Home / Top News / O’Reilly Automotive, Inc. Reports Third Quarter 2021 Results

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

  • 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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