Exhibit 99.1
letterhead2018a07.jpg
FOR IMMEDIATE RELEASE

O’REILLY AUTOMOTIVE, INC. REPORTS THIRD QUARTER 2018 RESULTS


Third quarter comparable store sales increase of 3.9%
40% increase in third quarter diluted earnings per share to $4.50
Year-to-date net cash provided by operating activities increased 23%

Springfield, MO, October 24, 2018O’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 third quarter ended September 30, 2018.

3rd Quarter Financial Results
Greg Johnson, O’Reilly’s CEO and Co-President, commented, “We are pleased to report another profitable quarter, driven by Team O’Reilly’s commitment to providing excellent service to every customer.  Our third quarter comparable store sales increase of 3.9% was at the top end of our guidance range and is a testament to the hard work and dedication of our Team.  As a reminder, our third quarter comparable store sales results include approximately 50 basis points of headwind from one additional Sunday this year, which is our lowest volume day.  Our Team’s continued focus on profitable growth generated a solid 5% increase in third quarter operating profit dollars and a 40% increase in third quarter diluted earnings per share to $4.50, and I would like to thank our Team Members for their continued hard work, dedication and relentless focus on providing consistently excellent service to our customers.”

Sales for the third quarter ended September 30, 2018, increased $143 million, or 6%, to $2.48 billion from $2.34 billion for the same period one year ago. Gross profit for the third quarter increased 7% to $1.32 billion (or 53.0% of sales) from $1.23 billion (or 52.6% of sales) for the same period one year ago. Selling, general and administrative expenses (“SG&A”) for the third quarter increased 8% to $831 million (or 33.5% of sales) from $768 million (or 32.8% of sales) for the same period one year ago. Operating income for the third quarter increased 5% to $485 million (or 19.5% of sales) from $462 million (or 19.7% of sales) for the same period one year ago.

Net income for the third quarter ended September 30, 2018, increased $82 million, or 29%, to $366 million (or 14.7% of sales) from $284 million (or 12.1% of sales) for the same period one year ago. Diluted earnings per common share for the third quarter increased 40% to $4.50 on 81 million shares versus $3.22 on 88 million shares for the same period one year ago.

Year-to-Date Financial Results
Mr. Johnson continued, “During the third quarter, we opened 43 net, new stores, which brings our year-to-date store openings to 171 net, new stores across 33 states, and we are well positioned to achieve our target of 200 net, new stores for 2018.  We continue to be pleased with the performance of our new stores and remain very confident in our opportunities to profitably grow in both existing and new market areas.  Based on solid industry demand drivers and our confidence in the ability of our store Teams to continue to take market share, we are establishing a target range of 200 to 210 net, new store openings for 2019, supported by our industry-leading distribution network and best-in-class parts availability.”

Sales for the first nine months of 2018 increased $435 million, or 6%, to $7.22 billion from $6.79 billion for the same period one year ago. Gross profit for the first nine months of 2018 increased 7% to $3.81 billion (or 52.7% of sales) from $3.56 billion (or 52.5% of sales) for the same period one year ago. SG&A for the first nine months of 2018 increased 8% to $2.42 billion (or 33.5% of sales) from $2.24 billion (or 33.0% of sales) for the same period one year ago. Operating income for



the first nine months of 2018 increased 5% to $1.39 billion (or 19.2% of sales) from $1.32 billion (or 19.5% of sales) for the same period one year ago.

Net income for the first nine months of 2018 increased $193 million, or 23%, to $1.02 billion (or 14.2% of sales) from $831 million (or 12.3% of sales) for the same period one year ago. Diluted earnings per common share for the first nine months of 2018 increased 35% to $12.36 on 83 million shares versus $9.15 on 91 million shares for the same period one year ago.

Share Repurchase Program
During the third quarter ended September 30, 2018, the Company repurchased 0.9 million shares of its common stock, at an average price per share of $306.22, for a total investment of $285 million. During the first nine months ended September 30, 2018, the Company repurchased 4.7 million shares of its common stock, at an average price per share of $266.48, for a total investment of $1.25 billion. Subsequent to the end of the third quarter and through the date of this release, the Company repurchased an additional 0.2 million shares of its common stock, at an average price per share of $340.76, for a total investment of $68 million. The Company has repurchased a total of 71.1 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 $145.53, for a total aggregate investment of $10.35 billion. As of the date of this release, the Company had approximately $396 million remaining under its current share repurchase authorization.

