O'Reilly Automotive Inc. (ORLY, Financial) filed Annual Report for the period ended 2011-12-31.
O Reilly Auto has a market cap of $10.99 billion; its shares were traded at around $87.34 with a P/E ratio of 22.4 and P/S ratio of 1.9. O Reilly Auto had an annual average earning growth of 18.3% over the past 10 years. GuruFocus rated O Reilly Auto the business predictability rank of 5-star.
Total other expense for the year ended December 31, 2011, increased to $51 million (or 0.9% of sales), from $23 million (or 0.4% of sales) for the same period one year ago, representing an increase of 118%. The increase in total other expense for the year was primarily due to one-time charges related to our new financing transactions that were completed in January of 2011 (discussed in detail below), offset by decreased interest expense on a lower average interest rate on outstanding borrowings, a lower facility fee on our revolving credit facility and less amortization of debt issuance costs in the current period as compared to the borrowing rates, facility fee and amortization of debt issuance costs in the prior period. In addition, during 2010, we recognized a nonrecurring, non-operating gain of $12 million related to the favorable settlement of a note receivable acquired in the acquisition of CSK (discussed in detail below).
Sales for the year ended December 31, 2010, increased $550 million to $5.4 billion from $4.85 billion for the same period one year ago, representing an increase of 11%. Comparable store sales are calculated based on the change in sales of stores open at least one year and exclude sales of specialty machinery, sales to independent parts stores, sales to Team Members and sales during the one- to two-week period certain CSK branded stores were closed for conversion. Comparable store sales for stores open at least one year increased 8.8% and 4.6% for the year ended December 31, 2010 and 2009, respectively.
Gross profit for the year ended December 31, 2010, increased to $2.62 billion (or 48.6% of sales) from $2.33 billion (or 48.0% of sales) for the same period one year ago, representing an increase of 13%. The increase in gross profit dollars was primarily a result of the increase in sales from new stores and the increase in comparable store sales at existing stores. The increase in gross profit as a percentage of sales was the result of improved product mix, lower product acquisition costs and decreased inventory shrinkage at converted CSK stores, partially offset by the impact of increased commercial sales as a percent of the total sales mix and reduced leverage on the expanded number of distribution centers. The improvement in product mix was primarily driven by increased sales in the hard part categories, which typically generate a higher gross margin percentage than other categories. Increasing hard part sales were the result of strong consumer demand as consumers retained their vehicles longer and our enhanced and more comprehensive inventory levels in the hard part categories in the CSK stores, supported by a more extensive and robust distribution network. Lower product acquisition costs were derived from improved negotiating leverage with our vendors as the result of large purchase volume increases associated with the acquisition of CSK. The benefit of this improvement in gross margin was realized in the first and second quarters of 2010 as compared to the same periods in 2009 when we renegotiated these vendor contracts. Our gross margin results for the third and fourth quarters of 2010 reflected comparable periods of improved purchasing leverage. The decrease in inventory shrinkage at converted CSK stores was the result of the more robust OReilly point of sale system (POS), which was installed in all CSK stores when they converted to the OReilly distribution systems. The OReilly POS provides our store managers with better tools to track and control inventory resulting in improved inventory shrinkage. Commercial sales are growing at a faster rate than DIY sales as a result of the enhanced distribution model in our western markets, which supports the implementation of our dual market strategy in these areas. Commercial sales typically carry a lower gross margin percentage than DIY sales, as volume discounts are granted on wholesale transactions to professional customers, and create pressure on our gross margin as a percent of sales. The reduced leverage on distribution center costs was the result of the additional distribution centers, which were opened in conjunction with the CSK integration plan. New Team Members in these distribution centers were not yet fully proficient with distribution operations, resulting in inefficiencies.
Interest expense for the year ended December 31, 2010, decreased to $39 million (or 0.7% of sales) from $45 million (or 0.9% of sales) for the same period one year ago, representing a decrease of 13%. The decrease in interest expense during 2010 as compared to 2009 was the result of a lower level of average outstanding borrowings under our ABL Credit Facility. Included as a component of Other income for the year ended December 31, 2010, was a nonrecurring, non-operating gain of $12 million related to the favorable settlement of a note receivable acquired in the acquisition of CSK.
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O Reilly Auto has a market cap of $10.99 billion; its shares were traded at around $87.34 with a P/E ratio of 22.4 and P/S ratio of 1.9. O Reilly Auto had an annual average earning growth of 18.3% over the past 10 years. GuruFocus rated O Reilly Auto the business predictability rank of 5-star.
