O'Reilly Auto Parts 2005 Annual Report Download

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O’REILLY AUTOMOTIVE 2005 ANNUAL REPORT
Live Green
Putting Exceptional Customer Service to Work.

Table of contents

  • Page 1
    O ' R E I L LY A U T O M O T I V E 2 0 0 5 A N N U A L R E P O R T Live Green Putting Exceptional Customer Service to Work.

  • Page 2
    ...on customer service and drive to make O'Reilly Auto Parts the number one distributor of auto parts in all of our markets. With our continued efforts to control expenses while also driving sales, our operating margin increased to 12.3% in 2005 which is the highest level in company history. (a) 2004...

  • Page 3
    ...AUTOMOTIVE 2005 ANNUAL REPORT Living Green Culture can't be selected or scripted, it must be consistently practiced. The O'Reilly Culture is more than a slogan or a short-term program, it's a way of life ...something we live and breathe. Day in and day out, our culture comes alive in our stores and...

  • Page 4
    O'REILLY AUTOMOTIVE 2005 ANNUAL REPORT Enthusiasm Approach every job responsibility with enthusiasm. O'Reilly team members truly have a passion for se serv rvice. ice. We tak take e pride in ensuring a positive experience our ur customers. for each of o 2 2

  • Page 5
    O'REILLY AUTOMOTIVE 2005 ANNUAL REPORT Hard Work Work harder and smarter than your competition. Our unique model of doing business has proven very ry successful over time ...but it is not easy. easy. to be ve Our commitment to our customers is to ensure that we have the part they need when they ...

  • Page 6
    .... T The he daily dedication of our the exception with T team m members embers is the driving force in creating value for our shareholders. Teamwork Be a part of the team. The he time time-tested tested success of the O'Reilly business model requires the contributions of all of our 19,000 9,000...

  • Page 7
    O'REILLY AUTOMOTIVE 2005 ANNUAL REPORT Safety Practice safe work habits and maintain a safe environment for all team members and customers. make e We firmly believe that safety is never an accident. We mak the he way we safety a way of life by integrating it in t manage and conduct our business. 5

  • Page 8
    O'REILLY AUTOMOTIVE 2005 ANNUAL REPORT Excellent Customer Service Never forget that our customers are our bosses, and they pay our wages; treat them accordingly. will ill never settle f for or anything but t the he very very highest l level evel o of f We w customer service service and would never ...

  • Page 9
    ... 2005 ANNUAL REPORT Expense Control Think about controlling expenses at all times. We remain serious about our responsibility to our decision-making making customers and shareholders. Our decisionprocess aggressively weeds out waste so that we can offer lower p prices rices to our customers...

  • Page 10
    O'REILLY AUTOMOTIVE 2005 ANNUAL REPORT Honesty Be honest in your dealings with O'Reilly, your fellow team members and our customers. Our customers and fellow team m members embers deserve deserve honesty at a all ll times. W We e build lifetime relationships with customers by always fulfilling the ...

  • Page 11
    O'REILLY AUTOMOTIVE 2005 ANNUAL REPORT Win-Win Attitude Make an effort to help everyone succeed. At O'Reilly, we are very very aware that our customers must succeed in order for us to be successful. That's hat's why our team m members embers are providing "better parts at better prices ...everyday ...

  • Page 12
    ... AUTOMOTIVE 2005 ANNUAL REPORT Letter to Shareholders 2005 was truly a momentous year for Team O'Reilly. We again realized significant expansion in our store base through aggressive growth in existing and new markets and the successful acquisition and integration of Midwest Auto Parts Distributors...

  • Page 13
    ... new point of sale computer system which will allow our team members to more efficiently process customer transactions and speed up team member training. Our team excelled in meeting numerous challenges in 2005 by living the O'Reilly Culture, which serves as the theme for this year's Annual Report...

