®
2 0 2 0
A n n u a l R e p o r t
$8,593
$8,978
$9,536
$10,150
$11,604
$10.73
$12.67
$16.10
$17.88
$23.53
34.3%
35.1%
39.5%
38.7%
48.6%
2017
2016
SALES
(in millions)
2018
2019
2020
2018
2017
2016
2019
DILUTED EARNINGS
per SHARE
2020
2018
2017
2016
RETURN on
INVESTED CAPITAL
2019
FINANCIAL HIGHLIGHTS
In thousands, except earnings per share and ratio data and store count
YEAR ENDED DECEMBER 31,
Store Count
Percentage Increase in Comparable Store Sales
2020
5,616
10.9%
2019
5,460
4.0%
2018
5,219
3.8%
2017
5,019
1.4%
2020
2016
4,829
4.8%
$ 11,604,493 $
10,149,985 $
9,536,428 $
8,977,726 $
8,593,096
Sales
Operating Income
Net Income
Accounts Payable to Inventory
Working Capital
Total Assets
Total Debt
Shareholders’ Equity
2,419,336
1,752,302
114.5%
(762,630)
11,596,642
4,123,217
140,258
1,920,726
1,391,042
104.4%
(635,765)
10,717,160
3,890,527
397,340
1,815,184
1,324,487
105.7%
(350,918)
7,980,789
3,417,122
353,667
1,725,400
1,133,804
106.0%
(249,694)
7,571,885
2,978,390
653,046
1,699,206
1,037,691
105.7%
(142,674)
7,204,189
1,887,019
1,627,136
10.73
96,720
Earnings Per Share (assuming dilution)
$ 23.53 $
17.88 $
16.10 $
12.67 $
Weighted-Average Common Shares
Outstanding (assuming dilution)
74,462
77,788
82,280
89,502
COMPARISON OF TEN-YEAR CUMULATIVE RETURN
This graph shows the cumulative total shareholder return assuming the investment of $100 on December 31, 2010, and the
reinvestment of dividends thereafter, if any, in the common stock of O’Reilly Automotive, Inc., the Standard and Poor’s S&P 500
Retail Index and the Standard and Poor’s S&P 500 Index.
$72 5 $749
$57 0
$100
$ 13 2
$148
$213
$41 9
$46 1
$39 8
$319
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
O’Reilly Automotive, Inc.
S&P 500 Retail Index
S&P 500 Index
Our commitment to our customers and our team members:
We are enthusiastic, hardworking professionals who are dedicated to teamwork,
safety/wellness, and excellent customer service. We will practice expense control while
setting an example of respect, honesty, and a win-win attitude in everything we do.
Andres Quiroz-Marin, Installer Service Specialist, O’Reilly 5796-Aurora, IL.
TO OUR FELLOW
SHAREHOLDERS:
2020 was one of the most challenging years in the 63-
year history of our Company, and words simply
cannot express the gratitude we have for the selfless dedication
and hard work demonstrated by our Team of over 77,000 Team
Members in our stores, distribution centers and corporate offices.
At the beginning of the year, we could never have anticipated
the obstacles we would face during 2020 as a result of the
COVID-19 pandemic, natural disasters and social unrest, and the
disruptions and changes these would impose on every facet of
our daily lives. In trying times, a company’s true merit is put on
full display, and we were, and continue to be, extremely proud
to see our Team demonstrate the O’Reilly Culture to its fullest,
showing that being “O’Reilly Strong” is a key foundation for
our success and cannot be easily duplicated. Our commitment
to protecting the health and safety of our Team Members and
customers has remained paramount, and it will continue to be
our top priority as we meet the critical needs of our customers
as an essential service provider. Thank you, Team O’Reilly, for
your commitment to our Culture, our Customers, and to each
other; you continue to be our greatest competitive advantage and
the fuel for our future success.
"O’Reilly
Strong"
is a key
foundation
for our
success
and cannot
be easily
duplicated.
GREG JOHNSON
Chief Executive Officer
and Co-President
JEFF SH AW
Chief Operating Officer
and Co-President
BR AD BECKH AM
Executive Vice President of
Store Operations and Sales
BRENT KIRBY
Executive Vice President of
Supply Chain
THOM AS MCFALL
Executive Vice President
and Chief Financial Officer
O’REILLY AUTOMOTIVE 2020 ANNUAL REPORT • 1
industry-leading distribution
network with the opening
of our Lebanon, Tennessee,
distribution center in 2020,
and we made significant
progress on our new Horn
Lake, Mississippi, distribution
center, which is expected
to open during the second
quarter of 2021. In addition,
we continue to invest heavily
in enhancing our omnichannel
capabilities to meet our
customers on their terms,
whether they visit a store, call
or click.
As we seek the highest return
for our shareholders’ capital,
reinvesting in our business
remains the top priority. Our
capital strategy continues to
be to enhance our existing
store base and distribution
network, grow organically
through new store openings,
and consolidate the market
Eduardo Damian Garcia Jimenez, Assistant Store Manager, and Ana Karen Velasco, Store Manager,
at the opening of our new ORMA store, Guadalajara, Jalisco, Mexico, in December 2020.
Ricardo Bernabe Hernandez, Retail Service Specialist, O’Reilly 281-Des Moines, IA.
stimulus, our Team’s performance allowed us to gain significant
market share.
We remain optimistic regarding the health and strength of
the automotive aftermarket industry and the ability of our
Team to produce strong top-line results. Miles driven is the
fundamental long-term driver of demand in our industry,
and we expect to benefit as miles driven returns to normal
levels and more consumers return to work. With these miles
being driven by a growing and aging vehicle fleet, we remain
confident consumers will continue to see value in repairing and
maintaining their vehicles, particularly as economic uncertainty
persists. These drivers provide both a short-term and long-term
positive outlook for our industry.
On top of the impressive operating results, our Team was able
to make investments in the continued growth of our business.
During 2020, we successfully opened 156 net, new stores,
including our first greenfield new store opening in Mexico.
For 2021, we have established a growth target of 165 to 175
net, new store openings, which includes an additional five
new stores in Mexico. During 2020, we further expanded our
In the face of unprecedented
challenges, Team O’Reilly
delivered record-breaking
operating performance,
highlighted by full-year
comparable store sales growth
of 10.9% and an incredible
26% increase in operating
profit. The significance of
these outstanding results
cannot be understated, but it
is also extremely important
to note that these results were
achieved by executing our
time-tested business model
of excellent customer service
by our professional parts
people, supported by our
robust distribution network
supplying industry-leading
parts availability. Our mission
is to be the dominant supplier
of auto parts in all of our
markets, and while the strong
results in 2020 were supported
by significant macroeconomic
tailwinds and government
O’REILLY AUTOMOTIVE 2020 ANNUAL REPORT • 2
Krishna Lakkamraju, Outbound Materials Handler, at the opening of our new DC-Lebanon, TN, on March 9, 2020.
Tonny Nguyen, Retail Service Specialist, O'Reilly 396-Lincoln, NE.
O’REILLY AUTOMOTIVE 2020 ANNUAL REPORT • 3
CUSTOMER SERVICE Coast To Coast
Nebraska .............. 49
Nevada ................. 57
New Hampshire ..... 33
New Mexico .......... 60
New York ............. 20
North Carolina ..... 199
North Dakota .........15
Ohio ....................211
Oklahoma ............124
Oregon ................. 71
Pennsylvania ........ 37
Rhode Island ..........12
South Carolina .....115
South Dakota .........19
Tennessee ............185
Texas .................. 755
Utah ..................... 66
Vermont ............... 24
Virginia ................. 90
Washington .........158
West Virginia ..........18
Wisconsin ............128
Wyoming .............. 23
United States
Alabama ..............152
Alaska ...................15
Arizona ................142
Arkansas .............. 117
California ............ 562
Colorado ............ 109
Connecticut ........... 26
Florida ................ 246
Georgia .............. 224
Hawaii ...................13
Idaho ................... 48
Illinois .................213
Indiana ................156
Iowa ..................... 80
Kansas ................. 86
Kentucky ............ 105
Louisiana .............127
Maine ................... 34
Massachusetts .......51
Michigan .............181
Minnesota ............124
Mississippi ............ 82
Missouri .............. 204
Montana ............... 28
Mexico
Guanajuato ............. 3
Jalisco ..................19
Store Count 200-700+ 100-199 1-99
Distribution Center
Future Distribution Center
through prudent acquisitions of existing auto
parts chains. We continue to be pleased with
the strong performance of our new stores,
driven by our Teams of Professional Parts
People delivering excellent customer service
from the day the doors are opened. 2020 also
represented our first full year with operations
in Mexico, after completing the acquisition of
Mayasa Auto Parts at the end of 2019, and we
are delighted with our Team and the expansion
opportunities that lie ahead in the Mexican
automotive aftermarket.
Our Team’s dedication to excellent customer
service and expense control drove free cash
flow of $2.2 billion in 2020, an increase of
$1.2 billion over 2019. After investing $466
million in capital projects across our business,
we were able to return $2.1 billion, to you,
our shareholders, through prudent execution
of our share repurchase program during 2020.
We continue to view share repurchases as an
effective means of returning excess capital
to our shareholders after we have exhausted
O’REILLY AUTOMOTIVE 2020 ANNUAL REPORT • 4
opportunities to profitably grow our business
and generate strong returns. We remain
committed to a capital structure that upholds
our investment-grade credit ratings and
provides us the ability to take advantage of
growth opportunities, while also optimizing
returns for our shareholders.
We conclude this year’s shareholder letter
by renewing our commitment to you, our
shareholders, to perpetuate the O’Reilly Culture
that has been the driver of our success, and
ensuring it remains the foundation for every
decision we make. 2021 will mark 64 years of
dedication to excellent customer service, and
we consider it an honor to continue to build
on our strong legacy. We are thankful for the
trust and confidence our shareholders place
in the O’Reilly Team, and we look forward to
extending our long record of profitable growth
in 2021, while we continue to navigate the
challenges presented by the pandemic and focus
on protecting the health and safety of our Team
Members and customers.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
☒☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2020
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
O’REILLY AUTOMOTIVE, INC.
(Exact name of registrant as specified in its charter)
Missouri
(State or other jurisdiction
of incorporation or organization)
000-21318
Commission file
number
27-4358837
(I.R.S. Employer
Identification No.)
233 South Patterson Avenue
Springfield, Missouri 65802
(Address of principal executive offices, Zip code)
(417) 862-6708
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Common Stock
$0.01 par value
Trading Symbol(s)
ORLY
Name of Each Exchange on which Registered
The NASDAQ Stock Market LLC
(NASDAQ Global Select Market)
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Note - Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Exchange
Act from their obligations under those Sections.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant
to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such
files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,”
and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☒
Non-accelerated filer ☐
Emerging growth company ☐
Accelerated filer ☐
Smaller reporting company ☐
FORM 10-K
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for
complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness
of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered
public accounting firm that prepared or issued its audit report. ☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
At June 30, 2020, the aggregate market value of the voting stock held by non-affiliates of the Company was $25,984,638,678 based on
the last price of the common stock reported by The NASDAQ Global Select Market.
At February 22, 2021, an aggregate of 70,206,669 shares of common stock of the registrant were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive proxy statement for the 2021 Annual Meeting of Shareholders to be filed with the Securities and Exchange
Commission within 120 days after December 31, 2020, are incorporated by reference into Part III.
FORM 10-K
O’REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 2020
TABLE OF CONTENTS
PART I
Item 1. Business
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2.
Item 3.
Item 4. Mine Safety Disclosures
Properties
Legal Proceedings
Selected Financial Data
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Item 6.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Financial Statements and Supplementary Data
Item 8.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A. Controls and Procedures
Item 9B. Other Information
PART III
Item 10. Directors, Executive Officers and Corporate Governance
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14. Principal Accounting Fees and Services
Item 15. Exhibits and Financial Statement Schedules
Item 16 Form 10-K Summary
PART IV
Page
3
15
20
20
21
21
22
24
26
39
40
72
72
73
74
74
75
75
75
76
79
1
FORM 10-K
Forward-Looking Statements
We claim 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 annual report 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, terrorist activities, war and the threat of war, risks associated with the performance of acquired businesses,
our increased debt levels, credit ratings on public debt, our ability to hire and retain qualified employees, 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 in this 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 our
financial performance. Forward-looking statements speak only as of the date they were made, and we undertake 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.
2
FORM 10-K
Item 1. Business
GENERAL INFORMATION
PART I
Unless otherwise indicated, “we,” “us,” “our” and similar terms, as well as references to the “Company,” refer to O’Reilly
Automotive, Inc. and its Subsidiaries. O’Reilly is one of the largest specialty retailers of automotive aftermarket parts, tools, supplies,
equipment and accessories in the United States (“U.S.”), selling our products to both do-it-yourself (“DIY”) and professional service
provider customers, our “dual market strategy.” The business was founded in 1957 by Charles F. O’Reilly and his son, Charles H.
“Chub’’ O’Reilly, Sr., and initially operated from a single store in Springfield, Missouri. Our common stock has traded on The NASDAQ
Global Select Market under the symbol “ORLY” since April 22, 1993.
After the close of business on November 29, 2019, we completed the acquisition of Mayoreo de Autopartes y Aceites, S.A. de C.V.
(“Mayasa”), a specialty retailer of automotive aftermarket parts headquartered in Guadalajara, Jalisco, Mexico pursuant to a stock
purchase agreement. At the time of the acquisition, Mayasa operated six distribution centers, 21 Orma Autopartes stores and served
over 2,000 independent jobber locations in 28 Mexican states.
At December 31, 2020, we operated 5,594 stores in 47 states in the United States and 22 stores in Mexico. Our stores carry an extensive
product line, including
•
•
new and remanufactured automotive hard parts and maintenance items, such as alternators, batteries, brake system components,
belts, chassis parts, driveline parts, engine parts, fuel pumps, hoses, starters, temperature control, water pumps, antifreeze,
appearance products, engine additives, filters, fluids, lighting, oil and wiper blades; and
accessories, such as floor mats, seat covers and truck accessories.
Our stores offer many enhanced services and programs to our customers, such as
•
•
•
•
•
•
•
•
•
battery diagnostic testing;
battery, wiper and bulb replacement;
check engine light code extraction, where allowed by law;
custom hydraulic hoses;
drum and rotor resurfacing;
electrical and module testing;
loaner tool program;
professional paint shop mixing and related materials; and
used oil, oil filter and battery recycling.
See the “Risk Factors” section of this annual report on Form 10-K for a description of certain risks relevant to our business. These risk
factors include, among others, risk related to the novel coronavirus (“COVID-19”) pandemic, deteriorating economic conditions,
competition in the automotive aftermarket business, our sensitivity to regional economic and weather conditions, our relationships with
key suppliers and availability of key products, complications in our distribution centers (“DCs”), failure to protect our brand and
reputation, risks associated with international operations, unanticipated fluctuations in our quarterly results, the volatility of the market
price of our common stock, our increased debt levels, a downgrade in our credit ratings, future growth assurance, our dependence upon
key and other personnel, our acquisition strategies, data security and environmental legislation and other regulations.
OUR BUSINESS
Our goal is to continue to achieve growth in sales and profitability by capitalizing on our competitive advantages and executing our
growth strategy. We remain confident in our ability to continue to gain market share in our existing markets and grow our business in
new markets by focusing on our dual market strategy and the core O’Reilly values, including superior customer service and expense
control. Our intent is to be the dominant auto parts provider in all the markets we serve, by providing a higher level of customer service
and a better value position than our competitors to both DIY and professional service provider customers.
3
FORM 10-K
Competitive Advantages
We believe our effective dual market strategy, superior customer service, technically proficient store personnel, strategic distribution
network and experienced management Team make up our key competitive advantages, which cannot be easily duplicated.
Proven Ability to Execute Our Dual Market Strategy:
For more than 40 years, we have established a track record of effectively serving, at a high level, both DIY and professional service
provider customers. We believe our proven ability to effectively execute a dual market strategy is a unique competitive advantage. The
execution of this strategy enables us to better compete by targeting a larger base of automotive aftermarket parts consumers, capitalizing
on our existing store and distribution infrastructure, operating profitably in both large markets and less densely populated geographic
areas that typically attract fewer competitors and enhancing service levels offered to DIY customers through the offering of a broad
inventory and the extensive product knowledge required by professional service provider customers.
In 2020, we derived approximately 59% of our sales from our DIY customers and approximately 41% of our sales from our professional
service provider customers. Over the long-term, we have increased our sales to professional service provider customers at a faster pace
than the increase in our sales to DIY customers due to the more fragmented nature of the professional service provider business, which
offers a greater opportunity for consolidation. We believe we will continue to have a competitive advantage on the professional service
provider portion of our business, due to our systems, knowledge, industry-leading parts availability and experience serving the
professional service provider side of the automotive aftermarket, supported by our approximately 765 full-time sales staff dedicated
solely to calling upon and servicing the professional service provider customer. We will also continue to expand and enhance the level
of offerings focused on growing our DIY business and will continue to execute our proven dual market strategy in both existing and
new markets.
Superior Customer Service:
We seek to provide our customers with an efficient and pleasant in-store experience by maintaining attractive stores in convenient
locations with a wide selection of automotive products. We believe the satisfaction of DIY and professional service provider customers
is substantially dependent upon our ability to provide, in a timely fashion, the specific automotive products needed to complete their
repairs. Accordingly, each O’Reilly store carries, or has same or next day availability to, a broad selection of automotive products
designed to cover a wide range of vehicle applications. We continuously refine the inventory levels and assortments carried in each of
our stores and within our network, based in large part on the sales movement tracked by our inventory control system, market vehicle
registration data, failure rates and management’s assessment of the changes and trends in the marketplace. We have no material
backorders for the products we sell.
We seek to attract new DIY and professional service provider customers and retain existing customers by offering superior customer
service, the key elements of which are identified below:
superior in-store service through highly-motivated, technically-proficient store personnel (“Professional Parts People”);
•
•
• many enhanced service programs, including battery and electrical testing, battery, wiper and bulb replacement and check engine
an extensive selection and availability of products;
•
•
•
light code extractions;
attractive stores in convenient locations;
competitive pricing, supported by a good, better, best product assortment designed to meet all of our customers’ quality and
value preferences; and
a robust point-of-sale system integrated with our proprietary electronic catalog, which contains a wide variety of product
images, schematics and technical specifications and equips our Team Members with highly effective tools to source products
in our extensive supply network.
Technically Proficient Professional Parts People:
Our highly-motivated, technically-proficient Professional Parts People provide us with a significant competitive advantage, particularly
over less specialized retail operators. We require our Professional Parts People to undergo extensive and ongoing training and to be
knowledgeable, particularly with respect to hard part repairs, in order to better serve the technically-oriented professional service
provider customers with whom they interact on a daily basis. Such technical proficiency also enhances the customer service we provide
to our DIY customers who value the expert assistance provided by our Professional Parts People.
4
FORM 10-K
Strategic Regional Tiered Distribution Network:
We believe our commitment to a robust, regional, tiered distribution network provides superior replenishment and access to hard-to-
find parts and enables us to optimize product availability and inventory levels throughout our store network. Our strategic, regional,
tiered distribution network includes DCs and Hub stores. Our inventory management and distribution systems electronically link each
of our stores to one or more DCs, which provides for efficient inventory control and management. We currently operate 28 regional
DCs, which provide our stores with same-day or overnight access to an average of 159,000 stock keeping units (“SKUs”), many of
which are hard-to-find items not typically stocked by other auto parts retailers. To augment our robust distribution network, we operate
a total of 362 Hub stores that also provide delivery service and same-day access to an average of 70,000 SKUs from a Super Hub or
42,000 SKUs from a Hub to other stores within the surrounding area. We believe this timely access to a broad range of products is a
key competitive advantage in satisfying customer demand and generating repeat business.
Experienced Management Team:
Our Company philosophy is to “promote from within” and the vast majority of our senior management, district managers and store
managers have been promoted from within the Company. We augment this promote from within philosophy by pursuing strategic hires
with a strong emphasis on automotive aftermarket experience. We have a strong management Team comprised of 216 senior managers
who average 20 years of service, 269 corporate managers who average 16 years of service and 560 district managers who average 13
years of service. Our management Team has demonstrated the consistent ability to successfully execute our business plan and growth
strategy by generating 28 consecutive years of record revenues and earnings and positive comparable store sales results since becoming
a public company in April of 1993.
Growth Strategy
Aggressively Open New Stores:
We intend to continue to consolidate the fragmented automotive aftermarket. During 2020, we opened 155 net, new domestic stores
and one new store in Mexico. In 2021, we plan to open 165 to 175 net, new stores, which will increase our penetration in existing
markets and allow for expansion into new, contiguous markets. The sites for these new stores have been identified, and to date, we have
not experienced significant difficulties in locating suitable sites for construction of new stores or identifying suitable acquisition targets
for conversion to O’Reilly stores. We typically open new stores by
(i) constructing a new facility or renovating an existing one on property we purchase or lease and stocking the new store with
fixtures and inventory;
(ii) acquiring an independently owned auto parts store (“jobber store”), typically by the purchase of substantially all of the inventory
and other assets (other than realty) of such store; or
(iii) purchasing multi-store chains.
New store sites are strategically located in clusters within geographic areas that complement our distribution network in order to achieve
economies of scale in management, advertising and distribution. Other key factors we consider in the site selection process include
population density and growth patterns, demographic lifestyle segmentation, age and per capita income, vehicle traffic counts, vehicles
in operation, number and type of existing automotive repair facilities and competing auto parts stores within a predetermined radius.
We target both small and large markets for expansion of our store network. While we have, and continue to face, aggressive competition
in the more densely populated markets, we believe we have competed effectively, and are well positioned to continue to compete
effectively, in such markets and to achieve our goal of continued profitable sales growth within these markets. We also believe that
with our dual market strategy, we are better able to operate stores in less densely populated areas, which would not otherwise support a
national chain store selling primarily to the retail automotive aftermarket. Therefore, we continue to pursue opening new stores in less
densely populated market areas as part of our growth strategy.
Grow Sales in Existing Stores:
Profitable comparable store sales growth is also an important part of our growth strategy. To achieve improved sales and profitability
at existing O’Reilly stores, we continually strive to improve the service provided to our customers. We believe that while competitive
pricing is an essential component of successful growth in the automotive aftermarket business, it is customer satisfaction, whether of
the DIY consumer or professional service provider, resulting from superior customer service, that generates increased sales and
profitability.
Selectively Pursue Strategic Acquisitions:
The automotive aftermarket industry is still highly fragmented, and we believe the ability of national auto parts chains, like O’Reilly, to
operate more efficiently and effectively than smaller independent operators will result in continued industry consolidation. Our intention
5
FORM 10-K
is to continue to selectively pursue strategic acquisitions that will strengthen our position as a leading automotive aftermarket parts
supplier in existing markets and provide a springboard for expansion into new markets, domestic and cross-border.
Continually Enhance Store Design and Location:
Our current prototype store design features optimized square footage, high ceilings, convenient interior store layouts, in-store signage,
bright lighting, convenient ingress, egress and parking and dedicated counters to serve professional service provider customers, each
designed to increase sales and operating efficiencies to enhance overall customer service. We continually update the location and
condition of our store network through systematic renovation and relocation of our existing stores to enhance store performance. During
2020, while experiencing constraints to construction timing due to the COVID-19 pandemic, we relocated 16 stores and performed
minor to major updates or renovations to approximately 970 additional stores. We believe that our ability to consistently achieve growth
in comparable store sales is due in part to our commitment to maintaining an attractive store network, which is strategically located to
best serve our customers.
Omnichannel Growth Strategy:
Our Omnichannel growth strategies reflect the continued evolution of customer preferences in researching and completing purchases.
More than ever before, our customers’ purchase decisions are informed by a range of interactions, whether in-person, over the phone,
or through a variety of digital channels, as they seek to find the professional parts knowledge and the product availability they need to
meet their automotive repair and maintenance needs. Our Omnichannel growth strategies are focused on offering our customers an
enhanced and seamless research and buying experience through any of these channels. We have long been known for excellent customer
service and continue to grow the functionality and user-friendliness of our websites, including www.OReillyAuto.com and
www.FirstCallOnline.com, to enhance our customer’s shopping experience. Many of our customers interact over multiple channels to
research and complete a purchase, and the functionality and features of our digital sites complements the outstanding customer service
provided in our over 5,600 brick and mortar locations.
Team Members and Human Capital Management
Our tradition for 64 years has been to treat all of our Team Members with honesty and respect and to commit significant resources to
instill in them our “Live Green” culture, which emphasizes the importance of each Team Member’s contribution to the success of
O’Reilly. This focus on professionalism and respect has created an industry-leading Team, and we consider our relations with our Team
Members to be excellent.
We are also committed to providing a work environment where Team Members feel highly valued and where productivity at work is
enhance by maintaining an inclusive environment and healthy work/life balance, which we believe increases employee engagement.
Our ongoing emphasis on diversity and inclusion, including further ensuring our policies, recruitment and selection procedures,
onboarding tactics and training efforts, positively builds upon our successful “promote from within” philosophy and growth strategies.
Management Structure:
Our Company knows the value of a tenured Team, which is why our philosophy is to “promote from within” first. As management
opportunities arise, we look first within the Company and promote those who have performed well, have the right expertise and have
shown leadership potential before looking outside the Company; however, we augment this philosophy by pursuing strategic hires with
a strong emphasis on automotive aftermarket experience when appropriate. This comprehensive approach increases Team Member
commitment and has resulted in a very experienced leadership Team. As of December 31, 2020, our strong management Team was
comprised of 216 senior managers who average 20 years of service, 269 corporate managers who average 16 years of service and 560
district managers who average 13 years of service.
Each of our stores is staffed with a store manager and one or more assistant managers, in addition to parts specialists, retail and/or
installer service specialists and other positions required to meet the specific needs of each store. Each of our 560 district managers has
general supervisory responsibility for an average of 10 stores, which provides our stores with strong operational support.
Store and district managers complete a comprehensive training program to ensure each has a thorough understanding of customer
service, leadership, inventory management and store profitability, as well as all other sales and operational aspects of our business
model. Store and district managers are also required to complete a structured training program that is specific to their position, including
attending a week-long manager development program at the corporate headquarters in Springfield, Missouri. Store and district managers
also receive continuous training through online training, field workshops, regional meetings and our annual leadership conference.
We provide financial incentives to all store Team Members through incentive compensation programs. Under our incentive
compensation programs, base salary is augmented by incentive compensation based on individual and store sales and profitability. In
6
FORM 10-K
addition, each of our district managers participates in our stock option and bonus programs, and store managers participate in bonus
programs based on their store’s performance. We believe our incentive compensation programs significantly increase the motivation
and overall performance of our store Team Members and enhance our ability to attract and retain qualified management and other
personnel.
Professional Parts People:
We believe our highly trained Team of Professional Parts People is essential in providing superior customer service to both DIY and
professional service provider customers. A significant portion of our business is from professional service provider customers; therefore,
our Professional Parts People are required to be highly technically proficient in automotive products. In addition, we have found that
the typical DIY customer often seeks assistance from Professional Parts People, particularly when purchasing hard parts. The ability of
our Professional Parts People to provide such assistance to the DIY customer creates a favorable impression and is a significant factor
in generating repeat DIY business.
We screen prospective Team Members to identify highly motivated individuals who either have experience with automotive parts or
repairs, or automotive aptitude. New store Team Members go through a comprehensive orientation focused on the culture of our
Company, as well as the requirements for their specific position. Additionally, during their first year of employment, our parts specialists
go through extensive automotive systems and product knowledge training to ensure they are able to provide high levels of service to our
customers. Once all of the required training has been satisfied, our parts specialists become eligible to take the O’Reilly Certified Parts
Professional test. Passing the O’Reilly test helps prepare them to become certified by the National Institute for Automotive Service
Excellence (“ASE”).
All of our stores have the ability to service professional service provider customers. For this reason, select Team Members in each store
complete extensive sales call training with a regional field sales manager. These Team Members then spend at least one day per week
calling on existing and potential professional service provider customers. Additionally, each Team Member engaged in such sales
activities participates in quarterly advanced training programs for sales and business development.
Team Members and Unions:
As of January 31, 2021, we employed 77,827 Team Members (62,530 full-time Team Members and 15,297 part-time Team Members),
of whom 63,212 were employed at our U.S. stores, 9,593 were employed at our U.S. DCs, 3,625 were employed at our U.S. corporate
and regional offices and 1,397 were employed in Mexico. Ours is an increasingly technical business creating the need for knowledgeable
Professional Parts People, and our ongoing focus on developing a technically proficient Team has resulted in the growth of our full-time
work force, increasing to 80% as of January 31, 2021, up from 65% as of January 31, 2020. While full-time Professional Parts People
play a vital role in our ongoing success, the flexibility of incorporating part-time employment into our work force is also an important
component of providing excellent customer service. Many of our part-time Team Members choose to work at O’Reilly while attending
school, or during other transitional periods in their lives, or simply because of their passion for cars and knowledge of auto parts. Part-
time Team Members have the opportunity to become career Professional Parts People because of our promote from within philosophy,
and many of our leaders today began their careers as part-time Team Members in our stores or distribution centers.
A union represents Team Members in 53 stores (408 Team Members) in the Greater Bay Area in California and has for many years.
Approximately 63 Team Members that drive over-the-road trucks in two of our domestic DCs are also represented by a labor union. In
addition, the Company has collective bargaining agreements with two unions in Mexico, where the legal environment is very different
and evolving compared to the U.S. Our relationships with unions in Mexico will continue to evolve to ensure compliance with changing
requirements. We consider our current relationship with these unions and union Team Members to be excellent. With the exception of
the previously described Team Members, our Team Members are not represented by labor unions.
Store Network
New Store Site Selection:
In selecting sites for new stores, we seek to strategically locate store sites in clusters within geographic areas in order to achieve
economies of scale in management, advertising and distribution. Other key factors we consider in the site selection process are
population density;
demographics, including age, life style and per capita income;
•
•
• market economic strength, retail draw and growth patterns;
•
•
number, age and percent of makes and models of registered vehicles;
the number, type and sales potential of existing automotive repair facilities;
7
FORM 10-K
•
•
•
•
the number of auto parts stores and other competitors within a predetermined radius;
physical location, traffic count, size, economics and presentation of the site;
financial review of adjacent existing locations; and
the type and size of store that should be developed.
When entering new, more densely populated markets, we generally seek to initially open several stores within a short span of time in
order to maximize the effect of initial promotional programs and achieve economies of scale. After opening this initial cluster of new
stores, we begin penetrating the less densely populated surrounding areas. As these store clusters mature, we evaluate the need to open
additional locations in the more densely populated markets where we believe opportunities exist to expand our market share or to
improve the level of service provided in high volume areas. This strategy enables us to achieve additional distribution and advertising
efficiencies in each market.
Store Locations and Size:
As a result of our dual market strategy, we are able to profitably operate in both large, densely populated markets and small, less densely
populated areas that would not otherwise support a national chain selling primarily to the retail automotive aftermarket. Our U.S. stores,
on average, carry approximately 22,000 SKUs and average approximately 7,400 total square feet in size. At December 31, 2020, we
had a total of approximately 42 million square feet in our 5,594 domestic stores. Our domestic stores are served primarily by the nearest
DC, which averages 159,000 SKUs, but also have same-day access to the broad selection of inventory available at one of our 362 Hub
stores, which are comprised of 88 Super Hubs that average approximately 17,100 square feet and carry an average of 70,000 SKUs and
274 Hubs that average approximately 10,200 square feet and carry an average of 42,000 SKUs.
We believe that our stores are “destination stores” generating their own traffic rather than relying on traffic created by the presence of
other stores in the immediate vicinity. Consequently, most of our stores are freestanding buildings or prominent end caps situated on or
near major traffic thoroughfares and offer ample parking, easy customer access and are generally located in close proximity to our
professional service provider customers.
8
FORM 10-K
The following table sets forth the geographic distribution and activity of our stores as of December 31, 2020 and 2019:
December 31, 2019
2020 Net, New Stores
December 31, 2020
State
Texas
California
Florida
Georgia
Illinois
Ohio
Missouri
North Carolina
Tennessee
Michigan
Washington
Indiana
Alabama
Arizona
Wisconsin
Louisiana
Minnesota
Oklahoma
Arkansas
South Carolina
Colorado
Kentucky
Virginia
Kansas
Mississippi
Iowa
Oregon
Utah
New Mexico
Nevada
Massachusetts
Nebraska
Idaho
Pennsylvania
Maine
New Hampshire
Montana
Connecticut
Vermont
Wyoming
New York
South Dakota
West Virginia
Alaska
North Dakota
Hawaii
Rhode Island
Total U.S. stores
Mexico
Total stores
% of Total
Store Count
13.5 %
10.2 %
4.4 %
3.9 %
3.9 %
3.7 %
3.7 %
3.4 %
3.4 %
3.2 %
2.9 %
2.7 %
2.7 %
2.6 %
2.3 %
2.3 %
2.3 %
2.2 %
2.1 %
2.0 %
1.9 %
1.9 %
1.7 %
1.7 %
1.5 %
1.4 %
1.3 %
1.2 %
1.1 %
1.0 %
0.8 %
0.9 %
0.8 %
0.6 %
0.6 %
0.6 %
0.5 %
0.4 %
0.4 %
0.4 %
0.3 %
0.3 %
0.3 %
0.3 %
0.3 %
0.2 %
0.2 %
100.0 %
Store
Count
735
554
239
214
211
203
203
185
183
175
158
147
147
140
124
124
126
122
114
110
105
101
85
85
80
78
72
65
60
56
46
47
45
33
34
32
28
23
24
22
17
18
17
15
15
12
10
5,439
21
5,460
% of Total
Store
Change
Store
Change
Store
Count
755
562
246
224
213
211
204
199
185
181
158
156
152
142
128
127
124
124
117
115
109
105
90
86
82
80
71
66
60
57
51
49
48
37
34
33
28
26
24
23
20
19
18
15
15
13
12
5,594
22
5,616
12.9 %
5.2 %
4.5 %
6.5 %
1.3 %
5.2 %
0.6 %
9.0 %
1.3 %
3.9 %
— %
5.8 %
3.2 %
1.3 %
2.7 %
1.9 %
(1.3) %
1.3 %
1.9 %
3.2 %
2.7 %
2.7 %
3.2 %
0.6 %
1.3 %
1.3 %
(0.6) %
0.6 %
— %
0.6 %
3.2 %
1.3 %
1.9 %
2.7 %
— %
0.6 %
— %
1.9 %
— %
0.6 %
1.9 %
0.6 %
0.6 %
— %
— %
0.6 %
1.3 %
100.0 %
20
8
7
10
2
8
1
14
2
6
—
9
5
2
4
3
(2)
2
3
5
4
4
5
1
2
2
(1)
1
—
1
5
2
3
4
—
1
—
3
—
1
3
1
1
—
—
1
2
155
1
156
9
Cumulative
% of Total
Store Count
13.5 %
23.5 %
27.9 %
31.9 %
35.7 %
39.5 %
43.1 %
46.7 %
50.0 %
53.2 %
56.0 %
58.8 %
61.5 %
64.0 %
66.3 %
68.6 %
70.8 %
73.0 %
75.1 %
77.2 %
79.1 %
81.0 %
82.6 %
84.1 %
85.6 %
87.0 %
88.3 %
89.5 %
90.6 %
91.6 %
92.5 %
93.4 %
94.3 %
95.0 %
95.6 %
96.2 %
96.7 %
97.2 %
97.6 %
98.0 %
98.4 %
98.7 %
99.0 %
99.3 %
99.6 %
99.8 %
100.0 %
% of Total
Store Count
13.5 %
10.0 %
4.4 %
4.0 %
3.8 %
3.8 %
3.6 %
3.6 %
3.3 %
3.2 %
2.8 %
2.8 %
2.7 %
2.5 %
2.3 %
2.3 %
2.2 %
2.2 %
2.1 %
2.1 %
1.9 %
1.9 %
1.6 %
1.5 %
1.5 %
1.4 %
1.3 %
1.2 %
1.1 %
1.0 %
0.9 %
0.9 %
0.9 %
0.7 %
0.6 %
0.6 %
0.5 %
0.5 %
0.4 %
0.4 %
0.4 %
0.3 %
0.3 %
0.3 %
0.3 %
0.2 %
0.2 %
100.0 %
FORM 10-K
Distribution Systems
We believe that our tiered distribution model provides industry-leading parts availability and store in-stock positions, while lowering
our inventory carrying costs by controlling the depth of our store stocked inventory. Moreover, we believe our ongoing, significant
capital investments made in our DC network allow us to efficiently service new stores that are planned to open in contiguous market
areas as well as servicing our existing store network. Our distribution expansion strategy complements our new store opening strategy
by supporting newly established clusters of stores, and additional penetration into existing markets, in the regions surrounding each DC.
As of December 31, 2020, we had a total growth capacity of more than 585 stores in our distribution center network, which benefited
from relocating our Nashville, Tennessee, DC into a larger facility in Lebanon, Tennessee, providing a larger, more efficient facility in
March 2020. The existing store portion of the Nashville, Tennessee, DC facility remained a large Hub that continues to provide same
day parts availability in the attractive Nashville market. The distribution operations of our Knoxville, Tennessee, DC are in the process
of being merged into our Lebanon, Tennessee, DC, which is expected to be completed in 2021, and the existing store portion of our
Knoxville, Tennessee, DC facility will remain a large Hub that will continue to provide same day parts availability in the Knoxville
market. Additionally, we plan to merge our North Little Rock, Arkansas, DC into our new Horn Lake, Mississippi, DC, which we
expect to open in mid-2021. At that time, the existing store portion of our North Little Rock, Arkansas, DC facility will remain a large
Hub that will continue to provide same day parts availability in the Little Rock market.
Distribution Centers:
As of December 31, 2020, we operated 28 domestic DCs comprised of approximately 11.6 million operating square feet (see the
“Properties” table in Item 2 of this annual report on Form 10-K for more information about DC operating square footages). Our DCs
stock an average of 159,000 SKUs and most DCs are linked to and have access to multiple other regional DCs’ inventory. Our DCs
provide five-night-a-week delivery, primarily via a Company-owned fleet, to substantially all of our stores in the continental United
States. In addition, stores within an individual DC’s metropolitan area receive multiple daily deliveries from the DC’s “city counter,”
many of which receive this service seven days per week. Our DCs provide weekend service to not only the stores they service via their
city counters but also to strategic Hub locations, which redistribute products to surrounding stores. Our national Hub store network
provides additional service throughout the week, and on weekends, to surrounding stores.
As part of our continuing efforts to enhance our distribution network in 2021, we plan to
continue to utilize routing software to continue to enhance logistics efficiencies;
continue to enhance our distribution network through the engineering, design, expansion or relocation of new or current DCs;
•
•
•
•
• make proven, return-on-investment based capital enhancements to material handling equipment in DCs, including conveyor
continue to implement labor management software to improve DC productivity and overall operating efficiency;
continue to define and implement best practices in all DCs;
systems, picking modules, lift equipment and computer hardware; and
•
continue to augment our robust distribution network, when and where appropriate, through the use of strategically located Hubs
and Super Hubs.
Hub Stores:
We currently operate a total of 362 strategically located Hub stores. In addition to serving DIY and professional service provider
customers in their markets, Hub stores also provide delivery service to our other stores within the surrounding area and access to an
expanded selection of SKUs on a same-day basis. Our Hub store network consists of 88 Super Hubs that average approximately 17,100
square feet and carry an average of 70,000 SKUs and 274 Hubs that average approximately 10,200 square feet and carry an average of
42,000 SKUs.
