O’Reilly Automotive, Inc. Reports Fourth Quarter and Full-Year 2021 Results

Wednesday, 09. February 2022 22:30

 

  • Fourth quarter comparable store sales growth of 14.5%, full-year increase of 13.3%
  • 41% increase in fourth quarter diluted earnings per share, full-year increase of 32%
  • $3.21 billion net cash provided by operating activities in 2021

SPRINGFIELD, Mo., Feb. 09, 2022 (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 fourth quarter ended December 31, 2021. The results represent 29 consecutive years of comparable stores sales growth and record revenue and operating income for O’Reilly since becoming a public company in April of 1993.

4th Quarter Financial Results
O’Reilly’s CEO and Co-President, Greg Johnson, commented, “We are very pleased to once again report an extremely strong quarter, highlighted by 14.5% growth in comparable store sales and a 41% increase in diluted earnings per share. This incredible performance in the fourth quarter caps a tremendous year for our Company, a year in which we delivered the best financial results in our Company’s history, after setting the same records in 2020. Our full-year 2021 comparable store sales growth of 13.3%, on top of our strong 2020 performance, represents a two-year stack of 24.2% and is a testament to our Team’s unrelenting dedication to our customers. These accomplishments are all the more impressive in light of the extremely difficult challenges our Team has faced the past two years, and I am extremely grateful for Team O’Reilly’s commitment to meeting the critical needs of our customers during the pandemic.”

Sales for the fourth quarter ended December 31, 2021, increased $463 million, or 16%, to $3.29 billion from $2.83 billion for the same period one year ago. Gross profit for the fourth quarter increased 18% to $1.73 billion (or 52.7% of sales) from $1.47 billion (or 52.0% of sales) for the same period one year ago. Selling, general and administrative expenses (“SG&A”) for the fourth quarter increased 13% to $1.06 billion (or 32.2% of sales) from $938 million (or 33.2% of sales) for the same period one year ago. Operating income for the fourth quarter increased 27% to $676 million (or 20.5% of sales) from $534 million (or 18.9% of sales) for the same period one year ago.

Net income for the fourth quarter ended December 31, 2021, increased $126 million, or 32%, to $519 million (or 15.8% of sales) from $393 million (or 13.9% of sales) for the same period one year ago. Diluted earnings per common share for the fourth quarter increased 41% to $7.64 on 68 million shares versus $5.40 on 73 million shares for the same period one year ago.

Full-Year Financial Results
Mr. Johnson continued, “Team O’Reilly’s dedication to unsurpassed customer service levels and relentless focus on profitable growth translated our strong top-line performance in 2021 into a record 21.9% operating margin, which exceeded our previous record operating margin by over 100 basis points. Our full-year diluted earnings per share increased 32% to $31.10, which represents a compounded annual growth rate of 25% over the last three years. I would like to congratulate Team O’Reilly for exceeding our sales and profitability goals in yet another incredible year and thank each of them for their continued hard work and dedication to our ongoing success.”

Sales for the year ended December 31, 2021, increased $1.72 billion, or 15%, to $13.33 billion from $11.60 billion for the same period one year ago. Gross profit for the year ended December 31, 2021, increased 15% to $7.02 billion (or 52.7% of sales) from $6.09 billion (or 52.4% of sales) for the same period one year ago. SG&A for the year ended December 31, 2021, increased 12% to $4.10 billion (or 30.8% of sales) from $3.67 billion (or 31.6% of sales) for the same period one year ago. Operating income for the year ended December 31, 2021, increased 21% to $2.92 billion (or 21.9% of sales) from $2.42 billion (or 20.8% of sales) for the same period one year ago.

Net income for the year ended December 31, 2021, increased $412 million, or 24%, to $2.16 billion (or 16.2% of sales) from $1.75 billion (or 15.1% of sales) for the same period one year ago. Diluted earnings per common share for the year ended December 31, 2021, increased 32% to $31.10 on 70 million shares versus $23.53 on 74 million shares for the same period one year ago.