3rd 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. Online sales, resulting from ship-to-home orders and pick-up-in-store orders, for stores open at least one year, are included in the comparable store sales calculation. Comparable store sales increased 3.9% for the third quarter ended September 30, 2018, on top of 1.8% for the same period one year ago. Comparable store sales increased 4.0% for the nine months ended September 30, 2018, on top of 1.5% for the same period one year ago.

4th Quarter and Updated Full-Year 2018 Guidance
The table below outlines the Company’s guidance for selected fourth quarter and updated full-year 2018 financial data:
 
For the Three Months Ending
December 31, 2018
 
For the Year Ending
December 31, 2018
Comparable store sales
2% to 4%
 
3% to 4%
Total revenue
 
 
$9.4 billion to $9.6 billion
Gross profit as a percentage of sales
 
 
52.5% to 53.0%
Operating income as a percentage of sales
 
 
18.5% to 19.0%
Effective income tax rate
 
 
21% to 22%
Diluted earnings per share (1)
$3.60 to $3.70
 
$15.95 to $16.05
Net cash provided by operating activities
 
 
$1.62 billion to $1.76 billion
Capital expenditures
 
 
$490 million to $520 million
Free cash flow (2)
 
 
$1.1 billion to $1.2 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:
(in millions)
For the Year Ending
December 31, 2018
Net cash provided by operating activities
$
1,620

to
$
1,760

Less:
Capital expenditures
490

to
520

 
Excess tax benefit from share-based compensation payments
30

to
40

Free cash flow
$
1,100

to
$
1,200





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 25, 2018, 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) 619-6396; the conference call identification number is 47646960. A replay of the conference call will be available on the Company’s website through Thursday, October 24, 2019.

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, 2018, the Company operated 5,190 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, the impact of the U.S. Tax Cuts and Jobs Act, 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, 2017, 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)
 
September 30, 2018
 
September 30, 2017
 
December 31, 2017
 
(Unaudited)
 
(Unaudited)
 
(Note)
Assets
 
 
 
 
 
Current assets:
 
 
 
 
 
Cash and cash equivalents
$
40,019

 
$
37,287

 
$
46,348

Accounts receivable, net
242,692

 
219,631

 
216,251

Amounts receivable from suppliers
83,237

 
79,491

 
76,236

Inventory
3,139,621

 
2,987,592

 
3,009,800

Other current assets
54,462

 
34,480

 
49,037

Total current assets
3,560,031

 
3,358,481

 
3,397,672

 
 
 
 
 
 
Property and equipment, at cost
5,512,325

 
5,114,804

 
5,191,135

Less: accumulated depreciation and amortization
2,010,392

 
1,822,123

 
1,847,329

Net property and equipment
3,501,933

 
3,292,681

 
3,343,806

 
 
 
 
 
 
Goodwill
789,178

 
787,210

 
789,058

Other assets, net
43,572

 
40,956

 
41,349

Total assets
$
7,894,714

 
$
7,479,328

 
$
7,571,885

 
 
 
 
 
 
Liabilities and shareholders’ equity
 
 
 
 
 
Current liabilities:
 
 
 
 
 
Accounts payable
$
3,384,098

 
$
3,154,250

 
$
3,190,029

Self-insurance reserves
75,440

 
72,223

 
71,695

Accrued payroll
89,721

 
80,953

 
77,147

Accrued benefits and withholdings
83,113

 
65,574

 
69,308

Income taxes payable

 
6,175

 

Other current liabilities
272,709

 
249,325

 
239,187

Total current liabilities
3,905,081

 
3,628,500

 
3,647,366

 
 
 
 
 
 
Long-term debt
3,174,327

 
2,900,816

 
2,978,390

Deferred income taxes
102,640

 
131,847

 
85,406

Other liabilities
214,287

 
203,986

 
207,677

 
 
 
 
 
 
Shareholders’ equity:
 
 
 
 
 
Common stock, $0.01 par value:
 