Products and Purchasing
Our stores offer DIY and professional service provider customers a wide selection of products for domestic and imported automobiles,
vans and trucks. Our merchandise generally consists of nationally recognized, well-advertised, premium name brand products, such as
AC Delco, Armor All, Bosch, Castrol, Dorman, Fel-Pro, Gates Rubber, Lucas Oil, Mobil1, Monroe, Moog, Pennzoil, Prestone, Standard,
STP, Turtle Wax, Valvoline, Wagner, and Wix, and a wide selection of quality proprietary private label products, which span the entire
good, better and best value spectrum, under our BesTest®, BrakeBest®, Cartek®, Import Direct®, MasterPro®, MicroGard®,
Murray®, Omnispark®, O’Reilly Auto Parts®, Precision®, Power Torque®, Super Start®, and Ultima® brands. Our proprietary
private label products are produced by respected automotive manufacturers, meet or exceed original equipment manufacturer
specifications and consist of house brands and nationally recognized proprietary bands, which we have acquired or developed over time.
Our “good” proprietary brands provide a great combination of quality and value, a characteristic important to our DIY customers, while
10
FORM 10-K
our “better” and “best” proprietary brands offer options for our more heavy-duty DIY customers, as well as our professional service
provider customers, who often prefer higher quality products that can be relied upon to support and grow their businesses.
We have no long-term contracts with material purchase commitments with any of our suppliers, nor have we experienced difficulty in
obtaining satisfactory alternative supply sources for automotive parts. We believe that alternative supply sources exist at competitive
costs for substantially all of the automotive products that we sell. It is our policy to take advantage of payment and seasonal purchasing
discounts offered by our suppliers and to utilize extended dating terms available from suppliers. We have entered into various programs
and arrangements with certain suppliers that provided for extended dating and payment terms for inventory purchases. As a whole, we
consider our relationships with our suppliers to be very good.
We purchase automotive products in substantial quantities from over 730 suppliers, the five largest of which accounted for approximately
25% of our total purchases in 2020. Our largest supplier in 2020 accounted for approximately 7% of our total purchases and the next
four largest suppliers each accounted for approximately 3% to 6% of our total purchases.
Marketing
Retail and Online Marketing:
Our integrated marketing strategy and Omnichannel efforts include national media channels, in-store, digital and social media activation,
as well as marketing the O’Reilly brand through automotive event sponsorships and on-site appearances throughout the country. Our
O’Rewards loyalty program encourages repeat customers, as they accumulate points from their O’Reilly purchases that are redeemable
for rewards at various purchase levels. Our marketing efforts also target the Spanish-speaking market through broadcast media, print
and sports marketing, as well as sponsorships of local and regional events.
Professional Marketing:
To develop our continued relationships with professional service providers and installers, we employ Territory Sales Managers in nearly
every market to ensure complete sales territory coverage and personalized service for these customers. Flyers, quick reference guides
and catalogs are distributed on a regular basis to all professional service providers, including paint and body shops and fleet maintenance
customers to encourage brand and program awareness. In addition, our professional customer program, First Call, also offers an ordering
website, www.FirstCallOnline.com, dedicated to Professional Service Specialists in stores, multiple daily deliveries and access to
training opportunities, shop management, maintenance supplies and the Certified Auto Repair program, which offers professional
service providers with the business tools they need to profitably grow and market their business.
INDUSTRY ENVIRONMENT
The automotive aftermarket industry includes all products and services purchased for light and heavy-duty vehicles after the original
sale. The total size of the automotive aftermarket is estimated to be approximately $281 billion, according to The Auto Care Association.
This market is made up of four segments: labor share of professional service provider sales, auto parts share of professional service
provider sales, DIY sales and tire sales. We estimate that O’Reilly’s addressable market within this industry is approximately $90 billion
to $100 billion, which includes the auto parts share of professional service provider sales at wholesale and DIY sales at retail. We do
not sell tires or perform for-fee automotive repairs or installations.
Competition
The sale of automotive aftermarket items is highly competitive in many areas, including customer service, product availability, store
location, brand recognition and price. We compete in both the DIY and professional service provider portions of the automotive
aftermarket and are one of the largest specialty retailers within that market. We compete primarily with
•
national retail and wholesale automotive parts chains (such as AutoZone, Inc., Advance Auto Parts, CARQUEST, NAPA and
the Pep Boys - Manny, Moe and Jack, Inc.);
regional retail and wholesale automotive parts chains;
•
• wholesalers or jobber stores (some of which are associated with national automotive parts distributors or associations such as
NAPA, CARQUEST, Bumper to Bumper and Auto Value);
automobile dealers; and
•
• mass merchandisers and online retailers that carry automotive replacement parts, maintenance items and accessories (such as
Wal-Mart Stores, Inc. and Amazon.com, Inc.).
11
FORM 10-K
We compete on the basis of customer service, which includes merchandise selection and availability, technical proficiency and
helpfulness of store personnel, price, store layout, continually enhancing the Omnichannel experience and convenient and accessible
store locations. Our dual market strategy requires significant capital, such as the capital expenditures required for our distribution and
store networks and working capital needed to maintain inventory levels necessary for providing products to both the DIY and
professional service provider portions of the automotive aftermarket.
Inflation and Seasonality
We have been successful, in many cases, in reducing the effects of merchandise cost increases principally by taking advantage of supplier
incentive programs, economies of scale resulting from increased volume of purchases and selective forward buying. To the extent our
acquisition costs increase due to price increases industry wide, we have typically been able to pass along these increased costs through
higher retail prices for the affected products. As a result, we do not believe our operations have been materially, adversely affected by
inflation.
To some extent our business is seasonal, primarily as a result of the impact of weather conditions on customer buying patterns. Store
sales, profits and inventory levels have historically been higher in the second and third quarters (April through September) than in the
first and fourth quarters (October through March) of the year.
Regulations
We are subject to federal, state and local laws and governmental regulations relating to our business, as well as the health and safety of
our Team Members and customers, including, but not limited to, those related to the handling, storage and disposal of hazardous
substances, the recycling of batteries and used lubricants and the ownership and operation of real property.
As part of our operations, we handle hazardous materials in the ordinary course of business and our customers may bring hazardous
materials onto our property in connection with, for example, our used oil, oil filter and battery recycling programs. We currently provide
a recycling program for batteries and the collection of used lubricants at certain stores as a service to our customers pursuant to
agreements with third-party suppliers. The batteries and used lubricants are collected by our Team Members, deposited into supplier-
provided containers and pallets and then recycled by the third-party suppliers. In general, our agreements with such suppliers contain
provisions that are designed to limit our potential liability under applicable environmental regulations for any damage or contamination,
which may be caused by the batteries and lubricants to off-site properties (including as a result of waste disposal) and to our properties,
when caused by the supplier.
Compliance with any such laws and regulations has not had a material adverse effect on our operations to date. However, we cannot
give any assurance that we will not incur significant expenses in the future in order to comply with any such laws or regulations.
INFORMATION ABOUT OUR EXECUTIVE OFFICERS
Gregory D. Johnson, age 55, Chief Executive Officer and Co-President, has been an O’Reilly Team Member for 38 years, which includes
continuous years of service with a company acquired by O’Reilly. Mr. Johnson’s O’Reilly career began as a part-time Distribution
Center Team Member and progressed through the roles of Retail Systems Manager, Warehouse Management Systems (WMS)
Development Manager, Director of Distribution, Vice President of Distribution Operations, Senior Vice President of Distribution
Operations, and Executive Vice President of Supply Chain. Mr. Johnson has held the position of Co-President since 2017. Mr. Johnson
was promoted to Chief Executive Officer and Co-President in 2018.
Jeff M. Shaw, age 58, Chief Operating Officer and Co-President, has been an O’Reilly Team Member for 32 years. Mr. Shaw’s primary
areas of responsibility are Store Operations, Sales, Distribution Operations and International Operations. Mr. Shaw’s O’Reilly career
began as a Parts Specialist and progressed through the roles of Store Manager, District Manager, Regional Manager, Vice President of
the Southern Division, Vice President of Sales and Operations, Senior Vice President of Sales and Operations, and Executive Vice
President of Store Operations and Sales. Mr. Shaw has held the position of Co-President since 2017. Mr. Shaw was promoted to Chief
Operating Officer and Co-President in 2018.
Brad Beckham, age 42, Executive Vice President of Store Operations and Sales, has been an O’Reilly Team Member for 24 years.
Mr. Beckham’s primary areas of responsibility are Store Operations and Sales for O’Reilly’s Store Operations. Mr. Beckham’s O’Reilly
career began as a Parts Specialist and progressed through the roles of Store Manager, District Manager, Regional Manager, Divisional
Vice President, Vice President of Eastern Store Operations and Sales, Senior Vice President of Eastern Store Operations and Sales, and
Senior Vice President of Central Store Operations. Mr. Beckham has held the position of Executive Vice President of Store Operations
and Sales since 2018.
12
FORM 10-K
Brent G. Kirby, age 52, Executive Vice President of Supply Chain, has been an O’Reilly Team Member since 2018. Mr. Kirby’s primary
areas of responsibility are Inventory Management, Purchasing, Merchandise, Pricing, Store Design, Marketing, Advertising, Electronic
Catalog, Customer Satisfaction and Digital business areas while working cross functionally to deliver our Omnichannel strategy.
Mr. Kirby has over 30 years of experience in the retail industry. Prior to joining O’Reilly, Mr. Kirby held the position of Chief Supply
Chain Officer for Lowe’s Companies, Inc. (“Lowe’s”), with direct responsibility for leading the global supply chain supporting Lowe’s
U.S.-based home improvement business. In this role, Mr. Kirby was responsible for team members across a diverse network of
distribution centers, manufacturing facilities, direct-to-consumer parcel operations and last mile delivery operations. Mr. Kirby began
his retail career as a hardware associate with Lowe’s and progressed through various positions at the store, district and regional levels
before being promoted to Senior Vice President of Store Operations and later Chief Omnichannel Officer. In 2018, Mr. Kirby joined
O’Reilly as Senior Vice President of Omnichannel. Mr. Kirby has held the position of Executive Vice President of Supply Chain since
January of 2021.
Tom McFall, age 50, Executive Vice President and Chief Financial Officer, has been an O’Reilly Team Member for 14 years.
Mr. McFall’s primary areas of responsibility are Finance, Accounting, Information Technology, Legal, Real Estate and Risk
Management. Mr. McFall’s career began with Ernst & Young LLP in Detroit, Michigan, where he achieved the position of Audit
Manager, before accepting a position with Murray’s Discount Auto Stores (“Murray’s”). Mr. McFall served Murray’s for eight years
through the roles of Controller, Vice President of Finance, and Chief Financial Officer, with direct responsibility for finance, accounting
and distribution and logistics operations. After Murray’s was acquired by CSK Auto Corporation (“CSK”) in 2005, Mr. McFall held
the position of Chief Financial Officer of Midwest Operation for CSK. In 2006, Mr. McFall joined O’Reilly as Senior Vice President
of Finance and Chief Financial Officer. Mr. McFall has held the position of Executive Vice President and Chief Financial Officer since
2007.
Jonathan Andrews, age 53, Senior Vice President of Human Resources and Training, has been an O’Reilly Team Member for eight
years. Mr. Andrews’s primary areas of responsibility are Human Resources and Training. Mr. Andrews has over 25 years of human
resources experience. Mr. Andrews’s career includes human resource positions with Cargill, Inc., Tyson Foods, Inc. and AutoNation,
Inc. Mr. Andrews served AutoNation for 10 years as Director of Human Resources and Senior Director of Human Resources. In 2012,
Mr. Andrews joined O’Reilly as Vice President of Human Resources and progressed through the role of Vice President of Human
Resources and Training. Mr. Andrews has held the position of Senior Vice President of Human Resources and Training since 2019.
Doug Bragg, age 51, Senior Vice President of Central Store Operations and Sales, has been an O’Reilly Team Member for 30 years.
Mr. Bragg’s primary areas of responsibility are Store Operations and Sales for O’Reilly Central Store Operations. Mr. Bragg’s O’Reilly
career began as a Distribution Center Team Member and progressed through the roles of Assistant Store Manager, Store Manager,
District Manager, Regional Manager, and Divisional Vice President. Mr. Bragg has held the position of Senior Vice President of Central
Store Operations since 2018.
Robert Dumas, age 47, Senior Vice President of Eastern Store Operations and Sales, has been an O’Reilly Team Member for 29 years,
which includes continuous years of service with a company acquired by O’Reilly. Mr. Dumas’s primary areas of responsibility are
Store Operations and Sales for O’Reilly’s Eastern Store Operations. Mr. Dumas’s O’Reilly career began as a Parts Specialist and
progressed through the roles of Installer Service Specialist, Night Manager, Associate Manager, Store Manager, District Manager,
Regional Manager, and Divisional Vice President. Mr. Dumas has held the position of Senior Vice President of Eastern Store Operations
and Sales since 2016.
Larry L. Ellis, age 65, Senior Vice President of Distribution Operations, has been an O’Reilly Team Member for 45 years, which includes
continuous years of service with a company acquired by O’Reilly. Mr. Ellis’s primary areas of responsibility are Distribution Operations
and Logistics. Mr. Ellis’s O’Reilly career began as a Distribution Center Team Member and progressed through the roles of Distribution
Center Supervisor, Distribution Center Manager, Director of Distribution Operations, Vice President of Logistics, Vice President of
Western Division Distribution Operations, and Vice President of Distribution Operations. Mr. Ellis has held the position of Senior Vice
President of Distribution Operations since 2014.
Jeremy Fletcher, age 43, Senior Vice President of Finance and Controller, has been an O’Reilly Team Member for 15 years.
Mr. Fletcher’s primary area of responsibility is Finance. Mr. Fletcher’s O’Reilly career began as the Financial Reporting and Budgeting
Manager and progressed through the roles of Director of Finance, and Vice President of Finance and Controller. Prior to joining
O’Reilly, Mr. Fletcher worked as a Certified Public Accountant with a public accounting firm and in a financial reporting and planning
role for a Fortune 1000 corporation. Mr. Fletcher has held the position of Senior Vice President of Finance and Controller since 2017.
Jeffrey L. Groves, age 55, Senior Vice President of Legal and General Counsel, has been an O’Reilly Team Member for 16 years.
Mr. Groves’s primary areas of responsibility are Corporate Governance, Regulatory Matters, and Internal Audit. Mr. Groves’s O’Reilly
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FORM 10-K
career began as Director of Legal and Claim Services and progressed through the roles of Director of Legal and Claim Services and
General Counsel and Vice President of Legal and Claim Services and General Counsel. Prior to joining O’Reilly, Mr. Groves worked
in a private civil defense trial practice. Mr. Groves has held the position of Senior Vice President of Legal and General Counsel since
2016.
Scott Kraus, age 44, Senior Vice President of Real Estate and Expansion, has been an O’Reilly Team Member for 22 years. Mr. Kraus’s
primary areas of responsibility are Real Estate Expansion and Acquisitions. Mr. Kraus’s O’Reilly career began as a Parts Specialist and
progressed through the roles of Store Manager, District Manager, Regional Field Sales Manager, Regional Manager, Divisional Vice
President, and Vice President of Real Estate. Mr. Kraus has held the position of Senior Vice President of Real Estate and Expansion
since 2016.
Jeffrey A. Lauro, age 54, Senior Vice President of Information Technology, has been an O’Reilly Team Member for five years.
Mr. Lauro’s primary area of responsibility is Information Technology. Mr. Lauro has over 30 years of information technology
experience primarily in the retail industry. Prior to joining O’Reilly, Mr. Lauro held the position of Chief Information Officer for
Payless ShoeSource (“Payless”), with direct responsibility for solution delivery, infrastructure and operations and enterprise architecture.
Prior to joining Payless, Mr. Lauro was the Vice President, Global Information Technology Service Delivery Director for The TJX
Companies, Inc., with direct responsibility for global information technology service management, operations, implementation and
disaster recovery. In 2015, Mr. Lauro joined O’Reilly as Senior Vice President of Information Technology and has held this position
since that time.
Jason Tarrant, age 40, Senior Vice President of Western Store Operations and Sales, has been an O’Reilly Team Member for 19 years,
which includes continuous years of service with a company acquired by O’Reilly. Mr. Tarrant’s primary areas of responsibility are
Store Operations and Sales for O’Reilly Western Store Operations. Mr. Tarrant’s O’Reilly career began as a Parts Specialist and
progressed through the roles of Assistant Store Manager, Store Manager, District Manager, Regional Field Sales Manager, Regional
Manager, and Divisional Vice President. Mr. Tarrant has held the position of Senior Vice President of Western Store Operations and
Sales since 2018.
Darin Venosdel, age 50, Senior Vice President of Inventory Management, has been an O’Reilly Team Member for 23 years.
Mr. Venosdel’s primary areas of responsibility are Inventory Management, Purchasing and Store Design. Mr. Venosdel’s O’Reilly
career began as a Programmer/Analyst and progressed through the roles of Application Development Manager, Director of Application
Development, Director of Inventory Management, and Vice President of Inventory Management. Mr. Venosdel has held the position
of Senior Vice President of Inventory Management since 2018.
David Wilbanks, age 49, Senior Vice President of Merchandise, has been an O’Reilly Team Member for eight years. Mr. Wilbanks’s
primary areas of responsibility are Merchandise and Pricing. Mr. Wilbanks has over 30 years of experience in the automotive
aftermarket industry. Mr. Wilbanks’s career began as a counter technician for an independent jobber and progressed to becoming an
ASE Certified Master Technician for an automotive dealership, before accepting a position with AutoZone, Inc. (“AutoZone”).
Mr. Wilbanks served AutoZone for twelve years as a financial analyst, Category Manager, and Director of Merchandise. In 2012,
Mr. Wilbanks joined O’Reilly as Vice President of Merchandise and has held the position of Senior Vice President of Merchandise since
2016.
SERVICE MARKS AND TRADEMARKS
We have registered, acquired and/or been assigned the following service marks and trademarks in the United States: BENNETT AUTO
SUPPLY®; BESTEST®; BETTER PARTS. BETTER PRICES.®; BETTER PARTS, BETTER PRICES....EVERYDAY!®; BOND
AUTO PARTS®; BRAKEBEST®; BRAKEBEST HD®; BRAKEBEST SELECT®; CARTEK®; CARTEK PRO®; CERTIFIED
AUTO REPAIR®; CHECKER AUTO PARTS®; CSK PROSHOP®; CUSTOMIZE YOUR RIDE®; DO IT RIGHT DEALS®; DO IT
RIGHT REBATE®; DRIVE WITH THE LEADER!®; EARN POINTS EVERY WAY YOU SHOP®; FIRST CALL®; FLEET &
HEAVY DUTY PROFESSIONAL PARTS PEOPLE®; FRIENDLIEST PARTS STORE IN TOWN®; FROM OUR STORE TO
YOUR DOOR®; IMPORT DIRECT®; KRAGEN AUTO PARTS®; MASTER PRO®; MASTER PRO REFINISHING®;
MASTERPRO SELECT®; MASTERPRO UNDERCAR®; MICROGARD®; MICROGARD HEPA®; MURRAY®; MURRAY
CLIMATE CONTROL®; MURRAY TEMPERATURE CONTROL®; MURRAY’S MASCOT® (Design only); MURRAY PLUS®;
MURRAY ULTRA®; MURRAY’S AUTO PARTS®; O LOW PRICE GUARANTEE! ®; O® (Shamrock inside of “O”);
OMNISPARK®; O’REILLY®; O’REILLY AUTO COLOR PROFESSIONAL PAINT PEOPLE®; O’REILLY AUTO PARTS®;
O’REILLY AUTO PARTS PROFESSIONAL PARTS PEOPLE®; O’REILLY AUTOMOTIVE®; O’REILLY O’REWARDS®;
O’REILLY SELECT®; O’REWARDS®; PARTNERSHIP NETWORK®; PARTS CITY®; PARTS CITY AUTO COLOR
PROFESSIONAL PAINT PEOPLE®; PARTS CITY AUTO PARTS®; PARTS FOR YOUR CAR WHEREVER YOU ARE®; PARTS
PAYOFF®; POWER TORQUE®; PRECISION®; PRECISION HUB ASSEMBLIES®; PRIORITY PARTS®; QUIETECH®; REAL
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FORM 10-K
WORLD TRAINING®; ¡SIGUE ADELANTE CON O’REILLY!®; SCHUCK’S AUTO SUPPLY®; SUPER START®; TOOLBOX®;
ULTIMA®; ULTIMA SELECT®; and WORK AT THE O®. Some of the service marks and trademarks listed above may also have a
design associated therewith. Each of the service marks and trademarks are in duration for as long as we continue to use and seek renewal
of such marks. The above list includes only the trademarks and service marks that are currently and validly registered with the United
States Patent and Trademark Office. It does not include trademarks or service marks which may also be in use, but are not yet registered.
We believe that our business is not otherwise dependent upon any patent, trademark, service mark or copyright.
Solely for convenience, our service marks and trademarks may appear in this report without the ® or ™ symbol, which is not intended
to indicate that we will not assert, to the fullest extent under applicable law, our rights or the right to these service marks and trademarks.
AVAILABLE INFORMATION
Our Internet address is www.OReillyAuto.com. Interested readers can access, free of charge, our annual reports on Form 10-K, quarterly
reports on Form 10-Q, current reports on Form 8-K and any amendments to those reports filed or furnished pursuant to Section 13(a) or
15(d) of the Securities Exchange Act of 1934, as amended, through the Securities and Exchange Commission website at www.sec.gov
and searching with our ticker symbol “ORLY.” Such reports are generally available the day they are filed. Upon request, we will
furnish interested readers a paper copy of such reports free of charge by contacting Mark Merz, Vice President of Investor Relations,
Financial Reporting and Planning, at 233 South Patterson Avenue, Springfield, Missouri, 65802.
Item 1A. Risk Factors
Our future performance is subject to a variety of risks and uncertainties. Although the risks described below are the risks that we believe
are material, there may also be risks of which we are currently unaware, or that we currently regard as immaterial based upon the
information available to us that later may prove to be material. Interested parties should be aware that the occurrence of the events
described in these risk factors, elsewhere in this Form 10-K and in our other filings with the Securities and Exchange Commission could
have a material adverse effect on our business, operating results and financial condition. Actual results, therefore, may materially differ
from anticipated results described in our forward-looking statements.
RISKS RELATED TO THE COVID-19 PANDEMIC
The ongoing occurrence of COVID-19, or any other such widespread public health crisis, could have a material adverse effect on
our business, results of operations, financial condition and cash flows.
The outbreak of the COVID-19 pandemic and its global spread, including in the U.S., has had a significant impact on the U.S. and world
economies. The public health concerns resulting from the pandemic have created significant uncertainty, economic disruption and
volatility, all of which have impacted and may continue to impact our business. We may be required to take significant actions to
mitigate any adverse impact of the COVID-19 pandemic, including, but not limited to, reduced staffing and increased expenses. We
are unable to predict the ongoing short-term and long-term impact of the COVID-19 pandemic on our business, results of operations,
financial condition and cash flows due to several factors beyond our control, including, but not limited to:
•
•
•
•
•
•
•
the severity and duration of the pandemic, including additional outbreaks, new strands of the virus and availability of effective
medical treatments and vaccines for COVID-19;
the continued response of both governmental and nongovernmental authorities, including, but not limited to, stay at home
orders or quarantine, restrictions on our operations, such as requiring a reduction in store operating hours or the temporary
closure of stores, distributions centers and other facilities, complex and changing regulations and guidance regarding the safety
of employees and customers, inconsistent application of COVID-19 orders and regulations, unemployment compensation and
economic stimulus;
the impact of the pandemic on consumer confidence and macroeconomic factors such as unemployment and work force
availability, as well as industry specific demand drivers such as the number of U.S. miles driven, which could impact demand
for our product;
temporary or long-term disruption in our supply network from local and international suppliers and/or delays in the delivery of
our inventory;
volatility in the U.S. and global financial markets, including global debt and equity markets;
the impact of regulatory and legislative changes in liability for workers’ compensation; and
the impact of litigation, investigations or claims from customers, Team Members, suppliers, regulators or other third parties
relating to the COVID-19 pandemic or our actions in response thereto, including any reputational harm.
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The above factors and uncertainties, in addition to others we are not currently aware of, may result in adverse impacts to our business,
results of operations, financial condition and cash flows.
RISKS SPECIFIC TO OUR BUSINESS AND INDUSTRY
Deteriorating economic conditions may adversely impact demand for our products, reduce access to credit and cause our customers
and others, with which we do business, to suffer financial hardship, all of which could adversely impact our business, results of
operations, financial condition and cash flows.
Although demand for many of our products is primarily non-discretionary in nature and tend to be purchased by consumers out of
necessity, rather than on an impulse basis, our sales are impacted by constraints on the economic health of our customers. The economic
health of our customers is affected by many factors, including, among others, general business conditions, interest rates, inflation,
consumer debt levels, the availability of consumer credit, currency exchange rates, taxation, fuel prices, unemployment levels and other
matters that influence consumer confidence and spending, such as a prolonged public health crisis or pandemic, such as the COVID-19
pandemic. Many of these factors are outside of our control. Our customers’ purchases, including purchases of our products, could
decline during periods when income is lower, when prices increase in response to rising costs, or in periods of actual or perceived
unfavorable economic conditions or political uncertainty. If any of these events occur, or if unfavorable economic conditions challenge
the consumer environment, our business, results of operations, financial condition and cash flows could be adversely affected.
Overall demand for products sold in the automotive aftermarket is dependent upon many factors including the total number of vehicle
miles driven in the U.S., the total number of registered vehicles in the U.S., the age and quality of these registered vehicles and the level
of unemployment in the U.S. Changes in vehicle technology used by the original equipment manufacturers (“OEM”) on future vehicles,
including but not limited to electric, hybrid and internal combustion engines, may result in less frequent repairs, parts lasting longer or
elimination of certain repairs. In addition, restrictions on access to telematics, diagnostic tools and repair information imposed by the
OEMs or by governmental regulations may force vehicle owners to rely on dealers to perform maintenance and repairs. Adverse changes
in these factors could lead to a decreased level of demand for our products, which could negatively impact our business, results of
operations, financial condition and cash flows.
In addition, economic conditions, including decreased access to credit, may result in financial difficulties leading to restructurings,
bankruptcies, liquidations and other unfavorable events for our customers, suppliers, logistics and other service providers and financial
institutions that are counterparties to our credit facilities. Furthermore, the ability of these third parties to overcome these difficulties
may increase. If third parties, on whom we rely for merchandise, are unable to overcome difficulties resulting from the deterioration in
economic conditions, the cause of which could include a prolonged public health crisis or pandemic, such as the COVID-19 pandemic,
and provide us with the merchandise we need, or if counterparties to our credit facilities do not perform their obligations, our business,
results of operations, financial condition and cash flows could be adversely affected.
The automotive aftermarket business is highly competitive, and we may have to risk our capital to remain competitive, all of which
could adversely impact our business, results of operations, financial condition and cash flows.
Both the DIY and professional service provider portions of our business are highly competitive, particularly in the more densely
populated areas that we serve. Some of our competitors are larger than we are and have greater financial resources. In addition, some
of our competitors are smaller than we are, but have a greater presence than we do in a particular market. Online and mobile platforms
may allow customers to quickly compare prices and product assortments between us and a range of competitors, which could result in
pricing pressure. Some online competitors may have a lower cost structure than we do, as a result of our strategy of providing an
exceptional in-store experience and superior parts availability supported by our extensive store network and robust, regional distribution
footprint, which could also create pricing pressure. We may have to expend more resources and risk additional capital to remain
competitive and our results of operations, financial condition and cash flows could be adversely affected. For a list of our principal
competitors, see the “Competition” section of Item 1 of this annual report on Form 10-K.
We are sensitive to regional economic and weather conditions that could impact our costs and sales.
Our business is sensitive to national and regional economic and weather conditions and natural disasters. Unusually inclement weather,
such as significant rain, snow, sleet, freezing rain, flooding, seismic activity and hurricanes, has historically discouraged our customers
from visiting our stores during the affected period and reduced our sales, particularly to DIY customers. Extreme weather conditions,
such as extreme heat and extreme cold temperatures, may enhance demand for our products due to increased failure rates of our
customers’ automotive parts, while temperate weather conditions may have a lesser impact on failure rates of automotive parts. In
addition, our stores and DCs located in coastal regions may be subject to increased insurance claims resulting from regional weather
conditions and our results of operations, financial condition and cash flows could be adversely affected.
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FORM 10-K
A change in the relationship with any of our key suppliers, the unavailability of our key products at competitive prices or changes in
trade policies could affect our financial health.
Our business depends on developing and maintaining close relationships with our suppliers and on our suppliers’ ability or willingness
to sell quality products to us at favorable prices and terms. Many factors outside of our control may harm these relationships and the
ability or willingness of these suppliers to sell us products on favorable terms. For example, financial or operational difficulties that our
suppliers may face could increase the cost of the products we purchase from them or our ability to source products from them. In
addition, the trend toward consolidation among automotive parts suppliers, as well as the off-shoring of manufacturing capacity to
foreign countries, may disrupt or end our relationship with some suppliers and could lead to less competition and result in higher prices.
We could also be negatively impacted by suppliers who might experience work stoppages, labor strikes, a prolonged public health crisis
or pandemic, such as the COVID-19 pandemic, or other interruptions to, or difficulties in the, manufacture or supply of the products we
purchase from them. Changes in U.S. trade policies, practices, tariffs or taxes could affect our ability and our suppliers’ ability to source
product at current volumes and/or prices.
Business interruptions in our distribution centers or other facilities may affect our store hours, stability of our computer systems,
and/or availability and distribution of merchandise, which may affect our business.
Weather, terrorist activities, war or other disasters, or the threat of them, may result in the closure of one or more of our DCs or other
facilities, or may adversely affect our ability to deliver inventory to our stores on a nightly basis. This may affect our ability to timely
provide products to our customers, resulting in lost sales or a potential loss of customer loyalty. Some of our merchandise is imported
from other countries and these goods could become difficult or impossible to bring into the United States, and we may not be able to
obtain such merchandise from other sources at similar prices. Such a disruption in revenue could potentially have a negative impact on
our results of operations, financial condition and cash flows.
We rely extensively on our computer systems to manage inventory, process transactions and timely provide products to our customers.
Our systems are subject to damage or interruption from power outages, telecommunications failures, computer viruses, security breaches
or other catastrophic events. If our systems are damaged or fail to function properly, we may experience loss of critical data and
interruptions or delays in our ability to manage inventories or process customer transactions. Such a disruption of our systems could
negatively impact revenue and potentially have a negative impact on our results of operations, financial condition and cash flows.
Failure to protect our brand and reputation could have a material adverse effect on our brand name, business, results of operations,
financial condition and cash flows.
We believe our Company has built an excellent reputation as a leading retailer in the automotive aftermarket industry. We believe our
continued success depends, in part, on our ability to preserve, grow and leverage the value of our brand. Our reputation is based, in
part, on perceptions of subjective qualities; negative publicity involving the Company, our merchandise or our industry in general that
erode customer trust or confidence could adversely affect our reputation and business. Failure to comply with ethical, social, product,
labor, health and safety, accounting or environmental standards, or existing or future laws or regulations could also jeopardize our
reputation and potentially lead to various adverse actions from consumer or environmental groups, employees or regulatory bodies,
which could require us to incur substantial legal fees and costs. In addition, negative claims or publicity, including the availability of
information and opinions on social media, as its impact is immediate, could adversely affect our reputation. The opportunity for the
rapid dissemination of information, including inaccurate and inflammatory information and opinions, is virtually limitless and easily
accessible. Damage to our reputation or loss of consumer confidence for any of these or other reasons could have an adverse effect on
our business, results of operations, financial condition or cash flows, as well as require additional resources to rebuild our reputation.
Risks associated with international operations could result in additional costs and inefficiencies.
In addition to many of the risks we face in our U.S. operations, international operations present a unique set of risks and challenges,
including local laws and customs, U.S. laws applicable to foreign operations and political and socio-economic conditions. Our ability
to operate effectively and grow in international markets could be impacted by these risks resulting in legal liabilities, additional costs
and the distraction of management’s attention. Compliance with the Foreign Corrupt Practices Act and protection of intellectual property
rights surrounding items such as tradenames and trademarks in foreign jurisdictions can pose significant challenges.
In addition, our operations in international markets are conducted primarily in the local currency of those countries. Given that our
Consolidated Financial Statements are denominated in U.S. dollars, amounts of assets, liabilities, net sales and other revenues and
expenses denominated in local currencies must be translated into U.S. dollars using exchange rates for the current period. As a result,
foreign currency exchange rates and fluctuations in those rates may adversely impact our financial performance.
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FORM 10-K
RISKS RELATED TO OUR COMMON STOCK
Risks related to us and unanticipated fluctuations in our quarterly operating results could affect our stock price.
We believe that quarter-to-quarter comparisons of our financial results are not necessarily meaningful indicators of our future operating
results and should not be relied on as an indication of future performance. If our quarterly operating results fail to meet the expectations
of analysts, the trading price of our common stock could be negatively affected. We cannot be certain that our growth plans and business
strategies will be successful or that they will successfully meet the expectations of these analysts. If we fail to adequately address any
of these risks or difficulties, our stock price would likely suffer.
The market price of our common stock may be volatile and could expose us to securities class action litigation.
The stock market and the price of our common stock may be subject to wide fluctuations based upon general economic and market
conditions and potentially being targeted through the selling and buying of our common stock by a group of individuals, whose interests
and reasoning behind such actions may not align with an average market participant. The market price of our common stock may also
be affected by our ability to meet analysts’ expectations and failure to meet such expectations, even slightly, could have an adverse
effect on the market price of our common stock.
In addition, stock market volatility has had a significant effect on the market prices of securities issued by many companies for reasons
unrelated to the operating performance of these companies. Downturns in the stock market may cause the price of our common stock
to decline. In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has
often been initiated against such companies. If similar litigation were initiated against us, it could result in substantial costs and a
diversion of our management’s attention and resources, which could have an adverse effect on our business.
RISKS RELATED TO OUR INDEBTEDNESS AND FINANCING
Our debt levels could adversely affect our cash flow and prevent us from fulfilling our obligations.
We have an unsecured revolving credit facility and unsecured senior notes, which could have important consequences to our financial
health. For example, our level of indebtedness could, among other things,
• make it more difficult to satisfy our financial obligations, including those relating to the senior unsecured notes and our credit
•
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•
•
•
facility;
increase our vulnerability to adverse economic and industry conditions;
limit our flexibility in planning for, or reacting to, changes and opportunities in our industry, which may place us at a
competitive disadvantage;
require us to dedicate a substantial portion of our cash flows to service the principal and interest on the debt, reducing the funds
available for other business purposes, such as working capital, capital expenditures or other cash requirements;
limit our ability to incur additional debt with acceptable terms, if at all; and
expose us to fluctuations in interest rates, including changes that may result from the implementation of new benchmark rates
that replace LIBOR.
In addition, the terms of our financing obligations include restrictions, such as affirmative, negative and financial covenants, conditions
on borrowing and subsidiary guarantees. A failure to comply with these restrictions could result in a default under our financing
obligations or could require us to obtain waivers from our lenders for failure to comply with these restrictions. The occurrence of a
default that remains uncured or the inability to secure a necessary consent or waiver could have a material adverse effect on our business,
financial condition, results of operations and cash flows.
A downgrade in our credit rating would impact our cost of capital and could impact the market value of our unsecured senior notes,
as well as limit our access to attractive supplier financing programs.
Credit ratings are an important component of our cost of capital. These ratings are based upon, among other factors, our financial
strength. Our current credit ratings provide us with the ability to borrow funds at favorable rates. A downgrade in our current credit
rating from either rating agency could adversely affect our cost of capital by causing us to pay a higher interest rate on borrowed funds
under our unsecured revolving credit facility and a higher facility fee on commitments under our unsecured revolving credit facility. A
downgrade in our current credit rating could also adversely affect the market price and/or liquidity of our unsecured senior notes,
preventing a holder from selling the unsecured senior notes at a favorable price, as well as adversely affect our ability to issue new notes
in the future. In addition, a downgrade in our current credit rating could limit the financial institutions willing to commit funds to our
supplier financing programs at attractive rates. Decreased participation in our supplier financing programs would lead to an increase in
working capital needed to operate the business, adversely affecting our cash flows.
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FORM 10-K
GENERAL RISKS
We cannot assure future growth will be achieved.
We believe that our ability to open additional, profitable stores at a high growth rate will be a significant factor in achieving our growth
objectives for the future. Our ability to accomplish our growth objectives is dependent, in part, on matters beyond our control, such as
weather conditions, zoning and other issues related to new store site development, the availability of qualified management personnel
and general business and economic conditions. We cannot be sure that our growth plans for 2021 and beyond will be achieved. Failure
to achieve our growth objectives may negatively impact the trading price of our common stock. For a discussion of our growth strategies,
see the “Growth Strategy” section of Item 1 of this annual report on Form 10-K.
In order to be successful, we will need to retain and motivate key employees.
Our success has been largely dependent on the efforts of certain key personnel. In order to be successful, we will need to retain and
motivate executives and other key employees. Experienced management and technical personnel are in high demand and competition
for their talents is intense. We must also continue to motivate employees and keep them focused on our strategies and goals. Our
business, results of operations and cash flows could be materially adversely affected by the unexpected loss of the services of one or
more of our key employees. We cannot be sure that we will be able to continue to attract qualified personnel, which could cause us to
be less efficient and, as a result, may adversely impact our sales and profitability. For a discussion of our management, see the
“Business” section of Item 1 of this annual report on Form 10-K.
Risks associated with future acquisitions may not lead to expected growth and could result in increased costs and inefficiencies.
We expect to continue to make acquisitions as an element of our growth strategy. Acquisitions involve certain risks that could cause
our actual growth and profitability to differ from our expectations. Examples of such risks include the following:
• We may not be able to continue to identify suitable acquisition targets or to acquire additional companies at favorable prices
or on other favorable terms.
• Our management’s attention may be distracted.
• We may fail to retain key personnel from acquired businesses.
• We may assume unanticipated legal liabilities and other problems.
• We may not be able to successfully integrate the operations (accounting and billing functions, for example) of businesses we
acquire to realize economic, operational and other benefits.
We may fail, or be unable to, discover liabilities of businesses that we acquire for which we or the subsequent owner or operator may
be liable.
A breach of customer, supplier, Team Member or Company information could damage our reputation or result in substantial
additional costs or possible litigation.
Our business involves the storage of information about our customers, suppliers, Team Members and the Company, some of which is
entrusted to third-party service providers and vendors. We and our third-party service providers and vendors have taken reasonable and
appropriate steps to protect this information; however, these security measures may be breached due to cyber-attacks, Team Member
error, system compromises, fraud, hacking or other intentional or unintentional acts, which could result in unauthorized parties gaining
access to such information. The methods used to obtain unauthorized access are constantly evolving and may be difficult to anticipate
or detect for long periods of time. If we experience a significant data security breach, we could be exposed to damage to our reputation,
additional costs, lost sales, litigation or possible regulatory action. In addition, the regulatory environment related to information security
and privacy is constantly evolving, and compliance with those requirements could result in additional costs. There is no guarantee that
the procedures that we and our third-party service providers and vendors have implemented to protect against unauthorized access to
secured data are adequate to safeguard against all data security breaches, and such a breach could potentially have a negative impact on
our results of operations, financial condition and cash flows.
Litigation, governmental proceedings, environmental legislation and regulations and employment legislation and regulations may
affect our business, financial condition, results of operations and cash flows.
We are, and in the future may become, involved in lawsuits, regulatory inquiries and governmental and other legal proceedings, arising
out of the ordinary course of our business. The damages sought against us in some of these litigation proceedings may be material and
may adversely affect our business, results of operations, financial condition and cash flows.
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Environmental legislation and regulations, like the initiatives to limit greenhouse gas emissions and bills related to climate change, could
adversely impact all industries. While it is uncertain whether these initiatives will become law, additional climate change related
mandates could potentially be forthcoming and these matters, if enacted, could adversely impact our costs, by, among other things,
increasing fuel prices.