“As we look forward to 2022,” Mr. Johnson continued, “we remain confident in the strength of our Team and our industry, and our 2022 financial guidance reflects our expectations for continued strong customer demand, as well as our planned strategy to further invest in pricing on the professional side of our business. We continually monitor the competitive landscape in our industry and have been extremely pleased with our ability to grow both our DIY and professional business at record levels over the last two years; however, we believe we have an opportunity to accelerate our professional share gain through targeted competitive adjustments to our pricing strategy. We have incorporated our expectations for continued robust demand on both sides of our business and the anticipated sales lift from our professional pricing initiative in establishing our 2022 comparable store sales guidance range of 5% to 7%. Our gross profit and operating profit guidance ranges also reflect the rollout of our professional pricing initiative, which we strongly believe will further solidify our competitive position and drive long-term profitable growth.”

4th Quarter and Full-Year 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 year ended December 31, 2020. Online sales for 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 14.5% for the fourth quarter ended December 31, 2021, on top of 11.2% for the same period one year ago. Comparable stores sales increased 13.3% for the year ended December 31, 2021, on top of 10.9% for the same period one year ago.

Share Repurchase Program
During the fourth quarter ended December 31, 2021, the Company repurchased 0.7 million shares of its common stock, at an average price per share of $637.15, for a total investment of $469 million. During the year ended December 31, 2021, the Company repurchased 4.5 million shares of its common stock, at an average price per share of $545.78, for a total investment of $2.48 billion. Subsequent to the end of the fourth 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 $660.23, for a total investment of $215 million. The Company has repurchased a total of 85.9 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 $197.48, for a total aggregate investment of $16.96 billion. As of the date of this release, the Company had approximately $1.79 billion remaining under its current share repurchase authorizations.

Full-Year 2022 Guidance
The table below outlines the Company’s guidance for selected full-year 2022 financial data:

  For the Year Ending
  December 31, 2022
Net, new store openings 175 to 185 
Comparable store sales 5% to 7% 
Total revenue $14.2 billion to $14.5 billion 
Gross profit as a percentage of sales 50.8% to 51.3% 
Operating income as a percentage of sales 20.6% to 21.1% 
Effective income tax rate 23.2% 
Diluted earnings per share (1) $32.35 to $32.85 
Net cash provided by operating activities $2.1 billion to $2.5 billion 
Capital expenditures $650 million to $750 million 
Free cash flow (2) $1.3 billion to $1.6 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, 2022
Net cash provided by operating activities $2,080  to $2,500 
Less:Capital expenditures  650  to  750 
 Excess tax benefit from share-based compensation payments  10  to  20 
 Investment in tax credit equity investments  120  to  130 
Free cash flow $1,300  to $1,600 
           

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, February 10, 2022, 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 50259150. A replay of the conference call will be available on the Company’s website through Thursday, February 9, 2023.

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 December 31, 2021, the Company operated 5,759 stores in 47 U.S. states and 25 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)

  December 31, 2021 December 31, 2020
  (Unaudited) (Note)
Assets      
Current assets:      
Cash and cash equivalents $ 362,113  $465,640 
Accounts receivable, net   272,562   229,679 
Amounts receivable from suppliers   113,112   100,615 
Inventory   3,686,383   3,653,195 
Other current assets   70,092   50,658 
Total current assets   4,504,262   4,499,787 
       
Property and equipment, at cost   6,948,038   6,559,911 
Less: accumulated depreciation and amortization   2,734,523   2,464,993 
Net property and equipment   4,213,515   4,094,918 
       
Operating lease, right-of-use assets   1,982,478   1,995,127 
Goodwill   879,340   881,030 
Other assets, net   139,112   125,780 
Total assets $ 11,718,707  $11,596,642 
       
