FOR IMMEDIATE RELEASE

O'REILLY AUTOMOTIVE, INC. REPORTS SECOND QUARTER 2017 RESULTS
  • Second quarter comparable store sales increase of 1.7%
  • 17% increase in second quarter diluted earnings per share to $3.10
Springfield, MO, July 26, 2017 - O'Reilly Automotive, Inc. (the "Company" or "O'Reilly") (Nasdaq: ORLY), a leading retailer in the automotive aftermarket industry, today announced record revenues and earnings for its second quarter ended June 30, 2017. 2nd Quarter Financial Results

Sales for the second quarter ended June 30, 2017, increased $114 million, or 5%, to $2.29 billion from $2.18 billion for the same period one year ago. Gross profit for the second quarter increased to $1.20 billion (or 52.4% of sales) from $1.13 billion (or 51.8% of sales) for the same period one year ago, representing an increase of 6%. Selling, general and administrative expenses ("SG&A") for the second quarter increased to $743 million (or 32.4% of sales) from $702 million (or 32.3% of sales) for the same period one year ago, representing an increase of 6%. Operating income for the second quarter increased to $457 million (or 20.0% of sales) from $425 million (or 19.5% of sales) for the same period one year ago, representing an increase of 8%. The Company's second quarter 2017 operating income included the benefit of a $9 million reduction in its legal accruals following the expiration of the statute of limitations related to a legacy claim, which increased second quarter operating margin by 40 basis points.

Net income for the second quarter ended June 30, 2017, increased $25 million, or 10%, to $283 million (or 12.3% of sales) from $258 million (or 11.8% of sales) for the same period one year ago. Diluted earnings per common share for the second quarter increased 17% to $3.10 on 91 million shares versus $2.65 on 97 million shares for the same period one year ago. The Company adopted a new share-based compensation accounting standard during the first quarter of this year, which requires excess tax benefits from share-based compensation payments to be recorded in the income statement. The Company's second quarter ended June 30, 2017, diluted earnings per common share of $3.10 includes a $0.09 benefit from the adoption of the new accounting standard and a $0.06 benefit from the reduction in legal accruals.

Greg Henslee, O'Reilly's CEO commented, "As we announced in our press release earlier this month, we faced a more challenging sales environment during the second quarter than expected, resulting in a disappointing second quarter comparable store sales increase of 1.7%. While there are several factors that drive demand in our industry that can result in soft performance in any given period, it is clear that we continue to face headwinds from a second consecutive unseasonably mild winter, which did not generate the rate of parts failure we would normally expect through this point of the year, combined with continued soft consumer demand across our industry. During difficult market conditions, such as the ones we faced in the first half of this year, our Team remains absolutely dedicated to providing consistently high levels of service to our customers. Our long-term commitment to exceptional customer service is the key to our past and future success, and I would like to thank Team O'Reilly for their relentless dedication to taking care of every customer who calls or walks through our doors every day."

Year-to-Date Financial Results

Sales for the first six months of 2017 increased $174 million, or 4%, to $4.45 billion from $4.27 billion for the same period one year ago. Gross profit for the first six months of 2017 increased to $2.33 billion (or 52.4% of sales) from $2.22 billion (or 52.1% of sales) for the same period one year ago, representing an increase of 5%. SG&A for the first six months of 2017 increased to $1.47 billion (or 33.1% of sales) from $1.38 billion (or 32.3% of sales) for the same period one year ago, representing an increase of 6%. Operating income for the first six months of 2017 increased to $861 million (or 19.4% of sales) from $844 million (or 19.7% of sales) for the same period one year ago, representing an increase of 2%. The Company's results for the six months ended June 30, 2016, included a benefit from one additional day due to Leap Day in February 2016.

Net income for the first six months of 2017 increased $35 million, or 7%, to $548 million from $513 million for the same period one year ago. Diluted earnings per common share for the first six months of 2017 increased 13% to $5.93 on 92 million shares versus $5.24 on 98 million shares for the same period one year ago. The Company's first six months of 2017 diluted earnings per common share of $5.93 includes a $0.32 benefit from the adoption of the new accounting standard.

Mr. Henslee continued, "We opened 105 net, new stores during the first half of 2017, and we are well positioned to hit our target of 190 net, new store openings by the end of the year. We continue to be pleased with the performance of our new stores and remain very confident in our opportunities to grow in existing and new market areas. While our comparable store sales growth for the first half of 2017 is below our expectations, we continue to strongly believe in the long-term strength of our industry, supported by a growing and aging vehicle fleet, which has now reached an average age of 11.6 years, and steady, sustained increases in annual miles driven, now trending at over 3.2 trillion miles per year. More importantly, we remain extremely confident in our ability to increase our market share, driven by our Team's ability to provide industry- leading parts availability and unsurpassed technical knowledge and service levels to our customers."