Our business is subject to employment legislation and regulations, including requirements related to minimum wage. Our success
depends, in part, on our ability to manage operating costs and identify opportunities to reduce costs. Our ability to meet labor needs,
while controlling costs is subject to external factors, such as minimum wage legislation. A violation of, or change in, employment
legislation and/or regulations could hinder our ability to control costs, which could have a material adverse effect on our business, results
of operations, financial condition and cash flows.
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
Stores, distribution centers and other properties:
Of the 5,616 stores we operated at December 31, 2020, 2,325 stores were owned, 3,220 stores were leased from unaffiliated parties, 22
of which were located in Mexico, and 71 stores were leased from entities that include one or more of our affiliated directors or members
of their immediate family. Leases with unaffiliated parties generally provide for payment of a fixed base rent, payment of certain tax,
insurance and maintenance expenses and an original term of, at a minimum, 10 years, subject to one or more renewals at our option.
We have entered into separate master lease agreements with each of the affiliated entities for the occupancy of the stores covered thereby.
Such master lease agreements with two of the five affiliated entities have been modified to extend the term of the lease agreement for
specific stores. The master lease agreements or modifications thereto expire on dates ranging from June 30, 2021, to November 1, 2035.
We believe that the lease agreements with the affiliated entities are on terms comparable to those obtainable from third parties.
The following table provides information regarding our U.S. domestic regional DCs in operation as of December 31, 2020:
Principal Use
Distribution center
Distribution center
Total
Nature of Occupancy
Owned
Leased (2)
Number of Locations
21
7
28
(in thousands)
9,161
2,483
11,644
Operating Square Footage (1)
(1) DC operating square footage includes floor and mezzanine operating square footage and excludes subleased square footage.
(2) Terms expiring on dates ranging from March 31, 2022, to June 30, 2035.
In addition, we operate six small distribution centers in Mexico; these distribution centers do not serve U.S. stores and are immaterial
in the aggregate. In 2020, we relocated our Nashville, Tennessee, DC into a larger facility in Lebanon, Tennessee, providing a larger,
more efficient facility that serves both markets in March 2020. The existing store portion of the Nashville, Tennessee, DC facility
remained a large Hub that continues to provide same day parts availability in the attractive Nashville market. The distribution operations
of our Knoxville, Tennessee, DC are in the process of being merged into our Lebanon, Tennessee, DC, which is expected to be completed
in 2021, and the existing store portion of our Knoxville, Tennessee, DC facility will remain a large Hub that will continue to provide
same day parts availability in the Knoxville market. Additionally, we plan to merge our North Little Rock, Arkansas, DC into our new
Horn Lake, Mississippi, DC, which we expect to open in mid-2021. At that time, the existing store portion of our North Little Rock,
Arkansas, DC facility will remain a large Hub that will continue to provide same day parts availability in the Little Rock market.
We believe that our present facilities are in good condition, are sufficiently insured and are adequate for the conduct of our current
operations. The store servicing capability of our 28 existing U.S. DCs is approximately 6,180 stores, providing a growth capacity of
more than 585 U.S. stores, which will increase by approximately 150 net, stores with the completion of our Horn Lake, Mississippi, DC
and the conversion of our North Little Rock, Arkansas, DC into a Hub facility in 2021. We believe the growth capacity in our DCs,
along with the additional capacity of our new Horn Lake, Mississippi, DC, will provide us with the DC infrastructure needed for near-
term expansion. However, as we expand our geographic footprint, we will continue to evaluate our existing distribution system
infrastructure and will adjust our distribution system capacity as needed to support our future growth.
Our corporate office operations occur primarily in Springfield, Missouri, and as of December 31, 2020, the total square footage was 0.6
million square feet, substantially all of which was owned.
20
FORM 10-K
Item 3. Legal Proceedings
The Company is currently involved in litigation incidental to the ordinary conduct of the Company’s business. The Company accrues
for litigation losses in instances where a material adverse outcome is probable and the Company is able to reasonably estimate the
probable loss. The Company accrues for an estimate of material legal costs to be incurred in pending litigation matters. Although the
Company cannot ascertain the amount of liability that it may incur from any of these matters, it does not currently believe that, in the
aggregate, these matters, taking into account applicable insurance and accruals, will have a material adverse effect on its consolidated
financial position, results of operations or cash flows in a particular quarter or annual period.
Item 4. Mine Safety Disclosures
Not applicable.
21
FORM 10-K
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Common stock:
Shares of the Company’s common stock are traded on The NASDAQ Global Select Market (“Nasdaq”) under the symbol “ORLY.”
The Company’s common stock began trading on April 22, 1993; no cash dividends have been declared since that time, and the Company
does not anticipate paying any cash dividends in the foreseeable future.
As of February 18, 2021, the Company had approximately 420,000 shareholders of common stock based on the number of holders of
record and an estimate of individual participants represented by security position listings.
Sales of unregistered securities:
There were no sales of unregistered securities during the year ended December 31, 2020.
Issuer purchases of equity securities:
The following table identifies all repurchases during the fourth quarter ended December 31, 2020, of any of the Company’s securities
registered under Section 12 of the Securities Exchange Act of 1934, as amended, by or on behalf of the Company or any affiliated
purchaser (in thousands, except per share data):
Period
October 1, 2020, to October 31, 2020
November 1, 2020, to November 30, 2020
December 1, 2020, to December 31, 2020
Total as of December 31, 2020
Total
Number of
Average Shares Purchased as
Price Paid
Part of Publicly
Shares Purchased per Share Announced Programs
Total Number of
Maximum Dollar Value
of Shares that May Yet
Be Purchased Under the
Programs (1)
779 $ 457.71
449.32
714
448.08
705
2,198 $ 451.90
779 $
714
705 $
2,198
1,118,244
797,226
481,538
(1) Under the Company’s share repurchase program, as approved by its Board of Directors on January 11, 2011, the Company may, from time to
time, repurchase shares of its common stock, solely through open market purchases effected through a broker dealer at prevailing market prices,
based on a variety of factors such as price, corporate trading policy requirements and overall market conditions not to exceed a dollar limit
authorized by the Board of Directors. The Company’s Board of Directors may increase or otherwise modify, renew, suspend or terminate the
share repurchase program at any time, without prior notice. As announced on February 5, 2020, October 28, 2020, and February 10, 2021, the
Company’s Board of Directors each time approved a resolution to increase the authorization amount under the share repurchase program by an
additional $1.0 billion, resulting in a cumulative authorization amount of $15.8 billion. Each additional authorization is effective for a three–year
period, beginning on its respective announcement date. The authorizations under the share repurchase program that currently have capacity are
scheduled to expire on October 28, 2023 and February 10, 2024. No other share repurchase programs existed during the twelve months ended
December 31, 2020.
The Company repurchased a total of 4.8 million shares of its common stock under its publicly announced share repurchase program
during the year ended December 31, 2020, at an average price per share of $431.93, for a total investment of $2.1 billion. Subsequent
to the end of the year and through February 26, 2021, the Company repurchased an additional 1.1 million shares of its common stock,
at an average price per share of $447.49, for a total investment of $478.4 million. The Company has repurchased a total of 82.1 million
shares of its common stock under its share repurchase program since the inception of the program in January of 2011 and through
February 26, 2021, at an average price of $179.65, for a total aggregate investment of $14.7 billion.
22
FORM 10-K
Stock performance graph:
The graph below shows the cumulative total shareholder return assuming the investment of $100, on December 31, 2015, and the
reinvestment of dividends thereafter, if any, in the Company’s common stock versus the Standard and Poor’s S&P 500 Retail Index
(“S&P 500 Retail Index”) and the Standard and Poor’s S&P 500 Index (“S&P 500”).
Company/Index
O’Reilly Automotive, Inc.
S&P 500 Retail Index
S&P 500
2015
$
2016
December 31,
2018
2017
2019
2020
100 $
100
100 $
110 $
105
110 $
95 $
135
131 $
136 $
152
123 $
173 $
191
158 $
179
278
184
$
23
FORM 10-K
Item 6. Selected Financial Data
The table below compares the “Company’s selected financial data over a ten-year period:
Years ended December 31,
(In thousands, except per
share, Team Members, stores
and ratio data)
INCOME STATEMENT
DATA:
Sales ($)
Cost of goods sold, including
warehouse and distribution
expenses
Gross profit
Selling, general and
administrative expenses
Former CSK officer
clawback
Operating income
Write-off of asset-based
revolving credit agreement
debt issuance costs
Termination of interest rate
swap agreements
Other income (expense), net
Total other income (expense)
Income before income taxes
Provision for income taxes
(a)(b)
Net income ($) (a)(b)
Basic earnings per common
share:
Earnings per share – basic ($)
Weighted-average common
shares outstanding – basic
Earnings per common share -
assuming dilution: (a)(b)
Earnings per share –
assuming dilution ($)
Weighted-average common
shares outstanding –
assuming dilution
SELECTED OPERATING
DATA:
Number of Team Members
at year end (c)
Total number of stores
at year end (d)(e)
Number of U.S. stores at year
end (d)
Number of Mexico stores
at year end (e)
Store square footage at year
end (c)(f)
Sales per weighted-average
store ($) (c)(g)
Sales per weighted-average
square foot ($) (c)(f)(h)
Percentage increase in
comparable store sales (c)(i)
2020
2019
2018
2017
2016
2015
2014
2013
2012
2011
11,604,493 10,149,985
9,536,428
8,977,726
8,593,096
7,966,674
7,216,081
6,649,237
6,182,184
5,788,816
5,518,801
6,085,692
4,755,294
5,394,691
4,496,462
5,039,966
4,257,043
4,720,683
4,084,085
4,509,011
3,804,031
4,162,643
3,507,180
3,708,901
3,280,236
3,369,001
3,084,766
3,097,418
2,951,467
2,837,349
3,666,356
3,473,965
3,224,782
2,995,283
2,809,805
2,648,622
2,438,527
2,265,516
2,120,025
1,973,381
—
2,419,336
—
1,920,726
—
1,815,184
—
1,725,400
—
1,699,206
—
1,514,021
—
1,270,374
—
1,103,485
—
977,393
(2,798)
866,766
—
—
—
—
—
—
—
—
—
(21,626)
—
(152,931)
(152,931)
2,266,405
—
(130,397)
(130,397)
1,790,329
—
(121,097)
(121,097)
1,694,087
—
(87,596)
(87,596)
1,637,804
—
(62,015)
(62,015)
1,637,191
—
(53,655)
(53,655)
1,460,366
—
(48,192)
(48,192)
1,222,182
—
(44,543)
(44,543)
1,058,942
—
(35,872)
(35,872)
941,521
(4,237)
(25,130)
(50,993)
815,773
514,103
1,752,302
399,287
1,391,042
369,600
1,324,487
504,000
1,133,804
599,500
1,037,691
529,150
931,216
444,000
778,182
388,650
670,292
355,775
585,746
308,100
507,673
23.74
18.07
16.27
12.82
10.87
9.32
7.46
6.14
4.83
3.77
73,817
76,985
81,406
88,426
95,447
99,965
104,262
109,244
121,182
134,667
23.53
17.88
16.10
12.67
10.73
9.17
7.34
6.03
4.75
3.71
74,462
77,788
82,280
89,502
96,720
101,514
106,041
111,101
123,314
136,983
76,257
81,223
78,882
75,552
74,580
71,621
67,569
61,909
53,063
49,324
5,616
5,594
22
5,460
5,219
5,019
4,829
4,571
4,366
4,166
3,976
3,740
5,439
5,219
5,019
4,829
4,571
4,366
4,166
3,976
3,740
21
—
—
—
—
—
—
—
—
41,668
40,227
38,455
36,685
35,123
33,148
31,591
30,077
28,628
26,530
2,057
277
1,881
1,842
1,807
1,826
1,769
1,678
1,614
1,590
1,566
255
251
248
251
244
232
224
224
221
10.9 %
4.0 %
3.8 %
1.4 %
4.8 %
7.5 %
6.0 %
4.6 %
3.5 %
4.6 %
24
FORM 10-K
Years ended December 31,
(In thousands, except per
share, Team Members, stores
and ratio data)
SELECT BALANCE
SHEET AND CASH
FLOW DATA:
Working capital ($) (j)
Total assets ($) (j)
Inventory turnover (k)
Accounts payable to
inventory (l)
Current portion of long-term
debt and short-term debt ($)
Long-term debt, less current
portion ($) (j)
Shareholders’ equity ($) (a)
Cash provided by operating
activities ($) (m)
Capital expenditures ($)
Free cash flow ($) (m)(n)
2020
2019
2018
2017
2016
2015
2014
2013
2012
2011
(762,630)
(635,765)
11,596,642 10,717,160
1.4
1.5
(350,918)
7,980,789
1.4
(249,694)
7,571,885
1.4
(142,674)
7,204,189
1.5
(36,372)
6,676,684
1.5
252,082
6,532,083
1.4
430,832
6,057,895
1.4
478,093
5,741,241
1.4
1,028,330
5,494,174
1.5
114.5 %
104.4 %
105.7 %
106.0 %
105.7 %
99.1 %
94.6 %
86.6 %
84.7 %
64.4 %
—
—
—
—
—
—
25
67
222
662
4,123,217
140,258
3,890,527
397,340
3,417,122
353,667
2,978,390
653,046
1,887,019
1,627,136
1,390,018
1,961,314
1,388,397
2,018,418
1,386,828
1,966,321
1,087,789
2,108,307
790,585
2,844,851
2,836,603
465,579
2,189,995
1,708,479
628,057
1,020,649
1,727,555
504,268
1,188,584
1,403,687
465,940
889,059
1,510,713
476,344
978,375
1,345,488
414,020
868,390
1,190,430
429,987
760,443
908,026
395,881
512,145
1,251,555
300,719
950,836
1,118,991
328,319
790,672
(a) During the year ended December 31, 2017, the Company adopted a new accounting standard that requires excess tax benefits related to share-based compensation
payments to be recorded through the income statement. In compliance with the standard, the Company did not restate prior period amounts to conform to current
period presentation. The Company recorded a cumulative effect adjustment to opening retained earnings, due to the adoption of the new accounting standard. See
Note 1 “Summary of Significant Accounting Policies” to the Consolidated Financial Statements of the annual report on Form 10-K for the year ended December 31,
2017, for more information.
(b) Following the enactment of the U.S. Tax Cuts and Jobs Act in December of 2017, the Company revalued its deferred income tax liabilities, which resulted in a one-
time benefit to the Company’s Consolidated Statement of Income for the years ended December 31, 2018 and 2017. See Note 13 “Income Taxes” to the Consolidated
Financial Statements of the annual report on Form 10-K for the year ended December 31, 2018, for more information.
(c) Represents O’Reilly’s U.S. operations only.
(d)
In 2012, 2016 and 2018, the Company acquired materially all assets of VIP Parts, Tires & Service (“VIP”), Bond Auto Parts (“Bond”) and Bennett Auto Supply,
Inc. (“Bennett”), respectively. The 2012 VIP acquisition added 56 stores, and the 2016 Bond acquisition added 48 stores to the O’Reilly store count. After the
close of business on December 31, 2018, the Company acquired substantially all of the non-real estate assets of Bennett, including 33 stores that were not included
in the 2018 store count and were not operated by the Company in 2018, but beginning January 1, 2019, the operations of the acquired Bennett locations were
included in the Company’s store count, and during the year ended December 31, 2019, the Company merged 13 of these acquired Bennett stores into existing
O’Reilly locations and rebranded the remaining 20 Bennett stores as O’Reilly stores. Financial results for these acquired companies have been included in the
Company’s consolidated financial statements from the dates of the acquisitions forward.
(e)
In 2019, the Company acquired Mayoreo de Autopartes y Aceites, S.A. de C.V. (“Mayasa”), which added 21 stores to the O’Reilly store count. Financial results
for this acquired company have been included in the Company’s consolidated financial statements beginning from the date of the acquisition.
Square footage includes normal selling, office, stockroom and receiving space.
(f)
(g) Sales per weighted-average store are weighted to consider the approximate dates of store openings, acquisitions or closures.
(h) Sales per weighted-average square foot are weighted to consider the approximate dates of domestic store openings, acquisitions, expansions or closures.
(i) Comparable store sales are calculated based on the change in sales of U.S. stores open at least one year and excludes sales of specialty machinery, sales to independent
parts stores, sales to Team Members, sales from Leap Day during the years ended December 31, 2020, 2016 and 2012. 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.
(j) Certain prior period amounts have been reclassified to conform to current period presentation, due to the Company’s adoption of new accounting standards during
the fourth quarter ended December 31, 2015. See Note 1 “Summary of Significant Accounting Policies” to the Consolidated Financial Statements of the annual
report on Form 10-K for the year ended December 31, 2015, for more information.
(k)
Inventory turnover is 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.
(l) Accounts payable to inventory is calculated as accounts payable divided by inventory.
(m) Certain prior period amounts have been reclassified to conform to current period presentation, due to the Company’s adoption of a new accounting standard during
the first quarter ended March 31, 2017. See Note 1 “Summary of Significant Accounting Policies” to the Consolidated Financial Statements of the annual report on
Form 10-K for the year ended December 31, 2017, for more information.
(n) Free cash flow is calculated as net cash provided by operating activities less capital expenditures, excess tax benefit from share-based compensation payments and
investment in tax credit equity investments for the period.
25
FORM 10-K
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
In Management’s Discussion and Analysis, we provide a historical and prospective narrative of our general financial condition, results
of operations, liquidity and certain other factors that may affect our future results, including
•
•
•
•
•
•
•
•
•
an overview of the key drivers of the automotive aftermarket industry;
key events and recent developments within our Company;
our results of operations for the years ended December 31, 2020 and 2019;
our liquidity and capital resources;
any contractual obligations, to which we are committed;
any off-balance sheet arrangements we utilize;
our critical accounting estimates;
the inflation and seasonality of our business; and
recent accounting pronouncements that may affect our Company.
The review of Management’s Discussion and Analysis should be made in conjunction with our consolidated financial statements, related
notes and other financial information, forward-looking statements and other risk factors included elsewhere in this annual report.
OVERVIEW
We are a specialty retailer of automotive aftermarket parts, tools, supplies, equipment and accessories in the United States and Mexico.
We are one of the largest U.S. automotive aftermarket specialty retailers, selling our products to both DIY customers and professional
service providers – our “dual market strategy.” Our stores carry an extensive product line consisting of new and remanufactured
automotive hard parts, maintenance items, accessories, a complete line of auto body paint and related materials, automotive tools and
professional service provider service equipment.
Our extensive product line includes an assortment of products that are differentiated by quality and price for most of the product lines
we offer. For many of our product offerings, this quality differentiation reflects “good,” “better,” and “best” alternatives. Our sales and
total gross profit dollars are highest for the “best” quality category of products. Consumers’ willingness to select products at a higher
point on the value spectrum is a driver of sales and profitability in our industry. We have ongoing initiatives focused on marketing and
training to educate customers on the advantages of ongoing vehicle maintenance, as well as “purchasing up” on the value spectrum.
Our stores also offer enhanced services and programs to our customers, including used oil, oil filter and battery recycling; battery, wiper
and bulb replacement; battery diagnostic testing; electrical and module testing; check engine light code extraction; loaner tool program;
drum and rotor resurfacing; custom hydraulic hoses; and professional paint shop mixing and related materials. As of
December 31, 2020, we operated 5,594 stores in 47 U.S. states and 22 stores in Mexico.
We are influenced by a number of general macroeconomic factors that impact both our industry and our consumers, including, but not
limited to, fuel costs, unemployment trends, interest rates and other economic factors. Due to the nature of these macroeconomic factors,
we are unable to determine how long current conditions will persist and the degree of impact future changes may have on our business.
Macroeconomic factors, such as increases in the U.S. unemployment rate, and demand drivers specific to the automotive aftermarket,
such as U.S. miles driven, have been pressured as a result of responses to the COVID-19 pandemic, such as stay at home orders, work
from home arrangements and reduced travel. Gradual reopening processes across many markets positively impacted our performance
beginning in the second quarter and continuing into our third and fourth quarters; however, we are unable to predict the ongoing and
future impact of the pandemic on broader economic conditions or our industry.
We believe the key drivers of current and future long-term demand for the products sold within the automotive aftermarket include the
number of U.S. miles driven, number of U.S. registered vehicles, new light vehicle registrations and average vehicle age.
Number of Miles Driven
The number of total miles driven in the U.S. influences the demand for repair and maintenance products sold within the automotive
aftermarket. In total, vehicles in the U.S. are driven approximately three trillion miles per year, resulting in ongoing wear and tear and
a corresponding continued demand for the repair and maintenance products necessary to keep these vehicles in operation. According
to the Department of Transportation, the number of total miles driven in the U.S. increased 0.9% and 0.4% in 2019 and 2018,
respectively, and through February of 2020, year-to-date miles driven increased 2.1%. Miles driven dramatically declined beginning in
March of 2020, and through December 2020, year-to-date miles driven decreased 13.2%, as a result of the measures taken by state and
26
FORM 10-K
local governments in response to COVID-19 and the impact to economic activity as consumers responded to COVID-19. Further
government measures or consumer and business behavior could continue to have a negative impact on miles driven, but we are unable
to predict the duration and severity of the impact to our business.
Size and Age of the Vehicle Fleet
The total number of vehicles on the road and the average age of the vehicle population heavily influence the demand for products sold
within the automotive aftermarket industry. As reported by The Auto Care Association, the total number of registered vehicles increased
10.4% from 2009 to 2019, bringing the number of light vehicles on the road to 278 million by the end of 2019. For the year ended
December 31, 2020, the seasonally adjusted annual rate of light vehicle sales in the U.S. (“SAAR”) was approximately 16.3 million. In
the past decade, vehicle scrappage rates have remained relatively stable, ranging from 4.1% to 5.7% annually. As a result, over the past
decade, the average age of the U.S. vehicle population has increased, growing 18.0%, from 10.0 years in 2009 to 11.8 years in 2019.
We believe this increase in average age can be attributed to better engineered and manufactured vehicles, which can be reliably driven
at higher mileages due to better quality power trains, interiors and exteriors and the consumer’s willingness to invest in maintaining
these higher-mileage, better built vehicles. As the average age of vehicles on the road increases, a larger percentage of miles are being
driven by vehicles that are outside of a manufacturer warranty. These out-of-warranty, older vehicles generate strong demand for
automotive aftermarket products as they go through more routine maintenance cycles, have more frequent mechanical failures and
generally require more maintenance than newer vehicles. We believe consumers will continue to invest in these reliable, higher-quality,
higher-mileage vehicles and these investments, along with an increasing total light vehicle fleet, will support continued demand for
automotive aftermarket products.
We remain confident in our ability to gain market share in our existing markets and grow our business in new markets by focusing on
our dual market strategy and the core O’Reilly values of hard work and excellent customer service.
KEY EVENTS AND RECENT DEVELOPMENTS
Several key events have had or may have a significant impact on our operations and are identified below:
After the close of business on November 29, 2019, we completed the acquisition of Mayasa, a specialty retailer of automotive aftermarket
parts headquartered in Guadalajara, Jalisco, Mexico pursuant to a stock purchase agreement. At the time of the acquisition, Mayasa
operated six distribution centers, 21 Orma Autopartes stores and served over 2,000 independent jobber locations in 28 Mexican
states. The results of Mayasa’s operations have been included in the Company’s consolidated financial statements and results of
operations beginning from the date of acquisition.
The COVID-19 pandemic has caused significant disruption to the economy, placing pressure on our business beginning in mid-March
2020, as stay at home orders and/or business restrictions were put in place in most cities, counties and states. This pressure continued
until mid-April when our customers began to receive Economic Impact Payments under the CARES Act. We believe these government
stimulus payments and enhanced unemployment benefits, along with the easing of stay at home orders and the associated market
reopenings beginning in May and June and favorable industry dynamics, such as consumers investing in existing vehicles, led to strong
demand for our products beginning in April and continuing through the remainder of 2020.
We have been deemed an essential service provider in the communities we serve, and have taken many steps to promote the health and
safety of our customers and Team Members, while keeping our stores open and operating to meet our customers’ critical needs during
the COVID-19 crisis. In addition, when our business was pressured at the end of the first quarter, we took steps to strengthen our
liquidity and mitigate the expected ongoing impact on our operations and financial performance.
These actions include, but are not limited to:
•
Implementing social distancing standards throughout the Company, providing our Team Members with personal protective
equipment and modifying store procedures, including the implementation of curbside pickup for Buy Online, Pick Up In-Store
orders, enhanced cleaning protocols, health screening, contact tracing and mandatory masking for all Team Members;
• Putting in place programs to relax attendance policies, as well as advance sick time to assist Team Members who are place in
quarantine or need time away to support family members effective by COVID-19;
• Temporarily deferring certain capital investments, many of which have now resumed, and prudently managing our cost
structure in response to sales volatility;
27
FORM 10-K
• Successfully issuing $500 million aggregate principal amount unsecured 4.20% Senior Notes due 2030, and drawing a
precautionary $250 million on our existing revolving credit facility, however during the second quarter of 2020, this additional
draw was repaid;
• Temporarily suspending our share repurchase program on March 16, 2020, however, the program resumed on May 29, 2020,
based on the improved business environment and outlook; and
• Utilizing relief efforts as part of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) signed into law on
March 27, 2020, which included bonus depreciation on eligible property, deferral of employer portion of social security taxes
and deferral of certain tax payments.
While we continue to make adjustments as we navigate the current environment, we are unable to predict how long the current crisis
will last or the extent of the impact on our customers and our business.
RESULTS OF OPERATIONS
The following table includes income statement data as a percentage of sales, which is computed independently and may not compute to
presented totals due to rounding differences, for the years ended December 31, 2020 and 2019:
Sales
Cost of goods sold, including warehouse and distribution expenses
Gross profit
Selling, general and administrative expenses
Operating income
Interest expense
Interest income
Income before income taxes
Provision for income taxes
Net income
2020 Compared to 2019
For the Year Ended
December 31,
2020
100.0 %
47.6
52.4
31.6
20.8
(1.4)
0.1
19.5
4.4
15.1 %
2019
100.0 %
46.9
53.1
34.2
18.9
(1.4)
0.1
17.6
3.9
13.7 %
Sales:
Sales for the year ended December 31, 2020, increased $1.45 billion, or 14%, to $11.60 billion from $10.15 billion for the same period
in 2019. Comparable store sales for stores open at least one year increased 10.9% and 4.0% for the years ended December 31, 2020 and
2019, respectively. Comparable store sales are calculated based on changes in sales for U.S. domestic 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 in
the year ended December 31, 2020. Online sales, resulting from ship-to-home orders and pickup in-store orders, for stores open at least
one year, are included in the comparable store sales calculation.
28
FORM 10-K
The following table presents the components of the increase in sales for the year ended December 31, 2020 (in millions):
Increase in Sales for the Year Ended
December 31, 2020,
Compared to the Same Period in 2019
Store sales:
Comparable store sales
Non-comparable store sales:
$
Sales for stores opened throughout 2019, excluding stores open at least one year that
are included in comparable store sales, and sales from the acquired Mayasa stores
Sales for stores opened throughout 2020
Sales from Leap Day
Decline in sales for stores that have closed
Non-store sales:
Includes sales of machinery and sales to independent parts stores and Team Members
Total increase in sales
$
1,082
120
123
34
(9)
105
1,455
We believe the increased sales are the result of store growth, the acquisition of Mayasa, sales from one additional day due to Leap Day
for the year ended December 31, 2020, the high levels of customer service provided by our well-trained and technically proficient Team
Members, superior inventory availability, including same day and over-night access to inventory in our regional distribution centers,
enhanced services and programs offered in our stores, a broader selection of product offerings in most stores with a dynamic catalog
system to identify and source parts, a targeted promotional and advertising effort through a variety of media and localized promotional
events, continued improvement in the merchandising and store layouts of our stores, compensation programs for all store Team Members
that provide incentives for performance and our continued focus on serving both DIY and professional service provider customers. The
Company incurred significant sales headwinds beginning in the middle of March and through the middle of April, as a result of COVID-
19; however, the government stimulus payments, enhanced unemployment benefits, easing of stay at home orders and the associated
market reopenings beginning in May and June, when combined with favorable industry dynamics, such as consumers investing in
existing vehicles, led to strong demand for our products over the remainder of the second quarter and continuing through the remainder
of 2020.
Our comparable store sales increase for the year ended December 31, 2020, was driven by increases in average ticket and transaction
counts for both DIY and professional service provider customers. Beginning in April of 2020, average ticket values, primarily for DIY
customers, benefited from consumers spending additional time and money repairing and maintaining their vehicles in response to the
COVID-19 and economic environment. In addition, the improvement in average ticket values was the result of the increasing complexity
and cost of replacement parts necessary to maintain the current population of better-engineered and more technically advanced vehicles.
These better-engineered, more technically advanced vehicles require less frequent repairs, as the component parts are more durable and
last for longer periods of time. This decrease in repair frequency creates pressure on customer transaction counts; however, when repairs
are needed, the cost of replacement parts is, on average, greater, which is a benefit to average ticket values. Average ticket values also
benefited from increased selling prices on a SKU-by-SKU basis, as compared to the same period in 2019, driven by increases in
acquisition cost of inventory, which were passed on in market prices.
As the COVID-19 stay at home orders and business restrictions took effect in our markets in the middle of March 2020, transaction
counts for both DIY and professional service provider customers turned sharply negative, with a larger impact realized on the
professional side of the business, as we believe a larger segment of the demographic served by our professional service provider
customers is more likely to accommodate working from home than a typical DIY customer. However, in the middle of April 2020, as
the government stimulus and enhanced unemployment benefits reached consumers, we saw a reversal in transaction counts, with a more
immediate impact realized on the DIY side of the business. Improved transaction counts continued through December 2020, as states
implemented reopening plans and many individuals returned to work. We cannot predict what continued impact the COVID-19
pandemic will have to our business in the future given the high degree of uncertainty as to the duration and severity of the pandemic,
the potential future changes to economic reopening plans and the mitigating impact of government stimulus for consumers.
We opened 155 net, new U.S. stores and one new store in Mexico during the year ended December 31, 2020, compared to opening 200
net, new U.S. stores during the year ended December 31, 2019. In addition, on January 1, 2019, we began operating 33 acquired Bennett
stores, and during the year ended December 31, 2019, we merged 13 of these acquired Bennett stores into existing O’Reilly locations
and rebranded the remaining 20 Bennett stores as O’Reilly stores. After the close of business on November 29, 2019, we acquired 21
stores from Mayasa. As of December 31, 2020, we operated 5,594 stores in 47 U.S. states and 22 stores in Mexico compared to 5,439
U.S. stores in 47 states and 21 stores in Mexico at December 31, 2019. We anticipate new store growth will be 165 to 175 net, new
store openings in 2021.
29
FORM 10-K
Gross profit:
Gross profit for the year ended December 31, 2020, increased 13% to $6.09 billion (or 52.4% of sales) from $5.39 billion (or 53.1% of
sales) for the same period in 2019. The increase in gross profit dollars for the year ended December 31, 2020, was primarily the result
of sales from new stores, the increase in comparable store sales at existing stores, sales from the acquired Mayasa stores and one
additional day due to Leap Day. The decrease in gross profit as a percentage of sales for the year ended December 31, 2020, was due
to the comparable period in the prior year receiving a benefit from selling through inventory purchased prior to tariff related, industry-
wide acquisition cost increases, and corresponding selling price increases, and the lower gross margin sales from the acquired Mayasa
stores, due to their large independent jobber customer base, partially offset by a greater percentage of total sales generated from DIY
customers, which carry a higher gross margin than professional service provider sales and acquisition cost reductions. We determine
inventory cost using the last-in, first-out (“LIFO”) method, but have, over time, seen our LIFO reserve balance exhausted as a result of
cumulative historical acquisition cost decreases. Our policy is to not write up inventory in excess of replacement cost, and accordingly,
we are effectively valuing our inventory at replacement cost.
Selling, general and administrative expenses:
Selling, general and administrative expenses (“SG&A”) for the year ended December 31, 2020, increased 6% to $3.67 billion (or 31.6%
of sales) from $3.47 billion (or 34.2% of sales) for the same period in 2019. The increase in total SG&A dollars for the year ended
December 31, 2020, was the result of facilities and vehicles to support our increased sales and store count, expense from the acquired
Mayasa stores and one additional day due to Leap Day. The decrease in SG&A as a percentage of sales for the year ended December 31,
2020, was principally due to leverage of store operating costs on strong comparable store sales growth combined with our cautionary
approach and strict expense control measures in response to the onset of the COVID-19 environment.
Operating income:
As a result of the impacts discussed above, operating income for the year ended December 31, 2020, increased 26% to $2.42 billion (or
20.8% of sales) from $1.92 billion (or 18.9% of sales) for the same period in 2019.
Other income and expense:
Total other expense for the year ended December 31, 2020, increased 17% to $153 million (or 1.3% of sales), from $130 million (or
1.3% of sales) for the same period in 2019. The increase in total other expense for the year ended December 31, 2020, was the result of
increased interest expense on higher average outstanding borrowings.
Income taxes:
Our provision for income taxes for the year ended December 31, 2020, increased 29% to $514 million (22.7% effective tax rate) from
$399 million (22.3% effective tax rate) for the same period in 2019. The increase in our provision for income taxes for the year ended
December 31, 2020, was the result of higher taxable income and lower excess tax benefits from share-based compensation, partially
offset by a greater benefit from tax credit equity investments in 2020, as compared to the same period in 2019. The increase in our
effective tax rate for the year ended December 31, 2020, was the result of the lower excess tax benefits from share-based compensation,
partially offset by a greater benefit from tax credit equity investments in 2020, as compared to the same period in 2019.
Net income:
As a result of the impacts discussed above, net income for the year ended December 31, 2020, increased 26% to $1.75 billion (or 15.1%
of sales), from $1.39 billion (or 13.7% of sales) for the same period in 2019.
Earnings per share:
Our diluted earnings per common share for the year ended December 31, 2020, increased 32% to $23.53 on 74 million shares from
$17.88 on 78 million shares for the same period in 2019.
2019 Compared to 2018
A discussion of the changes in our results of operations for the year ended December 31, 2019, as compared to the year ended December
31, 2018, has been omitted from this Form 10-K but may be found in Item 7. “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” of the annual report on Form 10-K for the year ended December 31, 2019, filed with the Securities
and Exchange Commission (the “SEC”) on February 28, 2020, which is available free of charge on the SEC’s website at www.sec.gov
by searching with our ticker symbol “ORLY” or at our internet address, www.OReillyAuto.com, by clicking “Investor Relations”
located at the bottom of the page.
30
FORM 10-K
LIQUIDITY AND CAPITAL RESOURCES
Our long-term business strategy requires capital to open new stores, fund strategic acquisitions, expand distribution infrastructure,
operate and maintain our existing stores and may include the opportunistic repurchase of shares of our common stock through our Board-
approved share repurchase program. The primary sources of our liquidity are funds generated from operations and borrowed under our
unsecured revolving credit facility. Decreased demand for our products or changes in customer buying patterns could negatively impact
our ability to generate funds from operations. Additionally, decreased demand or changes in buying patterns could impact our ability
to meet the debt covenants of our credit agreement and, therefore, negatively impact the funds available under our unsecured revolving
credit facility.
As we operated amid uncertainty and disruption caused by the COVID-19 pandemic, we have demonstrated our ability to take prudent
steps to support the future stability and financial flexibility of our Company. At the onset of disruption caused by the COVID-19
pandemic, our Teams took decisive action to reduce costs and conserve cash, which included delaying capital investments, reducing
operating costs and temporarily suspending our share repurchase program from March 16, 2020, through May 28, 2020. As we are
unable to determine the duration or potential increase in severity of this crisis, we cannot predict its future impacts on our ability to
generate funds from operations or maintain liquidity, and accordingly, we will continue to make adjustments as we navigate the current
and expected environment.
Liquidity and related ratios:
The following table highlights our liquidity and related ratios as of December 31, 2020 and 2019 (dollars in millions):
Liquidity and Related Ratios
Current assets
Current liabilities
Working capital (1)
Total debt
Total equity
Debt to equity (2)
(1) Working capital is calculated as current assets less current liabilities.
(2) Debt to equity is calculated as total debt divided by total equity.
December 31,
Percentage
2020
2019
Change
$
$
4,500 $
5,262
(763)
4,123
140 $
29.40:1
3,834
4,469
(636)
3,891
397
9.79:1
17.4 %
17.7 %
(20.0) %
6.0 %
(64.7) %
200.2 %
Current assets increased 17%, current liabilities increased 18%, total debt increased 6% and total equity decreased 65% from 2019 to
2020. The increase in current assets was primarily due to the increase in cash, resulting from our strong sales in 2020, and inventory,
resulting from our distribution expansion projects and the opening of 156 net, new stores in 2020. The increase in current liabilities was
primarily due to an increase in accounts payable, which was the result of higher inventory turns on strong sales, and accrued benefits
and withholdings, which was the result of deferred payroll tax payments under the CARES Act and Team member incentive payments.
Our accounts payable to inventory ratio was 114.5% as of December 31, 2020, as compared to 104.4% for the same period in 2019.
The increase in total debt was attributable to the issuance of $500 million of 4.200% Senior Notes due 2030 and $500 million of 1.750%
Senior Notes due 2031, partially offset by the redemption of $500 million aggregate principal amount of unsecured 4.875% Senior Notes
due 2021 and no borrowings on our revolving credit facility at December 31, 2020. The decrease in total equity was due to an increase
in retained deficit, resulting from a greater impact of share repurchase activity under our share repurchase program, partially offset by
net income for the year ended December 31, 2020.
31
FORM 10-K
The following table identifies cash provided by/(used in) our operating, investing and financing activities for the years ended
December 31, 2020 and 2019 (in thousands):
Liquidity:
Total cash provided by/(used in):
Operating activities
Investing activities
Financing activities
Effect of exchange rate changes on cash
Net increase (decrease) in cash and cash equivalents
Capital expenditures
Free cash flow (1)
For the Year Ended
December 31,
2020
2019
$
$
$
2,836,603
(614,895)
(1,796,577)
103
425,234
465,579
2,189,995
$
$
$
1,708,479
(796,746)
(902,811)
169
9,091
628,057
1,020,649
(1) Calculated as net cash provided by operating activities, less capital expenditures, excess tax benefit from share-based compensation payments and
investment in tax credit equity investments for the period.
Cash and cash equivalents balances held outside of the U.S. were $11.5 million and $5.7 million as of December 31, 2020 and 2019,
respectively, which was generally utilized to support the liquidity needs of foreign operations in Mexico.
Operating activities:
The increase in net cash provided by operating activities in 2020 compared to 2019 was primarily due to a decrease in net inventory
investment, a larger increase in net income, an increase in income taxes payable and an increase in accrued benefits and withholdings.
The larger decrease in net inventory investment in 2020, as compared to 2019, was primarily attributable to the strong comparable store
sales growth and the resulting benefit to inventory turns. The increase in income taxes payable in 2020, compared to the decrease in
income taxes payable in 2019, was primarily the result of the realization of credits from renewable energy tax credit investments and an
income taxes payable position at the end of 2020, versus a prepaid income taxes position at the end of 2019. The increase in accrued
benefits and withholdings is primarily due to the deferral of payroll tax payments under the CARES Act and the timing of Team Member
incentive payments.
Investing activities:
The decrease in net cash used in investing activities in 2020 compared to 2019 was primarily the result of a decrease in capital
expenditures and a decrease in other investing activities, partially offset by an increase in investments in tax credit equity investments.
Total capital expenditures were $466 million in 2020 versus $628 million in 2019, and the decrease was primarily related to lower new
store project development spending in 2020, as compared to 2019, and the level of distribution expansion projects in 2020, as compared
to 2019. The decrease in other investment activities was due to the acquisition of Mayasa in 2019. The increase in investments in tax
credit equity investments was the result of entering into more renewable energy tax credit investments in 2020, as compared to 2019,
primarily for the purpose of receiving renewable energy tax credits.