 
 
 
 
Authorized shares – 245,000,000
 
 
 
 
 
Issued and outstanding shares –
 
 
 
 
 
80,345,665 as of September 30, 2018,
 
 
 
 
 
85,338,294 as of September 30, 2017, and
 
 
 
 
 
84,302,187 as of December 31, 2017
803

 
853

 
843

Additional paid-in capital
1,265,827

 
1,267,810

 
1,265,043

Retained deficit
(768,251
)
 
(654,484
)
 
(612,840
)
Total shareholders’ equity
498,379

 
614,179

 
653,046

 
 
 
 
 
 
Total liabilities and shareholders’ equity
$
7,894,714

 
$
7,479,328

 
$
7,571,885

Note: The balance sheet at December 31, 2017, 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
(Unaudited)
(In thousands, except per share data)




 
For the Three Months Ended 
 September 30,
 
For the Nine Months Ended 
 September 30,
 
2018
 
2017
 
2018
 
2017
Sales
$
2,482,717

 
$
2,339,830

 
$
7,221,471

 
$
6,786,918

Cost of goods sold, including warehouse and distribution expenses
1,166,962

 
1,109,536

 
3,415,820

 
3,225,415

Gross profit
1,315,755

 
1,230,294

 
3,805,651

 
3,561,503

 
 
 
 
 
 
 
 
Selling, general and administrative expenses
830,607

 
768,331

 
2,418,507

 
2,238,938

Operating income
485,148

 
461,963

 
1,387,144

 
1,322,565

 
 
 
 
 
 
 
 
Other income (expense):
 
 
 
 
 
 
 
Interest expense
(31,582
)
 
(24,324
)
 
(90,661
)
 
(64,555
)
Interest income
669

 
592

 
1,838

 
1,768

Other, net
1,416

 
1,299

 
2,609

 
1,302

Total other expense
(29,497
)
 
(22,433
)
 
(86,214
)
 
(61,485
)
 
 
 
 
 
 
 
 
Income before income taxes
455,651

 
439,530

 
1,300,930

 
1,261,080

Provision for income taxes
89,500

 
155,796

 
276,800

 
429,591

Net income
$
366,151

 
$
283,734

 
$
1,024,130

 
$
831,489

 
 
 
 
 
 
 
 
Earnings per share-basic:
 
 
 
 
 
 
 
Earnings per share
$
4.54

 
$
3.26

 
$
12.50

 
$
9.28

Weighted-average common shares outstanding – basic
80,593

 
86,947

 
81,939

 
89,641

 
 
 
 
 
 
 
 
Earnings per share-assuming dilution:
 
 
 
 
 
 
 
Earnings per share
$
4.50

 
$
3.22

 
$
12.36

 
$
9.15

Weighted-average common shares outstanding – assuming dilution
81,410

 
88,025

 
82,841

 
90,869

 




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


 
For the Nine Months Ended 
 September 30,
 
2018
 
2017
 
 
 
 
Operating activities:
 
 
 
Net income
$
1,024,130

 
$
831,489

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization of property, equipment and intangibles
193,318

 
173,500

Amortization of debt discount and issuance costs
2,557

 
2,078

Deferred income taxes
17,234

 
41,848

Share-based compensation programs
15,144

 
14,835

Other
6,304

 
8,174

Changes in operating assets and liabilities:
 
 
 
Accounts receivable
(32,799
)
 
(28,761
)
Inventory
(129,214
)
 
(208,338
)
Accounts payable
194,069

 
217,486

Income taxes payable
4,460

 
32,124

Other
46,816

 
2,984

Net cash provided by operating activities
1,342,019

 
1,087,419

 
 
 
 
Investing activities:
 
 
 
Purchases of property and equipment
(350,461
)
 
(347,756
)
Proceeds from sale of property and equipment
3,353

 
1,906

Other
(716
)
 
(2,072
)
Net cash used in investing activities
(347,824
)
 
(347,922
)
 
 
 
 
Financing activities:
 
 
 
Proceeds from borrowings on revolving credit facility
1,745,000

 
2,487,000

Payments on revolving credit facility
(2,046,000
)
 