Share Repurchase Program

During the second quarter ended June 30, 2017, the Company repurchased 3.5 million shares of its common stock, at an average price per share of $245.26, for a total investment of $852 million. During the first six months of 2017, the Company repurchased 5.3 million shares of its common stock, at an average price per share of $253.13, for a total investment of $1.34 billion. Subsequent to the end of the second quarter and through the date of this release, the Company did not repurchase any additional shares of its common stock. The Company has repurchased a total of 62.3 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 $131.80, for a total aggregate investment of $8.20 billion. As of the date of this release, the Company had approximately $545 million remaining under its current share repurchase authorization.

2nd Quarter Comparable Store Sales Results

Comparable store sales are calculated based on the change in sales for 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 the sales from Leap Day in the six months ended June 30, 2016. Comparable store sales increased 1.7% for the second quarter ended June 30, 2017, on top of 4.3% for the same period one year ago. Comparable store sales increased 1.3% for the six months ended June 30, 2017, on top of 5.1% for the same period one year ago.

3rd Quarter and Updated Full-Year 2017 Guidance

The table below outlines the Company's guidance for selected third quarter and updated full-year 2017 financial data:

For the Three Months Ending September 30, 2017 For the Year Ending December 31, 2017

Comparable store sales 1% to 3% 1% to 2%

Total revenue $8.9 billion to $9.1 billion

Gross profit as a percentage of sales 52.5% to 52.9%

Operating income as a percentage of sales 19.1% to 19.5%

Diluted earnings per share (1) $3.10 to $3.20 $11.77 to $11.87 Capital expenditures $470 million to $500 million

Free cash flow (2) $830 million to $880 million

(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) Calculated as net cash provided by operating activities, less capital expenditures and excess tax benefit from share-based compensation payments for the period.

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, July 27, 2017, 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; the conference call identification number is 45130675. A replay of the conference call will be available on the Company's website through Thursday, July 26, 2018.

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 June 30, 2017, the Company operated 4,934 stores in 47 states.

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 economy in general, inflation, 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, 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, 2016, 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 Contact

Mark Merz (417) 829-5878

O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

June 30, 2017

June 30, 2016

December 31, 2016

Assets

(Unaudited)

(Unaudited)

(Note)

Current assets:

Cash and cash equivalents

$ 26,528

$ 398,259

$ 146,598

Accounts receivable, net

203,673

186,192

197,274

Amounts receivable from suppliers

61,876

78,824

82,105

Inventory

2,959,315

2,741,030

2,778,976

Other current assets

38,197

33,828

53,022

Total current assets

3,289,589

3,438,133

3,257,975

Property and equipment, at cost

5,035,242

4,587,944

4,832,342

Less: accumulated depreciation and amortization

1,805,844

1,608,704

1,708,911

Net property and equipment

3,229,398

2,979,240

3,123,431

Goodwill

786,938

757,130

785,399

Other assets, net

39,773

36,137

37,384

Total assets

$ 7,345,698

$ 7,210,640

$ 7,204,189

Liabilities and shareholders' equity

Current liabilities:

Accounts payable

$ 3,091,888

$ 2,914,641

$ 2,936,656

Self-insurance reserves

70,198

71,177

67,921

Accrued payroll

70,538

62,596

71,717

Accrued benefits and withholdings

59,099

59,966

74,454

Income taxes payable

31,803

-

-

Other current liabilities

242,607

258,295

249,901

Total current liabilities

3,566,133

3,366,675

3,400,649

Long-term debt

2,604,062

1,886,324

1,887,019

Deferred income taxes

98,048

72,961

90,166

Other liabilities

208,143

194,670

199,219

Shareholders' equity:

Common stock, $0.01 par value: Authorized shares - 245,000,000 Issued and outstanding shares - 87,998,971 as of June 30, 2017,

94,881,546 as of June 30, 2016, and

92,851,815 as of December 31, 2016

880

949

929

Additional paid-in capital

1,296,674

1,309,441

1,336,707

Retained (deficit) earnings

(428,242)

379,620

289,500

Total shareholders' equity

869,312

1,690,010

1,627,136

Total liabilities and shareholders' equity $ 7,345,698 $ 7,210,640 $ 7,204,189

Note: The balance sheet at December 31, 2016, 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. published this content on 26 July 2017 and is solely responsible for the information contained herein.
Distributed by Public, unedited and unaltered, on 26 July 2017 20:39:34 UTC.

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