We opened 156 and 200 net, new stores in 2020 and 2019, respectively. In addition, on January 1, 2019, we began operating 33 acquired
Bennett stores, and during the year ended December 31, 2019, we merged 13 of these acquired Bennett stores into existing O’Reilly
locations and rebranded the remaining 20 Bennett stores as O’Reilly stores. After the close of business on November 29, 2019, we
acquired 21 stores from Mayasa. We plan to open 165 to 175 net, new stores in 2021. The current costs associated with the opening of
a new store, including the cost of land acquisition, building improvements, fixtures, vehicles, net inventory investment and computer
equipment, are estimated to average approximately $1.5 million to $1.8 million; however, such costs may be significantly reduced where
we lease, rather than purchase, the store site.
Financing activities:
The increase in net cash used in financing activities in 2020 compared to 2019 was primarily attributable to an increase in repurchases
of our common stock during 2020, compared to 2019, the redemption of $500 million aggregate principal amount of unsecured 4.875%
Senior Notes due 2021 and no borrowings on our revolving credit facility at December 31, 2020, partially offset by higher proceeds
from the issuance of long-term debt in 2020, compared to 2019.
2019 Compared to 2018:
A discussion of the changes in our operating activities, liquidity activities and financing activities for the year ended December 31, 2019,
as compared to the year ended December 31, 2018, has been omitted from this Form 10-K but may be found in Item 7. “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” of the annual report on Form 10-K for the year ended
32
FORM 10-K
December 31, 2019, filed with the Securities and Exchange Commission (the “SEC”) on February 28, 2020, which is available free of
charge on the SEC’s website at www.sec.gov by searching with our ticker symbol “ORLY” or at our internet address,
www.OReillyAuto.com, by clicking “Investor Relations” located at the bottom of the page.
Unsecured revolving credit facility:
On April 5, 2017, the Company entered into a credit agreement (the “Credit Agreement”). The Credit Agreement provides for a five-
year $1.2 billion unsecured revolving credit facility (the “Revolving Credit Facility”) arranged by JPMorgan Chase Bank, N.A., which
is scheduled to mature in April 2022. The Credit Agreement includes a $200 million sub-limit for the issuance of letters of credit and a
$75 million sub-limit for swing line borrowings. As described in the Credit Agreement governing the Revolving Credit Facility, the
Company may, from time to time, subject to certain conditions, increase the aggregate commitments under the Revolving Credit Facility
by up to $600 million, provided that the aggregate amount of the commitments does not exceed $1.8 billion at any time.
As of December 31, 2020 and 2019, we had outstanding letters of credit, primarily to support obligations related to workers’
compensation, general liability and other insurance policies, in the amounts of $66.4 million and $38.9 million, respectively, reducing
the aggregate availability under the Credit Agreement by those amounts. As of December 31, 2020, we had no outstanding borrowings
under the Revolving Credit Facility, versus $261.0 million as of December 31, 2019.
Senior Notes:
On March 27, 2020, we issued $500 million aggregate principal amount of unsecured 4.200% Senior Notes due 2030 (“4.200% Senior
Notes due 2030”) at a price to the public of 99.959% of their face value with U.S. Bank National Association (“U.S. Bank”) as trustee.
Interest on the 4.200% Senior Notes due 2030 is payable on April 1 and October 1 of each year, which began on October 1, 2020, and
is computed on the basis of a 360-day year.
On September 23, 2020, we issued $500 million aggregate principal amount of unsecured 1.750% Senior Notes due 2031 (“1.750%
Senior Notes due 2031”) at a price to the public of 99.544% of their face value with U.S. Bank as trustee. Interest on the 1.750% Senior
Notes due 2031 is payable on March 15 and September 15 of each year, beginning on March 15, 2021, and is computed on the basis of
a 360-day year.
On October 14, 2020, we redeemed our $500 million aggregate principal amount of unsecured 4.875% Senior Notes due 2021 at a
redemption price of $500 million, plus accrued and unpaid interest to, but not including, the date of redemption.
As of December 31, 2020, we have issued and have outstanding a cumulative $4.2 billion aggregate principal amount of unsecured
senior notes, which are due between 2021 and 2031, with UMB Bank, N.A. and U.S. Bank as trustees. Interest on the senior notes,
ranging from 1.750% to 4.625%, is payable semi-annually and is computed on the basis of a 360-day year. None of our subsidiaries is
a guarantor under our senior notes.
Debt covenants:
The indentures governing our senior notes contain covenants that limit our ability and the ability of certain of our subsidiaries to, among
other things, create certain liens on assets to secure certain debt and enter into certain sale and leaseback transactions, and limit our
ability to merge or consolidate with another company or transfer all or substantially all of our property, in each case as set forth in the
indentures. These covenants are, however, subject to a number of important limitations and exceptions. As of December 31, 2020, we
were in compliance with the covenants applicable to our senior notes.
The Credit Agreement contains certain covenants, including limitations on indebtedness, a minimum consolidated fixed charge coverage
ratio of 2.50:1.00 and a maximum consolidated leverage ratio of 3.50:1.00. The consolidated fixed charge coverage ratio includes a
calculation of earnings before interest, taxes, depreciation, amortization, rent and non-cash share-based compensation expense to fixed
charges. Fixed charges include interest expense, capitalized interest and rent expense. The consolidated leverage ratio includes a
calculation of adjusted debt to earnings before interest, taxes, depreciation, amortization, rent and non-cash share-based compensation
expense. Adjusted debt includes outstanding debt, outstanding stand-by letters of credit and similar instruments, five-times rent expense
and excludes any premium or discount recorded in conjunction with the issuance of long-term debt. In the event that we should default
on any covenant contained within the Credit Agreement, certain actions may be taken, including, but not limited to, possible termination
of commitments, immediate payment of outstanding principal amounts plus accrued interest and other amounts payable under the Credit
Agreement and litigation from our lenders.
We had a consolidated fixed charge coverage ratio of 5.93 times and 5.21 times as of December 31, 2020 and 2019, respectively, and a
consolidated leverage ratio of 1.92 times and 2.20 times as of December 31, 2020 and 2019, respectively, remaining in compliance with
all covenants related to the borrowing arrangements.
33
FORM 10-K
The table below outlines the calculations of the consolidated fixed charge coverage ratio and consolidated leverage ratio covenants, as
defined in the Credit Agreement governing the Revolving Credit Facility, for the years ended December 31, 2020 and 2019 (dollars in
thousands):
GAAP net income
Add: Interest expense
Rent expense (1)
Provision for income taxes
Depreciation expense
Amortization expense
Non-cash share-based compensation
Non-GAAP EBITDAR
Interest expense
Capitalized interest
Rent expense (1)
Total fixed charges
Consolidated fixed charge coverage ratio
GAAP debt
Add: Stand-by letters of credit
Discount on senior notes
Debt issuance costs
Five-times rent expense
Non-GAAP adjusted debt
Consolidated leverage ratio
For the Year Ended
December 31,
2020
1,752,302
161,126
354,316
514,103
305,566
9,069
22,747
3,119,229
161,126
10,180
354,316
525,622
5.93
4,123,217
66,427
5,071
21,712
1,771,580
5,988,007
$
$
$
$
$
$
2019
1,391,042
139,975
338,697
399,287
270,076
799
21,921
2,561,797
139,975
12,998
338,697
491,670
5.21
3,890,527
38,870
3,515
16,958
1,693,485
5,643,355
1.92
2.20
$
$
$
$
$
$
(1) The table below outlines the calculation of Rent expense and reconciles Rent expense to Total lease cost, per Accounting Standard Codification
842 (“ASC 842”), adopted and effective January 1, 2019, the most directly comparable GAAP financial measure, for the twelve months ended
December 31, 2020 and 2019 (in thousands):
Total lease cost, per ASC 842, for the year ended December 31, 2020
Less: Variable non-contract operating lease components, related to property taxes and insurance, for the year
$
ended December 31, 2020
Rent expense for the year ended December 31, 2020
Total lease cost, per ASC 842, for the year ended December 31, 2019
Less: Variable non-contract operating lease components, related to property taxes and insurance, for the year
ended December 31, 2019
Rent expense for the year ended December 31, 2019
$
$
$
420,365
66,049
354,316
398,294
59,597
338,697
The table below outlines the calculation of Free cash flow and reconciles Free cash flow to Net cash provided by operating activities,
the most directly comparable GAAP financial measure, for the years ended December 31, 2020 and 2019 (in thousands):
Cash provided by operating activities
Less: Capital expenditures
Excess tax benefit from share-based compensation payments
Investment in tax credit equity investments
Free cash flow
For the Year Ended
December 31,
2020
2,836,603
465,579
16,918
164,111
2,189,995
$
$
2019
1,708,479
628,057
25,992
33,781
1,020,649
$
$
34
FORM 10-K
Free cash flow, the consolidated fixed charge coverage ratio and the consolidated leverage ratio discussed and presented in the tables
above are not derived in accordance with United States generally accepted accounting principles (“GAAP”). We do not, nor do we
suggest investors should, consider such non-GAAP financial measures in isolation from, or as a substitute for, GAAP financial
information. We believe that the presentation of our free cash flow, consolidated fixed charge coverage ratio and consolidated leverage
ratio provides meaningful supplemental information to both management and investors and reflects the required covenants under the
Credit Agreement. We include these items in judging our performance and believe this non-GAAP information is useful to investors as
well. Material limitations of these non-GAAP measures are that such measures do not reflect actual GAAP amounts. We compensate
for such limitations by presenting, in the tables above, a reconciliation to the most directly comparable GAAP measures.
Share repurchase program:
In January of 2011, our Board of Directors approved a share repurchase program. Under the program, we may, from time to time,
repurchase shares of our common stock, solely through open market purchases effected through a broker dealer at prevailing market
prices, based on a variety of factors such as price, corporate trading policy requirements and overall market conditions. Our Board of
Directors may increase or otherwise modify, renew, suspend or terminate the share repurchase program at any time, without prior notice.
As announced on February 5, 2020, October 28, 2020, and February 10, 2021, our Board of Directors each time approved a resolution
to increase the authorization amount under our share repurchase program by an additional $1.0 billion, resulting in a cumulative
authorization amount of $15.8 billion. Each additional authorization is effective for a three-year period, beginning on its respective
announcement date. In order to conserve liquidity in response to COVID-19, we suspended our share repurchase program on March
16, 2020. We continued to evaluate business conditions and our liquidity and, as a result of this evaluation, resumed our share repurchase
program on May 29, 2020.
The following table identifies shares of our common stock that have been repurchased as part of our publicly announced share repurchase
program for the year ended December 31, 2020 and 2019 (in thousands, except per share data):
Shares repurchased
Average price per share
Total investment
For the Year Ended
December 31,
2020
4,832
431.93
2,087,146
$
$
2019
3,877
369.55
1,432,752
$
$
As of December 31, 2020, we had $481.5 million remaining under our share repurchase program. Subsequent to the end of the year and
through February 26, 2021, we repurchased an additional 1.1 million shares of our common stock under our share repurchase program,
at an average price of $447.49, for a total investment of $478.4 million. We have repurchased a total of 82.1 million shares of our
common stock under our share repurchase program since the inception of the program in January of 2011 and through February 26,
2021, at an average price of $179.65 for a total aggregate investment of $14.7 billion. As of February 26, 2021, we had approximately
$1.0 billion remaining under our share repurchase program.
CONTRACTUAL OBLIGATIONS
Our contractual obligations as of December 31, 2020, included commitments for short and long-term debt arrangements, interest
payments related to long-term debt, future payments under non-cancelable lease arrangements, self-insurance reserves, purchase
obligations for construction contract commitments and other long-term liabilities, which are identified in the table below and are fully
disclosed in Note 6 “Leases,” Note 13 “Share-Based Compensation and Benefit Plans” and Note 14 “Commitments” to the Consolidated
Financial Statements. We expect to fund these commitments primarily with operating cash flows expected to be generated in the normal
course of business or through borrowings under our Revolving Credit Facility.
Deferred income taxes, as well as commitments with various suppliers for the purchase of inventory, are not reflected in the table below
due to the absence of scheduled maturities, the nature of the account or the commitment’s cancellation terms. Due to the absence of
scheduled maturities, the timing of certain of these payments cannot be determined, except for amounts estimated to be payable in 2021,
which are included in “Current liabilities” on our Consolidated Balance Sheets.
We record a reserve for potential liabilities related to uncertain tax positions, including estimated interest and penalties, which are fully
disclosed in Note 16 “Income Taxes” to the Consolidated Financial Statements. These estimates are not included in the table below
because the timing related to the ultimate resolution or settlement of these positions cannot be determined. As of December 31, 2020,
we recorded a net liability of $35.9 million related to these uncertain tax positions on our Consolidated Balance Sheets, all of which was
included in “Other liabilities.”
35
FORM 10-K
We record a reserve for the projected obligation related to future payments under the Company’s nonqualified deferred compensation
plan, which is fully disclosed in Note 13 “Share-Based Compensation and Benefit Plans” to the Consolidated Financial Statements.
This estimate is not included in the table below because the timing related to the ultimate payment cannot be determined. As of
December 31, 2020, we recorded a liability of $40.4 million related to this uncertain liability on our Consolidated Balance Sheets, all of
which was included in “Other liabilities.”
The following table identifies the estimated payments of the Company’s contractual obligations as of December 31, 2020 (in thousands):
Contractual Obligations
Long-term debt principal and interest payments (1)
Future minimum lease payments under operating leases (2)
Self-insurance reserves (3)
Construction commitments
Total contractual cash obligations
Payments Due By Period
Before
Years
1 Year 1 and 2
Total
$ 5,121,911 $ 453,410 $
Years
Years 5
3 and 4 and Over
861,581 $ 231,500 $ 3,575,420
1,046,308
457,298
589,425
13,411
25,233
65,489
—
—
—
$ 7,789,019 $ 923,354 $ 1,516,495 $ 714,031 $ 4,635,139
2,415,508
213,332
38,268
322,477
109,199
38,268
(1) Our Revolving Credit Facility, which has a maximum aggregate commitment of $1.20 billion and matures in April 2022, bears interest (other than
swing line loans), at our option, at either the Alternate Base Rate or Adjusted LIBO Rate (both as defined in the Credit Agreement) plus a margin,
that will vary from 0.000% to 0.250% in the case of loans bearing interest at the Alternate Base Rate and 0.680% to 1.250% in the case of loans
bearing interest at the Adjusted LIBO Rate, in each case based upon the better of the ratings assigned to our debt by Moody’s Investor Service, Inc.
and Standard & Poor’s Rating Services, subject to limited exceptions. Swing line loans made under the Revolving Credit Facility bear interest at
the Alternate Base Rate plus the applicable margin described above. In addition, we pay a facility fee on the aggregate amount of the commitments
in an amount equal to a percentage of such commitments, varying from 0.070% to 0.250% per annum based upon the better of the ratings assigned
to our debt by Moody’s Investor Service, Inc. and Standard & Poor’s Rating Services, subject to limited exceptions. Based on our current credit
ratings, our margin for Alternate Base Rate loans was 0.000%, our margin for Eurodollar Revolving Loans was 0.900% and our facility fee was
0.100%. As of December 31, 2020, we had no outstanding borrowings under our Revolving Credit Facility.
(2) The minimum lease payments above do not include potential amounts for percentage rent and other variable operating lease related costs, which
are also required contractual obligations under our operating leases but are generally not fixed and can fluctuate from year to year. See Note 6
“Leases” to the Consolidated Financial Statements for further information on our operating leases.
(3) We use various self-insurance mechanisms to provide for potential liabilities from workers’ compensation, vehicle and general liability and
employee health care benefits. The self-insurance reserves above are at the undiscounted obligation amount. The self-insurance reserves liabilities
are recorded on our Consolidated Balance Sheets at our estimate of their net present value and do not have scheduled maturities; however, we can
estimate the timing of future payments based upon historical patterns. See Note 14 “Commitments” to the Consolidated Financial Statements for
further information on our self-insurance reserves.
OFF-BALANCE SHEET ARRANGEMENTS
Off-balance sheet arrangements are transactions, agreements, or other contractual arrangements with an unconsolidated entity, for which
we have an obligation to the entity that is not recorded in our consolidated financial statements. We historically utilized various off-
balance sheet financial instruments, including sale-leaseback and synthetic lease transactions, but we have not entered into any such
transactions for over 10 years and do not plan to utilize off-balance sheet arrangements in the future to fund our working capital
requirements, operations or growth plans.
We issue stand-by letters of credit provided by a $200 million sub-limit under the Revolving Credit Facility that reduce our available
borrowings under the Revolving Credit Facility. Those letters of credit are issued primarily to satisfy the requirements of workers’
compensation, general liability and other insurance policies. Substantially all of the outstanding letters of credit have a one-year term
from the date of issuance. Letters of credit totaling $66.4 million and $38.9 million were outstanding at December 31, 2020 and 2019,
respectively.
We do not have any off-balance sheet financing that has, or is reasonably likely to have, a material, current or future effect on our
financial condition, cash flows, results of operations, liquidity, capital expenditures or capital resources.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The preparation of our financial statements in accordance with GAAP requires the application of certain estimates and judgments by
management. Management bases its assumptions, estimates and adjustments on historical experience, current trends and other factors
believed to be relevant at the time the consolidated financial statements are prepared. Management believes that the following policies
are critical due to the inherent uncertainty of these matters and the complex and subjective judgments required in establishing these
estimates. Management continues to review these critical accounting policies and estimates to ensure that the consolidated financial
36
FORM 10-K
statements are presented fairly in accordance with GAAP. However, actual results could differ from our assumptions and estimates and
such differences could be material.
Supplier Concessions:
We receive concessions from our suppliers through a variety of programs and arrangements, including co-operative advertising,
allowances for warranties, merchandise allowances and volume purchase rebates. Co-operative advertising allowances that are
incremental to our advertising program, specific to a product or event and identifiable for accounting purposes are reported as a reduction
of advertising expense in the period in which the advertising occurred. All other material supplier concessions are recognized as a
reduction to the cost of sales. Amounts receivable from suppliers also include amounts due to us relating to supplier purchases and
product returns. Management regularly reviews amounts receivable from suppliers and assesses the need for a reserve for uncollectible
amounts based on our evaluation of our suppliers’ financial position and corresponding ability to meet their financial obligations. Based
on our historical results and current assessment, we have not recorded a reserve for uncollectible amounts in our consolidated financial
statements, and we do not believe there is a reasonable likelihood that our ability to collect these amounts will differ from our
expectations. The eventual ability of our suppliers to pay us the obliged amounts could differ from our assumptions and estimates, and
we may be exposed to losses or gains that could be material.
Valuation of Long-Lived Assets:
We evaluate the carrying value of finite and indefinite long-lived assets for impairment whenever events or changes in circumstances
indicate the carrying value of these assets might exceed their current fair values. As a component of the finite long-lived assets
evaluation, we review performance at the store level to identify any stores with current period operating losses that should be considered
for impairment. A potential impairment has occurred if the projected future undiscounted cash flows realized from the best possible use
of the asset are less than the carrying value of the asset. The estimate of cash flows includes management’s assumptions of cash inflows
and outflows directly resulting from the use of that asset in operations. If the carrying amount of an asset exceeds its estimated future
cash flows, an impairment charge is recognized for the amount by which the carrying amount of the asset exceeds the fair value of the
assets. As a component of the indefinite long-lived assets evaluation, we perform a qualitative assessment to determine if events or
circumstances that could affect the inputs used to determine the fair value of the intangible asset have occurred, as well as if they continue
to support an indefinite useful life. Areas evaluated include changes in cost factors such as raw materials or labor, financial performance
including declining revenues or cash flows, the legal, regulatory and political environment, and other industry and market considerations,
including the competitive environment and changes in product demand. If events or market conditions exist that would more likely than
not indicate that impairment may be necessary, a detailed quantitative assessment would be performed. Based on our qualitative
assessment, we do not believe there has been a change of events or circumstances that would indicate that a calculation of fair value of
indefinite long-lived assets is required as of December 31, 2020. Our impairment analyses contain estimates due to the inherently
judgmental nature of forecasting long-term estimated cash flows and determining the ultimate useful lives and fair values of the assets.
Actual results could differ from these estimates, which could materially impact our impairment assessment.
Self-Insurance Reserves:
We use a combination of insurance and self-insurance mechanisms to provide for potential liabilities from workers’ compensation,
general liability, vehicle liability, property loss and Team Member health care benefits. With the exception of certain Team Member
health care benefit liabilities, employment related claims and litigation, certain commercial litigation and certain regulatory matters, we
obtain third-party insurance coverage to limit our exposure for any individual workers’ compensation, general liability, vehicle liability
or property loss claim. When estimating our self-insurance liabilities, we consider a number of factors, including historical claims
experience and trend-lines, projected medical and legal inflation, growth patterns and exposure forecasts. The assumptions made by
management as they relate to each of these factors represent our judgment as to the most probable cumulative impact of each factor to
our future obligations. Our calculation of self-insurance liabilities requires management to apply judgment to estimate the ultimate cost
to settle reported claims and claims incurred but not yet reported as of the balance sheet date, and the application of alternative
assumptions could result in a different estimate of these liabilities. Actual claim activity or development may vary from our assumptions
and estimates, which may result in material losses or gains. As we obtain additional information that affects the assumptions and
estimates we used to recognize liabilities for claims incurred in prior accounting periods, we adjust our self-insurance liabilities to reflect
the revised estimates based on this additional information. These liabilities are recorded at our estimate of their net present value. These
liabilities do not have scheduled maturities, but we can estimate the timing of future payments based upon historical patterns. We could
apply alternative assumptions regarding the timing of payments or the applicable discount rate that could result in materially different
estimates of the net present value of the liabilities. If self-insurance reserves were changed 10% from our estimated reserves at
December 31, 2020, the financial impact would have been approximately $20 million or 0.9% of pretax income for the year ended
December 31, 2020.
37
FORM 10-K
INFLATION AND SEASONALITY
We have generally been successful in reducing the effects of merchandise cost increases principally by taking advantage of supplier
incentive programs, economies of scale resulting from increased volume of purchases and selective forward buying. To the extent our
acquisition cost increased due to price increases industry-wide, we have typically been able to pass along these increased costs through
higher retail prices for the affected products. As a result, we do not believe inflation has had a material adverse effect on our operations.
To some extent, our business is seasonal primarily as a result of the impact of weather conditions on customer buying patterns. While
we have historically realized operating profits in each quarter of the year, our store sales and profits have historically been higher in the
second and third quarters (April through September) than in the first and fourth quarters (October through March) of the year.
RECENT ACCOUNTING PRONOUNCEMENTS
See Note 1 “Summary of Significant Accounting Policies” to the Consolidated Financial Statements for information about recent
accounting pronouncements.
38
FORM 10-K
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Interest rate risk:
We are subject to interest rate risk to the extent we borrow against our unsecured revolving credit facility (the “Revolving Credit
Facility”) with variable interest rates based on either an Alternative Base Rate or Adjusted LIBO Rate, as defined in the credit agreement
governing the Revolving Credit Facility. As of December 31, 2020, we had no outstanding borrowings under our Revolving Credit
Facility.
We had outstanding fixed rate debt of $4.2 billion and $3.7 billion as of December 31, 2020 and 2019, respectively. The fair value of
our fixed rate debt was estimated at $4.6 billion and $3.9 billion as of December 31, 2020 and 2019, respectively, which was determined
by reference to quoted market prices.
Cash equivalents risk:
We invest certain of our excess cash balances in short-term, highly-liquid instruments with maturities of 90 days or less. We do not
expect any material losses from our invested cash balances and we believe that our interest rate exposure is minimal. As of
December 31, 2020, our cash and cash equivalents totaled $465.6 million.
Foreign currency risk:
Foreign currency exposures arising from transactions include firm commitments and anticipated transactions denominated in a currency
other than our entities’ functional currencies. To minimize our risk, we generally enter into transactions denominated in the respective
functional currencies. Our foreign currency exposure arises from Mexican peso-denominated revenues and profits and their translation
into U.S. dollars.
We view our investments in Mexican subsidiaries as long-term. The net asset exposure in the Mexican subsidiaries translated into U.S.
dollars using the year-end exchange rates was $149.2 million at December 31, 2020. The year ended December 31, 2020, exchange
rates of the Mexican peso with respect to the U.S. dollar decreased by approximately 5% from December 31, 2019. The potential loss
in value of our net assets in the Mexican subsidiaries resulting from a 10% change in quoted foreign currency exchange rates at
December 31, 2020, would be approximately $13.6 million. Any changes in our net assets in the Mexican subsidiaries relating to foreign
currency exchange rates would be reflected in the financial statement through the foreign currency translation component of accumulated
other comprehensive income, unless the Mexican subsidiaries are sold or otherwise disposed. A 10% change in average exchange rates
would not have had a material impact on our results of operations.
39
FORM 10-K
Item 8. Financial Statements and Supplementary Data
Index
Management’s Report on Internal Control over Financial Reporting
Report of Independent Registered Public Accounting Firm: Internal Control over Financial Reporting
Report of Independent Registered Public Accounting Firm: Financial Statements
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Comprehensive Income
Consolidated Statements of Shareholders’ Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Page
41
42
43
45
46
47
48
49
50
40
FORM 10-K
MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
The management of O’Reilly Automotive, Inc. and Subsidiaries (the “Company”), under the supervision and with the participation of
the Company’s principal executive officer and principal financial officer and effected by the Company’s Board of Directors, is
responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13(a)-15(f) or
15(d)-15(f) under the Securities Exchange Act of 1934, as amended. The Company’s internal control system is designed to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with accounting principles generally accepted in the United States.
Internal control over financial reporting includes all policies and procedures that
•
•
•
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of
the assets of the Company;
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with accounting principles generally accepted in the United States of America, and that receipts and expenditures
of the Company are being made only in accordance with authorizations of management and directors of the Company; and
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the
Company’s assets that could have a material effect on the financial statements.
Management recognizes that all internal control systems, no matter how well designed, have inherent limitations. Therefore, even those
systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and
presentation. Also, projections of any evaluation of effectiveness to future periods are subject to risk. Over time, controls may become
inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.
Under the supervision and with the participation of the Company’s principal executive officer and principal financial officer,
management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2020. In making
this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission
(“COSO”) in Internal Control - Integrated Framework (2013 framework). Based on this assessment, management believes that as of
December 31, 2020, the Company’s internal control over financial reporting is effective based on those criteria.
Ernst & Young LLP, Independent Registered Public Accounting Firm, has audited the Company’s consolidated financial statements
and has issued an attestation report on the effectiveness of the Company’s internal control over financial reporting, as stated in their
report, which is included herein.
/s/ Gregory D. Johnson
Gregory D. Johnson
Chief Executive Officer and
Co-President
February 26, 2021
/s/ Thomas McFall
Thomas McFall
Executive Vice President and
Chief Financial Officer
February 26, 2021
41
FORM 10-K
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Directors of O’Reilly Automotive, Inc. and Subsidiaries
Opinion on Internal Control Over Financial Reporting
We have audited O’Reilly Automotive, Inc. and Subsidiaries’ internal control over financial reporting as of December 31, 2020, based
on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (2013 framework) (the COSO criteria). In our opinion, O’Reilly Automotive, Inc. and Subsidiaries (the
Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on the
COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB),
the consolidated balance sheets of the Company as of December 31, 2020 and 2019, the related consolidated statements of income,
comprehensive income, shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2020, and the
related notes, and our report dated February 26, 2021 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of
the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control
over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based
on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the
Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness
exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such
other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in
accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention
or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections
of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
Kansas City, Missouri
February 26, 2021
42
FORM 10-K
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Directors of O’Reilly Automotive, Inc. and Subsidiaries
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of O’Reilly Automotive, Inc. and Subsidiaries (the Company) as of
December 31, 2020 and 2019, the related consolidated statements of income, comprehensive income, shareholders’ equity and cash
flows for each of the three years in the period ended December 31, 2020, and the related notes (collectively referred to as the
“consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the
financial position of the Company at December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 2020, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB),
the Company’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control-
Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our
report dated February 26, 2021 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the
Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to
be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations
of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error
or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding
the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and
significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that
our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was
communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to
the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the
critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by
communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures
to which it relates.
Valuation of Self-insurance Reserves
Description of the
Matter
At December 31, 2020, the Company’s self-insurance reserve was $202 million. As discussed in Note 1 of the
financial statements, self-insurance liabilities are estimated based upon historical claim experience and trend-
lines. Furthermore, certain of these liabilities were recorded at an estimate of their net present value.
Auditing management’s self-insurance reserves was complex and judgmental and required us to use our
actuarial specialists for certain reserves due to the estimation required in determining the ultimate claim value
and net present value of certain liabilities. The estimate is sensitive to assumptions such as the projected cost
inflation, claim growth patterns and exposure forecasts.
How We Addressed
the Matter in Our
Audit
We obtained an understanding, evaluated the design of controls over the Company’s self-insurance estimation
process and tested the operating effectiveness of those controls including management’s controls over reviewing
the appropriateness of assumptions and the completeness and accuracy of the data underlying the reserves.
43
FORM 10-K
To test the Company’s determination of the estimated self-insurance reserves, we performed audit procedures
that included, among others, involving a specialist to assist in the development of an independent actuarial
estimate for certain of the reserve balances based upon current industry and economic trends, comparing
selected assumptions used by management to our independent estimates which were developed with the
assistance of our specialists, testing the underlying data used by management in the development of the reserves
and testing the mathematical accuracy of the calculations.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 1992.
Kansas City, Missouri
February 26, 2021
44
FORM 10-K
O’REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
Assets
Current assets:
Cash and cash equivalents
Accounts receivable, less allowance for doubtful accounts $12,670 in 2020 and
$14,417 in 2019
Amounts receivable from suppliers
Inventory
Other current assets
Total current assets
Property and equipment, at cost
Less: accumulated depreciation and amortization
Net property and equipment
Operating lease, right-of-use assets
Goodwill
Other assets, net
Total assets
Liabilities and shareholders’ equity
Current liabilities:
Accounts payable
Self-insurance reserves
Accrued payroll
Accrued benefits and withholdings
Income taxes payable
Current portion of operating lease liabilities
Other current liabilities
Total current liabilities
Long-term debt
Operating lease liabilities, less current portion
Deferred income taxes
Other liabilities
Shareholders’ equity:
Preferred stock, $0.01 par value:
Authorized shares – 5,000,000
Issued and outstanding shares – none
Common stock, $0.01 par value:
Authorized shares – 245,000,000
Issued and outstanding shares –
71,123,109 as of December 31, 2020, and
75,618,659 as of December 31, 2019
Additional paid-in capital
Retained deficit
Accumulated other comprehensive (loss) income
Total shareholders’ equity
December 31,
2020
2019
$
465,640
$
40,406
$
$
229,679
100,615
3,653,195
50,658
4,499,787
6,559,911
2,464,993
4,094,918
1,995,127
881,030
125,780
11,596,642
4,184,662
109,199
88,875
242,724
16,786
322,778
297,393
5,262,417
4,123,217
1,718,691
155,899
196,160
$
$
214,915
79,492
3,454,092
44,757
3,833,662
6,191,427
2,243,224
3,948,203
1,928,369
936,814
70,112
10,717,160
3,604,722
79,079
100,816
98,539
—
316,061
270,210
4,469,427
3,890,527
1,655,297
133,280
171,289
—
—
711
1,280,841
(1,139,139)
(2,155)
140,258
756
1,280,760
(889,066)
4,890
397,340
Total liabilities and shareholders’ equity
$
11,596,642
$
10,717,160
See accompanying Notes to consolidated financial statements.
45
FORM 10-K
O’REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
Sales
Cost of goods sold, including warehouse and distribution expenses
Gross profit
$
11,604,493 $
5,518,801
6,085,692
10,149,985
4,755,294
5,394,691
$
For the Year Ended
December 31,
2019
2020
Selling, general and administrative expenses
Operating income
Other income (expense):
Interest expense
Interest income
Other, net
Total other expense
Income before income taxes
Provision for income taxes
Net income
Earnings per share-basic:
Earnings per share
Weighted-average common shares outstanding – basic
Earnings per share-assuming dilution:
Earnings per share
Weighted-average common shares outstanding – assuming dilution
3,666,356
2,419,336
3,473,965
1,920,726
(161,126)
2,491
5,704
(152,931)
(139,975)
2,545
7,033
(130,397)
2,266,405
514,103
1,752,302 $
1,790,329
399,287
1,391,042
23.74 $
73,817
18.07
76,985
23.53 $
74,462
17.88
77,788
$
$
$
$
$
$
See accompanying Notes to consolidated financial statements.
2018
9,536,428
4,496,462
5,039,966
3,224,782
1,815,184
(122,129)
2,521
(1,489)
(121,097)
1,694,087
369,600
1,324,487
16.27
81,406
16.10
82,280
46
FORM 10-K
O’REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
Net income
Other comprehensive income (loss):
Foreign currency translation adjustments
Total other comprehensive (loss) income
2020
1,752,302
$
For the Year Ended
December 31,
2019
1,391,042
$
$
(7,045)
(7,045)
4,890
4,890
2018
1,324,487
—
—
Comprehensive income
$
1,745,257
$
1,395,932
$
1,324,487
See accompanying Notes to consolidated financial statements.
47
FORM 10-K
O’REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(In thousands)
Common Stock
Paid-In
Shares Par Value Capital
Additional
84,302 $
—
843 $ 1,265,043 $
—
—
1,324,487
Accumulated
Other
Comprehensive
Income
Retained
Earnings
(Deficit)
(612,840) $
Balance at December 31, 2017
Net income
Issuance of common stock under
employee benefit plans, net of forfeitures
and shares withheld to cover taxes
Net issuance of common stock upon
exercise of stock options
Share based compensation
Share repurchases, including fees
Balance at December 31, 2018
Cumulative effective adjustment from
adoption of ASU 2016-02
Net income
Other comprehensive income
Issuance of common stock under
employee benefit plans, net of forfeitures
and shares withheld to cover taxes
Net issuance of common stock upon
exercise of stock options
Share based compensation
Share repurchases, including fees
Balance at December 31, 2019
Net income
Other comprehensive income
Issuance of common stock under
employee benefit plans, net of forfeitures
and shares withheld to cover taxes
Net issuance of common stock upon
exercise of stock options
Share based compensation
Share repurchases, including fees
Balance at December 31, 2020
Total
653,046
1,324,487
— $
—
—
14,173
—
—
—
— $
57,168
18,806
(1,714,013)
353,667
—
—
—
—
—
—
58
—
14,173
745
—
(6,061)
79,044 $
8
—
(61)
790 $ 1,262,063 $
57,160
18,806
(93,119)
(1,620,833)
(909,186) $
—
—
—
—
—
—
—
—
—
(1,410)
1,391,042
—
—
—
4,890
(1,410)
1,391,042
4,890
46
—
15,302
406
—
(3,877)
75,619 $
—
—
5
—
(39)
756 $ 1,280,760 $
46,101
20,534
(63,240)
(1,369,512)
(889,066) $
—
—
—
—
1,752,302
—
—
15,302
—
—
—
4,890 $
—
(7,045)
46,106
20,534
(1,432,791)
397,340
1,752,302
(7,045)
48
—
17,314
—
—
17,314
288
—
(4,832)
71,123 $
3
—
(48)
(2,002,375)
711 $ 1,280,841 $ (1,139,139) $
46,279
21,259
(84,771)
—
—
—
—
—
(2,155) $
46,282
21,259
(2,087,194)
140,258
See accompanying Notes to consolidated financial statements.
48
FORM 10-K
O’REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Operating activities:
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of property, equipment and intangibles
Amortization of debt discount and issuance costs
Deferred income taxes
Share-based compensation programs
Other
Changes in operating assets and liabilities:
Accounts receivable
Inventory
Accounts payable
Income taxes payable
Accrued payroll
Accrued benefits and withholdings
Other
Net cash provided by operating activities
Investing activities:
Purchases of property and equipment
Proceeds from sale of property and equipment
Investment in tax credit equity investments
Other, including acquisitions, net of cash acquired
Net cash used in investing activities
Financing activities:
Proceeds from borrowings on revolving credit facility
Payments on revolving credit facility
Proceeds from the issuance of long-term debt
Principal payments on long-term debt
Payment of debt issuance costs
Repurchases of common stock
Net proceeds from issuance of common stock
Other
Net cash used in financing activities
Effect of exchange rate changes on cash
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of the period
Cash and cash equivalents at end of the period
Supplemental disclosures of cash flow information:
Income taxes paid
Interest paid, net of capitalized interest
For the Year Ended
December 31,
2019
2018
2020
$ 1,752,302 $ 1,391,042 $ 1,324,487
314,635
4,580
12,381
22,747
4,686
(20,515)
(198,864)
580,608
197,739
(11,941)
189,332
(11,087)
2,836,603
270,875
3,916
21,158
21,921
7,529
(15,577)
(239,912)
213,423
(20,139)
14,296
16,868
23,079
1,708,479
258,937
3,470
20,160
20,176
9,895
18,138
(163,367)
177,676
22,903
9,373
28,022
(2,315)
1,727,555
(465,579)
15,770
(164,111)
(975)
(614,895)
(628,057)
7,118
(33,781)
(142,026)
(796,746)
(504,268)
4,784
—
(34,818)
(534,302)
1,162,000
(1,423,000)
997,515
(500,000)
(7,929)
(2,087,194)
62,284
(253)
(1,796,577)
2,708,000
(2,734,000)
499,955
—
(3,990)
(1,432,791)
60,206
(191)
(902,811)
2,414,000
(2,473,000)
498,660
—
(3,923)
(1,714,013)
72,146
(2,156)
(1,208,286)
103
425,234
40,406
465,640 $
169
9,091
31,315
40,406 $
—
(15,033)
46,348
31,315
$
$
305,087 $
159,717
394,931 $
134,634
311,376
117,938
See accompanying Notes to consolidated financial statements.
49
FORM 10-K
O’REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2020
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of business:
O’Reilly Automotive, Inc. and Subsidiaries, collectively, “O’Reilly” or the “Company,” is a specialty retailer and supplier of automotive
aftermarket parts. The Company’s stores carry an extensive product line, including new and remanufactured automotive hard parts,
maintenance items and various automotive accessories. As of December 31, 2020, the Company owned and operated 5,594 stores in 47
U.S. states and 22 stores in Mexico, servicing both do-it-yourself (“DIY”) and the professional service provider customers. The
Company’s robust distribution system provides stores with same-day or overnight access to an extensive inventory of hard-to-find items
not typically stocked in the stores of other auto parts retailers.
Segment reporting:
The Company is managed and operated by a single management Team reporting to the chief operating decision maker. The Company’s
stores have similar characteristics, including the nature of the products and services, the type and class of customers and the methods
used to distribute products and provide service to its customers and, as a whole, make up a single operating segment. The Company
does not regularly prepare for review by the chief operating decision maker discrete financial information with respect to product lines,
types of customers or geographic locations and as such has one reportable segment.
Principles of consolidation:
The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All inter-company
balances and transactions have been eliminated in consolidation.
Use of estimates:
The preparation of the consolidated financial statements, in conformity with United States (“U.S.”) generally accepted accounting
principles (“GAAP”), requires management to make estimates and assumptions that affect the amounts reported in the consolidated
financial statements and accompanying notes. Actual results could materially differ from those estimates.
Cash equivalents:
Cash equivalents include investments with maturities of 90 days or less on the date of purchase.
Foreign Currency:
The Company accounts for its Mexican operations using the local market currency, the Mexican peso, and converts its financial
statements compiled for these operations from the Mexican peso to U.S. dollars. The cumulative gain or loss on currency translation is
included as a component of “Accumulated other comprehensive income” on the accompanying Consolidated Balance Sheets. See
Note 11 for further information concerning the Company’s accumulated other comprehensive income.