Liabilities and shareholders’ equity (deficit)      
Current liabilities:      
Accounts payable $ 4,695,312  $4,184,662 
Self-insurance reserves   128,794   109,199 
Accrued payroll   107,588   88,875 
Accrued benefits and withholdings   234,872   242,724 
Income taxes payable     16,786 
Current portion of operating lease liabilities   337,832   322,778 
Other current liabilities   370,217   297,393 
Total current liabilities   5,874,615   5,262,417 
       
Long-term debt   3,826,978   4,123,217 
Operating lease liabilities, less current portion   1,701,757   1,718,691 
Deferred income taxes   175,212   155,899 
Other liabilities   206,568   196,160 
       
Shareholders’ equity (deficit):      
Common stock, $0.01 par value:      
Authorized shares – 245,000,000      
Issued and outstanding shares –      
67,029,042 as of December 31, 2021, and      
71,123,109 as of December 31, 2020   670   711 
Additional paid-in capital   1,305,508   1,280,841 
Retained deficit   (1,365,802)  (1,139,139)
Accumulated other comprehensive loss   (6,799)  (2,155)
Total shareholders’ (deficit) equity   (66,423)  140,258 
       
Total liabilities and shareholders’ equity (deficit) $ 11,718,707  $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 Year Ended
  December 31,  December 31, 
  2021 2020 2021 2020
   (Unaudited)  (Unaudited)  (Unaudited)  (Note)
Sales $ 3,291,493  $2,828,773  $ 13,327,563  $11,604,493 
Cost of goods sold, including warehouse and distribution expenses   1,556,957   1,356,635    6,307,614   5,518,801 
Gross profit   1,734,536   1,472,138    7,019,949   6,085,692 
             
Selling, general and administrative expenses   1,058,655   937,866    4,102,781   3,666,356 
Operating income   675,881   534,272    2,917,168   2,419,336 
             
Other income (expense):            
Interest expense   (34,732)  (38,349)   (144,768)  (161,126)
Interest income   493   599    1,971   2,491 
Other, net   2,582   3,407    7,543   5,704 
Total other expense   (31,657)  (34,343)   (135,254)  (152,931)
             
Income before income taxes   644,224   499,929    2,781,914   2,266,405 
Provision for income taxes   125,251   106,984    617,229   514,103 
Net income $ 518,973  $392,945  $ 2,164,685  $1,752,302 
             
Earnings per share-basic:            
Earnings per share $ 7.71  $5.45  $ 31.39  $23.74 
Weighted-average common shares outstanding – basic   67,300   72,143    68,967   73,817 
             
Earnings per share-assuming dilution:            
Earnings per share $ 7.64  $5.40  $ 31.10  $23.53 
Weighted-average common shares outstanding – assuming dilution   67,928   72,771    69,611   74,462 
                 

Note: The income statement for the year ended 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 CASH FLOWS
(In thousands)

  For the Year Ended
  December 31, 
  2021 2020
  (Unaudited) (Note)
Operating activities:      
Net income $ 2,164,685  $1,752,302 
Adjustments to reconcile net income to net cash provided by operating activities:      
Depreciation and amortization of property, equipment and intangibles   328,217   314,635 
Amortization of debt discount and issuance costs   4,388   4,580 
Deferred income taxes   20,383   12,381 
Share-based compensation programs   24,656   22,747 
Other   2,128   4,686 
Changes in operating assets and liabilities:      
Accounts receivable   (47,427)  (20,515)
Inventory   (32,634)  (198,864)
Accounts payable   510,911   580,608 
Income taxes payable   152,339   197,739 
Other   79,664   166,304 
Net cash provided by operating activities   3,207,310   2,836,603 
       
Investing activities:      
Purchases of property and equipment   (442,853)  (465,579)
Proceeds from sale of property and equipment   9,494   15,770 
Investment in tax credit equity investments   (180,333)  (164,111)
Other   (1,928)  (975)
Net cash used in investing activities   (615,620)  (614,895)
       
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)  (500,000)
Payment of debt issuance costs   (3,412)  (7,929)
Repurchases of common stock   (2,476,048)  (2,087,194)
Net proceeds from issuance of common stock   84,915   62,284 
Other   (313)  (253)
Net cash used in financing activities   (2,694,858)  (1,796,577)
       