(2,218,000
)
Proceeds from the issuance of long-term debt
498,660

 
748,800

Payment of debt issuance costs
(3,923
)
 
(7,490
)
Repurchases of common stock
(1,251,060
)
 
(1,893,148
)
Net proceeds from issuance of common stock
58,955

 
34,186

Other
(2,156
)
 
(156
)
Net cash used in financing activities
(1,000,524
)
 
(848,808
)
 
 
 
 
Net decrease in cash and cash equivalents
(6,329
)
 
(109,311
)
Cash and cash equivalents at beginning of the period
46,348

 
146,598

Cash and cash equivalents at end of the period
$
40,019

 
$
37,287

 
 
 
 
Supplemental disclosures of cash flow information:
 
 
 
Income taxes paid
$
256,949

 
$
359,838

Interest paid, net of capitalized interest
102,025

 
72,252






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


 
For the Twelve Months Ended
September 30,
Adjusted Debt to EBITDAR:
2018
 
2017
(In thousands, except adjusted debt to EBITDAR ratio)
 
 
 
GAAP debt
$
3,174,327

 
$
2,900,816

Add:
Letters of credit
36,984

 
41,258

 
Discount on senior notes
4,498

 
3,894

 
Debt issuance costs
16,175

 
14,290

 
Six-times rent expense
1,876,758

 
1,770,498

Adjusted debt
$
5,108,742

 
$
4,730,756

 
 
 
 
 
GAAP net income
$
1,326,445

 
$
1,077,519

Add:
Interest expense
117,455

 
83,258

 
Provision for income taxes
351,209

 
574,491

 
Depreciation and amortization
253,663

 
229,919

 
Share-based compensation expense
19,710

 
19,323

 
Rent expense
312,793

 
295,083

EBITDAR
$
2,381,275

 
$
2,279,593

 
 
 
 
 
Adjusted debt to EBITDAR
2.15

 
2.08



 
September 30,
 
2018
 
2017
Selected Balance Sheet Ratios:
 
 
 
Inventory turnover (1)
1.4

 
1.5

Average inventory per store (in thousands) (2)
$
605

 
$
599

Accounts payable to inventory (3)
107.8
%
 
105.6
%
Return on assets (4)
17.2
%
 
14.7
%


 
For the Three Months Ended 
 September 30,
 
For the Nine Months Ended 
 September 30,
 
2018
 
2017
 
2018
 
2017
Reconciliation of Free Cash Flow (in thousands):
 
 
 
 
 
 
 
Net cash provided by operating activities
$
466,786

 
$
376,912

 
$
1,342,019

 
$
1,087,419

Less:
Capital expenditures
126,344

 
120,250

 
350,461

 
347,756

 
Excess tax benefit from share-based compensation payments
13,366

 
2,803

 
32,974

 
35,282

Free cash flow
$
327,076

 
$
253,859

 
$
958,584

 
$
704,381






Store and Team Member Information:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
For the Three Months Ended 
 September 30,
 
For the Nine Months Ended 
 September 30,
 
For the Twelve Months Ended
September 30,
 
2018
 
2017
 
2018
 
2017
 
2018
 
2017
Beginning store count
5,147

 
4,934

 
5,019

 
4,829

 
4,984

 
4,712

New stores opened
45

 
52

 
177

 
162

 
213

 
232

Stores acquired

 

 

 

 

 
48

Stores closed
(2
)
 
(2
)
 
(6
)
 
(7
)
 
(7
)
 
(8
)
Ending store count
5,190

 
4,984

 
5,190

 
4,984

 
5,190

 
4,984


 
For the Three Months Ended 
 September 30,
 
For the Twelve Months Ended
September 30,
 
2018
 
2017
 
2018
 
2017
Total employment
80,158

 
75,809

 
 
 
 
Square footage (in thousands)
38,166

 
36,340

 
 
 
 
Sales per weighted-average square foot (5)
$
65.02

 
$
64.37

 
$
250.71

 
$
248.82

Sales per weighted-average store (in thousands) (6)
$
477

 
$
469

 
$
1,836

 
$
1,811



(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)    Calculated as net income for the last 12 months divided by average total assets. Average total assets is calculated as the average of total assets for the trailing four quarters used in determining the denominator.
(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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