Accounts receivable:
The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of the Company’s customers
to make required payments. The Company considers the following factors when determining if collection is reasonably assured:
customer creditworthiness, past transaction history with the customer, current expectations of future economic and industry trends,
changes in customer payment terms and management’s expectations. Allowances for doubtful accounts are determined based on
historical experience and an evaluation of the current composition of accounts receivable.
The Company grants credit to certain professional service provider and jobber customers who meet the Company’s pre-established
credit requirements. Concentrations of credit risk with respect to these receivables are limited because the Company’s customer base
consists of a large number of small customers, spreading the credit risk across a broad base regarded as a single class of financing
receivable by the Company. The Company also controls this credit risk through credit approvals, credit limits and accounts receivable
and credit monitoring procedures. Generally, the Company does not require security when credit is granted to customers. Credit is
granted to customers on a short-term basis, consisting primarily of daily, weekly or monthly accounts. Credit losses are provided for in
the Company’s consolidated financial statements and have consistently been within management’s expectations.
50
FORM 10-K
Amounts due to the Company from its Team Members are included in “Accounts receivable” on the accompanying Consolidated
Balance Sheets. These amounts consist primarily of purchases of merchandise on Team Member accounts. Accounts receivable due
from Team Members was approximately $0.9 million as of December 31, 2020 and 2019, respectively.
Amounts receivable from suppliers:
The Company receives concessions from its suppliers through a variety of programs and arrangements, including allowances for new
stores and warranties, volume purchase rebates and co-operative advertising. Co-operative advertising allowances that are incremental
to the Company’s advertising program, specific to a product or event and identifiable for accounting purposes are reported as a reduction
of advertising expense in the period in which the advertising occurred. All other supplier concessions are recognized as a reduction to
the cost of sales. Amounts receivable from suppliers also include amounts due to the Company for changeover merchandise and product
returns. The Company regularly reviews supplier receivables for collectability and assesses the need for a reserve for uncollectable
amounts based on an evaluation of the Company’s suppliers’ financial positions and corresponding abilities to meet financial obligations.
Management does not believe there is a reasonable likelihood that the Company will be unable to collect the amounts receivable from
suppliers and the Company did not record a reserve for uncollectable amounts from suppliers in the consolidated financial statements
as of December 31, 2020 or 2019.
Inventory:
Inventory, which consists of automotive hard parts, maintenance items, accessories and tools, is stated at the lower of cost or market.
Inventory also includes capitalized costs related to procurement, warehousing and distribution centers (“DC”s). Cost has been
determined using the last-in, first-out (“LIFO”) method, which more accurately matches costs with related revenues. Over time, as the
Company’s merchandise inventory purchases have increased, the Company negotiated improved acquisition costs from its suppliers and
the corresponding price deflation exhausted the Company’s LIFO reserve balance. The Company’s policy is to not write up the value
of its inventory in excess of its replacement cost, and accordingly, the Company’s merchandise inventory has been effectively recorded
at replacement cost since December 31, 2013. The replacement cost of inventory was $3.67 billion and $3.47 billion as of
December 31, 2020 and 2019, respectively. LIFO costs exceeded replacement costs by $55.8 million and $31.0 million at
December 31, 2020 and 2019, respectively.
Fair value of financial instruments:
The Company uses the fair value hierarchy, which prioritizes the inputs used to measure the fair value of certain of its financial
instruments. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities
(Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement). The Company uses the income and
market approaches to determine the fair value of its assets and liabilities. The three levels of the fair value hierarchy are set forth below:
• Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity can access at
the measurement date.
• Level 2 – Inputs other than quoted prices in active markets included within Level 1 that are observable for the asset or liability,
either directly or indirectly.
• Level 3 – Unobservable inputs for the asset or liability.
See Note 3 for further information concerning the Company’s financial and non-financial assets and liabilities measured at fair value on
a recurring and non-recurring basis.
Property and equipment:
Property and equipment are carried at cost. Depreciation is calculated using the straight-line method, generally over the estimated useful
lives of the assets. Leasehold improvements are amortized over the lesser of the lease term or the estimated economic life of the assets.
The lease term includes renewal options determined by management at lease inception, for which failure to execute renewal options
would result in a substantial economic penalty to the Company. Maintenance and repairs are charged to expense as incurred. Upon
retirement or sale, the cost and accumulated depreciation are eliminated and the gain or loss, if any, is recognized in the Company’s
Consolidated Statements of Income. The Company reviews long-lived assets for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be fully recoverable. See Note 5 for further information concerning
the Company’s property and equipment.
Goodwill and other intangibles:
The accompanying Consolidated Balance Sheets at December 31, 2020 and 2019, include goodwill and other intangible assets recorded
as the result of acquisitions. The Company operates a single reporting unit and evaluates goodwill and indefinite-lived intangibles for
impairment annually during the fourth quarter, or when events or changes in circumstances indicate the carrying value of these assets
51
FORM 10-K
might exceed their current fair values. Beginning in 2019, the goodwill impairment test includes a qualitative assessment. The
Company’s qualitative assessment found no evidence to suggest it is more likely than not that its fair value is less than its carrying
amount, including goodwill, as of December 31, 2020 and 2019. As such, no goodwill impairment adjustment was required as of
December 31, 2020 and 2019. Finite-lived intangibles are carried at amortized cost and amortization is calculated using the straight-
line method, generally over the estimated useful lives of the intangibles. See Note 7 for further information concerning the Company’s
goodwill and other intangibles.
Leases:
The Company leases certain office space, retail stores, distribution centers and equipment under long-term, non-cancelable operating
leases. Lease components are not accounted for separately from nonlease components. Leases generally include renewal options and
some include options to purchase, provisions for percentage rent based on sales and/or incremental step increase provisions. The exercise
of renewal options is typically at the Company’s sole discretion and all operating lease expense is recognized on a straight-line basis
over the lease term. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive
covenants. The Company rents or subleases certain surplus real estate to third parties. Right-of-use assets and corresponding operating
lease liabilities are recognized for all leases with an initial term greater than 12 months. See Note 6 for further information concerning
the Company’s operating leases.
Impairment of long-lived assets:
The Company reviews its long-lived assets, including its right-of-use assets, for impairment whenever events or changes in
circumstances indicate that the carrying value of an asset may not be recoverable. When such an event occurs, the Company compares
the sum of the undiscounted expected future cash flows of the asset (asset group) with the carrying amounts of the asset. If the
undiscounted expected future cash flows are less than the carrying value of the assets, the Company measures the amount of impairment
loss as the amount by which the carrying amount of the assets exceeds the fair value of the assets. The Company has not historically
recorded any material impairment charges to its long-lived assets. During the year ended December 31, 2020, the Company recorded a
charge of $3.4 million, related to the write-down on surplus land and buildings that exceeded market value, and $1.9 million and $11.4
million, during the years ended December 31, 2019 and 2018, respectively, related to its long-lived assets, primarily due to the disposal
of certain software projects that were no longer expected to provide a long-term benefit.
Valuation of investments:
The Company has an unsecured obligation to pay, in the future, the value of deferred compensation and a Company match relating to
employee participation in the Company’s nonqualified deferred compensation plan (the “Deferred Compensation Plan”). The future
obligation is adjusted to reflect the performance, whether positive or negative, of selected investment measurement options, chosen by
each participant. The Company invests in various marketable securities with the intention of selling these securities to fulfill its future
obligations under the Deferred Compensation Plan. The investments in this plan were stated at fair value based on quoted market prices,
were accounted for as trading securities and were included in “Other assets, net” on the accompanying Consolidated Balance Sheets as
of December 31, 2020 and 2019. See Note 3 for further information concerning the fair value measurements of the Company’s
marketable securities. See Note 13 for further information concerning the Company’s benefit plans.
Variable Interest Entities:
The Company invests in certain tax credit funds that promote renewable energy. These investments generate a return primarily through
the realization of federal tax credits and other tax benefits. The Company accounts for the tax attributes of its renewable energy
investments using the deferral method. Under this method, realized investment tax credits and other tax benefits are recognized as a
reduction of the renewable energy investments.
The Company determined its investment in these tax credit funds was an investment in a variable interest entity (“VIE”). The Company
analyzes any investments in VIEs at inception and again if certain triggering events are identified to determine if it is the primary
beneficiary. The Company considers a variety of factors in identifying the entity that holds the power to direct matters that most
significantly impact the VIE’s economic performance including, but not limited to, the ability to direct financing, leasing, construction
and other operating decisions and activities. As of December 31, 2020, the Company had invested in three unconsolidated tax credit
fund entities that were considered to be VIEs and concluded it was not the primary beneficiary of any of the entities, as it did not have
the power to control the activities that most significantly impact the entities, and has accounted for these investments using the equity
method. The Company’s maximum exposure to losses associated with these VIEs is limited to its net investment, which was $19.5
million as of December 31, 2020, and was included in “Other assets, net” on the accompanying Consolidated Balance Sheets. During
the years ended December 31, 2020, 2019 and 2018, the Company recognized investment tax credits in the amounts of $170.5 million,
$8.5 million and $19.4 million, respectively, all of which were realized through reductions in cash income taxes paid and were reflected
as a component of the change in Income taxes payable on the accompanying Consolidated Statements of Cash Flows for the respective
years. See Note 16 for further information concerning the Company’s investment in renewable energy tax credits.
52
FORM 10-K
Self-insurance reserves:
The Company uses a combination of insurance and self-insurance mechanisms to provide for potential liabilities for Team Member
health care benefits, workers’ compensation, vehicle liability, general liability and property loss. With the exception of certain Team
Member health care benefit liabilities, employment related claims and litigation, certain commercial litigation and certain regulatory
matters, the Company obtains third-party insurance coverage to limit its exposure. The Company estimates its self-insurance liabilities
by considering a number of factors, including historical claims experience and trend-lines, projected medical and legal inflation, growth
patterns and exposure forecasts. Certain of these liabilities were recorded at an estimate of their net present value, using a credit-adjusted
discount rate.
The following table identifies the components of the Company’s self-insurance reserves as of December 31, 2020 and 2019 (in
thousands):
Self-insurance reserves (undiscounted)
Self-insurance reserves (discounted)
December 31,
$
2020
213,332
202,454
$
2019
168,397
156,585
The current portion of the Company’s discounted self-insurance reserves totaled $109.2 million and $79.1 million as of
December 31, 2020 and 2019, respectively, which was included in “Self-insurance reserves” on the accompanying Consolidated Balance
Sheets as of December 31, 2020 and 2019. The remainder was included in “Other liabilities” on the accompanying Consolidated
Balance Sheets as of December 31, 2020 and 2019.
Warranties:
The Company offers warranties on certain merchandise it sells with warranty periods ranging from 30 days to limited lifetime warranties.
The risk of loss arising from warranty claims is typically the obligation of the Company’s suppliers. Certain suppliers provide upfront
allowances to the Company in lieu of accepting the obligation for warranty claims. For this merchandise, when sold, the Company
bears the risk of loss associated with the cost of warranty claims. Differences between supplier allowances received by the Company,
in lieu of warranty obligations and estimated warranty expense, are recorded as an adjustment to cost of sales. Estimated warranty costs,
which are recorded as obligations at the time of sale, are based on the historical failure rate of each individual product line. The
Company’s historical experience has been that failure rates are relatively consistent over time and that the ultimate cost of warranty
claims to the Company has been driven by volume of units sold as opposed to fluctuations in failure rates or the variation of the cost of
individual claims. See Note 9 for further information concerning the Company’s aggregate product warranty liabilities.
Litigation accruals:
O’Reilly is currently involved in litigation incidental to the ordinary conduct of the Company’s business. The Company accrues for
litigation losses in instances where a material adverse outcome is probable and the Company is able to reasonably estimate the probable
loss. The Company accrues for an estimate of material legal costs to be incurred in pending litigation matters. Although the Company
cannot ascertain the amount of liability that it may incur from any of these matters, it does not currently believe that, in the aggregate,
these matters, taking into account applicable insurance and accruals, will have a material adverse effect on its consolidated financial
position, results of operations or cash flows in a particular quarter or annual period.
Share repurchases:
In January of 2011, the Company’s Board of Directors approved a share repurchase program. Under the program, the Company may,
from time to time, repurchase shares of its common stock, solely through open market purchases effected through a broker dealer at
prevailing market prices, based on a variety of factors such as price, corporate trading policy requirements and overall market conditions.
All shares repurchased under the share repurchase program are retired and recorded under the par value method on the accompanying
Consolidated Balance Sheets. See Note 10 for further information concerning the Company’s share repurchase program.
Revenue recognition:
The Company’s primary source of revenue is derived from the sale of automotive aftermarket parts and merchandise to its customers.
Revenue is recognized when performance obligations under the terms of a contract with a customer are satisfied, in an amount
representing the consideration the Company expects to receive in exchange for transferring goods to the customer. Generally, the
Company’s performance obligations are satisfied when the customer takes possession of the merchandise, which normally occurs
immediately at the point of sale or through same day delivery of the merchandise. All sales are recorded net of estimated returns
allowances, discounts and taxes. The Company does not recognize revenue related to product warranties, as these are considered
assurance warranty obligations.
53
FORM 10-K
Over-the-counter retail sales to DIY customers are recorded when the customer takes possession of the merchandise. Internet retail
sales, included in sales to DIY customers, are recorded when the merchandise is shipped or when the customer picks up the merchandise
at a store. Sales to professional service provider customers, also referred to as “commercial sales,” are recorded upon same-day delivery
of the merchandise to the customer, generally at the customer’s place of business. Other sales and sales adjustments primarily includes
sales to Team Members, wholesale sales to other retailers (“jobber sales”), equipment sales, discounts, rebates, deferred revenue
adjustments relating to the Company’s retail loyalty program and adjustments to estimated sales returns allowances. Sales to Team
Members are recorded when the Team Member takes possession of the merchandise. Jobber sales are recorded upon shipment of the
merchandise from a regional distribution center with same-day delivery to the jobber customer’s location.
The Company maintains a retail loyalty program named O’Reilly O’Rewards, which represents a performance obligation. The Company
records a deferred revenue liability, based on a breakage adjusted, estimated redemption rate and a corresponding reduction in revenue
in periods when loyalty points are earned by members. The Company recognizes revenue and a corresponding reduction to the deferred
revenue liability in periods when loyalty program issued coupons are redeemed by members, generally within a period of three months
from issuance, or when unredeemed points expire, generally within 12 months after the date they were earned, which satisfies the
Company’s performance obligation. See Note 12 for further information concerning the Company’s revenue.
Cost of goods sold and selling, general and administrative expenses:
The following table illustrates the primary costs classified in each major expense category:
Cost of goods sold, including warehouse and distribution expenses
Total cost of merchandise sold, including:
Selling, general and administrative expenses
Payroll and benefit costs for store and corporate Team
Members
Occupancy costs of store and corporate facilities
Freight expenses associated with acquiring merchandise and with
moving merchandise inventories from the Company’s distribution
centers to the stores
Defective merchandise and warranty costs
Supplier allowances and incentives, including:
Allowances that are not reimbursements for specific, incremental and
identifiable costs
Cash discounts on payments to suppliers
Costs associated with the Company’s supply chain, including:
Payroll and benefit costs
Warehouse occupancy costs
Transportation costs
Depreciation
Inventory shrinkage
Depreciation and amortization related to store and corporate
assets
Vehicle expenses for store delivery services
Self-insurance costs
Closed store expenses
Other administrative costs, including:
Accounting, legal and other professional services
Bad debt, banking and credit card fees
Supplies
Travel
Advertising costs
Advertising expenses:
Advertising expense consists primarily of expenses related to the Company’s integrated marketing program, which includes radio, in-
store, digital and social media promotions, as well as sports and event sponsorships and direct mail and newspaper promotional
distribution. The Company expenses advertising costs as incurred. The Company also participates in cooperative advertising
arrangements with certain of its suppliers. Advertising expense, net of cooperative advertising allowances from suppliers that were
incremental to the advertising program, specific to the product or event and identifiable for accounting purposes, total $73.8 million,
$79.3 million and $81.4 million for the years ended December 31, 2020, 2019 and 2018, respectively, which were included in “Selling,
general and administrative expenses” on the accompanying Consolidated Statements of Income.
Share-based compensation and benefit plans:
The Company sponsors share-based compensation plans and benefit plans. The Company recognizes compensation expense over the
requisite service period for its share-based plans based on the fair value of the awards on the date of the grant, award or issuance and
accounts for forfeitures as they occur. Share-based plans include stock option awards, restricted stock awards and stock appreciation
rights issued under the Company’s incentive plans and stock issued through the Company’s employee stock purchase plan. See Note 13
for further information concerning the Company’s share-based compensation and benefit plans.
54
FORM 10-K
Pre-opening expenses:
Costs associated with the opening of new stores, which consist primarily of payroll and occupancy costs, are charged to “Selling, general
and administrative expenses” on the accompanying Consolidated Statements of Income as incurred. Costs associated with the opening
of new distribution centers, which consist primarily of payroll and occupancy costs, are included in “Cost of goods sold, including
warehouse and distribution expenses” on the accompanying Consolidated Statements of Income as incurred.
Interest expense:
The Company capitalizes interest costs as a component of construction in progress, based on the weighted-average interest rates incurred
on its long-term borrowings. Total interest costs capitalized for the years ended December 31, 2020, 2019 and 2018, were $10.2 million,
$13.0 million and $9.1 million, respectively, which were included in “Interest expense” on the accompanying Consolidated Statements
of Income.
In conjunction with the issuance or amendment of long-term debt instruments, the Company incurs various costs, including debt
registration fees, accounting and legal fees and underwriter and book runner fees. Debt issuance costs related to the Company’s long-
term unsecured senior notes are recorded as a reduction of the principal amount of the corresponding unsecured senior notes. Debt
issuance costs related to the Company’s unsecured revolving credit facility are recorded as an asset. These debt issuance costs have
been deferred and are being amortized over the term of the corresponding debt instrument and the amortization expense is included in
“Interest expense” on the accompanying Consolidated Statements of Income. Deferred debt issuance costs totaled $22.3 million and
$18.0 million, net of accumulated amortization, as of December 31, 2020 and 2019, respectively, of which $0.6 million and $1.1 million
were included in “Other assets, net” as of December 31, 2020 and 2019, respectively, with the remainder included in “Long-term debt”
on the accompanying Consolidated Balance Sheets.
The Company issued its long-term unsecured senior notes at a discount. The original issuance discounts on the senior notes are recorded
as a reduction of the principal amount of the corresponding senior notes and are accreted over the term of the applicable senior note,
with the accretion expense included in “Interest expense” on the accompanying Consolidated Statements of Income. Original issuance
discounts, net of accretion, totaled $5.1 million and $3.5 million as of December 31, 2020 and 2019, respectively.
See Note 8 for further information concerning debt issuance costs and original issuance discounts associated with the Company’s
issuances of long-term debt instruments.
Income taxes:
The Company accounts for income taxes using the liability method, which requires the recognition of deferred tax assets and liabilities
for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax
assets and liabilities are determined based on differences between the U.S. GAAP basis and tax basis of assets and liabilities using
enacted tax rules and rates currently scheduled to be in effect for the year in which the differences are expected to reverse. Tax carry
forwards are also recognized in deferred tax assets and liabilities under this method. The effect of a change in tax rates on deferred tax
assets and liabilities is recognized in income in the period of the enactment date. The Company would record a valuation allowance
against deferred tax assets to the extent it is more likely than not the amount will not be realized, based upon evidence available at the
time of the determination and any change in the valuation allowance is recorded in the period of a change in such determination. The
Company did not establish a valuation allowance for deferred tax assets as of December 31, 2020 and 2019, as it was considered more
likely than not that deferred tax assets were realizable through a combination of future taxable income, the realization of deferred tax
liabilities and tax planning strategies.
The Company regularly reviews its potential tax liabilities for tax years subject to audit. The amount of such liabilities is based on
various factors, such as differing interpretations of tax regulations by the responsible tax authority, experience with previous tax audits
and applicable tax law rulings. In management’s opinion, adequate provisions for income taxes have been made for all years presented.
The estimates of the Company’s potential tax liabilities contain uncertainties because management must use judgment to estimate the
exposures associated with the Company’s various tax positions and actual results could differ from estimates. See Note 16 for further
information concerning the Company’s income taxes.
Earnings per share:
Basic earnings per share is calculated by dividing net income by the weighted-average number of common shares outstanding during
the fiscal period. Diluted earnings per share is calculated by dividing the weighted-average number of common shares outstanding plus
the common stock equivalents associated with the potential impact of dilutive stock options. Certain common stock equivalents that
could potentially dilute basic earnings per share in the future were not included in the fully diluted computation because they would
have been antidilutive. Generally, stock options are antidilutive and excluded from the earnings per share calculation when the exercise
55
FORM 10-K
price exceeds the market price of the common shares. See Note 17 for further information concerning the Company’s common stock
equivalents.
New accounting pronouncements:
In June of 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standard Update (“ASU”) No. 2016-13,
“Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”). Under
ASU 2016-13, businesses and other organizations are required to present financial assets, measured at amortized costs basis, at the net
amount expected to be collected. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis,
such as trade receivables. The measurement of expected credit loss will be based on historical experience, current conditions and
reasonable and supportable forecasts that affect the collectibility of the reported amount. For public companies, ASU 2016-13 is
effective for annual reporting periods beginning after December 15, 2019, including interim periods within that reporting period, and
requires a modified retrospective adoption, with early adoption permitted. The Company adopted this guidance using the modified
retrospective adoption method beginning with its first quarter ending March 31, 2020, and applied it to all applicable accounts. The
application of this new guidance did not have a material impact on the Company’s consolidated financial condition, results of operations
or cash flows. See Note 4 for further information concerning the Company’s allowance for accounts receivable.
NOTE 2 – BUSINESS COMBINATION
After the close of business on November 29, 2019, the Company completed the acquisition of Mayoreo de Autopartes y Aceites, S.A.
de C.V. (“Mayasa”), a specialty retailer of automotive aftermarket parts headquartered in Guadalajara, Jalisco, Mexico pursuant to a
stock purchase agreement. The results of Mayasa’s operations have been included in the Company’s consolidated financial statements
beginning from the date of acquisition. Pro forma results of operations related to the acquisition of Mayasa are not presented as Mayasa’s
results are not material to the Company’s results of operations.
The Company’s preliminary assessment resulted in the initial recognition of $128.1 million of goodwill and intangible assets included
in “Goodwill” on the accompanying Consolidated Balance Sheets as of December 31, 2019.
The purchase price allocation process, consisting of collecting data and information to enable the Company to value the identified assets
acquired and liabilities assumed as a result of the business combination, was finalized during the third quarter of 2020. Separately
identifiable intangible assets, arising as a result of the business combination, include $36.0 million of indefinite lived trade names and
trademarks and $25.5 million of finite lived intangible assets, primarily consisting of other trade names and trademarks, non-compete
agreements, customer relationships and internal use software. Residual goodwill of $73.4 million was recorded as of the acquisition
date, as a result of the final purchase price allocation. Goodwill generated from this acquisition is not amortizable for tax purposes.
See Note 7 for further information concerning the Company’s goodwill and other intangible assets.
NOTE 3 – FAIR VALUE MEASUREMENTS
Financial assets and liabilities measured at fair value on a recurring basis:
The Company’s marketable securities were accounted for as trading securities and the carrying amount of its marketable securities were
included in “Other assets, net” on the accompanying Consolidated Balance Sheets as of December 31, 2020 and 2019. The Company
recorded increases in fair value related to its marketable securities in the amounts of $5.4 million and $5.8 million for the years ended
December 31, 2020 and 2019, respectively, which were included in “Other income (expense)” on the accompanying Consolidated
Statements of Income.
56
FORM 10-K
The tables below identify the estimated fair value of the Company’s marketable securities, determined by reference to quoted market
prices (Level 1), as of December 31, 2020 and 2019 (in thousands):
Quoted Priced in Active Markets Significant Other
Significant
for Identical Instruments
(Level 1)
Observable Inputs Unobservable Inputs
(Level 2)
(Level 3)
Total
December 31, 2020
Marketable securities
$
40,411 $
— $
— $
40,411
Quoted Prices in Active Markets
Significant Other
Significant
for Identical Instruments
(Level 1)
Observable Inputs Unobservable Inputs
(Level 2)
(Level 3)
Total
December 31, 2019
Marketable securities
$
32,201 $
— $
— $
32,201
Non-financial assets and liabilities measured at fair value on a nonrecurring basis:
Certain long-lived non-financial assets and liabilities may be required to be measured at fair value on a nonrecurring basis in certain
circumstances, including when there is evidence of impairment. These non-financial assets and liabilities may include assets acquired
in a business combination or property and equipment that are determined to be impaired. As of December 31, 2020 and 2019, the
Company did not have any material non-financial assets or liabilities that had been measured at fair value subsequent to initial
recognition.
Fair value of financial instruments:
The carrying amounts of the Company’s senior notes and unsecured revolving credit facility borrowings are included in “Long-term
debt” on the accompanying Consolidated Balance Sheets as of December 31, 2020 and 2019.
The table below identifies the estimated fair value of the Company’s senior notes, using the market approach. The fair values as of
December 31, 2020 and 2019, were determined by reference to quoted market prices of the same or similar instruments (Level 2) (in
thousands):
December 31, 2020
December 31, 2019
Senior Notes
$
4,123,217
Carrying Amount
Estimated Fair Value
4,647,595
$
Carrying Amount
$
3,629,527
Estimated Fair Value
3,881,925
$
The carrying amount of the Company’s unsecured revolving credit facility approximates fair value, as borrowings under the facility bear
variable interest at current market rates. See Note 8 for further information concerning the Company’s senior notes and unsecured
revolving credit facility.
The accompanying Consolidated Balance Sheets include other financial instruments, including cash and cash equivalents, accounts
receivable, amounts receivable from suppliers and accounts payable. Due to the short-term nature of these financial instruments, the
Company believes that the carrying values of these instruments approximate their fair values.
NOTE 4 – ALLOWANCE FOR DOUBTFUL ACCOUNTS
The following table identifies the changes in the Company’s allowance for doubtful accounts included in “Accounts receivable” on the
accompanying Consolidated Balance Sheets as of December 31, 2020 and 2019 (in thousands):
Allowance for doubtful accounts, balance at January 1,
Reserve accruals
Uncollectable accounts written-off
Foreign currency translation
Allowance for doubtful accounts, balance at December 31,
2020
2019
$
$
14,417
5,030
(6,743)
(34)
12,670
$
$
13,238
8,738
(8,282)
723
14,417
57
FORM 10-K
NOTE 5 – PROPERTY AND EQUIPMENT
The following table identifies the types and balances of property and equipment included in “Property and equipment, at cost” on the
accompanying Consolidated Balance Sheets as of December 31, 2020 and 2019, and includes the estimated useful lives for its types of
property and equipment (in thousands, except original useful lives):
Original Useful
Lives
Land
Buildings and building improvements
Leasehold improvements
Furniture, fixtures and equipment
Vehicles
Construction in progress
Total property and equipment
Less: accumulated depreciation and amortization
Net property and equipment
15 – 39 years
3 – 25 years
3 – 20 years
5 – 10 years
$
860,797 $
December 31, 2020 December 31, 2019
805,556
2,378,074
751,155
1,450,444
447,939
358,259
6,191,427
2,243,224
3,948,203
2,574,969
799,013
1,562,664
456,957
305,511
6,559,911
2,464,993
4,094,918
$
$
The Company recorded depreciation and amortization expense related to property and equipment in the amounts of $303.0 million,
$267.3 million and $246.0 million for the years ended December 31, 2020, 2019 and 2018, respectively, which were primarily included
in “Selling, general and administrative expenses” on the accompanying Consolidated Statements of Income.
The Company recorded a charge of $3.4 million related to property and equipment for the year ended December 31, 2020, primarily
due to the write-down on surplus land and buildings that exceeded market value, and $1.9 million and $11.4 million related to property
and equipment for the years ended December 31, 2019 and 2018, respectively, primarily due to the disposal of certain software projects
that were no longer expected to provide a long-term benefit, which were included in “Selling, general and administrative expenses” on
the accompanying Consolidated Statements of Income.
NOTE 6 – LEASES
Operating lease commitments:
The following table summarizes Total lease cost for the years ended December 31, 2020 and 2019, which was primarily included in
“Selling, general and administrative expenses” on the accompanying Consolidated Statements of Income (in thousands):
Operating lease cost
Short-term operating lease cost
Variable operating lease cost
Sublease income
Total lease cost
For the Year Ended
December 31,
2020
2019
336,156
6,131
82,868
(4,790)
420,365
$
$
320,480
5,899
76,027
(4,112)
398,294
$
$
The following table summarizes the Net rent expense amounts, prior to the adoption of Accounting Standard Codification 842 – Leases,
for the year ended December 31, 2018, which were included in “Selling, general and administrative expenses” on the accompanying
Consolidated Statements of Income (in thousands):
Minimum operating lease expense
Contingent rents
Other lease related occupancy costs
Total rent expense
Less: sublease income
Net rent expense
For the Year Ended
December 31, 2018
305,613
806
14,449
320,868
3,585
317,283
$
$
58
FORM 10-K
The following table summarizes other lease related information for the years ended December 31, 2020 and 2019 (in thousands):
For the Year Ended
December 31,
2020
2019
Cash paid for amounts included in the measurement of operating lease liabilities:
Operating cash flows from operating leases
Right-of-use assets obtained in exchange for new operating lease liabilities
$
334,994 $
322,712
318,048
233,584
The following table identifies the future minimum lease payments under all of the Company’s operating leases for each of the next five
years, and in the aggregate thereafter, and reconciles to the present value of the “Operating lease liabilities, less current portion” included
in the accompanying Consolidated Balance Sheet as of December 31, 2020 (in thousands):
December 31, 2020
2021
2022
2023
2024
2025
Thereafter
Total operating lease payments
Less: present value discount
Total operating lease liabilities
Less: current portion of operating lease liabilities
Operating lease liabilities, less current portion
Related Parties Non-Related Parties
317,888 $
$
306,134
275,966
246,547
208,064
1,044,244
2,398,843
372,561
2,026,282
318,189
1,708,093 $
4,589 $
3,848
3,477
1,730
957
2,064
16,665
1,478
15,187
4,589
10,598 $
$
Total
322,477
309,982
279,443
248,277
209,021
1,046,308
2,415,508
374,039
2,041,469
322,778
1,718,691
See Note 15 for further information concerning the Company’s related party operating leases.
The future minimum lease payments under the Company’s operating leases, in the table above, do not include potential amounts for
percentage rent and other variable operating lease related costs and have not been reduced by expected future minimum sublease income
under non-cancelable subleases, which was approximately $17.2 million as of December 31, 2020. The weighted-average remaining
lease term and weighted-average discount rate for the Company’s operating leases was 10.0 years and 4.0%, respectively, as of
December 31, 2020.
The present value discount component of the future minimum lease payments under the Company’s operating leases, in the table above,
was primarily calculated using the Company’s incremental borrowing rate based on information available at the lease commencement
or modification date. Inputs for the calculation of the Company’s incremental borrowing rate include valuations and yields of U.S.
domestic investment grade corporate bonds and the applicable credit spread over comparable U.S. Treasury rates, adjusted to a
collateralized basis by estimating the credit spread improvement that would result from an upgrade of one ratings classification. For
leases that commenced prior to January 1, 2019, the incremental borrowing rate used was as of January 1, 2019. When the implicit rate
of a lease is available, the implicit rate is used in the calculation and not the Company’s incremental borrowing rate.
NOTE 7 – GOODWILL AND OTHER INTANGIBLES
Goodwill:
Goodwill is reviewed for impairment annually during the fourth quarter, or more frequently if events or changes in circumstances
indicate that impairment may exist. Goodwill is not amortizable for financial statement purposes. The Company did not record any
goodwill impairment during the years ended December 31, 2020 or 2019.
59
FORM 10-K
The following table identifies the changes in goodwill and certain acquisition intangibles, which were included in “Goodwill” on the
accompanying Consolidated Balance Sheets for the years ended December 31, 2020 and 2019 (in thousands):
Goodwill, balance at January 1,
Change in goodwill related to small acquisitions
Foreign currency translation
Provisional goodwill and intangibles related to Mayasa acquisition
Final purchase price allocation of intangibles related to Mayasa acquisition
Goodwill, balance at December 31,
2020
2019
$
$
936,814
109
(5,465)
—
(50,428)
881,030
$
$
807,260
1,464
4,130
123,960
—
936,814
For the year ended December 31, 2019, goodwill included $128.1 million of goodwill and intangible assets, as well as foreign currency
translation, from the preliminary purchase price allocation related to the acquisition of Mayasa. This amount was provisional, and during
the year ended December 31, 2020, as result of the final purchase price allocation of the Mayasa acquisition, $61.5 million of intangible
assets and $73.4 million of residual goodwill was recorded as of the acquisition date. See Note 2 for further information concerning the
Company’s business combination.
Intangibles other than goodwill:
The following table identifies the components of the Company’s intangible assets, inclusive of foreign currency translation adjustments,
which were included in “Other assets, net” on the accompanying Consolidated Balance Sheets for the years ended December 31, 2020
and 2019 (in thousands):
Cost of
December 31, 2020
Accumulated
Intangibles Amortization
Net
Cost of
Intangibles Intangibles Amortization
Net
Intangibles
December 31, 2019
Accumulated
Finite-lived intangible assets:
Trade names (1)
Non-compete agreements (2)
Other intangible assets (3)
Total finite-lived intangible
assets
Indefinite-lived intangible assets:
Trade names
$
8,363 $
7,183
12,200
(1,905) $
(2,713)
(2,242)
6,458
4,470
9,958
$
— $
— $
2,717
—
(928)
—
—
1,789
—
27,746
(6,860)
20,886
2,717
(928)
1,789
35,420
—
35,420
—
—
—
Total intangible assets
$
63,166 $
(6,860) $
56,306
$
2,717 $
(928) $
1,789
(1) Weighted-average remaining useful life of approximately 4.3 years as of December 31, 2020.
(2) Weighted-average remaining useful life of approximately 3.6 years as of December 31, 2020.
(3)
Includes internally-developed software and customer relationships and has an estimated weighted-average remaining useful life of approximately
7.3 years as of December 31, 2020.
During the year ended December 31, 2020, the Company recorded finite-lived and indefinite-lived intangible assets, related to trade
names from the Mayasa acquisition, in the amounts of $8.5 million and $36.0 million, respectively. During the years ended
December 31, 2020 and 2019, the Company recorded non-compete agreement assets in conjunction with small acquisitions, including
the acquisition of Mayasa, in the amounts of $4.7 million and less than $0.1 million, respectively. During the year ended
December 31, 2020, the Company recorded other finite-lived intangible assets, related to internally-developed software and customer
relationships from the Mayasa acquisition, in the amount of $12.4 million.
In prior years, the Company recorded favorable lease assets and unfavorable lease liabilities. These favorable lease assets represented
the values of operating leases acquired with favorable terms and these unfavorable lease liabilities represented the values of operating
leases acquired with unfavorable terms. With the adoption of Accounting Standard Codification 842 – Leases during the year ended
December 31, 2019, the Company’s favorable lease assets and unfavorable lease liabilities, from a previous acquisition, were
incorporated into the value of the right-of-use asset. For the years ended December 31, 2020, 2019 and 2018, the Company recorded
aggregate amortization expense related to its intangible assets in the amounts of $5.3 million, $0.3 million and $1.4 million, respectively.
For the year ended December 31, 2018, the Company recognized an amortized benefit of $0.9 million related to these unfavorable
operating leases.
60
FORM 10-K
The following table identifies the estimated amortization expense of the Company’s intangibles for each of the next five years as of
December 31, 2020 (in thousands):
2021
2022
2023
2024
2025
Total
NOTE 8 – FINANCING
December 31, 2020
Amortization Expense
$
$
5,602
5,347
2,714
1,397
1,391
16,451
The following table identifies the amounts of the Company’s financing facilities, which were included in “Long-term debt” on the
accompanying Consolidated Balance Sheets as of December 31, 2020 and 2019 (in thousands):
Revolving Credit Facility
4.875% Senior Notes due 2021
4.625% Senior Notes due 2021, effective interest rate of 4.643%
3.800% Senior Notes due 2022, effective interest rate of 3.845%
3.850% Senior Notes due 2023, effective interest rate of 3.851%
3.550% Senior Notes due 2026, effective interest rate of 3.570%
3.600% Senior Notes due 2027, effective interest rate of 3.619%
4.350% Senior Notes due 2028, effective interest rate of 4.383%
3.900% Senior Notes due 2029, effective interest rate of 3.901%
4.200% Senior Notes due 2030, effective interest rate of 4.205%
1.750% Senior Notes due 2031, effective interest rate of 1.798%
Total principal amount of debt
Less: Unamortized discount and debt issuance costs
Total long-term debt
December 31,
2020
— $
—
300,000
300,000
300,000
500,000
750,000
500,000
500,000
500,000
500,000
4,150,000
26,783
4,123,217 $
2019
261,000
500,000
300,000
300,000
300,000
500,000
750,000
500,000
500,000
—
—
3,911,000
20,473
3,890,527
$
$
The following table identifies the principal maturities of the Company’s financing facilities as of December 31, 2020 (in thousands):
2021
2022
2023
2024
2025
Thereafter
Total
Scheduled Maturities
$
$
300,000
300,000
300,000
—
—
3,250,000
4,150,000
Unsecured revolving credit facility:
On April 5, 2017, the Company entered into a credit agreement (the “Credit Agreement”). The Credit Agreement provides for a $1.2
billion unsecured revolving credit facility (the “Revolving Credit Facility”) arranged by JPMorgan Chase Bank, N.A., which is
scheduled to mature in April 2022. The Credit Agreement includes a $200 million sub-limit for the issuance of letters of credit and a
$75 million sub-limit for swing line borrowings under the Revolving Credit Facility. As described in the Credit Agreement governing
the Revolving Credit Facility, the Company may, from time to time, subject to certain conditions, increase the aggregate commitments
under the Revolving Credit Facility by up to $600 million, provided that the aggregate amount of the commitments does not exceed $1.8
billion at any time.
As of December 31, 2020 and 2019, the Company had outstanding letters of credit, primarily to support obligations related to workers’
compensation, general liability and other insurance policies, in the amounts of $66.4 million and $38.9 million, respectively, reducing
the aggregate availability under the Revolving Credit Facility by those amounts.
61
FORM 10-K
Borrowings under the Revolving Credit Facility (other than swing line loans) bear interest, at the Company’s option, at either an
Alternate Base Rate or an Adjusted LIBO Rate (both as defined in the Credit Agreement) plus an applicable margin. Swing line loans
made under the Revolving Credit Facility bear interest at an Alternate Base Rate plus the applicable margin for Alternate Base Rate
loans. In addition, the Company pays a facility fee on the aggregate amount of the commitments under the Credit Agreement in an
amount equal to a percentage of such commitments. The interest rate margins and facility fee are based upon the better of the ratings
assigned to the Company’s debt by Moody’s Investor Service, Inc. and Standard & Poor’s Ratings Services, subject to limited
exceptions. As of December 31, 2020, based upon the Company’s current credit ratings, its margin for Alternate Base Rate loans was
0.000%, its margin for Eurodollar Revolving Loans was 0.900% and its facility fee was 0.100%.