  • Page 14
    O'REILLY AUTOMOTIVE 2005 ANNUAL REPORT 12

  • Page 15
    ... resources to support the professional installer with full-time sales specialists dedicated to developing our relationships with these customers. Our support programs continually update our commercial customers on new developments in automotive technologies and our highly trained Professional Parts...

  • Page 16
    ... by a new distribution center opened in Atlanta, Georgia in March 2005. The 350,000 square foot distribution center in Atlanta and the Midwest distribution centers in St. Paul, Minnesota and Billings, Montana were added to our existing network to support our retail stores in 25 states. We will...

  • Page 17
    O'REILLY AUTOMOTIVE 2005 ANNUAL REPORT 15

  • Page 18
    ... stores alabama arkansas florida georgia illinois indiana iowa kansas kentucky 81 stores 81 stores 11 stores 64 stores 49 stores 13 stores 65 stores 59 stores 39 stores louisiana minnesota mississippi missouri montana nebraska north carolina north dakota oklahoma 64 stores 40 stores 52 stores...

  • Page 19
    O'REILLY AUTOMOTIVE 2005 ANNUAL REPORT 17

  • Page 20
    O'REILLY AUTOMOTIVE 2005 ANNUAL REPORT 18

  • Page 21
    ... partner with our customers to meet their needs. To support our professional installers, we have implemented the Certified Auto Repair Center, a new marketing program that assists them in growing and marketing their shops while providing them with business tools that drive profitability. Over 1,000...

  • Page 22
    O'REILLY AUTOMOTIVE 2005 ANNUAL REPORT In m e m o r y o f C h a r l e s H . " C h u b " O ' r e i l ly l 1913 - 2005 "I It' t's s important to tr re e a t o t h e r s w i t h h o n e s t y." y ." 20

  • Page 23
    ... when they opened their first auto parts store in Springfield, Missouri in 1957. The culture handed down from C.F. and Chub O'Reilly and nurtured over nearly 50 years lives on today in over 19,000 enthusiastic, hardworking, professional O'Reilly team members. This culture is the driving force behind...

  • Page 24
    ... AUTOMOTIVE 2005 ANNUAL REPORT selected consolidated financial data (In thousands, except per share data) years ended december 31, 2005 2004 2003 income statement data: Product sales Cost of goods sold, including warehouse and distribution expenses Gross profit Operating, selling, general and...

  • Page 25
    O'REILLY AUTOMOTIVE 2005 ANNUAL REPORT s e l e c t e d c o n s o l i d a t e d f i n a n c i a l d a t a (continued) 2002 2001 2000 1999 1998 1997 1996 $1,312,490 759,090 553,400 415,099 138,301 (7,319) 130,982 48,990 81,992 $ ...

  • Page 26
    ... Dick Smith Enterprises and Davie Automotive, Inc. in December 2002. (b) Total square footage includes normal selling, office, stockroom and receiving space. Weighted-average product sales per store and per square foot are weighted to consider the approximate dates of store openings or expansions...

  • Page 27
    O'REILLY AUTOMOTIVE 2005 ANNUAL REPORT s e l e c t e d c o n s o l i d a t e d f i n a n c i a l d a t a (continued) 2002 2001 2000 1999 1998 1997 1996 981 6,408 $ $ 1,372 211 3.7% 875 5,882 $ 1,426 $ 219 8.8% 672 4,491 $ 1,412 $ 218 5.0% 571 3,777 $ 1,422 $ 223 9.6% 491 3,...

  • Page 28
    ... in this annual report. We are one of the largest specialty retailers of automotive aftermarket parts, tools, supplies, equipment and accessories in the United States, selling our products to both do-it-yourself (DIY) customers and professional installers. Our stores carry an extensive product line...

  • Page 29
    ...2005 ANNUAL REPORT management's discussion and analysis o f f i n a n c i a l c o n d i t i o n a n d r e s u l t s o f o p e r a t i o n s (continued) results of operations The following table sets forth, certain income statement data as a percentage of product sales for the years indicated: years...