Highlight of Business Operations:
Sales for the year ended December 31, 2011, increased $391 million to $5.79 billion from $5.40 billion for the same period one year ago, representing an increase of 7.2%. Comparable store sales for stores open at least one year increased 4.6% and 8.8% for the years ended December 31, 2011 and 2010, respectively. Comparable store sales are calculated based on the change in sales of stores open at least one year and exclude sales of specialty machinery, sales to independent parts stores and sales to Team Members.Total other expense for the year ended December 31, 2011, increased to $51 million (or 0.9% of sales), from $23 million (or 0.4% of sales) for the same period one year ago, representing an increase of 118%. The increase in total other expense for the year was primarily due to one-time charges related to our new financing transactions that were completed in January of 2011 (discussed in detail below), offset by decreased interest expense on a lower average interest rate on outstanding borrowings, a lower facility fee on our revolving credit facility and less amortization of debt issuance costs in the current period as compared to the borrowing rates, facility fee and amortization of debt issuance costs in the prior period. In addition, during 2010, we recognized a nonrecurring, non-operating gain of $12 million related to the favorable settlement of a note receivable acquired in the acquisition of CSK (discussed in detail below).
Sales for the year ended December 31, 2010, increased $550 million to $5.4 billion from $4.85 billion for the same period one year ago, representing an increase of 11%. Comparable store sales are calculated based on the change in sales of stores open at least one year and exclude sales of specialty machinery, sales to independent parts stores, sales to Team Members and sales during the one- to two-week period certain CSK branded stores were closed for conversion. Comparable store sales for stores open at least one year increased 8.8% and 4.6% for the year ended December 31, 2010 and 2009, respectively.
Gross profit for the year ended December 31, 2010, increased to $2.62 billion (or 48.6% of sales) from $2.33 billion (or 48.0% of sales) for the same period one year ago, representing an increase of 13%. The increase in gross profit dollars was primarily a result of the increase in sales from new stores and the increase in comparable store sales at existing stores. The increase in gross profit as a percentage of sales was the result of improved product mix, lower product acquisition costs and decreased inventory shrinkage at converted CSK stores, partially offset by the impact of increased commercial sales as a percent of the total sales mix and reduced leverage on the expanded number of distribution centers. The improvement in product mix was primarily driven by increased sales in the hard part categories, which typically generate a higher gross margin percentage than other categories. Increasing hard part sales were the result of strong consumer demand as consumers retained their vehicles longer and our enhanced and more comprehensive inventory levels in the hard part categories in the CSK stores, supported by a more extensive and robust distribution network. Lower product acquisition costs were derived from improved negotiating leverage with our vendors as the result of large purchase volume increases associated with the acquisition of CSK. The benefit of this improvement in gross margin was realized in the first and second quarters of 2010 as compared to the same periods in 2009 when we renegotiated these vendor contracts. Our gross margin results for the third and fourth quarters of 2010 reflected comparable periods of improved purchasing leverage. The decrease in inventory shrinkage at converted CSK stores was the result of the more robust OReilly point of sale system (POS), which was installed in all CSK stores when they converted to the OReilly distribution systems. The OReilly POS provides our store managers with better tools to track and control inventory resulting in improved inventory shrinkage. Commercial sales are growing at a faster rate than DIY sales as a result of the enhanced distribution model in our western markets, which supports the implementation of our dual market strategy in these areas. Commercial sales typically carry a lower gross margin percentage than DIY sales, as volume discounts are granted on wholesale transactions to professional customers, and create pressure on our gross margin as a percent of sales. The reduced leverage on distribution center costs was the result of the additional distribution centers, which were opened in conjunction with the CSK integration plan. New Team Members in these distribution centers were not yet fully proficient with distribution operations, resulting in inefficiencies.
Interest expense for the year ended December 31, 2010, decreased to $39 million (or 0.7% of sales) from $45 million (or 0.9% of sales) for the same period one year ago, representing a decrease of 13%. The decrease in interest expense during 2010 as compared to 2009 was the result of a lower level of average outstanding borrowings under our ABL Credit Facility. Included as a component of Other income for the year ended December 31, 2010, was a nonrecurring, non-operating gain of $12 million related to the favorable settlement of a note receivable acquired in the acquisition of CSK.
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