The Credit Agreement contains certain covenants, including limitations on subsidiary indebtedness, a minimum consolidated fixed
charge coverage ratio of 2.50:1.00 and a maximum consolidated leverage ratio of 3.50:1.00. The consolidated fixed charge coverage
ratio includes a calculation of earnings before interest, taxes, depreciation, amortization, rent and non-cash share-based compensation
expense to fixed charges. Fixed charges include interest expense, capitalized interest and rent expense. The consolidated leverage ratio
includes a calculation of adjusted debt to earnings before interest, taxes, depreciation, amortization, rent and non-cash share-based
compensation expense. Adjusted debt includes outstanding debt, outstanding stand-by letters of credit and similar instruments, five-
times rent expense and excludes any premium or discount recorded in conjunction with the issuance of long-term debt. In the event that
the Company should default on any covenant (subject to customary grace periods, cure rights and materiality thresholds) contained in
the Credit Agreement, certain actions may be taken, including, but not limited to, possible termination of commitments, immediate
payment of outstanding principal amounts plus accrued interest and other amounts payable under the Credit Agreement and litigation
from lenders. As of December 31, 2020, the Company remained in compliance with all covenants under the Credit Agreement.
Senior notes:
On March 27, 2020, the Company issued $500 million aggregate principal amount of unsecured 4.200% Senior Notes due 2030
(“4.200% Senior Notes due 2030”) at a price to the public of 99.959% of their face value with U.S. Bank National Association (“U.S.
Bank”) as trustee. Interest on the 4.200% Senior Notes due 2030 is payable on April 1 and October 1 of each year, which began on
October 1, 2020, and is computed on the basis of a 360-day year.
On September 23, 2020, the Company issued $500 million aggregate principal amount of unsecured 1.750% Senior Notes due 2031
(“1.750% Senior Notes due 2031”) at a price to the public of 99.544% of their face value with U.S. Bank as trustee. Interest on the
1.750% Senior Notes due 2031 is payable on March 15 and September 15 of each year, beginning on March 15, 2021, and is computed
on the basis of a 360-day year.
On October 14, 2020, the Company redeemed its $500 million aggregate principal amount of unsecured 4.875% Senior Notes due 2021
at a redemption price of $500 million, plus accrued and unpaid interest to, but not including, the date of redemption, and the Company
recorded a $0.2 million loss on debt extinguishment at that time.
As of December 31, 2020, the Company has issued and has outstanding a cumulative $4.2 billion aggregate principal amount of
unsecured senior notes, which are due between 2021 and 2031, with UMB Bank, N.A. and U.S. Bank as trustees. Interest on the senior
notes, ranging from 1.750% to 4.625%, is payable semi-annually and is computed on the basis of a 360-day year. The 4.625% Senior
Notes due 2021 were included in “Long-term debt” on the accompanying Consolidated Balance Sheet as of December 31, 2020, as the
Company has the ability and intent to refinance these notes on a long-term basis. None of the Company’s subsidiaries is a guarantor
under the senior notes. Each of the senior notes is subject to certain customary covenants, with which the Company complied as of
December 31, 2020.
NOTE 9 – WARRANTIES
The Company’s product warranty liabilities are included in “Other current liabilities” on the accompanying Consolidated Balance Sheets
as of December 31, 2020 and 2019. The following table identifies the changes in the Company’s aggregate product warranty liabilities
for the years ended December 31, 2020 and 2019 (in thousands):
Warranty liabilities, balance at January 1,
Warranty claims
Warranty accruals
Foreign currency translation
Warranty liabilities, balance at December 31,
2020
2019
$
$
61,069
(109,684)
114,526
(25)
65,886
$
$
52,220
(99,267)
108,099
17
61,069
62
FORM 10-K
NOTE 10 – SHARE REPURCHASE PROGRAM
In January of 2011, the Company’s Board of Directors approved a share repurchase program. Under the program, the Company may,
from time to time, repurchase shares of its common stock, solely through open market purchases effected through a broker dealer at
prevailing market prices, based on a variety of factors such as price, corporate trading policy requirements and overall market conditions.
The Company’s Board of Directors may increase or otherwise modify, renew, suspend or terminate the share repurchase program at any
time, without prior notice. As announced on February 5, 2020, October 28, 2020, and February 10, 2021, the Company’s Board of
Directors each time approved a resolution to increase the authorization amount under the share repurchase program by an additional
$1.0 billion, resulting in a cumulative authorization amount of $15.8 billion. Each additional authorization is effective for a three-year
period, beginning on its respective announcement date. In order to conserve liquidity in response to the COVID-19 pandemic, the
Company suspended its share repurchase program on March 16, 2020. The Company continued to evaluate business conditions and its
liquidity and, as a result of this evaluation, resumed its share repurchase program on May 29, 2020.
The following table identifies shares of the Company’s common stock that have been repurchased as part of the Company’s publicly
announced share repurchase program for the years ended December 31, 2020 and 2019 (in thousands, except per share data):
Shares repurchased
Average price per share
Total investment
For the Year Ended
December 31,
2020
4,832
431.93
2,087,146
$
$
2019
3,877
369.55
1,432,752
$
$
As of December 31, 2020, the Company had $481.5 million remaining under its share repurchase program. Subsequent to the end of
the year and through February 26, 2021, the Company repurchased an additional 1.1 million shares of its common stock under its share
repurchase program, at an average price of $447.49, for a total investment of $478.4 million. The Company has repurchased a total of
82.1 million shares of its common stock under its share repurchase program since the inception of the program in January of 2011 and
through February 26, 2021, at an average price of $179.65, for a total aggregate investment of $14.7 billion.
NOTE 11 – ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
Accumulated other comprehensive income includes adjustments for foreign currency translations. The table below summarizes activity
for changes in accumulated other comprehensive income included in “Accumulated other comprehensive (loss) income” on the
accompanying Consolidated Balance Sheets as of December 31, 2019 and 2018 (in thousands):
Accumulated other comprehensive income, balance at December 31, 2018
Change in accumulated other comprehensive income
Accumulated other comprehensive income, balance at December 31, 2019
Change in accumulated other comprehensive loss
Accumulated other comprehensive loss, balance at December 31, 2020
$
$
$
Foreign
Currency (1)
Total Accumulated Other
$
Comprehensive Income (Loss)
—
4,890
4,890
(7,045)
(2,155)
$
$
—
4,890
4,890
(7,045)
(2,155)
(1) Foreign currency is not shown net of additional U.S. tax, as other basis differences of non-U.S. subsidiaries are intended to be permanently
reinvested.
NOTE 12 – REVENUE
The table below identifies the Company’s revenues disaggregated by major customer type for the years ended December 31, 2020, 2019
and 2018 (in thousands):
Sales to do-it-yourself customers
Sales to professional service provider customers
Other sales and sales adjustments
Total sales
2020
6,684,183
4,647,189
273,121
11,604,493
$
$
63
For the Year Ended
December 31,
2019
5,612,390
4,369,541
168,054
10,149,985
$
$
2018
5,351,035
4,035,898
149,495
9,536,428
$
$
FORM 10-K
As of December 31, 2020 and 2019, the Company had recorded a deferred revenue liability of $4.5 million and $4.1 million,
respectively, related to its loyalty program, which were included in “Other liabilities” on the accompanying Consolidated Balance
Sheets. During the years ended December 31, 2020, 2019 and 2018, the Company recognized $14.4 million, $15.6 million and $15.9
million, respectively, of revenue related to its loyalty program, which were included in “Sales” on the accompanying Consolidated
Statements of Income.
NOTE 13 – SHARE-BASED COMPENSATION AND BENEFIT PLANS
The Company recognizes share-based compensation expense based on the fair value of the grants, awards or shares at the time of the
grant, award or issuance. Share-based compensation includes stock option awards, restricted stock awards and stock appreciation rights
issued under the Company’s incentive plans and stock issued through the Company’s employee stock purchase plan.
The table below identifies the shares that have been authorized for issuance and the shares available for future issuance under the
Company plans, as of December 31, 2020 (in thousands):
Plans
Incentive Plans
Employee Stock Purchase Plan
Profit Sharing and Savings Plan
Total Shares Authorized for Shares Available for Future
Issuance under the Plans
Issuance under the Plans
December 31, 2020
34,650
4,250
4,200
5,592
506
349
Stock options:
The Company’s incentive plans provide for the granting of stock options for the purchase of common stock of the Company to certain
key employees of the Company. Employee stock options are granted at an exercise price that is equal to the closing market price of the
Company’s common stock on the date of the grant. Employee stock options granted under the plans expire after 10 years and typically
vest 25% per year, over four years. The Company records compensation expense for the grant date fair value of the option awards
evenly over the vesting period or minimum required service period.
The table below identifies the employee stock option activity under these plans during the year ended December 31, 2020:
Shares
(in thousands)
Weighted- Average
Exercise Price
Contractual Terms
Average
Remaining
Aggregate
Intrinsic Value
(in thousands)
Outstanding at December 31, 2019
Granted
Exercised
Forfeited or expired
Outstanding at December 31, 2020
Vested or expected to vest at December 31, 2020
Exercisable at December 31, 2020
1,635 $
175
(288)
(22)
1,500 $
1,470 $
988 $
218.10
394.79
160.67
302.55
248.52
246.44
202.19
5.7 Years $
5.7 Years $
4.5 Years $
306,095
302,927
247,419
The fair value of each stock option award is estimated on the date of the grant using the Black-Scholes option pricing model. The Black-
Scholes model requires the use of assumptions, including the risk free rate, expected life, expected volatility and expected dividend
yield.
• Risk-free interest rate – The United States Treasury rates in effect at the time the options are granted for the options’ expected
life.
• Expected life – Represents the period of time that options granted are expected to be outstanding. The Company uses historical
experience to estimate the expected life of options granted.
• Expected volatility – Measure of the amount, by which the Company’s stock price is expected to fluctuate, based on a historical
trend.
• Expected dividend yield – The Company has not paid, nor does it have plans in the foreseeable future to pay, any dividends.
64
FORM 10-K
The table below identifies the weighted-average assumptions used for stock options awarded by the Company during the years ended
December 31, 2020, 2019 and 2018:
Risk free interest rate
Expected life
Expected volatility
Expected dividend yield
2020
0.86 %
5.9 Years
26.4 %
— %
December 31,
2019
2.26 %
5.7 Years
25.1 %
— %
2018
2.63 %
5.9 Years
24.0 %
— %
The following table summarizes activity related to stock options awarded by the Company for the years ended December 31, 2020, 2019
and 2018:
Compensation expense for stock options awarded (in thousands)
Income tax benefit from compensation expense related to stock options (in
thousands)
Total intrinsic value of stock options exercised (in thousands)
Cash received from exercise of stock options (in thousands)
Weighted-average grant-date fair value of options awarded
Weighted-average remaining contractual life of exercisable options (in years)
For the Year Ended
December 31,
2019
2018
2020
$
18,435 $
18,044 $
16,521
4,620
79,451
46,282
106.76 $
4.5
4,436
117,489
46,106
105.37 $
4.6
4,093
156,327
61,403
76.57
4.4
$
At December 31, 2020, the remaining unrecognized compensation expense related to unvested stock option awards was $32.6 million,
and the weighted-average period of time, over which this cost will be recognized, is 2.4 years.
Restricted stock:
The Company’s incentive plans provide for the awarding of shares of restricted stock to certain key employees that vest evenly over a
three-year period and are held in escrow until such vesting has occurred. Generally, unvested shares are forfeited when an employee
ceases employment. The fair value of shares awarded under these plans is based on the closing market price of the Company’s common
stock on the date of award and compensation expense is recorded over the vesting period or minimum required service period.
The table below identifies employee restricted stock activity under these plans during the year ended December 31, 2020 (in thousands,
except per share data):
Non-vested at December 31, 2019
Granted during the period
Vested during the period (1)
Forfeited during the period
Non-vested at December 31, 2020
Shares
Weighted-Average Grant-Date
Fair Value
4 $
2
(2)
—
4 $
301.40
419.88
289.03
—
358.58
(1)
Includes less than one thousand shares withheld to cover employees’ taxes upon vesting.
The Company’s incentive plans provide for the awarding of shares of restricted stock to the non-employee directors of the Company
that vest over a one-year period, except for awards issued prior to May 2020, which vests evenly over a three-year period, and are held
in escrow until such vesting has occurred. Unvested shares are forfeited when a director ceases their service on the Company’s Board
of Directors for reasons other than death or retirement. The fair value of shares awarded under these plans is based on the closing market
price of the Company’s common stock on the date of award, and compensation expense is recorded evenly over the minimum required
service period.
65
FORM 10-K
The table below identifies non-employee director restricted stock activity under these plans during the year ended December 31, 2020
(in thousands, except per share data):
Non-vested at December 31, 2019
Granted during the period
Vested during the period
Forfeited during the period
Non-vested at December 31, 2020
Shares
Fair Value
Weighted-Average Grant-Date
4 $
2
(2)
—
4 $
312.96
407.12
293.72
—
371.46
The following table summarizes activity related to restricted stock awarded by the Company for the years ended December 31, 2020,
2019 and 2018 (in thousands, except per share data):
Compensation expense for restricted shares awarded
Income tax benefit from compensation expense related to restricted shares
Total fair value of restricted shares at vest date
Shares awarded under the plans
Weighted-average grant-date fair value of shares awarded under the plans
For the Year Ended
December 31,
2019
2020
$
$
$
$
1,488 $
373 $
1,591 $
4
412.67 $
1,387 $
341 $
1,633 $
4
355.91 $
2018
1,370
340
1,230
5
263.89
At December 31, 2020, the remaining unrecognized compensation expense related to unvested restricted share awards was $0.4 million,
and the weighted-average period of time, over which this cost will be recognized, is 0.5 years.
Employee stock purchase plan:
The Company’s employee stock purchase plan (the “ESPP”) permits eligible employees to purchase shares of the Company’s common
stock at 85% of the fair market value. Employees may authorize the Company to withhold up to 5% of their annual salary to participate
in the plan. The fair value of shares issued under the ESPP is based on the average of the high and low market prices of the Company’s
common stock during the offering periods. Compensation expense is recognized based on the discount between the grant-date fair value
and the employee purchase price for the shares sold to employees.
The table below summarizes activity related to the Company’s ESPP for the years ended December 31, 2020, 2019 and 2018 (in
thousands, except per share data):
Compensation expense for shares issued under the ESPP
$
Income tax benefit from compensation expense related to shares issued under the ESPP $
Shares issued under the ESPP
Weighted-average price of shares issued under the ESPP
$
2,824 $
708 $
45
353.04 $
2,490 $
612 $
43
329.69 $
For the Year Ended
December 31,
2019
2020
2018
2,285
566
53
245.26
Profit sharing and savings plan:
The Company sponsors a contributory profit sharing and savings plan (the “401(k) Plan”) that covers substantially all employees who
are at least 21 years of age and have completed one year of service. The Company makes matching contributions equal to 100% of the
first 2% of each employee’s wages that are contributed and 25% of the next 4% of each employee’s wages that are contributed. An
employee generally must be employed on December 31 to receive that year’s Company matching contribution, with the matching
contribution funded annually at the beginning of the subsequent year following the year in which the matching contribution was earned.
The Company may also make additional discretionary profit sharing contributions to the plan on an annual basis as determined by the
Board of Directors. The Company did not make any discretionary contributions to the 401(k) Plan during the years ended
December 31, 2020, 2019 or 2018. The Company expensed matching contributions under the 401(k) Plan in the amounts of $31.0
million, $27.5 million and $24.8 million for the years ended December 31, 2020, 2019 and 2018, respectively, which were primarily
included in “Selling, general and administrative expenses” on the accompanying Consolidated Statements of Income.
66
FORM 10-K
Nonqualified deferred compensation plan:
The Company sponsors a nonqualified deferred compensation plan (the “Deferred Compensation Plan”) for highly compensated
employees whose contributions to the 401(k) Plan are limited due to the application of the annual limitations under the Internal Revenue
Code. The Deferred Compensation Plan provides these employees with the opportunity to defer the full 6% of matched compensation,
including salary and incentive based compensation, that was precluded under the Company’s 401(k) Plan, which is then matched by the
Company using the same formula as the 401(k) Plan. An employee generally must be employed on December 31 to receive that year’s
Company matching contribution, with the matching contribution funded annually at the beginning of the subsequent year following
the year in which the matching contribution was earned. In the event of bankruptcy, the assets of this plan are available to satisfy the
claims of general creditors. The Company has an unsecured obligation to pay, in the future, the value of the deferred compensation and
Company match, adjusted to reflect the performance, whether positive or negative, of selected investment measurement options chosen
by each participant during the deferral period. The liability for compensation deferred under the Deferred Compensation Plan was $40.4
million and $32.2 million as of December 31, 2020 and 2019, respectively, which were included in “Other liabilities” on the
Consolidated Balance Sheets. The Company expensed matching contributions under the Deferred Compensation Plan in the amounts
of $0.2 million, $0.2 million and $0.1 million for the years ended December 31, 2020, 2019 and 2018, respectively, which were primarily
included in “Selling, general and administrative expenses” on the accompanying Consolidated Statements of Income.
Stock appreciation rights:
The Company’s incentive plans provide for the granting of stock appreciation rights, which expire after 10 years and vest 25% per year,
over four years, and are settled in cash. There were 8,149 and 8,009 stock appreciation rights outstanding as of December 31, 2020 and
2019, respectively. During the year ended December 31, 2020, there were 1,011 stock appreciation rights granted. The liability for
compensation to be paid for the future redemption of stock appreciation rights was $0.3 million and less than $0.1 million as of
December 31, 2020 and 2019, respectively, which were included in “Other liabilities” on the Consolidated Balance Sheets. The
Company expensed compensation expense for stock appreciation rights in the amounts of $0.3 million and less than $1.0 million for the
years ended December 31, 2020 and 2019, respectively, which were included in “Selling, general and administrative expenses” on the
accompanying Consolidated Statements of Income.
NOTE 14 – COMMITMENTS
Construction commitments:
As of December 31, 2020, the Company had construction commitments in the amount of $38.3 million.
Letters of credit commitments:
As of December 31, 2020, the Company had outstanding letters of credit, primarily to satisfy workers’ compensation, general liability
and other insurance policies, in the amount of $66.4 million. See Note 8 for further information concerning the Company’s letters of
credit commitments.
Debt financing commitments:
Each series of senior notes is redeemable in whole, at any time, or in part, from time to time, at the Company’s option upon not less than
30 nor more than 60 days notice at a redemption price, plus any accrued and unpaid interest to, but not including, the redemption date,
equal to the greater of (i) 100% of the principal amount thereof or (ii) the sum of the present values of the remaining scheduled payments
of principal and interest thereon discounted to the redemption date on a semiannual basis at the applicable Treasury Yield plus basis
points identified in the indenture governing such series of senior notes; provided, that on or after the date that is three months prior to
the maturity date of the series of senior notes, such series of senior notes is redeemable at a redemption price equal to par plus accrued
and unpaid interest to, but not including, the redemption date. In addition, if at any time the Company undergoes a Change of Control
Triggering Event, as defined in the indenture governing such series of senior notes, the holders may require the Company to repurchase
all or a portion of their senior notes at a price equal to 101% of the principal amount of the notes being repurchased, plus accrued and
unpaid interest, if any, but not including the repurchase date. See Note 8 for further information concerning the Company’s debt
financing commitments.
Self-insurance reserves:
The Company uses a combination of insurance and self-insurance mechanisms to provide for potential liabilities for Team Member
health care benefits, workers’ compensation, vehicle liability, general liability and property loss. With the exception of certain Team
Member health care benefit liabilities, employment related claims and litigation, certain commercial litigation and certain regulatory
matters, the Company obtains third-party insurance coverage to limit its exposure to this obligation.
67
FORM 10-K
NOTE 15 – RELATED PARTIES
The Company leases certain land and buildings related to 71 of its O’Reilly Auto Parts stores and one surplus property under fifteen- or
twenty-year operating lease agreements with entities that include one or more of the Company’s affiliated directors or members of an
affiliated director’s immediate family. Generally, these lease agreements provide for renewal options for an additional five years at the
option of the Company and the lease agreements are periodically modified to further extend the lease term for specific stores under the
agreements. Lease payments under these operating leases totaled $4.7 million, $4.7 million and $4.6 million for the years ended
December 31, 2020, 2019 and 2018, respectively. The Company believes that the lease agreements with the affiliated entities are on
terms comparable to those obtainable from third parties. See Note 6 for further information concerning the Company’s operating leases.
NOTE 16 – INCOME TAXES
The following table identifies components of income from continuing operations before income taxes included in “Income before
income taxes” on the accompanying Consolidated Statements of Income for the years ended December 31, 2020, 2019 and 2018 (in
thousands):
Domestic
International
Income before income taxes
For the Year Ended
December 31,
2019
1,790,207 $
122
1,790,329 $
2020
2,260,385 $
6,020
2,266,405 $
$
$
2018
1,694,087
—
1,694,087
Provision for income taxes:
The following tables reconcile the amounts included in “Provision for income taxes” on the accompanying Consolidated Statements of
Income for the years ended December 31, 2020, 2019 and 2018 (in thousands):
Current:
Federal income tax expense
State income tax expense
International income tax expense
Total current
Deferred:
Federal income tax expense
State income tax (benefit) expense
International income tax benefit
Total deferred
For the Year Ended
December 31,
2019
2018
2020
$
401,331 $
97,085
3,306
501,722
315,061 $
62,795
273
378,129
289,953
59,487
—
349,440
16,749
(2,865)
(1,503)
12,381
19,367
2,027
(236)
21,158
16,309
3,851
—
20,160
Net income tax expense
$
514,103 $
399,287 $
369,600
The following table outlines the reconciliation of the “Provision for income taxes” amounts included on the accompanying Consolidated
Statements of Income to the amounts computed at the federal statutory rate for the years ended December 31, 2020, 2019 and 2018 (in
thousands):
Federal income taxes at statutory rate
State income taxes, net of federal tax benefit
Excess tax benefit from share-based compensation
Revaluation of deferred tax liability
Benefit from investment in renewable energy tax credits
Other items, net
Total provision for income taxes
$
$
68
For the Year Ended
December 31,
2019
375,942 $
2020
474,681 $
76,810
(16,918)
—
(17,904)
(2,566)
514,103 $
2018
355,758
56,345
(34,703)
(1,262)
(2,037)
(4,501)
369,600
54,739
(25,992)
—
(875)
(4,527)
399,287 $
FORM 10-K
The U.S. Tax Cuts and Jobs Act, enacted in December 2017 (the “Tax Act”), significantly reduced the federal corporate income tax rate
for tax years beginning in 2018 and required the Company to revalue its deferred income tax liabilities. During the year ended
December 31, 2018, the Company completed its evaluation of the impact of the Tax Act and recorded a one-time benefit of $1.3 million,
finalizing the revaluation of its deferred income tax liabilities due to the Tax Act, which was recorded in “Provision for income taxes”
on the accompanying Consolidated Statements of Income for the year ended December 31, 2018.
The Company has invested in tax credit equity investments for the purposes of receiving renewable energy tax credits. During the years
ended December 31, 2020, 2019 and 2018, the Company recognized investment tax credits in the amount of $170.5 million, $8.5 million
and $19.4 million, respectively, all of which were realized through reductions in cash income taxes paid and were reflected as a
component of the change in Income taxes payable on the accompanying Consolidated Statements of Cash Flows for the respective years.
See Note 1 for further information concerning the Company’s investment in tax credit funds.
Deferred income tax assets and liabilities:
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes, and also include the tax effect of carryforwards.
The following table identifies significant components of the Company’s net deferred tax liabilities included in “Deferred income taxes”
on the accompanying Consolidated Balance Sheets as of December 31, 2020 and 2019 (in thousands):
Deferred tax assets:
Allowance for doubtful accounts
Tax credits
Other accruals
Operating lease liability
Other
Total deferred tax assets
Deferred tax liabilities:
Inventories
Property and equipment
Operating lease asset
Other
Total deferred tax liabilities
Net deferred tax liabilities
$
December 31,
2020
2019
$
1,574
1,444
143,387
513,134
16,594
676,133
79,326
194,000
498,042
60,664
832,032
2,008
3,417
97,189
494,093
15,732
612,439
65,346
162,613
479,821
37,939
745,719
$
(155,899)
$
(133,280)
As of December 31, 2020, the Company had tax credit carryforwards available for state tax purposes, net of federal impact, in the
amount of $1.4 million, which generally expire in 2024.
Unrecognized tax benefits:
The following table summarizes the changes in the gross amount of unrecognized tax benefits, excluding interest and penalties, for
the years ended December 31, 2020, 2019 and 2018 (in thousands):
Unrealized tax benefit, balance at January 1,
Additions based on tax positions related to the current year
Additions based on tax positions related to prior years
Payments related to items settled with taxing authorities
Reductions due to the lapse of statute of limitations and settlements
Unrealized tax benefit, balance at December 31,
2020
31,475 $
4,795
—
—
(5,303)
30,967 $
2019
33,766 $
4,627
—
(443)
(6,475)
31,475 $
2018
35,388
3,550
4,255
(2,792)
(6,635)
33,766
$
$
For the years ended December 31, 2020, 2019 and 2018, the Company recorded a reserve for unrecognized tax benefits, including
interest and penalties, in the amounts of $35.9 million, $36.6 million and $38.9 million, respectively. All of the unrecognized tax
benefits recorded as of December 31, 2020, 2019 and 2018, respectively, would affect the Company’s effective tax rate if recognized,
generally net of the federal tax effect of approximately $7.5 million. The Company recognizes interest and penalties related to uncertain
69
FORM 10-K
tax positions in income tax expense. As of December 31, 2020, 2019 and 2018, the Company had accrued approximately $5.0 million,
$5.1 million and $5.1 million, respectively, of interest and penalties related to uncertain tax positions before the benefit of the deduction
for interest on state and federal returns. During the years ended December 31, 2020, 2019 and 2018, the Company recorded tax expense
related to an increase in its liability for interest and penalties in the amounts of $2.2 million, $2.7 million and $2.3 million, respectively.
Although unrecognized tax benefits for individual tax positions may increase or decrease during 2021, the Company expects a reduction
of $6.0 million of unrecognized tax benefits during the one-year period subsequent to December 31, 2020, resulting from settlement or
expiration of the statute of limitations.
The Company’s United States federal income tax returns for tax years 2017 and beyond remain subject to examination by the Internal
Revenue Service (“IRS”). The IRS concluded an examination of the O’Reilly consolidated 2014, 2015 and 2016 federal income tax
returns in the third quarter of 2018. The Company’s state income tax returns remain subject to examination by various state authorities
for tax years ranging from 2009 through 2019.
NOTE 17 – EARNINGS PER SHARE
The following table illustrates the computation of basic and diluted earnings per share for the years ended December 31, 2020, 2019 and
2018 (in thousands, except per share data):
Numerator (basic and diluted):
Net income
Denominator:
For the Year Ended
December 31,
2019
2018
2020
$
1,752,302
$
1,391,042
$
1,324,487
Weighted-average common shares outstanding – basic
Effect of stock options (1)
Weighted-average common shares outstanding – assuming dilution
73,817
645
74,462
76,985
803
77,788
81,406
874
82,280
Earnings per share:
Earnings per share-basic
Earnings per share-assuming dilution
Antidilutive potential common shares not included in the calculation of
diluted earnings per share:
Stock options (1)
Weighted-average exercise price per share of antidilutive stock options (1)
$
$
$
23.74
23.53
$
$
18.07
17.88
$
$
16.27
16.10
291
393.42
$
229
368.11
$
567
268.55
(1) See Note 13 for further information concerning the terms of the Company’s share-based compensation plans.
Subsequent to the end of the year and through February 26, 2021, the Company repurchased 1.1 million shares of its common stock, at
an average price of $447.49, for a total investment of $478.4 million.
NOTE 18 – QUARTERLY RESULTS (Unaudited)
The following tables set forth certain quarterly unaudited operating data for the fiscal years ended December 31, 2020 and 2019. The
unaudited quarterly information includes all adjustments, which the Company considers necessary for a fair presentation of the
information shown (in thousands, except per share data):
Fiscal 2020
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
Sales
Gross profit
Operating income
Net income
Earnings per share – basic (1)
Earnings per share – assuming dilution (1)
1,295,906
423,561
300,438
$ 2,476,487 $ 3,091,595 $ 3,207,638 $ 2,828,773
1,472,138
534,272
392,945
5.45
5.40
1,637,180
736,490
531,667
1,680,468
725,013
527,252
4.00 $
3.97 $
7.13 $
7.07 $
7.16 $
7.10 $
$
$
70
FORM 10-K
Sales
Gross profit
Operating income
Net income
Earnings per share – basic (1)
Earnings per share – assuming dilution (1)
Fiscal 2019
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
1,279,290
444,786
321,152
$ 2,410,608 $ 2,589,874 $ 2,666,528 $ 2,482,975
1,324,584
441,503
324,916
4.29
4.25
1,368,287
498,074
353,681
1,422,530
536,363
391,293
4.09 $
4.05 $
5.14 $
5.08 $
4.56 $
4.51 $
$
$
(1) Earnings per share amounts are computed independently for each quarter and annual period. The quarterly earnings per share amounts may not
sum to equal the full-year earnings per share amount.
The unaudited operating data presented above should be read in conjunction with the Company’s consolidated financial statements and
related notes and the other financial information included therein.
71
FORM 10-K
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
As of the end of the period covered by this report, the Company’s management, under the supervision and with the participation of its
Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of the Company’s disclosure
controls and procedures pursuant to Rule 13a-15(b) and as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”). Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that
the Company’s disclosure controls and procedures as of the end of the period covered by this report are functioning effectively to provide
reasonable assurance that the information required to be disclosed by the Company, including its consolidated subsidiaries, in reports
filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and
Exchange Commission’s rules and forms and is accumulated and communicated to management, including the Company’s Chief
Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
CHANGES IN INTERNAL CONTROLS
There were no changes in the Company’s internal control over financial reporting during the fiscal quarter ended December 31, 2020,
that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
INTERNAL CONTROL OVER FINANCIAL REPORTING
The management of the Company, under the supervision and with the participation of the Company’s principal executive officer and
principal financial officer and effected by the Company’s Board of Directors, is responsible for establishing and maintaining adequate
internal control over financial reporting as defined in Rule 13(a)-15(f) or 15(d)-15(f) under the Exchange Act. The Company’s internal
control system is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with accounting principles generally accepted in the United States.
Internal control over financial reporting includes all policies and procedures that
•
•
•
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the
assets of the Company;
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with accounting principles generally accepted in the United States of America, and that receipts and expenditures of the Company
are being made only in accordance with authorizations of management and directors of the Company; and
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the
Company’s assets that could have a material effect on the financial statements.
Management recognizes that all internal control systems, no matter how well designed, have inherent limitations. Therefore, even those
systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and
presentation. Also, projections of any evaluation of effectiveness to future periods are subject to risk. Over time, controls may become
inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.
Under the supervision and with the participation of the Company’s principal executive officer and principal financial officer,
management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2020. In making
this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in
Internal Control – Integrated Framework (2013 framework). Based on this assessment, management believes that as of
December 31, 2020, the Company’s internal control over financial reporting was effective based on those criteria.
Ernst & Young LLP, Independent Registered Public Accounting Firm, has audited the Company’s consolidated financial statements
and has issued an attestation report on the effectiveness of the Company’s internal control over financial reporting, which is included in
Item 8 of this annual report on Form 10-K.
72
FORM 10-K
Item 9B. Other Information
Not Applicable.
73
FORM 10-K
Item 10. Directors, Executive Officers and Corporate Governance
PART III
Certain information required by Part III is incorporated by reference from the Company’s Proxy Statement on Schedule 14A for the
2021 Annual Meeting of Shareholders (“Proxy Statement”), which will be filed with the Securities and Exchange Commission (the
“SEC”) within 120 days of the end of the Company’s most recent fiscal year. Except for those portions specifically incorporated in this
Annual Report on Form 10-K by reference to the Company’s Proxy Statement, no other portions of the Proxy Statement are deemed to
be filed as part of this Annual Report on Form 10-K.
Directors and Officers:
The information regarding the directors of the Company will be included in the Company’s Proxy Statement under the caption “Proposal
1 - Election of Directors” and “Information Concerning the Board of Directors” and is incorporated herein by reference. The Proxy
Statement will be filed with the SEC within 120 days of the end of the Company’s most recent fiscal year. The information regarding
executive officers called for by Item 401 of Regulation S-K is included in Part I, in accordance with General Instruction G(3) to
Form 10-K, for the Company’s executive officers who are not also directors.
Section 16(a) of the Securities Exchange Act of 1934, as amended:
The information regarding compliance with Section 16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”),
required by Item 405 of Regulation S-K, will be included in the Company’s Proxy Statement under the caption “Delinquent Section
16(a) Reports,” if applicable, and is incorporated herein by reference.
Code of Ethics:
The Company’s Board of Directors has adopted a code of ethics that applies to all of its directors, officers (including its chief executive
officer, chief operating officer, chief financial officer, chief accounting officer, controller and any person performing similar functions)
and Team Members. The Company’s Code of Ethics is available on its website at www.OReillyAuto.com, under the “Corporate Home”
caption. The information on the Company’s website is not a part of this Annual Report on Form 10-K and is not incorporated by
reference in this report or any of the Company’s other filings with the SEC.
Corporate Governance:
The Corporate Governance/Nominating Committee of the Board of Directors does not have a written policy on the consideration of
Director candidates recommended by shareholders. It is the view of the Board of Directors that all candidates, whether recommended
by a shareholder or the Corporate Governance/Nominating Committee, shall be evaluated based on the same established criteria for
persons to be nominated for election to the Board of Directors and its committees.
The Board of Directors has established an Audit Committee pursuant to Section 3(a)(58)(A) of the Exchange Act. The Audit Committee
currently consists of Jay D. Burchfield, Thomas T. Hendrickson, John R. Murphy, Dana M. Perlman, Maria A. Sastre and Andrea M.
Weiss, each an independent director in accordance with The Nasdaq Stock Market Marketplace Rule 5605(a)(2), the standards of
Rule 10A-3 of the Exchange Act and the requirements of The Nasdaq Stock Market Marketplace Rule 5605(c)(2). In addition, our
Board of Directors has determined that Mr. Hendrickson, Chairperson of the Audit Committee, qualifies as an audit committee financial
expert under Item 407(d)(5) of Regulation S-K.
Item 11. Executive Compensation
Director and Officer Compensation:
The information required by Item 402 of Regulation S-K will be included in the Company’s Proxy Statement under the captions
“Compensation of Executive Officers” and “Compensation of Directors” and is incorporated herein by reference.
Compensation Committee:
The information required by Item 407(e)(4) and (e)(5) of Regulation S-K will be included in the Company’s Proxy Statement under the
captions “Compensation Committee Interlocks and Insider Participation” and “Compensation Committee Report” and is incorporated
herein by reference.
74
FORM 10-K
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by Item 201(d) of Regulation S-K will be included in the Company’s Proxy Statement under the caption
“Equity Compensation Plans” and is incorporated herein by reference.
The information required by Item 403 of Regulation S-K will be included in the Company’s Proxy Statement under the captions
“Security Ownership of Certain Beneficial Owners” and “Security Ownership of Directors and Management” and is incorporated herein
by reference.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by Item 404 of Regulation S-K will be included in the Company’s Proxy Statement under the caption “Certain
Relationships and Related Transactions” and is incorporated herein by reference.
The information required by Item 407(a) of Regulation S-K will be included in the Company’s Proxy Statement under the caption
“Director Independence” and is incorporated herein by reference.
Item 14. Principal Accountant Fees and Services
The information required by Item 9(e) of Schedule 14A will be included in the Company’s Proxy Statement under the caption “Fees
Paid to Independent Registered Public Accounting Firm” and is incorporated herein by reference.
75
FORM 10-K
PART IV
Item 15. Exhibits and Financial Statement Schedules
(a) The following documents are filed as part of this Annual Report on Form 10-K:
1. Financial Statements - O’Reilly Automotive, Inc. and Subsidiaries
The following consolidated financial statements of O’Reilly Automotive, Inc. and Subsidiaries included in the Annual
Shareholders’ Report of the registrant for the year ended December 31, 2020, are filed with this Annual Report in Part II,
Item 8:
Management’s Report on Internal Control over Financial Reporting
Report of Independent Registered Public Accounting Firm – Internal Control over Financial Reporting
Report of Independent Registered Public Accounting Firm – Financial Statements
Consolidated Balance Sheets as of December 31, 2020 and 2019
Consolidated Statements of Income for the years ended December 31, 2020, 2019 and 2018
Consolidated Statements of Comprehensive Income for the years ended December 31, 2020, 2019 and 2018
Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2020, 2019 and 2018
Consolidated Statements of Cash Flows for the years ended December 31, 2020, 2019 and 2018
Notes to Consolidated Financial Statements for the years ended December 31, 2020, 2019 and 2018
2. Financial Statement Schedules - O’Reilly Automotive, Inc. and Subsidiaries
Any schedules, for which provision is made in the applicable accounting regulations of the Securities and Exchange
Commission, are not required under the related instructions or are inapplicable, and therefore have been omitted.
3. Exhibits
Exhibit No.
Description
3.1
Second Amended and Restated Articles of Incorporation of the Registrant, filed as Exhibit 3.1 to the Registrant’s
Current Report on Form 8-K dated May 19, 2020, is incorporated herein by this reference.
3.2
Fourth Amended and Restated Bylaws of the Registrant, filed as Exhibit 3.3 to the Registrant’s Current Report
on Form 8-K dated May 19, 2020, is incorporated herein by this reference.
4.1
Form of Stock Certificate for Common Stock, filed as Exhibit 4.1 to the Registration Statement of the Registrant
on Form S-1, File No. 33-58948, is incorporated herein by this reference.
4.2
4.3
4.4
4.5
4.6
4.7
Indenture, dated as of January 14, 2011, by and among O’Reilly Automotive, Inc., the subsidiaries party thereto
as guarantors, and UMB Bank, N.A., as Trustee, filed as Exhibit 4.1 to the Registrant’s Current Report on
Form 8-K dated January 14, 2011, is incorporated herein by this reference.
Form of 4.875% Note due 2021, included in Exhibit 4.1 to the Registrant’s Current Report on Form 8-K dated
January 14, 2011, is incorporated herein by this reference.
Indenture, dated as of September 19, 2011, by and among O’Reilly Automotive, Inc., the subsidiaries party
thereto as guarantors, and UMB Bank, N.A., as Trustee, filed as Exhibit 4.1 to the Registrant’s Current Report
on Form 8-K dated September 19, 2011, is incorporated herein by this reference.
Form of 4.625% Note due 2021, included in Exhibit 4.1 to the Registrant’s Current Report on Form 8-K dated
September 19, 2011, is incorporated herein by this reference.
Indenture, dated as of August 21, 2012, by and among O’Reilly Automotive, Inc., the subsidiaries party thereto
as guarantors, and UMB Bank, N.A., as Trustee, filed as Exhibit 4.1 to the Registrant’s Current Report on
Form 8-K dated August 21, 2012, is incorporated herein by this reference.
Form of 3.800% Note due 2022, included in Exhibit 4.1 to the Registrant’s Current Report on Form 8-K dated
August 21, 2012, is incorporated herein by this reference.
76
FORM 10-K
Exhibit No.
Description
4.8
4.9
4.10
4.11
4.12
4.13
4.14
4.15
4.16
4.17
4.18
4.19
4.20
4.21
4.22
4.23
4.24
Indenture, dated as of June 20, 2013, by and among O’Reilly Automotive, Inc., the subsidiaries party thereto as
guarantors, and UMB Bank, N.A., as Trustee, filed as Exhibit 4.1 to the Registrant’s Current Report on
Form 8-K dated June 20, 2013, is incorporated herein by this reference.
Form of 3.850% Note due 2023, included in Exhibit 4.1 to the Registrant’s Current Report on Form 8-K dated
June 20, 2013, is incorporated herein by this reference.
Indenture, dated as of March 8, 2016, by and among O’Reilly Automotive, Inc., the subsidiaries party thereto
as guarantors, and UMB Bank, N.A., as Trustee, filed as Exhibit 4.1 to the Registrant’s Current Report on
Form 8-K dated March 8, 2016, is incorporated herein by this reference.