Effect of exchange rate changes on cash   (359)  103 
Net (decrease) increase in cash and cash equivalents   (103,527)  425,234 
Cash and cash equivalents at beginning of the period   465,640   40,406 
Cash and cash equivalents at end of the period $ 362,113  $465,640 
       
Supplemental disclosures of cash flow information:      
Income taxes paid $ 450,935  $305,087 
Interest paid, net of capitalized interest   144,293   159,717 
         

Note: The cash flow statement for the year ended 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

SELECTED FINANCIAL INFORMATION
(Unaudited)

  For the Year Ended
  December 31, 
Adjusted Debt to EBITDAR: 2021 2020
(In thousands, except adjusted debt to EBITDAR ratio)        
GAAP debt $ 3,826,978  $4,123,217 
Add:Letters of credit   83,985   66,427 
 Discount on senior notes   4,360   5,071 
 Debt issuance costs   18,662   21,712 
 Six-times rent expense   2,232,132   2,125,896 
Adjusted debt $ 6,166,117  $6,342,323 
         
GAAP net income $ 2,164,685  $1,752,302 
Add:Interest expense   144,768   161,126 
 Provision for income taxes   617,229   514,103 
 Depreciation and amortization   328,217   314,635 
 Share-based compensation expense   24,656   22,747 
 Rent expense (i)   372,022   354,316 
EBITDAR $ 3,651,577  $3,119,229 
         
Adjusted debt to EBITDAR   1.69   2.03 
         

(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 year ended December 31, 2021 and 2020 (in thousands):

Total lease cost, per ASC 842, for the year ended December 31, 2021 $443,484 
Less:Variable non-contract operating lease components, related to property taxes and insurance, for the year ended December 31, 2021  71,462 
Rent expense for the year ended December 31, 2021 $372,022 
      
Total lease cost, per ASC 842, for the year ended December 31, 2020 $420,365 
Less:Variable non-contract operating lease components, related to property taxes and insurance, for the year ended December 31, 2020  66,049 
Rent expense for the year ended December 31, 2020 $354,316 


  December 31, 
  2021 2020
Selected Balance Sheet Ratios:        
Inventory turnover (1)   1.7   1.5 
Average inventory per store (in thousands) (2) $ 637  $650 
Accounts payable to inventory (3)   127.4%  114.5%


   For the Three Months Ended  For the Year Ended
   December 31,  December 31, 
   2021 2020 2021 2020
Reconciliation of Free Cash Flow (in thousands):                
Net cash provided by operating activities $ 641,983  $487,474  $ 3,207,310  $2,836,603 
Less:Capital expenditures   102,166   102,154    442,853   465,579 
 Excess tax benefit from share-based compensation payments   6,246   2,132    35,202   16,918 
 Investment in tax credit equity investments   178,538   68,819    180,333   164,111 
Free cash flow $ 355,033  $314,369  $ 2,548,922  $2,189,995 


  For the Three Months Ended  For the Year Ended
  December 31,  December 31, 
  2021
 2020 2021 2020
Store Count:         
Beginning domestic store count  5,740  5,592   5,594  5,439 
New stores opened  19  5   167  167 
Stores closed   (3)  (2) (12)
Ending domestic store count  5,759  5,594   5,759  5,594 
          
Mexico stores  25  22   25  22 
Ending total store count  5,784  5,616   5,784  5,616 


  For the Three Months Ended  For the Year Ended
  December 31,  December 31, 
  2021 2020 2021 2020
Store and Team Member Information: (4)                
Total employment   81,123   76,257         
Square footage (in thousands)   43,185   41,668         
Sales per weighted-average square foot (5) $ 74.96  $66.70  $ 307.37  $276.96 
Sales per weighted-average store (in thousands) (6) $ 562  $497  $ 2,298  $2,057 
                 

(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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