $786 million remaining under its current share repurchase authorization.

Updated Full-Year 2021 Guidance
The Company still anticipates potentially significant volatility in its results, driven by the ongoing uncertainty related to the pandemic. The table below outlines the Company’s updated guidance for selected full-year 2021 financial data:

For the Year Ending

December 31, 2021

Comparable store sales

10% to 12%

Total revenue

$12.9 billion to $13.2 billion

Gross profit as a percentage of sales

52.2% to 52.7%

Operating income as a percentage of sales

21.0% to 21.4%

Effective income tax rate

23.0%

Diluted earnings per share (1)

$29.25 to $29.45

Net cash provided by operating activities

$2.6 billion to $3.1 billion

Capital expenditures

$450 million to $550 million

Free cash flow (2)

$2.0 billion to $2.3 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

$

2,655

to

$

3,080

Less:

Capital expenditures

450

to

550

Excess tax benefit from share-based compensation payments

25

to

30

Investment in tax credit equity investments

180

to

200

Free cash flow

$

2,000

to

$

2,300

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, October 28, 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 (847) 619-6397 and the conference call identification number is 50226093. A replay of the conference call will be available on the Company’s website through Thursday, October 27, 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 September 30, 2021, the Company operated 5,740 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 crises; the economy in general; inflation; consumer debt levels; product demand; the market for auto parts; competition; weather; tariffs; availability of key products; business interruptions, including terrorist activities, war and the threat of war; failure to protect our brand and reputation; challenges in international markets; volatility of the market price of our common stock; our increased debt levels; credit ratings on public debt; historical growth rate sustainability; our ability to hire and retain qualified employees; risks associated with the performance of acquired businesses; information security and cyber-attacks; and governmental regulations. 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, 2020, 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)

September 30, 2021

September 30, 2020

December 31, 2020

(Unaudited)

(Unaudited)

(Note)

Assets

Current assets:

Cash and cash equivalents

$

449,302

$

1,627,098

$

465,640

Accounts receivable, net

282,883

243,192

229,679

Amounts receivable from suppliers

110,882

90,341

100,615

Inventory

3,646,988

3,527,495

3,653,195

Other current assets

72,154

45,315

50,658

Total current assets

4,562,209

5,533,441

4,499,787

Property and equipment, at cost

6,874,639

6,497,065

6,559,911

Less: accumulated depreciation and amortization

2,672,954

2,424,168

2,464,993

Net property and equipment

4,201,685

4,072,897

4,094,918

Operating lease, right-of-use assets

2,011,115

1,913,897

1,995,127

Goodwill

878,872

873,717

881,030

Other assets, net

135,504

109,999

125,780

Total assets

$

11,789,385

$

12,503,951

$

11,596,642

Liabilities and shareholders’ equity (deficit)

Current liabilities:

Accounts payable

$

4,608,549

$

4,083,805

$

4,184,662

Self-insurance reserves

122,551

91,118

109,199

Accrued payroll

89,095

127,841

88,875

Accrued benefits and withholdings

288,134

202,198

242,724

Income taxes payable

158,481

4,553

16,786

Current portion of operating lease liabilities

336,962

318,533

322,778

Other current liabilities

385,982

341,553

297,393

Current portion of long-term debt

499,783

Total current liabilities

5,989,754

5,669,384

5,262,417

Long-term debt

3,826,073

4,122,424

4,123,217

Operating lease liabilities, less current portion

1,729,013

1,640,646

1,718,691

Deferred income taxes

172,807

174,177

155,899

Other liabilities

212,591

188,095

196,160

Shareholders’ equity (deficit):

Common stock, $0.01 par value:

Authorized shares – 245,000,000

Issued and outstanding shares –

67,684,615 as of September 30, 2021,

73,272,379 as of September 30, 2020, and

71,123,109 as of December 31, 2020

677

733

711

Additional paid-in capital

1,296,358

1,303,699

1,280,841

Retained deficit

(1,430,060

)

(578,172

)

(1,139,139

)

Accumulated other comprehensive loss

(7,828

)

(17,035

)

(2,155

)

Total shareholders’ (deficit) equity

(140,853

)

709,225

140,258

Total liabilities and shareholders’ equity (deficit)

$

11,789,385

$

12,503,951

$

11,596,642

Note: The balance sheet at December 31, 2020, 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 Nine Months Ended

September 30,

September 30,

2021

2020

2021

2020

Sales

$

3,479,570

$

3,207,638

$

10,036,070

$

8,775,720

Cost of goods sold, including warehouse and distribution expenses

1,661,330

1,527,170

4,750,657

4,162,166

Gross profit

1,818,240

1,680,468

5,285,413

4,613,554

Selling, general and administrative expenses

1,063,641

955,455

3,044,126

2,728,490

Operating income

754,599

725,013

2,241,287

1,885,064

Other income (expense):

Interest expense

(34,873

)

(41,668

)

(110,036

)

(122,777

)

Interest income

485

582

1,478

1,892

Other, net

318

2,479

4,961

2,297

Total other expense

(34,070

)

(38,607

)

(103,597

)

(118,588

)

Income before income taxes

720,529

686,406

2,137,690

1,766,476

Provision for income taxes

161,877

159,154

491,978

407,119

Net income

$

558,652

$

527,252

$

1,645,712

$

1,359,357

Earnings per share-basic:

Earnings per share

$

8.14

$

7.13

$

23.67

$

18.28

Weighted-average common shares outstanding – basic

68,608

73,916

69,529

74,377

Earnings per share-assuming dilution:

Earnings per share

$

8.07

$

7.07

$

23.45

$

18.12

Weighted-average common shares outstanding – assuming dilution

69,240

74,586

70,174

75,026


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

For the Nine Months Ended

September 30,

2021

2020

Operating activities:

Net income

$

1,645,712

$

1,359,357

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

Depreciation and amortization of property, equipment and intangibles

237,654

231,510

Amortization of debt discount and issuance costs

3,294

3,300

Deferred income taxes

18,053

32,249

Share-based compensation programs

18,544

17,062

Other

1,803

2,576

Changes in operating assets and liabilities:

Accounts receivable

(56,743

)

(34,970

)

Inventory

6,420

(76,239

)

Accounts payable

424,710

481,431

Income taxes payable

141,273

123,581

Other

124,607

209,272

Net cash provided by operating activities

2,565,327

2,349,129

Investing activities:

Purchases of property and equipment

(340,687

)

(363,425

)

Proceeds from sale of property and equipment

6,643

11,690

Investment in tax credit equity investments

(1,795

)

(95,292

)

Other

(1,897

)

(312

)

Net cash used in investing activities

(337,736

)

(447,339

)

Financing activities:

Proceeds from borrowings on revolving credit facility

1,162,000

Payments on revolving credit facility

(1,423,000

)

Proceeds from the issuance of long-term debt

997,515

Principal payments on long-term debt

(300,000

)

Payment of debt issuance costs

(3,404

)

(7,779

)

Repurchases of common stock

(2,007,161

)

(1,094,000

)

Net proceeds from issuance of common stock

67,361

51,174

Other

(313

)

(253

)

Net cash used in financing activities

(2,243,517

)

(314,343

)

Effect of exchange rate changes on cash

(412

)

(755

)

Net (decrease) increase in cash and cash equivalents

(16,338

)

1,586,692

Cash and cash equivalents at beginning of the period

465,640

40,406

Cash and cash equivalents at end of the period

$

449,302

$

1,627,098

Supplemental disclosures of cash flow information:

Income taxes paid

$

333,360

$

250,484

Interest paid, net of capitalized interest

107,971

118,397


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

For the Twelve Months Ended

September 30,

Adjusted Debt to EBITDAR:

2021

2020

(In thousands, except adjusted debt to EBITDAR ratio)

GAAP debt

$

3,826,073

$

4,622,207

Add:

Letters of credit

83,985

66,527

Discount on senior notes

4,531

5,352

Debt issuance costs

19,396

22,441

Six-times rent expense

2,206,056

2,093,556

Adjusted debt

$

6,140,041

$

6,810,083

GAAP net income

$

2,038,657

$

1,684,273

Add:

Interest expense

148,385

158,065

Provision for income taxes

598,962

491,516

Depreciation and amortization

320,779

302,003

Share-based compensation expense

24,229

22,405

Rent expense (i)

367,676

348,926

EBITDAR

$

3,498,688

$

3,007,188

Adjusted debt to EBITDAR

1.75

2.26

(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 September 30, 2021 and 2020 (in thousands):

Total lease cost, per ASC 842, for the twelve months ended September 30, 2021

$

438,205

Less:

Variable non-contract operating lease components, related to property taxes and insurance, for the twelve months ended September 30, 2021

70,529

Rent expense for the twelve months ended September 30, 2021

$

367,676

Total lease cost, per ASC 842, for the twelve months ended September 30, 2020

$

413,314

Less:

Variable non-contract operating lease components, related to property taxes and insurance, for the twelve months ended September 30, 2020

64,388

Rent expense for the twelve months ended September 30, 2020

$

348,926


September 30,

2021

2020

Selected Balance Sheet Ratios:

Inventory turnover (1)

1.7

1.5

Average inventory per store (in thousands) (2)

$

633

$

628

Accounts payable to inventory (3)

126.4%

115.8%


For the Three Months Ended

For the Nine Months Ended

September 30,

September 30,

2021

2020

2021

2020

Reconciliation of Free Cash Flow (in thousands):

Net cash provided by operating activities

$

852,495

$

790,051

$

2,565,327

$

2,349,129

Less:

Capital expenditures

118,080

118,954

340,687

363,425

Excess tax benefit from share-based compensation payments

12,141

8,326

28,956

14,786

Investment in tax credit equity investments

27

1,795

95,292

Free cash flow

$

722,247

$

662,771

$

2,193,889

$

1,875,626


For the Three Months Ended

For the Nine Months Ended

For the Twelve Months Ended

September 30,

September 30,

September 30,

2021

2020

2021

2020

2021

2020

Store Count:

Beginning domestic store count

5,710

5,562

5,594

5,439

5,592

5,420

New stores opened

30

36

148

162

153

181

Stores closed

(6

)

(2

)

(9

)

(5

)

(9

)

Ending domestic store count

5,740

5,592

5,740

5,592

5,740

5,592

Mexico stores

22

21

22

21

22

21

Ending total store count

5,762

5,613

5,762

5,613

5,762

5,613


For the Three Months Ended

For the Twelve Months Ended

September 30,

September 30,

2021

2020

2021

2020

Store and Team Member Information: (4)

Total employment

80,536

76,027

Square footage (in thousands)

43,035

41,591

Sales per weighted-average square foot (5)

$

79.73

$

76.14

$

299.31

$

271.62

Sales per weighted-average store (in thousands) (6)

$

597

$

566

$

2,231

$

2,014

(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) Represents O’Reilly’s U.S. operations only.

(5) 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.

(6) 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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