Supplemental Indenture, dated as of March 8, 2016, by and among O’Reilly Automotive, Inc., the subsidiaries
party thereto as guarantors, and UMB Bank, N.A., as Trustee, filed as Exhibit 4.2 to the Registrant’s Current
Report on Form 8-K dated March 8, 2016, is incorporated herein by this reference.
Form of 3.550% Note due 2026, included in Exhibit 4.2 to the Registrant’s Current Report on Form 8-K dated
March 8, 2016, is incorporated herein by this reference.
Second Supplemental Indenture, dated as of August 17, 2017, by and between O’Reilly Automotive, Inc. and
UMB Bank N.A., as Trustee, filed as Exhibit 4.1 to the Registrant’s Current Report on Form 8-K dated
August 17, 2017, is incorporated herein by this reference.
Form of Note for 3.600% Senior Notes due 2027, included in Exhibit 4.1 to the Registrant’s Current Report on
Form 8-K dated August 17, 2017, is incorporated herein by this reference.
Third Supplemental Indenture, dated as of May 17, 2018, by and between O’Reilly Automotive, Inc. and UMB
Bank N.A., as Trustee, filed as Exhibit 4.1 to the Registrant’s Current Report on Form 8-K dated May 17, 2018,
is incorporated herein by this reference.
Form of Note for 4.350% Senior Notes due 2028, included in Exhibit 4.1 to the Registrant’s Current Report on
Form 8-K dated May 17, 2018, is incorporated herein by this reference.
Indenture, dated as of May 20, 2019, by and between O’Reilly Automotive, Inc. and U.S. Bank National
Association, as Trustee, filed as Exhibit 4.1 to the Registrant’s Current Report on Form 8-K dated May 20,
2019, is incorporated herein by this reference.
First Supplemental Indenture, dated as of May 20, 2019, by and between O’Reilly Automotive, Inc. and U.S.
Bank National Association, as Trustee, filed as Exhibit 4.2 to the Registrant’s Current Report on Form 8-K
dated May 20, 2019, is incorporated herein by this reference.
Form of Note for 3.900% Senior Notes due 2029, included in Exhibit 4.2 to the Registrant’s Current Report on
Form 8-K dated May 20, 2019, is incorporated herein by this reference.
Description of Capital Stock Exchange Act Section 12 Registered Securities of O’Reilly Automotive, Inc., filed
as Exhibit 4.20 to the Registrant’s Annual Shareholders’ Report on Form 10-K dated February 28, 2020, is
incorporated herein by this reference.
Second Supplemental Indenture, dated as of March 27, 2020, by and between O’Reilly Automotive, Inc. and
U.S. Bank National Association, as Trustee, filed as Exhibit 4.1 to the Registrant’s Current Report on Form 8-
K dated March 27, 2020, is incorporated herein by this reference.
Form of Note for 4.200% Senior Notes due 2030, included in Exhibit 4.1 to the Registrant’s Current Report on
Form 8-K dated March 27, 2020, is incorporated herein by this reference.
Third Supplemental Indenture, dated as of September 23, 2020, by and between O’Reilly Automotive, Inc. and
U.S. Bank National Association, as Trustee, filed as Exhibit 4.1 to the Registrant’s Current Report on Form 8-
K dated September 23, 2020, is incorporated herein by this reference.
Form of Note for 1.750% Senior Notes due 2031, included in Exhibit 4.1 to the Registrant’s Current Report on
Form 8-K dated September 23, 2020, is incorporated herein by this reference.
10.1 (a)
Form of Employment Agreement between the Registrant and David E. O’Reilly, filed as Exhibit 10.1 to the
Registration Statement of the Registrant on Form S-1, File No. 33-58948, is incorporated herein by this
reference.
77
FORM 10-K
Exhibit No.
Description
10.2 (a)
10.3 (a)
10.4 (a)
10.5 (a)
10.6 (a)
10.7 (a)
10.8 (a)
10.9 (a)
10.10 (a)
10.11 (a)
10.12 (a)
10.13 (a)
10.14 (a)
10.15 (a)
10.16 (a)
10.17 (a)
10.18 (a)
10.19
O’Reilly Automotive, Inc. Profit Sharing and Savings Plan, filed as Exhibit 4.1 to the Registration Statement of
the Registrant on Form S-8, File No. 33-73892, is incorporated herein by this reference.
O’Reilly Automotive, Inc. Performance Incentive Plan, filed as Exhibit 10.18 to the Registrant’s Annual
Shareholders’ Report on Form 10-K dated March 31, 1997, is incorporated herein by this reference.
Form of Retirement Agreement between the Registrant and David E. O’Reilly, filed as Exhibit 10.4 to the
Registrant’s Annual Shareholders’ Report on Form 10-K dated March 31, 1998, is incorporated herein by this
reference.
O’Reilly Automotive, Inc. Deferred Compensation Plan, filed as Exhibit 10.23 to the Registrant’s Quarterly
Report on Form 10-Q dated May 15, 1998, is incorporated herein by this reference.
First Amendment to Retirement Agreement, dated February 7, 2001, filed as Exhibit 10.26 to the Registrant’s
Annual Shareholders’ Report on Form 10-K dated March 29, 2002, is incorporated herein by this reference.
O’Reilly Automotive, Inc. 2009 Stock Purchase Plan, filed as Annex A to the Registrant’s Proxy Statement for
2009 Annual Meeting of Shareholders on Schedule 14A dated March 20, 2009, is incorporated herein by this
reference.
O’Reilly Automotive, Inc. 2009 Incentive Plan, filed as Annex B to the Registrant’s Proxy Statement for 2009
Annual Meeting of Shareholders on Schedule 14A dated March 20, 2009, is incorporated herein by this
reference.
O’Reilly Automotive, Inc. 2009 Incentive Plan, Form of Stock Option Agreement, dated as of December 31,
2009, filed as Exhibit 10.47 to the Registrant’s Annual Shareholders’ Report on Form 10-K dated February 26,
2010, is incorporated herein by this reference.
O’Reilly Automotive, Inc. 2012 Incentive Award Plan, filed as Annex A to the Registrant’s Proxy Statement
for 2012 Annual Meeting of Shareholders on Schedule 14A dated March 23, 2012, is incorporated herein by
this reference.
O’Reilly Automotive, Inc. 2012 Incentive Award Plan, Form of Stock Option Grant Notice and Agreement,
filed as Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q dated August 8, 2012, is incorporated
herein by this reference.
Form of O’Reilly Automotive, Inc. Director Indemnification Agreement, filed as Exhibit 10.1 to the
Registrant’s Current Report on Form 8-K dated August 19, 2013, is incorporated herein by this reference.
Second Form of O’Reilly Automotive, Inc. Director Indemnification Agreement, filed as Exhibit 10.1 to the
Registrant’s Quarterly Report on Form 10-Q dated August 7, 2020, is incorporated herein by this reference.
Form of O’Reilly Automotive, Inc. Executive Officer Indemnification Agreement, filed as Exhibit 10.2 to the
Registrant’s Current Report on Form 8-K dated August 19, 2013, is incorporated herein by this reference.
Second Form of O’Reilly Automotive, Inc. Executive Officer Indemnification Agreement, filed as Exhibit 10.2
to the Registrant’s Quarterly Report on Form 10-Q dated August 7, 2020, is incorporated herein by this
reference.
Form of O’Reilly Automotive, Inc. Executive Incentive Compensation Clawback Policy Acknowledgment,
between O’Reilly Automotive, Inc. and certain O’Reilly Automotive, Inc. Executive Officers, filed as
Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated February 4, 2015, is incorporated herein by
this reference.
Form of Change in Control Severance Agreement between O’Reilly and certain O’Reilly Executive Officers,
filed as Exhibit 10.2 to the Registrant’s Current Report on Form 8-K dated February 4, 2015, is incorporated
herein by this reference.
O’Reilly Automotive, Inc. 2017 Incentive Award Plan, filed as Annex A to the Registrant’s Proxy Statement
for 2017 Annual Meeting of Shareholders on Schedule 14A dated March 24, 2017, is incorporated herein by
this reference.
Credit Agreement, dated as of April 5, 2017, among O’Reilly Automotive, Inc., as Borrower, JPMorgan Chase
Bank, N.A., as Administrative Agent, Swing Line Lender, Letter of Credit Issuer and a Lender, and other lenders
party thereto, filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated April 11, 2017, is
incorporated herein by this reference.
78
FORM 10-K
Exhibit No.
Description
10.20 (a)
10.21 (a)
10.22 (a)
O’Reilly Automotive, Inc. 2017 Incentive Award Plan, Form of Stock Option Grant Notice and Agreement,
dated as of July 10, 2017, filed as Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q dated
August 7, 2017, is incorporated herein by this reference.
O’Reilly Automotive, Inc. 2017 Incentive Award Plan, Second Form of Stock Option Agreement, dated as of
August 6, 2020, filed as Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q dated August 7, 2020,
is incorporated herein by this reference.
O’Reilly Automotive, Inc. 2017 Incentive Award Plan, Form of Director Restricted Stock Agreement, filed as
Exhibit 10.19 to the Registrant’s Annual Shareholders’ Report on Form 10-K dated February 28, 2020, is
incorporated herein by this reference.
10.23 (a)
O’Reilly Automotive, Inc. Deferred Compensation Plan, as amended and restated effective as of January 1,
2021, filed herewith.
21.1
23.1
31.1
31.2
32.1 *
32.2 *
Subsidiaries of the Registrant, filed herewith.
Consent of Ernst & Young LLP, independent registered public accounting firm, filed herewith.
Certificate of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed
herewith.
Certificate of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed
herewith.
Certificate of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, furnished herewith.
Certificate of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002, furnished herewith.
101.INS
iXBRL Instance Document – the instance document does not appear in the Interactive Data File because its
XBRL tags are embedded within the Inline XBRL document.
101.SCH
101.CAL
101.DEF
101.LAB
101.PRE
104
iXBRL Taxonomy Extension Schema.
iXBRL Taxonomy Extension Calculation Linkbase.
iXBRL Taxonomy Extension Definition Linkbase.
iXBRL Taxonomy Extension Label Linkbase.
iXBRL Taxonomy Extension Presentation Linkbase.
Cover Page Interactive Data File, formatted as Inline XBRL, contained in Exhibit 101 attachments.
(a)
*
Management contract or compensatory plan or arrangement.
Furnished (and not filed) herewith pursuant to Item 601 (b)(32)(ii) of Regulation S-K.
Item 16. Form 10-K Summary
Not applicable.
79
FORM 10-K
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
O’REILLY AUTOMOTIVE, INC.
(Registrant)
Date: February 26, 2021
By:
/s/ Gregory D. Johnson
Gregory D. Johnson
Chief Executive Officer and
Co-President
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following
persons on behalf of the registrant in the capacities and on the dates indicated.
Date: February 26, 2021
/s/ David O’Reilly
David O’Reilly
Director and Chairman of the Board
/s/ Greg Henslee
Greg Henslee
Executive Vice Chairman of the Board
/s/ Thomas T. Hendrickson
Thomas T. Hendrickson
Director
/s/ Dana M. Perlman
Dana M. Perlman
Director
/s/ Andrea M. Weiss
Andrea M. Weiss
Director
/s/ Gregory D. Johnson
Gregory D. Johnson
Chief Executive Officer and
Co-President
(Principal Executive Officer)
/s/ Larry O’Reilly
Larry O’Reilly
Director and Vice Chairman of the Board
/s/ Jay D. Burchfield
Jay D. Burchfield
Director
/s/ John R. Murphy
John R. Murphy
Director
/s/ Maria A. Sastre
Maria A. Sastre
Director
/s/ Thomas McFall
Thomas McFall
Executive Vice President and
Chief Financial Officer
(Principal Financial and Accounting Officer)
80
FORM 10-K
Exhibit 10.23 – Deferred Compensation Plan
O’REILLY AUTOMOTIVE, INC.
DEFERRED COMPENSATION PLAN
As Amended and Restated Effective as of January 1, 2021
FORM 10-K O’REILLY AUTOMOTIVE, INC.
DEFERRED COMPENSATION PLAN
Table of Contents
Page
ARTICLE 1 PURPOSE, DEFINITIONS AND CONSTRUCTION ........................................................................ E-1
1.1
1.2
1.3
Purpose of the Plan ....................................................................................................................... E-1
Definitions..................................................................................................................................... E-1
Construction .................................................................................................................................. E-2
ARTICLE 2 ELIGIBILITY ...................................................................................................................................... E-2
2.1
2.2
2.3
Initial Eligibility Requirements ..................................................................................................... E-2
Loss of Eligible Employee Status ................................................................................................. E-2
Termination of Participation ......................................................................................................... E-3
ARTICLE 3 DEFERRAL ELECTIONS .................................................................................................................. E-3
3.1
3.2
3.3
3.4
Deferral Elections ......................................................................................................................... E-3
Deferral Election Timing .............................................................................................................. E-4
Deemed Deferral Elections ........................................................................................................... E-4
Cancellation of Deferral Elections ................................................................................................ E-4
ARTICLE 4 CONTRIBUTIONS TO THE PLAN ................................................................................................... E-4
4.1
4.2
Participant Contributions .............................................................................................................. E-4
Employer Matching Contributions ................................................................................................ E-4
ARTICLE 5 ALLOCATION AND INVESTMENT ................................................................................................ E-5
5.1
5.2
5.3
5.4
Establishment of Account ............................................................................................................. E-5
Allocation ...................................................................................................................................... E-5
Establishment of Trust .................................................................................................................. E-5
Allocation of Investment Earnings and Losses ............................................................................. E-5
ARTICLE 6 PAYMENT OF ACCOUNT ................................................................................................................ E-6
6.1
6.2
6.3
6.4
Vesting of Account ....................................................................................................................... E-6
Forfeiture of Unvested Account Balances..................................................................................... E-7
Timing of Payment........................................................................................................................ E-7
Form of Payment ........................................................................................................................... E-8
ARTICLE 7 MISCELLANEOUS ............................................................................................................................ E-9
7.1
7.2
7.3
7.4
7.5
Administration of the Plan ............................................................................................................ E-9
Benefit Claims .............................................................................................................................. E-9
Designation of a Beneficiary ....................................................................................................... E-10
Amendment of the Plan ............................................................................................................... E-10
Termination of the Plan ............................................................................................................... E-10
FORM 10-K
7.6
7.7
7.8
7.9
7.10
7.11
Notices ........................................................................................................................................ E-10
Non-Alienation ........................................................................................................................... E-11
Payments to Incompetents .......................................................................................................... E-11
Severability ................................................................................................................................. E-11
Governing Law ........................................................................................................................... E-11
Taxes ........................................................................................................................................... E-11
7.12 Waiver ......................................................................................................................................... E-11
7.13
7.14
No Right to Employment ............................................................................................................ E-11
Compliance With Code Section 409A ........................................................................................ E-11
FORM 10-K
ARTICLE 1
PURPOSE, DEFINITIONS AND CONSTRUCTION
1.1
Purpose of the Plan
The Plan was established by the Company effective as of January 1, 1997 to permit certain select management employees to
defer payment of a portion of their compensation and to accumulate Employer matching contributions on a deferred basis. The Plan is
not intended to, and does not, qualify under sections 401(a) and 501(a) of the Internal Revenue Code, and is designed and intended to
be a plan described in section 201(2) of ERISA. The Plan is amended and restated as set forth herein effective as of the Effective Date
or as otherwise specified herein.
1.2
Definitions
The following terms, when found in the Plan, shall have the meanings set forth below:
(a)
Account: The account established for a Participant pursuant to Section 5.1.
(b)
Base Compensation: A Participant’s base salary from the Employer, including amounts deferred under this Plan and
any other Employer plan or program providing for elective deferrals from base salary (such as the Employer’s cafeteria plan or 401(k)
plan).
(c)
Beneficiary: The person or persons designated (or deemed designated) by a Participant under Section 7.3 to receive
any benefits payable hereunder after the death of the Participant.
(d)
(e)
Bonus: The cash bonus payable to a Participant under the applicable Bonus Plan.
Bonus Plan: The cash component of the Executive Officer Bonus Plan(s) (or any successor plan(s) thereto) for
Participants eligible to participate therein or the cash component of the Performance Incentive Plan (or any successor plan thereto) for
Participants eligible to participate therein.
(f)
Code: The Internal Revenue Code of 1986, as it may be amended from time to time, including any successor and
including applicable Treasury regulations.
(g)
(h)
Committee: The Plan Investment Committee of the Company.
Company: O’Reilly Automotive, Inc. and any successor thereto that assumes sponsorship of the Plan.
(i)
pursuant to Section 6.2.
Date Certain: The certain day of any month in any year specified by a Participant in a Deferral Election made
(j)
(k)
(l)
Deferral Election: An election described in Section 3.1.
Determination Date: The last Valuation Date reasonably preceding the payment date.
Disabled or Disability: A Participant’s “disability” as defined by Treasury regulation section 1.409A-3(i)(4),
including a deemed disability as defined by Treasury regulation section 1.409A-3(i)(4)(iii).
(m)
Effective Date: January 1, 2021.
(n)
Eligible Employee: An employee of the Employer who has been designated by the most senior human resources
officer of the Company, by name, position, or in any other specifically identifiable manner, as being in the class of persons who are
eligible to participate in the Plan. No person shall be selected as an Eligible Employee except a common law employee of the
Employer whose taxable year is the Plan Year and who is a member of a “select group of management or highly compensated
employees” of the Employer within the meaning of Sections 201(2), 301(a)(3) and 401(a)(1) of ERISA.
(o)
Employer: The Company and each wholly owned subsidiary of the Company. For purposes of Section 1.2(w), the
term “Employer” includes all persons with whom such Employer would be considered a single employer under Code sections 414(b)
and/or 414(c) except determined by using the default 50% ownership threshold specified in Treasury regulation 1 409A-1(h)(3).
E-1
FORM 10-K
(p)
ERISA: The Employee Retirement Income Security Act of 1974, as it may be amended from time to time, including
any successor.
(q)
Level One Participant: Any Participant who is prohibited by the terms of the Employer’s 401(k) plan from making
elective contributions to such 401(k) plan. Status as a Level One Participant depends solely on the maximum permissible elective
contribution under the Employer’s 401(k) plan and not on whether the Participant actually elects to make or not make contributions to
such plan.
(r)
(s)
(t)
Level Two Participant: A Participant who is not a Level One Participant.
Level Three Participant: [Reserved.]
Participant: An Eligible Employee who has met the requirements of Section 2.1 hereof, and whose participation has
not been terminated in accordance with Section 2.3
(u)
Plan: The O’Reilly Automotive, Inc. Deferred Compensation Plan, as set forth herein, and as it may be amended
from time to time.
(v)
Plan Year: The twelve-month period beginning each January 1 and ending the immediately following December 31.
(w)
Separates from Service or Separation from Service: A Participant’s “separation from service” with the Employer
within the meaning of Code section 409A(a)(2)(A)(i) and Treasury regulation 1.409A-1(h). To the extent permitted by Treasury
regulation section 1.409A-1(h)(5), a Participant may be considered to have such a separation from service even if he continues to
provide services as an independent contractor or non-employee director of the Employer.
(x)
Valuation Date: Each date as of which the Plan is valued and gains or losses allocated, which shall be each date on
which NASDAQ (or any successor exchange) is open for business.
(y)
Year of Service: Shall have the same meaning as a “Year of Service for Vesting purposes” under the terms of the
O’Reilly Automotive, Inc. Profit Sharing and Savings Plan.
1.3
Construction
The masculine gender, where appearing in the Plan, shall be deemed to include the feminine gender, and the singular may
indicate the plural, unless the context clearly indicates the contrary. The words “hereof,” “herein,” “hereunder,” and other similar
compounds of the word “here” shall, unless otherwise specifically stated, mean and refer to the entire Plan, not to any particular
provision or Section. The word “including” and words of similar import when used in this Plan shall mean “including, without
limitation,” unless the context otherwise requires or unless otherwise specified. Article and Section headings are included for
convenience of reference and are not intended to add to, or subtract from, the terms of the Plan.
ARTICLE 2
ELIGIBILITY
2.1
Initial Eligibility Requirements
(a)
Each Eligible Employee who was a Participant in the Plan immediately prior to the Effective Date shall continue as
a Participant until the date participation terminates in accordance with Section 2.3.
(b)
Each individual who becomes an Eligible Employee on or after the Effective Date shall become a Participant
hereunder upon making a Deferral Election in accordance with Section 3.2.
2.2
Loss of Eligible Employee Status
If a Participant is demoted, such that he remains an employee of the Employer but is no longer an Eligible Employee, he shall
not be eligible to receive additional contributions under Section 4.2, but except as specifically provided in Section 3.4, such demotion
shall not result in the cancellation of a Deferral Election under Section 4.1 prior to the end of the Plan Year in which the demotion
occurs. No payment of Plan benefits shall be permitted solely as a result of a loss of Eligible Employee status, and payment to such an
employee shall occur only as otherwise specified herein.
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2.3
Termination of Participation
An individual who was a Participant shall cease to be a Participant when the individual is no longer an Eligible Employee
and has ceased to have an Account balance under the Plan due to payment of all Plan benefits.
ARTICLE 3
DEFERRAL ELECTIONS
3.1
Deferral Elections
(a)
A Deferral Election is an election (or deemed election) by a Participant to defer Base Compensation and/or Bonus
under Section 4.1, to select a time of payment (including postponement of payment) under Section 6.2, and/or to select a form of
payment under Section 6.4. A Deferral Election shall be made on a form and in a manner approved by the Committee.
(i)
Committee.
A Deferral Election must be in writing, which may include an electronic format approved by the
(ii)
A Participant’s Deferral Election shall be independent of any elections made by the Participant under the
Employer’s 401(k) plan.
(iii)
A Deferral Election shall not be effective unless made by the close of business on the latest date specified
for such election. A Deferral Election is considered made on the date the completed and valid election is received by the
Committee.
(iv)
A Deferral Election under Section 3.2 shall become irrevocable for the Plan Year to which it applies as of
December 31 of the prior Plan Year. A Deferral Election that is made prior to such December 31 may be revoked or changed
prior to becoming irrevocable by making a new Deferral Election on or before such December 31. A Deferral Election may
not be changed or cancelled during the Plan Year to which it relates except as specified in Section 3.4.
(b)
A Deferral Election under Section 4.1 shall apply only to Base Compensation and Bonus, as applicable, paid after
the effective date of the election for services performed after the date the election is made. For this purpose, Base Compensation with
respect to the payroll period containing the last day of the immediately preceding Plan Year that is paid during the immediately
following Plan Year in accordance with the Employer’s normal payroll and compensation practices is considered Base Compensation
for services performed in such following Plan Year.
(c)
Except as provided in Sections 6.3(b) and 6.4(d) with respect to an election to defer a Date Certain or change the
form of payment, a Participant’s Deferral Election under Sections 6.2 and 6.4 shall apply only to contributions (and related earnings
and losses) made after the date the election is made, and shall not affect or change the time or form of payment for contributions (and
related earnings and losses) made prior to such election. A Participant may make up to five different Deferral Elections under
Sections 6.2 and 6.3 (including elections under Sections 6.3(b) and 6.4(d)). A Deferral Election is considered different from another
Deferral Election if it provides for a different time or form of payment (or both). For example, if a Participant
(i)
elects payment in a lump sum after Separation from Service with respect to 50% of his contributions made
for the first Plan Year of participation,
(ii)
elects payment in a lump sum on the Valuation Date coincident with or immediately following July 4, 2026
with respect to the other 50% of his contributions made for the first Plan Year of participation,
(iii)
elects payment in four annual installments upon attainment of age 50 with respect to all contributions made
for the second and third Plan Years of participation,
(iv)
elects payment in a lump sum after Separation from Service with respect to 33% of his contributions made
for all subsequent Plan Years of participation, and
(v)
elects payment in ten annual installments after Separation from Service with respect to the remaining 67%
of his contributions made for all subsequent Plan Years of Participation, the Participant will be considered to have made four
different Deferral Elections for purposes of the limitation on different Deferral Elections under this subsection (the first and
fourth deferral elections are the same, but the other three elections are different for a total of four). Payment or the possibility
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of payment under Section 6.3(c)/6.4(a), Section 6.3(d)/6.4(b), or Section 7.14(d) is not considered a different Deferral
Election for purposes of the limitation on different Deferral Elections under this subsection.
(d)
A Deferral Election under Section 6.3(b) or Section 6.4(d) must be made at least twelve months before the date on
which or the beginning of the period during which payment would otherwise commence, shall be irrevocable as of the date that is
twelve months before such date, and shall not be effective until the first anniversary of the date the election is made.
(e)
A Deferral Election under Section 6.4(c) shall not apply to benefits payable to a Beneficiary after the death of a
Participant or to benefits payable to the Participant due to his Disability. Such benefits are payable solely in the form of a single lump
sum cash payment in accordance with Sections 6.4(a) and 6.4(b).
3.2
Deferral Election Timing
A newly Eligible Employee may participate effective as of the beginning of the Plan Year following the Plan Year in which
the employee is designated as an Eligible Employee. For those newly Eligible Employees and all other Eligible Employees and
Participants, a Deferral Election must be made in the month of December, but no later than December 31, to apply to the immediately
following Plan Year. A Deferral Election made after December 31 shall not apply to such immediately following Plan Year. A new
Deferral Election shall apply prospectively and, except as provided in Sections 6.3(b) and Section 6.4(d), shall not change the time of
payment or the form of payment elected or deemed elected for prior Deferral Elections under Sections 6.2 and 6.4.
3.3
Deemed Deferral Elections
(a)
Effective as of November 15, 2014, if a Participant who is an Eligible Employee does not make an affirmative
Deferral Election under Section 4.1 for a Plan Year, the Participant shall be deemed to have elected not to make any contributions for
such Plan Year.
(b)
Sections 6.3(a) and 6.4(c) specify the default time and form of payment if a Participant does not elect a time and
form of payment on his Deferral Election.
3.4
Cancellation of Deferral Elections
(a)
After a Deferral Election becomes irrevocable in accordance with Section 3.1, the election shall remain in effect
until the end of the Plan Year to which the election applies. If the Participant is no longer an Eligible Employee as of the last day of
such Plan Year, the Deferral Election shall be cancelled and shall not apply to a subsequent Plan Year notwithstanding Section 3.3.
(b)
Notwithstanding the foregoing and to the extent required to comply with section 401(k) of the Internal Revenue
Code, a Participant’s Deferral Election shall be cancelled effective as of the date on which he takes a “safe harbor” hardship
withdrawal from the Employer’s 401(k) plan.
(c)
A Deferral Election that is cancelled in accordance with the foregoing shall not be reinstated during the same Plan
Year. A cancelled election may only be replaced by a new election under Section 3.2 that is effective as of a subsequent Plan Year,
and, in the case of a cancellation under subsection (b) above, such new election cannot apply to a Plan Year that commences earlier
than six months after the date of such hardship withdrawal.
ARTICLE 4
CONTRIBUTIONS TO THE PLAN
4.1
Participant Contributions
(a)
A Participant may make a Deferral Election to reduce his Base Compensation subject to such election in increments
of one whole percentage point (1%), and to contribute such amount to the Plan as a Participant contribution.
(b)
A Participant may make a separate Deferral Election to reduce his Bonus subject to such election in increments of
one whole percentage point (1%), and to contribute such amount to the Plan as a Participant contribution.
4.2
Employer Matching Contributions
The matching contribution formula set forth below shall be calculated and applied to a Participant’s contributions from Base
Compensation. For the avoidance of doubt, Employer matching contributions shall not be credited to a Participant’s account for
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contributions from Bonus. A Participant shall be eligible to receive an allocation of the Employer matching contribution for a Plan
Year only if the Participant is an Eligible Employee on the last day of such Plan Year or if the Participant Separated from Service
during the Plan Year due to death, Disability, or retirement after attainment of age 65. If a Participant is eligible for an allocation of
the Employer matching contribution due to a qualifying Separation from Service as described in the preceding sentence, the matching
contribution with respect to the portion of the Plan Year preceding the Participant’s Separation from Service shall be allocated not
later than as soon as administratively practicable following the date of the Participant’s Separation from Service in accordance with
Section 5.2(b).
(a)
For each Level One Participant, the Employer shall credit an Employer matching contribution to the Participant’s
Account in an amount equal to
(i)
One hundred percent (100%) of the first two percent (2%) of such Participant’s contributions made under
Section 4.1 when expressed as a percentage of Base Compensation for the portion of the Plan Year to which the matching
contribution relates; plus
(ii)
Twenty-five percent (25%) of the next four percent (4%) of such Participant’s contributions made under
Section 4.1 when expressed as a percentage of Base Compensation for the portion of the Plan Year to which the matching
contribution relates.
(b)
Effective as of January 29, 2019, Employer matching contributions shall not be credited to the Accounts of Level
Two Participants.
ARTICLE 5
ALLOCATION AND INVESTMENT
5.1
Establishment of Account
Each Participant herein shall have maintained in his name an Account, to which shall be credited his Participant
contributions, as well as his share of Employer contributions. A Participant’s Account shall also reflect his allocable share of any
gains and losses pursuant to Section 5.4. All distributions with respect to the Account pursuant to Article 6 shall be charged against
the Account as of the date of such distribution. At the discretion of the Committee, a Participant’s Account may be divided into one or
more subaccounts for recordkeeping purposes.
5.2
Allocation
(a)
Contributions made pursuant to Section 4.1 hereof shall be credited to the Account of the Participant from whose
Base Compensation and/or Bonus such amounts were deferred, as soon as administratively practicable following the date of actual
Base Compensation or Bonus reduction.
(b)
Employer matching contributions made pursuant to Section 4.2 shall be credited to the Account of each Participant
eligible to receive such contributions not later than as soon as administratively practicable following the end of the period to which the
contributions relate.
5.3
Establishment of Trust
The Employer may, but shall not be required to, establish a trust fund with regard to the Accounts hereunder, designed to be a
grantor trust under Code section 671 and Internal Revenue Service Revenue Procedure 92-64 (or any successor ruling or procedure).
However, if the assets of such trust are not available or are insufficient to pay such benefits or if no such trust is established or funded,
then benefits hereunder shall be paid from the general assets of the Employer. Notwithstanding anything herein or in any related
agreement to the contrary, no person shall have a security interest in any amounts (if any) set aside for the payment of benefits
hereunder and, to the extent that any person acquires a right to receive payments or any other rights hereunder, such rights shall be no
greater than the rights of any unsecured general creditor of the Employer.
5.4
Allocation of Investment Earnings and Losses
(a)
As of each Valuation Date, the Committee shall credit to each Participant’s Account the deemed income or losses
attributable thereto, as provided in Section 5.4(b) below, as well as any other credits to or charges against such Account, including any
withdrawals or other distributions made to or on behalf of the Participant. All payments from an Account between Valuation Dates
shall be charged against the Account as of the preceding Valuation Date. Contributions to a Participant’s Account shall not be
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adjusted for deemed investment experience for periods prior to the Valuation Date on which the Contributions are credited to the
Account (even if the Contribution amount is known prior to such date). No amount shall be adjusted for deemed investment
experience after the Valuation Date coincident with or immediately preceding the date on which the amount is distributed from the
Participant’s Account.
(b)
Each Participant, upon becoming a Participant in the Plan, may, on a form prescribed by the Committee, designate
the manner in which he wishes his Account to be deemed invested among the various options designated by the Committee for this
purpose. The Committee shall not be obligated to follow such deemed investment election in the event such action on the part of the
Committee would result in a failure of the Plan to be considered unfunded for purposes of the Code or ERISA. Such designation may
be changed as of any Valuation Date, with respect to future contributions and transfers among investment options, by making a new
deemed election, in the method prescribed by the Committee, and within the period of time prior to such Valuation Date as is
established by the Committee. The Participant must designate, in such minimum percentages or amounts as may be prescribed by the
Committee, that portion of his Account which the Participant deems allocated to each investment option offered hereunder. The
investment designation will continue until changed by the timely submission of a new deemed investment election, which change will
be effective within the time period established by the Committee. In the absence of any such deemed investment designation, a
Participant’s Account shall be deemed to be invested in such property as the Committee, in its sole and absolute discretion, shall
determine. The Committee shall be authorized at any time and from time to time to modify, alter, delete or add to the deemed
investment options hereunder. In the event a modification occurs, the Committee shall notify those Participants whom the Committee,
in its sole and absolute discretion, determines are affected by the change, and shall give such persons such additional time as is
determined necessary by the Committee to designate the manner and percentage in which amounts thereby affected shall be deemed
invested. The Committee shall not be obligated to substitute investment options with similar deemed investment criteria for existing
investment options, nor shall it be obligated to continue the types of deemed investment options presently available to the Participants.
(c)
The crediting of earnings and losses under the Plan does not mean and shall not be construed to mean that the
Account of a Participant is actually invested in any security, fund or other investment, and no Participant or Beneficiary shall have any
security or other interest in any security, fund or investment, even if the Employer maintains actual investments that mirror or are
substantially similar to liabilities under the Plan.
(d)
Neither the Company nor the Committee warrants or represents that the value of any Participant’s Account will
increase. Each Participant assumes the risk in connection with the deemed investment of his or her Account.
(e)
A Participant’s Account shall continue to be credited with earnings and losses until the applicable Determination
Date. The value of a Participant’s Account and the amount paid to a Participant on the payment date shall be determined as of the
applicable Determination Date.
ARTICLE 6
PAYMENT OF ACCOUNT
6.1
Vesting of Account
(a)
Each Participant’s interest in the portion of his Account attributable to (i) the Participant’s own contributions under
Section 4.1 and (ii) Employer matching contributions under Section 4.2 for periods prior to the Effective Date shall be one hundred
percent (100%) vested and non-forfeitable at all times.
(b)
A Participant shall become vested in the portion of his Account attributable to Employer matching contributions
under Section 4.2 for periods on or after the Effective Date in accordance with the following schedule.
Years of Service
0
1
2
3
4
5
6
Vested Percentage
0%
0%
20%
40%
60%
80%
100%
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(c)
Notwithstanding the foregoing schedule, a Participant shall have a one hundred percent (100%) vested and non-
forfeitable interest in the portion of his Account attributable to Employer matching contributions under Section 4.2 for periods on or
after the Effective Date upon the first to occur of the following:
(i)
(ii)
the Participant’s Separation from Service upon or after reaching age 65;
the Participant’s Disability; and
(iii)
the death of the Participant.
6.2
Forfeiture of Unvested Account Balances
As of the date of a Participant’s Separation from Service with the Employer (including termination due to any of the events
specified under Section 6.1(c) hereof), his vested Account balance shall be determined in accordance with the provisions of Section
6.1 above. Thereafter, as of the Valuation Date coincident with or next following the Participant’s Separation from Service, the
nonvested portion of his Account shall be irrevocably forfeited and shall not be payable under the Plan. If a trust is established
pursuant to Section 5.3, forfeited amounts shall be returned to the Employer.
6.3
Timing of Payment
(a)
A Participant may make a Deferral Election to receive payment of the vested portion of his benefit subject to such
Deferral Election commencing upon any one of the following distribution dates.
(i)
On or as soon as administratively practicable after the first Valuation Date coincident with or immediately
following a Date Certain designated by the Participant; provided that payment shall in any event commence within 60 days
after such Date Certain, and no Participant or Beneficiary shall have a right to designate the taxable year of such payment.
(ii)
On or as soon as administratively practicable after the first Valuation Date occurring in January of the Plan
Year immediately following the Plan Year in which the Participant Separates from Service; provided that payment shall in
any event commence by January 31 of such immediately following Plan Year, and no Participant or Beneficiary shall have a
right to designate the taxable year of such payment.
(iii)
On or as soon as administratively practicable after the first Valuation Date coincident with or immediately
following the earlier to occur of (A) a Date Certain designated by the Participant and (B) the date the Participant Separates
from Service; provided that payment shall in any event commence within 60 days after such Date Certain or Separation from
Service, as applicable, and no Participant or Beneficiary shall have a right to designate the taxable year of such payment.
If a Participant’s Deferral Election does not specify a time of payment, then, with respect to amounts subject to such Deferral Election,
the Participant shall be deemed to have elected payment after Separation from Service in accordance with subsection (ii) above.
(b)
Subject to Section 3.1(d),
(i)
a Participant who has elected (or who is deemed to have elected) payment under subsection (a)(i) above
may elect a new Date Certain that occurs on or after the fifth anniversary of the previously elected Date Certain by making a
Deferral Election specifying the new Date Certain.
(ii)
a Participant who has elected payment under subsection (a)(iii) above may elect a new Date Certain that
occurs on or after the fifth anniversary of the previously elected Date Certain by making a Deferral Election specifying the
new Date Certain. Such election shall not defer or affect payment under subsection (a)(iii)(B) if the Participant’s Separation
form Service occurs earlier than the specified Date Certain.
If payment is deferred pursuant to an effective Deferral Election but the Participant subsequently dies or becomes Disabled, earlier
payment shall be made in accordance with subsection (c) or (d) below.
(c)
Notwithstanding subsections (a) and (b) above, payment of a Participant’s entire Account, less any amounts required
to be withheld by law, shall occur on or as soon as administratively practicable after the first Valuation Date coincident with or
immediately following the Participant’s death; provided that payment shall in any event occur within 30 days after such Valuation
Date, and no Participant or Beneficiary shall have a right to designate the taxable year of such payment.
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Notwithstanding subsections (a) and (b) above, payment of a Participant’s entire Account, less any amounts required
to be withheld by law, shall occur on or as soon as administratively practicable after the first Valuation Date coincident with or
immediately following the Participant’s Disability; provided that payment shall in any event occur within 30 days after such Valuation
Date, and no Participant or Beneficiary shall have a right to designate the taxable year of such payment.
(e)
Payment to a Participant shall be delayed to the extent required by Code section 409A(a)(2)(B)(i). Accordingly, if a
Participant is a “specified employee” as defined by Code section 409A(a)(2)(B)(i) and Treasury regulation 1.409A-1(i) (determined
by applying the default rules applicable under such Code section except to the extent such rules are modified by a written resolution
that is adopted by the Board of Directors of the Employer and that applies for purposes of all applicable nonqualified deferred
compensation plans of the Employer and its affiliates described in the second sentence of Section 1.2(n)), any payments which the
Participant is otherwise entitled to receive on account of Separation from Service during the six-month period beginning on the date
the Participant Separates from Service for any reason other than death shall be accumulated and paid effective as of the earlier to occur
of (i) the first Valuation Date that occurs on or after the date that is six months after the date the Participant Separates from Service
and (ii) the first Valuation Date that occurs on or after the 30th day following the date of the Participant’s death. This subsection (e) is
intended to satisfy the minimum requirements of Code section 409A(a)(2)(B)(i) and shall not be construed to accelerate or defer or
otherwise apply to distributions to the extent those distributions are not subject to the requirements of such Code section.
6.4
Form of Payment
(a)
In the event of the Participant’s death the Participant’s entire Account, less any amounts required to be withheld by
law, shall be paid to his Beneficiary in the form of a single lump sum payment in cash in accordance with Section 6.3(c) as to the time
of payment and without regard to any election to postpone payment under Section 6.3(b). The preceding sentence shall also apply to
the entire remaining Account of a Participant who dies after commencing installment payments.
(b)
In the event of payment due to the Participant’s Disability the Participant’s entire Account, less any amounts
required to be withheld by law, shall be paid to him in the form of a single lump sum payment in cash in accordance with Section
6.3(d) as to the time of payment and without regard to any election to postpone payment under Section 6.3(b). The preceding sentence
shall also apply to the entire remaining Account of a Participant who becomes Disabled after commencing installment payments.
(c)
A Participant may select on his Deferral Election (including a deemed Deferral Election) from among the following
optional forms of payment for the vested portion of his Account to the extent not payable in accordance with subsections (a) and (b),
above:
(i)
a single cash lump sum payment;
(ii)
annual cash installments over a period of years designated by the Participant in the Deferral Election. Each
installment shall be calculated by dividing the portion of the Participant’s Account balance subject to such Deferral Election
as of the preceding Valuation Date by the total number of installments remaining to be paid. Annual installments shall be
paid on the payment commencement date under Section 6.2 and each anniversary of that date.
(iii)
monthly cash installments over a period of years designated by the Participant in the Deferral Election,
Each monthly installment payable during a year shall be the same amount, calculated by dividing the portion of the
Participant’s Account balance subject to such Deferral Election as of the Valuation Date preceding the first installment for
the year by the total number of installments remaining to be paid; except that the final installment of the last year of the
elected period shall be an amount equal to the entire remaining portion of the Account balance subject to such Deferral
Election. Monthly installments shall be paid on the payment commencement date under Section 6.2 and on the fifteenth
(15th) day of each month thereafter.
If a Participant’s Deferral Election does not specify an optional form of payment, the Participant shall be deemed to have
elected payment in the form of a single cash lump sum payment with respect to vested amounts subject to such Deferral Election.
Except as provided in subsection (d) below, a Participant may not subsequently elect to change the optional form of payment elected
or deemed elected under a Deferral Election for so long as he remains a Participant. For purposes of Code section 409A, the
entitlement to a series of installment payments shall be treated as the entitlement to a single payment.
(d)
Subject to Section 3.1(d), a Participant may elect to change the optional form of payment applicable to the portion of
his Account subject to a Deferral Election under subsection (c) above, but such election shall also defer the time of payment elected by
the Participant to the fifth anniversary of the date payment would otherwise occur under Section 6.2.
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FORM 10-K ARTICLE 7
MISCELLANEOUS
7.1
Administration of the Plan
(a)
The Plan shall be administered by the Committee. The books and records of the Plan shall be maintained by the
Company at its expense, and no member of the Board of Directors of the Company, or any employee of the Company acting on its
behalf, shall be liable to any person for any action taken or omitted in connection with the administration of the Plan, unless
attributable to his own fraud or willful misconduct.
(b)
The Company shall appoint the members of the Committee and may terminate a Committee member at any time by
providing written notice of such termination to the member. Any member of the Committee may resign by delivering his written
resignation to the Company and to the other members of the Committee.
(c)
The Committee shall perform any act which the Plan authorizes. The Committee may by a writing signed by a
majority of its members, appoint any member of the Committee to act on behalf of the Committee.
(d)
The Committee may designate in writing other persons to carry out its responsibilities under the Plan, and may
remove any person designated to carry out its responsibilities under the Plan by notice in writing to that person. The Committee may
employ persons to render advice with regard to any of its responsibilities. All usual and reasonable expenses of the Committee shall
be paid by the Company.
(e)
No member of the Board of Directors of the Company or of the Committee, or any employee of the Company acting
on behalf of either, shall be liable to any person for any action taken or omitted in connection with the administration of the Plan,
unless attributable to his own willful neglect or willful misconduct. The Company shall indemnify and hold harmless each member of
the Committee from and against any and all claims and expenses (including, without limitation, attorney’s fees and related costs), in
connection with the performance by such member of his duties in that capacity, other than any of the foregoing arising in connection
with the willful neglect or willful misconduct of the person so acting.
(f)
The members of the Committee shall serve without bond or security for the performance of their duties hereunder
unless applicable law makes the furnishing of such bond or security mandatory or unless required by the Company.
(g)
The Committee shall establish rules, not contrary to the provisions of the Plan, for the administration of the Plan and
the transaction of its business. The Committee shall have the authority to interpret the Plan in its sole and absolute discretion, and
shall determine all questions arising in the administration, interpretation, and application of the Plan, including all claims for benefit
hereunder. All determinations of the Committee shall be conclusive and binding on all concerned.
7.2
Benefit Claims
The Committee shall administer the claims procedures set forth in this Section 7.2 in accordance with section 503 of ERISA.
The Committee shall automatically direct the distribution of all benefits to which a Participant is entitled hereunder. In the event that
a Participant believes that he has been denied benefits to which he is entitled under the provisions of the Plan, the Committee shall,
upon the request of the Participant, provide to the Participant written notice of the denial which shall set forth:
(a)
(b)
(c)
the specific reason or reasons for the denial;
specific references to pertinent Plan provisions on which the Committee based its denial;
a description of any additional material or information needed for the Participant to perfect the claim and an
explanation of why the material or information is needed;
(d)
a statement that the Participant or his authorized representative may (i) request a review upon written application to
the Committee; (ii) review pertinent Plan documents; and (iii) submit issues and comments in writing;
(e)
if an internal rule was relied on to make the decision, either a copy of the internal rule or a statement that this
information is available at no charge upon request;
(f)
the claim on appeal;
a description of the Participant’s right to bring a civil action under Section 502(a) of ERISA following a denial of
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(g)
a statement that any appeal the Participant wishes to make of the adverse determination must be made in writing to
the Committee within sixty (60) days (one hundred eighty (180) days in the case of a claim relating to Disability benefits) after receipt
of the Committee’s notice of denial of benefits and that failure to appeal the initial determination to the Committee in writing within
such sixty (60)-day period (one hundred eighty (180)-day period in the case of a claim relating to Disability benefits) will render the
Committee’s determination final, binding, and conclusive; and
(h)
the address to which the Participant must forward any request for review.
If a Participant should appeal to the Committee, he, or his duly authorized representative, may submit, in writing, whatever issues and
comments he, or his duly authorized representative, feels are pertinent. The Committee shall re-examine all facts related to the appeal
and make a final determination as to whether the denial of the claim is justified under the circumstances. The Committee shall advise
the Participant in writing of its decision on appeal, the specific reasons for the decision, and the specific Plan provisions on which the
decision is based. The notice of the decision shall be given within sixty (60) days (forty-five (45) days in the case of a claim relating
to Disability benefits) after the Participant’s written request for review is received, unless special circumstances (such as a hearing)
would make the rendering of a decision within such sixty (60)-day period (forty-five (45)-day period in the case of a claim relating to
Disability benefits) impracticable. In such case, notice of an extension shall be provided to the Participant within the original sixty
(60)-day period (forty-five (45)-day period in the case of a claim relating to Disability benefits), and notice of a final decision
regarding the denial of a claim for benefits will be provided within one hundred twenty (120) days (ninety (90) days in the case of a
claim relating to Disability benefits) after receipt of the original request for review.
7.3
Designation of a Beneficiary
(a)
A Participant may designate one or more Beneficiaries to receive any benefits payable under the Plan after the death
of the Participant. A Participant may revoke or change a prior beneficiary designation by filing a new beneficiary designation with the
Committee. To be effective, any beneficiary designation or revocation of a beneficiary designation must be on a form acceptable to
the Committee and must be received by the Committee prior to the date of the Participant’s death.
(b)
Any designation of a person as a Beneficiary shall be deemed to be contingent upon the person’s surviving the
Participant. Any designation of a class or group of Beneficiaries shall be deemed to be a designation of only those members of the
class or group who are living at the time of the Participant’s death. Any designation of a trust or other organization as a Beneficiary
shall be invalid if the trust is not in existence at the time of the Participant’s death. A Participant may designate (in the manner
provided in subsection (a), above) one or more persons as a contingent Beneficiary or Beneficiaries to receive, upon the Participant’s
death, the benefit that the primary Beneficiary would have received had the primary Beneficiary survived the Participant.
(c)
If a Participant does not make an effective beneficiary designation prior to death or if no designated Beneficiary
survives the Participant, the Participant’s estate shall be deemed to be his Beneficiary.
(d)
References hereunder to a benefit payable to or with respect to a Participant include any benefit payable to the
Participant’s Beneficiary.
7.4
Amendment of the Plan
The Plan may be amended, in whole or in part, from time to time, by the Committee, without the consent of any other party;
provided, however, that no amendment shall divest any Participant or Beneficiary of vested credits to his or her Account or of any
rights to which he would have been entitled if the Plan had been terminated immediately prior to the effective date of such amendment
and further provided that no amendment shall materially increase the cost of the Plan to the Company without the approval of the
Board of Directors of the Company.
7.5
Termination of the Plan
The Plan may be terminated, at any time, by action of the Board of Directors, without the consent of any other party. The
termination of this Plan shall not result in the granting of any additional rights to any Participant, such as, full vesting or funding of his
Account, and Plan benefits shall be payable solely as provided under Section 6.2 and, if applicable, Section 7.1 4(d)(iv).
7.6
Notices
(a)
From time to time, the Committee shall provide each Participant with a statement of the value of his Account. The
Committee shall also provide each Participant with a written summary of any amendment of the Plan that materially modifies his
rights hereunder and with notice of the termination of the Plan.
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FORM 10-K (b)
Any notice or election required or permitted to be given hereunder by a Participant or Beneficiary shall be deemed
to be received by the Committee (i) on the date it is personally delivered to the Committee or (ii) on the date it is sent by certified or
registered mail, addressed to the Committee at 233 South Patterson, Springfield, Missouri 65802.
extent applicable.
time subject to any modifications necessary to satisfy a good faith interpretation of the requirements of Code section 409A, to the
7.7
Non-Alienation
Except as required by ERISA, the right of any Participant or Beneficiary in his Account balance hereunder or in any benefit
payable under the Plan or any interest therein shall not be subject in any manner to anticipation, alienation, sale, transfer, assignment,
pledge, encumbrance, garnishment or charge, and any such attempted action shall be void (except for the designation of beneficiaries
pursuant to Section 7.3). No such Account, benefit, or interest shall be in any manner liable for or subject to debts, contracts,
liabilities, engagements or torts of the person entitled to such Account, benefit, or interest. The preceding sentences shall not prohibit
the direct deposit of Plan benefits to a Participant’s or Beneficiary’s savings, checking, or other deposit account in a financial
institution.
7.8
Payments to Incompetents
Whenever any benefit which shall be payable under the Plan is to be paid to or for the benefit of any person who is then a
minor or determined by the Committee, on the basis of qualified medical advice, to be incompetent, the Committee need not require
the appointment of a guardian or custodian, but shall be authorized to cause the same to be paid over to the person having custody of
the minor or incompetent, or to cause the same to be paid to the minor or incompetent without the intervention of a guardian or
custodian, or to cause the same to be paid to a legal guardian or custodian of the minor or incompetent, if one has been appointed, or
to cause the same to be used for the benefit of the minor or incompetent.
7.9
Severability
In the event that any provision of this Plan shall be declared illegal or invalid for any reason, said illegality or invalidity shall
not affect the remaining provisions of this Plan but shall be fully severable and this Plan shall be construed and enforced as if said
illegal or invalid provision had never been inserted herein.
7.10
Governing Law
The validity and effect of this Plan and the rights and obligations of all persons affected hereby shall be construed and
determined in accordance with the internal laws, and not the law of conflicts, of the State of Missouri, except to the extent superseded
by federal law.
7.11
Taxes
All amounts payable hereunder shall be reduced by any and all federal, state, and local taxes imposed upon the Participant
which are required to be paid or withheld by the Employer or any other payor of Plan benefits.
7.12 Waiver
Neither the failure nor any delay on the part of the Employer or the Committee to exercise any right, power or privilege
hereunder shall operate as a waiver thereof, nor shall any single or partial exercise or waiver of any such right, power or privilege
preclude any other or further exercise thereof, or the exercise of any other right, power or privilege available to the Employer or the
Committee at law or in equity.
7.13
No Right to Employment
Neither the establishment of the Plan nor the payment of any benefits thereunder nor any action of the Company, the
Employer, or the Committee shall be held or construed to confer upon any person any legal right to be continued in the employ of any
Employer, and each Employer expressly reserves the right to discharge any employee whenever the interest of the Employer in its sole
judgment may so require, without liability to the Employer or the Committee or any affiliate of either.
(b)
To the extent any provision of this Plan or any omission from the Plan would (absent this Section 7.14(6)) cause
amounts to be includable in income under Code section 409A(a)(1), the Plan shall be deemed amended to the extent necessary to
comply with the requirements of Code section 409A; provided, however, that this Section 7.14(b) shall not apply and shall not be
construed to amend any provision of the Plan to the extent this Section 7.14(b) or any amendment required thereby would itself cause
any amounts to be includable in income under Code section 409A(a)(1).
(c)
If any provision of this Plan would cause a Participant to incur any additional tax under Code section 409A, the
parties will in good faith attempt to reform the provision in a manner that maintains, to the extent possible, the original intent of the
applicable provision without violating the provisions of Code section 409A. Notwithstanding the foregoing, the Company makes no
representation that the Plan complies with Code section 409A and shall have no liability to any Participant for any failure to comply
with Code section 409A.
409A.
(d)
Except as provided in this Section and notwithstanding anything herein to the contrary, the payment of benefits
under the Plan shall not be accelerated in a manner that would cause such benefits to be includable in income under Code section
(i)
The Committee may establish a procedure for the Plan to administer qualified domestic relations orders.
Such procedure shall comply with the applicable requirements of ERISA Sections 206(d)(3) and 514(b)(7). The Committee
may approve immediate payment to an alternative payee (who is not the Participant) pursuant to the terms of a qualified
domestic relations order, as defined under ERISA sections 206(d)(3) and 514(6)(7). Any such payment shall not be
prohibited by Section 7.7 and shall not be subject to the six-month delay requirement under Section 6.3(e).
(ii)
If a benefit hereunder is required to be included in the income of a Participant under Code section 409A as
a result of the failure to comply with the requirements of Code section 409A, the benefit amount so includable shall be paid
to the Participant as of the Valuation Date next following such compliance failure. This subsection shall not accelerate the
payment of a benefit that is subject to the six-month delay requirement under Section 6.3(e).
(iii)
The Committee may accelerate the payment of amounts credited to a Participant’s Account (i) to the extent
necessary for any Federal officer or employee in the executive branch to comply with an ethics agreement with the Federal
government and (ii) to the extent reasonably necessary to avoid the violation of an applicable Federal, state, local, or foreign
ethics law or conflicts of interest law. Any such payment shall be made in a single lump sum cash payment to the Participant
on or as soon as administratively practicable after the first Valuation Date that occurs on or after the Committee’s
determination. Any such payment shall not be subject to the six-month delay requirement under Section 6.3(e).
(iv)
The entire amount credited to a Participant’s Account shall be paid to the Participant if the Plan is
terminated in accordance with Section 7.5 and the Committee determines that the requirements of Treasury regulation
I .409A-3(j)(4)(ix) have been and will be satisfied in connection with such termination. Any such payment shall be made in a
single lump sum cash payment to the Participant on or as soon as administratively practicable after the first Valuation Date
that occurs on or after the Plan termination and the Committee’s determination. This subsection shall not accelerate the
payment of a benefit that is subject to the six-month delay requirement under Section 6.3(e).
(v)
This Plan shall constitute an “account balance plan” as defined in Treas. Reg. Section 31.3121(v)(2)-
1(c)(1)(ii)(A). For purposes of Section 409A of the Code, all amounts deferred under this Plan shall be aggregated with
amounts deferred under other account balance plans.
IN WITNESS WHEREOF, and as conclusive evidence of the adoption of the foregoing instrument comprising the O’Reilly
Automotive, Inc. Deferred Compensation Plan as amended and restated effective as of the Effective Date and as otherwise specified
herein, O’REILLY AUTOMOTIVE, INC., as the Company, has caused its seal to be affixed hereto and these presents to be duly
executed in its name and behalf by its proper officers thereunto authorized this _________ day of October 2020.
7.14
Compliance With Code Section 409A
O’REILLY AUTOMOTIVE, INC.
(a)
The Plan is intended to comply with the requirements of Code section 409A and, notwithstanding anything herein to
the contrary, shall be administered, operated, and interpreted in compliance with such requirements. For periods on and after January
1, 2005 and prior to January 1, 2009, each Participant’s benefit shall be determined in accordance with the Plan as in effect at such
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Name:
Title:
E-12
FORM 10-K
(b)
Any notice or election required or permitted to be given hereunder by a Participant or Beneficiary shall be deemed
to be received by the Committee (i) on the date it is personally delivered to the Committee or (ii) on the date it is sent by certified or
time subject to any modifications necessary to satisfy a good faith interpretation of the requirements of Code section 409A, to the
extent applicable.
(b)
To the extent any provision of this Plan or any omission from the Plan would (absent this Section 7.14(6)) cause
amounts to be includable in income under Code section 409A(a)(1), the Plan shall be deemed amended to the extent necessary to
comply with the requirements of Code section 409A; provided, however, that this Section 7.14(b) shall not apply and shall not be
construed to amend any provision of the Plan to the extent this Section 7.14(b) or any amendment required thereby would itself cause
any amounts to be includable in income under Code section 409A(a)(1).
(c)
If any provision of this Plan would cause a Participant to incur any additional tax under Code section 409A, the
parties will in good faith attempt to reform the provision in a manner that maintains, to the extent possible, the original intent of the
applicable provision without violating the provisions of Code section 409A. Notwithstanding the foregoing, the Company makes no
representation that the Plan complies with Code section 409A and shall have no liability to any Participant for any failure to comply
with Code section 409A.
(d)
Except as provided in this Section and notwithstanding anything herein to the contrary, the payment of benefits
under the Plan shall not be accelerated in a manner that would cause such benefits to be includable in income under Code section
409A.
(i)
The Committee may establish a procedure for the Plan to administer qualified domestic relations orders.
Such procedure shall comply with the applicable requirements of ERISA Sections 206(d)(3) and 514(b)(7). The Committee
may approve immediate payment to an alternative payee (who is not the Participant) pursuant to the terms of a qualified
domestic relations order, as defined under ERISA sections 206(d)(3) and 514(6)(7). Any such payment shall not be
prohibited by Section 7.7 and shall not be subject to the six-month delay requirement under Section 6.3(e).
(ii)
If a benefit hereunder is required to be included in the income of a Participant under Code section 409A as
a result of the failure to comply with the requirements of Code section 409A, the benefit amount so includable shall be paid
to the Participant as of the Valuation Date next following such compliance failure. This subsection shall not accelerate the
payment of a benefit that is subject to the six-month delay requirement under Section 6.3(e).
(iii)
The Committee may accelerate the payment of amounts credited to a Participant’s Account (i) to the extent
necessary for any Federal officer or employee in the executive branch to comply with an ethics agreement with the Federal
government and (ii) to the extent reasonably necessary to avoid the violation of an applicable Federal, state, local, or foreign
ethics law or conflicts of interest law. Any such payment shall be made in a single lump sum cash payment to the Participant
on or as soon as administratively practicable after the first Valuation Date that occurs on or after the Committee’s
determination. Any such payment shall not be subject to the six-month delay requirement under Section 6.3(e).
(iv)
The entire amount credited to a Participant’s Account shall be paid to the Participant if the Plan is
terminated in accordance with Section 7.5 and the Committee determines that the requirements of Treasury regulation
I .409A-3(j)(4)(ix) have been and will be satisfied in connection with such termination. Any such payment shall be made in a
single lump sum cash payment to the Participant on or as soon as administratively practicable after the first Valuation Date
that occurs on or after the Plan termination and the Committee’s determination. This subsection shall not accelerate the
payment of a benefit that is subject to the six-month delay requirement under Section 6.3(e).
(v)
This Plan shall constitute an “account balance plan” as defined in Treas. Reg. Section 31.3121(v)(2)-
1(c)(1)(ii)(A). For purposes of Section 409A of the Code, all amounts deferred under this Plan shall be aggregated with
amounts deferred under other account balance plans.
IN WITNESS WHEREOF, and as conclusive evidence of the adoption of the foregoing instrument comprising the O’Reilly
Automotive, Inc. Deferred Compensation Plan as amended and restated effective as of the Effective Date and as otherwise specified
herein, O’REILLY AUTOMOTIVE, INC., as the Company, has caused its seal to be affixed hereto and these presents to be duly
executed in its name and behalf by its proper officers thereunto authorized this _________ day of October 2020.
7.14
Compliance With Code Section 409A
O’REILLY AUTOMOTIVE, INC.
Name:
Title:
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registered mail, addressed to the Committee at 233 South Patterson, Springfield, Missouri 65802.
7.7
Non-Alienation
Except as required by ERISA, the right of any Participant or Beneficiary in his Account balance hereunder or in any benefit
payable under the Plan or any interest therein shall not be subject in any manner to anticipation, alienation, sale, transfer, assignment,
pledge, encumbrance, garnishment or charge, and any such attempted action shall be void (except for the designation of beneficiaries
pursuant to Section 7.3). No such Account, benefit, or interest shall be in any manner liable for or subject to debts, contracts,
liabilities, engagements or torts of the person entitled to such Account, benefit, or interest. The preceding sentences shall not prohibit
the direct deposit of Plan benefits to a Participant’s or Beneficiary’s savings, checking, or other deposit account in a financial
institution.
7.8
Payments to Incompetents
Whenever any benefit which shall be payable under the Plan is to be paid to or for the benefit of any person who is then a
minor or determined by the Committee, on the basis of qualified medical advice, to be incompetent, the Committee need not require
the appointment of a guardian or custodian, but shall be authorized to cause the same to be paid over to the person having custody of
the minor or incompetent, or to cause the same to be paid to the minor or incompetent without the intervention of a guardian or
custodian, or to cause the same to be paid to a legal guardian or custodian of the minor or incompetent, if one has been appointed, or
to cause the same to be used for the benefit of the minor or incompetent.
In the event that any provision of this Plan shall be declared illegal or invalid for any reason, said illegality or invalidity shall
not affect the remaining provisions of this Plan but shall be fully severable and this Plan shall be construed and enforced as if said
illegal or invalid provision had never been inserted herein.
The validity and effect of this Plan and the rights and obligations of all persons affected hereby shall be construed and
determined in accordance with the internal laws, and not the law of conflicts, of the State of Missouri, except to the extent superseded
All amounts payable hereunder shall be reduced by any and all federal, state, and local taxes imposed upon the Participant
which are required to be paid or withheld by the Employer or any other payor of Plan benefits.
Neither the failure nor any delay on the part of the Employer or the Committee to exercise any right, power or privilege
hereunder shall operate as a waiver thereof, nor shall any single or partial exercise or waiver of any such right, power or privilege
preclude any other or further exercise thereof, or the exercise of any other right, power or privilege available to the Employer or the
Committee at law or in equity.
7.13
No Right to Employment
Neither the establishment of the Plan nor the payment of any benefits thereunder nor any action of the Company, the
Employer, or the Committee shall be held or construed to confer upon any person any legal right to be continued in the employ of any
Employer, and each Employer expressly reserves the right to discharge any employee whenever the interest of the Employer in its sole
judgment may so require, without liability to the Employer or the Committee or any affiliate of either.
(a)
The Plan is intended to comply with the requirements of Code section 409A and, notwithstanding anything herein to
the contrary, shall be administered, operated, and interpreted in compliance with such requirements. For periods on and after January
1, 2005 and prior to January 1, 2009, each Participant’s benefit shall be determined in accordance with the Plan as in effect at such
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7.9
Severability
7.10
Governing Law
by federal law.
7.11
Taxes
7.12 Waiver
FORM 10-K
Exhibit 21.1 – Subsidiaries of the Registrant
Exhibit 23.1 – Consent of Independent Registered Public Accounting Firm
O’REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
Consent of Independent Registered Public Accounting Firm
SUBSIDIARIES OF THE REGISTRANT
We consent to the incorporation by reference in the following Registration Statements:
Subsidiary
O’Reilly Automotive Stores, Inc.
Ozark Automotive Distributors, Inc.
Ozark Services, Inc.
Ozark Purchasing, LLC
OAP Transportation, LLC
O’Reilly Auto Enterprises, LLC
State of Incorporation
Missouri
Missouri
Missouri
Missouri
Missouri
Delaware
In addition, 16 subsidiaries operating in the United States and Mexico have been omitted from the above list, as they would not,
considered in the aggregate as a single subsidiary, constitute a significant subsidiary as defined by Rule 1-02(w) of Regulation S-X.
Plan;
One hundred percent of the capital stock of each of the above subsidiaries is directly or indirectly owned by O’Reilly Automotive, Inc.
(1) Registration Statement (Form S-8 No. 033-91022), Post-Effective Amendment No. 1 to Registration Statement on Form S-8
(Form S-8 No. 033-91022) and Post-Effective Amendment No. 2 to Registration Statement on Form S-8 (Form S-8 No. 033-
91022) pertaining to the O’Reilly Automotive, Inc. Performance Incentive Plan;
(2) Registration Statements (Form S-8 No. 333-59568 and 333-136958) and Post-Effective Amendment No. 1 (Form S-8 No. 333-
59568 and 333-136958) pertaining to the O’Reilly Automotive, Inc. Profit Sharing and Savings Plan;
(3) Registration Statement (Form S-8 No. 333-159351) and Post-Effective Amendment No. 1 (Form S-8 No. 333-159351)
pertaining to the O’Reilly Automotive, Inc. 2009 Stock Purchase Plan and to the O’Reilly Automotive, Inc. 2009 Incentive
(4) Registration Statement (Form S-8 No. 333-181364) pertaining to the O’Reilly Automotive, Inc. 2012 Incentive Award Plan
and Post-Effective Amendment No. 1 (Form S-8 No. 333-181364) pertaining to the O’Reilly Automotive, Inc. 2012 Incentive
Award Plan and to the O’Reilly Automotive, Inc. 2017 Incentive Award Plan; and
(5) Registration Statement (Form S-3ASR No. 333-230033) pertaining to the offer from time to time of debt securities;
of our reports dated February 26, 2021, with respect to the consolidated financial statements of O’Reilly Automotive, Inc.
and Subsidiaries and the effectiveness of internal control over financial reporting of O’Reilly Automotive, Inc. and Subsidiaries,
included in this Annual Report (Form 10-K) of O’Reilly Automotive, Inc. and Subsidiaries for the year ended December 31, 2020.
/s/ Ernst & Young LLP
Kansas City, Missouri
February 26, 2021
FORM 10-K
Exhibit 21.1 – Subsidiaries of the Registrant
Exhibit 23.1 – Consent of Independent Registered Public Accounting Firm
O’REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
Consent of Independent Registered Public Accounting Firm
SUBSIDIARIES OF THE REGISTRANT
We consent to the incorporation by reference in the following Registration Statements:
Subsidiary
State of Incorporation
O’Reilly Automotive Stores, Inc.
Ozark Automotive Distributors, Inc.
Ozark Services, Inc.
Ozark Purchasing, LLC
OAP Transportation, LLC
O’Reilly Auto Enterprises, LLC
Missouri
Missouri
Missouri
Missouri
Missouri
Delaware
In addition, 16 subsidiaries operating in the United States and Mexico have been omitted from the above list, as they would not,
considered in the aggregate as a single subsidiary, constitute a significant subsidiary as defined by Rule 1-02(w) of Regulation S-X.
One hundred percent of the capital stock of each of the above subsidiaries is directly or indirectly owned by O’Reilly Automotive, Inc.
(1) Registration Statement (Form S-8 No. 033-91022), Post-Effective Amendment No. 1 to Registration Statement on Form S-8
(Form S-8 No. 033-91022) and Post-Effective Amendment No. 2 to Registration Statement on Form S-8 (Form S-8 No. 033-
91022) pertaining to the O’Reilly Automotive, Inc. Performance Incentive Plan;
(2) Registration Statements (Form S-8 No. 333-59568 and 333-136958) and Post-Effective Amendment No. 1 (Form S-8 No. 333-
59568 and 333-136958) pertaining to the O’Reilly Automotive, Inc. Profit Sharing and Savings Plan;
(3) Registration Statement (Form S-8 No. 333-159351) and Post-Effective Amendment No. 1 (Form S-8 No. 333-159351)
pertaining to the O’Reilly Automotive, Inc. 2009 Stock Purchase Plan and to the O’Reilly Automotive, Inc. 2009 Incentive
Plan;
(4) Registration Statement (Form S-8 No. 333-181364) pertaining to the O’Reilly Automotive, Inc. 2012 Incentive Award Plan
and Post-Effective Amendment No. 1 (Form S-8 No. 333-181364) pertaining to the O’Reilly Automotive, Inc. 2012 Incentive
Award Plan and to the O’Reilly Automotive, Inc. 2017 Incentive Award Plan; and
(5) Registration Statement (Form S-3ASR No. 333-230033) pertaining to the offer from time to time of debt securities;
of our reports dated February 26, 2021, with respect to the consolidated financial statements of O’Reilly Automotive, Inc.
and Subsidiaries and the effectiveness of internal control over financial reporting of O’Reilly Automotive, Inc. and Subsidiaries,
included in this Annual Report (Form 10-K) of O’Reilly Automotive, Inc. and Subsidiaries for the year ended December 31, 2020.
/s/ Ernst & Young LLP
Kansas City, Missouri
February 26, 2021
FORM 10-K
O’REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
O’REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
CERTIFICATIONS
CERTIFICATIONS
I, Gregory D. Johnson, certify that
I, Thomas McFall, certify that
1.
I have reviewed this report on Form 10-K of O’Reilly Automotive, Inc.;
1.
I have reviewed this report on Form 10-K of O’Reilly Automotive, Inc.;
Exhibit 31.1 - CEO Certification
Exhibit 31.2 - CFO Certification
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading
with respect to the period covered by this report;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading
with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined
in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined
in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is
being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by
this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;
and
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in accordance with generally accepted accounting
being prepared;
principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by
this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;
and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons
performing the equivalent functions):
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons
performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and
report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and
report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
Date: February 26, 2021
/s/ Gregory D. Johnson
Date: February 26, 2021
/s/ Thomas McFall
Gregory D. Johnson
Chief Executive Officer and
Co-President
(Principal Executive Officer)
Thomas McFall
Executive Vice President and
Chief Financial Officer
(Principal Financial and Accounting Officer)
FORM 10-K
O’REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
O’REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
CERTIFICATIONS
CERTIFICATIONS
I, Gregory D. Johnson, certify that
I, Thomas McFall, certify that
1.
I have reviewed this report on Form 10-K of O’Reilly Automotive, Inc.;
1.
I have reviewed this report on Form 10-K of O’Reilly Automotive, Inc.;
Exhibit 31.1 - CEO Certification
Exhibit 31.2 - CFO Certification
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading
with respect to the period covered by this report;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading
with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined
in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined
in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in accordance with generally accepted accounting
being prepared;
principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by
this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;
and
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is
being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by
this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;
and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons
performing the equivalent functions):
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons
performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and
report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and
report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
Date: February 26, 2021
/s/ Gregory D. Johnson
Gregory D. Johnson
Chief Executive Officer and
Co-President
(Principal Executive Officer)
Date: February 26, 2021
/s/ Thomas McFall
Thomas McFall
Executive Vice President and
Chief Financial Officer
(Principal Financial and Accounting Officer)
FORM 10-K
Exhibit 32.1 - CEO Certification
Exhibit 32.2 - CFO Certification
O’REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
O’REILLY AUTOMOTIVE, INC.
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
O’REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
O’REILLY AUTOMOTIVE, INC.
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Report of O’Reilly Automotive, Inc. (the “Company”) on Form 10-K for the period ended December 31, 2020,
as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Gregory D. Johnson, Chief Executive Officer
of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
that, to the best of my knowledge:
In connection with the Report of O’Reilly Automotive, Inc. (the “Company”) on Form 10-K for the period ended December 31, 2020,
as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Thomas McFall, Chief Financial Officer of
the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that,
to the best of my knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended;
amended; and
and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations
operations of the Company.
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of
of the Company.
/s/ Gregory D. Johnson
Gregory D. Johnson
Chief Executive Officer
February 26, 2021
/s/ Thomas McFall
Thomas McFall
Chief Financial Officer
February 26, 2021
This certification is made solely for purposes of 18 U.S.C. Section 1350, and not for any other purpose. This certification accompanies
the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley
Act of 2002, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.
A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to the Company
and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
This certification is made solely for purposes of 18 U.S.C. Section 1350, and not for any other purpose. This certification accompanies
the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley
Act of 2002, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.
A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to the Company
and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
FORM 10-K
Exhibit 32.1 - CEO Certification
Exhibit 32.2 - CFO Certification
O’REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
O’REILLY AUTOMOTIVE, INC.
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
O’REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
O’REILLY AUTOMOTIVE, INC.
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Report of O’Reilly Automotive, Inc. (the “Company”) on Form 10-K for the period ended December 31, 2020,
as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Gregory D. Johnson, Chief Executive Officer
of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
that, to the best of my knowledge:
In connection with the Report of O’Reilly Automotive, Inc. (the “Company”) on Form 10-K for the period ended December 31, 2020,
as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Thomas McFall, Chief Financial Officer of
the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that,
to the best of my knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended;
amended; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations
operations of the Company.
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of
This certification is made solely for purposes of 18 U.S.C. Section 1350, and not for any other purpose. This certification accompanies
the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley
Act of 2002, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.
A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to the Company
and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
This certification is made solely for purposes of 18 U.S.C. Section 1350, and not for any other purpose. This certification accompanies
the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley
Act of 2002, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.
A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to the Company
and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
/s/ Thomas McFall
Thomas McFall
Chief Financial Officer
February 26, 2021
and
of the Company.
/s/ Gregory D. Johnson
Gregory D. Johnson
Chief Executive Officer
February 26, 2021
FORM 10-K
BOARD of DIRECTORS
DAVID O’REILLY
Director and
Executive Chairman of the Board
LARRY O’REILLY
Director and
Vice Chairman of the Board
GREG HENSLEE
Director Since 2017 and
Executive Vice Chairman of the Board
JAY D. BURCHFIELD
Director Since 1997;
Lead Director Since 2018
Audit Committee
Compensation Committee
DANA M. PERLMAN
Director Since 2017
Audit Committee
Corporate Governance/
Nominating Committee - Chair
THOMAS T. HENDRICKSON
Director Since 2010
Audit Committee - Chair
Compensation Committee
MARIA M. SASTRE
Director Since 2020
Audit Committee
JOHN R. MURPHY
Director Since 2003
Audit Committee
Compensation Committee - Chair
Corporate Governance/
Nominating Committee
ANDREA M. WEISS
Director Since 2019
Audit Committee
Corporate Governance/
Nominating Committee
EXECUTIVE COMMITTEE and DIVISIONAL VICE PRESIDENTS
GREG JOHNSON
Chief Executive Officer and
Co-President
JEFF SHAW
Chief Operating Officer and
Co-President
BRAD BECKHAM
Executive Vice President of
Store Operations and Sales
BRENT KIRBY
Executive Vice President of
Supply Chain
TOM MCFALL
Executive Vice President and
Chief Financial Officer
JONATHAN ANDREWS
Senior Vice President of
Human Resources and Training
DOUG BRAGG
Senior Vice President of
Central Store Operations and Sales
ROBERT DUMAS
Senior Vice President of
Eastern Store Operations and Sales
LARRY ELLIS
Senior Vice President of
Distribution Operations
JEREMY FLETCHER
Senior Vice President of
Finance and Controller
SCOTT BLACKBURN
Vice President of Store Operations
ROB BODENHAMER
Vice President of Information Technology
Infrastructure and Operations
GUY BROYLES
Vice President of
Merchandise - Backroom
CHIP CARLSON
Vice President of International
Business Development
TAMARA CONN
Deputy General Counsel and
Vice President of Legal Services
JIM DICKENS
Vice President of Gulf States Division
JOE EDWARDS
Vice President of Store Installations
CHRIS FARROW
Vice President of Northern Division
ALAN FEARS
Vice President of International
Jobber Sales and Acquisitions
JULIE GRAY
Vice President of Corporate Services
and Assistant Corporate Secretary
LARRY GRAY
Vice President of Distribution
Operations Eastern Division
JEFF GROVES
Senior Vice President of
Legal and General Counsel
SCOTT KRAUS
Senior Vice President of
Real Estate and Expansion
JEFF LAURO
Senior Vice President of
Information Technology
JASON TARRANT
Senior Vice President of Western
Store Operations and Sales
DARIN VENOSDEL
Senior Vice President of Inventory
Management
DAVID WILBANKS
Senior Vice President of Merchandise
TRICIA HEADLEY
Vice President and Corporate Secretary
and Secretary to the Board
STEVE ABARR
Vice President of Northwest Division
DOUG ADAMS
Vice President of Southeast Division
AARON BIGGS
Vice President of Southern Division
CORY BLACKBURN
Vice President of
Merchandise - Out Front
DAN GRIFFIN
Vice President of East-Central Division
TOM HARRINGTON
Vice President of New England Division
GARTH HILL
Vice President of Transportation
PHIL HOPPER
Vice President of Real Estate Expansion
and Property Management
JUSTIN KALE
Vice President of Central Division
CHAD KEEL
Vice President of
Jobber Sales and Acquisitions
DAVID LEONHART
Vice President of Distribution
Operations Western Division
STEVE LUELLEN
Vice President of Mid-Atlantic Division
CHRIS MANCINI
Vice President of Western Division
MARK MERZ
Vice President of Investor Relations,
Financial Reporting and Planning
RYAN MOORE
Vice President of
Pricing and Customer Satisfaction
RAMON ODEMS
Vice President of Great Lakes Division
DAVID P. ORTEGA
Vice President of
Electronic Catalog Systems
WAYNE PRICE
Vice President of
Treasury and Governmental Affairs
TIM RATHBUN
Vice President of
Inventory Management
SHARI REAVES
Vice President of Human Resources
CHUCK ROGERS
Vice President of Professional Sales
BARRY SABOR
Vice President of Loss Prevention
HUGO SANCHEZ
Vice President of
Marketing and Advertising
DIEGO SANTILLANA
Vice President of Southwestern Division
TOM SOWELL
Vice President of
Inventory Management
KARLA WILLIAMS
Vice President of Solution Delivery
MIKE YOUNG
Vice President of
Real Estate Development and Facilities
SHAREHOLDER INFORMATION
CORPORATE ADDRESS
233 South Patterson Avenue • Springfield, Missouri 65802
417-862-3333 • www.OReillyAuto.com
INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
Ernst & Young LLP
One Kansas City Place • 1200 Main Street, Suite 2500
Kansas City, Missouri 64105-2167
REGISTRAR AND TRANSFER AGENT
Computershare Investor Services
P.O. Box 505000 • Louisville, Kentucky 40233
800-884-4225 • www.computershare.com
Inquiries regarding stock transfers, lost certificates or address changes
should be directed to Computershare Investor Services at the above address.
ANALYST COVERAGE
The following analysts provide research coverage of O’Reilly Automotive, Inc.:
ATLANTIC EQUITIES Sam Hudson
BANK OF AMERICAN MERRILL LYNCH Elizabeth Suzuki
CITI RESEARCH Steven Zaccone
CLEVELAND RESEARCH Tom Mahoney
CREDIT SUISSE - NORTH AMERICA Seth Sigman
D.A. DAVIDSON & COMPANY Michael Baker
EDGEWATER RESEARCH Daryl Boehringer
EVERCORE ISI Gregory Melich
EXANE BNP PARIBAS Christopher Bottiglieri
GOLDMAN SACHS Kate McShane
GUGGENHEIM SECURITIES LLC Ali-Ahmad Faghri
JEFFERIES EQUITY RESEARCH Bret Jordan
J.P.MORGAN Christopher Horvers
MORGAN STANLEY RESEARCH Simeon Gutman
NORTHCOAST RESEARCH Tim Vierengel
OPPENHEIMER & CO., INC. Brian Nagel
RAYMOND JAMES Bobby Griffin
RBC CAPITAL MARKETS Scot Ciccarelli
STEPHENS INC. Daniel Imbro
UBS SECURITIES Michael Lasser
WEDBUSH SECURITIES INC. Seth Basham
WELLS FARGO SECURITIES, LLC Zachary Fadem
WILLIAM BLAIR & COMPANY Daniel Hofkin
WOLFE RESEARCH Gregory Badishkanian
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