  • Page 30
    ... one new distribution center near Atlanta, Georgia. We acquired an additional facility near Indianapolis, Indiana in 2005 for the opening of a distribution center in 2006. One new distribution center was acquired in 2003, located near Mobile, Alabama. Our continuing store expansion program requires...

  • Page 31
    O'REILLY AUTOMOTIVE 2005 ANNUAL REPORT management's discussion and analysis o f f i n a n c i a l c o n d i t i o n a n d r e s u l t s o f o p e r a t i o n s (continued) Although the cost to acquire the business of an independently owned parts store varies, depending primarily upon the amount of ...

  • Page 32
    ...policy for inventory costs. Under the new method, we have inventoried certain warehousing and distribution center costs. Our previous method recorded these expenses directly into cost of goods sold. We believe the change in application of accounting method is preferable as it more accurately matches...

  • Page 33
    ... cost of employee services received in exchange for awards of equity instruments, based on the grant date fair value of those awards, in the financial statements. SFAS No. 123R also requires that the benefits associated with the tax deductions in excess of recognized compensation cost be reported as...

  • Page 34
    ... Public Accounting Firm, has audited the Company's consolidated financial statements has issued an attestation report on management's assessment of the Company's internal control over financial reporting, as stated in their report which is included herein. Greg Henslee Chief Executive Officer & Co...

  • Page 35
    ... 2005 ANNUAL REPORT report of independent registered public accounting firm the board of directors and shareholders of o'reilly automotive, inc. and subsidiaries We have audited management's assessment, included in the accompanying Management's Report on Internal Control Over Financial Reporting...

  • Page 36
    ... 567,493 21,690 29,697 $ 1,432,357 liabilities and shareholders' equity Current liabilities: Income taxes payable Accounts payable Self insurance reserve Accrued payroll Accrued benefits and withholdings Deferred income taxes Other current liabilities Current portion of long-term debt Total current...

  • Page 37
    ... 2005 ANNUAL REPORT consolidated statements of income (In thousands, except per share data) years ended december 31, Product sales Cost of goods sold, including warehouse and distribution expenses Gross profit Operating, selling, general and administrative expenses Operating income Other income...

  • Page 38
    ...of stock options exercised Net income balance at december 31, 2004 2-for-1 stock split Issuance of common stock under employee benefit plans Issuance of common stock under stock option plans Tax benefit of stock options exercised Share based compensation Net income balance at december 31, 2005 See...

  • Page 39
    ... activities: Cumulative effect of accounting change Depreciation and amortization Deferred income taxes Share based compensation programs Tax benefit of stock options exercised Other Changes in operating assets and liabilities: Accounts receivable Inventory Accounts payable Other Net cash provided...

  • Page 40
    ... (DIY) customer and the professional installer throughout Alabama, Arkansas, Florida, Georgia, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Minnesota, Mississippi, Missouri, Montana, Nebraska, North Carolina, North Dakota, Oklahoma, South Carolina, South Dakota, Tennessee, Texas, Virginia...

  • Page 41
    ...-value-based method of accounting for stock-based employee compensation plans. In the fourth quarter of 2005, the Board of Directors approved the accelerated vesting of all unvested stock options previously awarded to employees and executive officers. Option awards granted subsequent to the Board...

  • Page 42
    ...at the date of grant using a Black-Scholes option pricing model with the following weighted-average assumptions for 2005, 2004, and 2003, respectively: risk-free interest rates of 4.25%, 3.01% and 3.61%; volatility factors of the expected market price of the Company's common stock of .358, .404, and...

  • Page 43
    ... cost of employee services received in exchange for awards of equity instruments, based on the grant date fair value of those awards, in the financial statements. SFAS No. 123R also requires that the benefits associated with the tax deductions in excess of recognized compensation cost be reported as...

  • Page 44
    ...certain land and buildings related to forty-nine of its O'Reilly Auto Parts stores under six-year operating lease agreements with O'Reilly Investment Company and O'Reilly Real Estate Company, partnerships in which certain shareholders and directors of the Company are partners. Generally, these lease...

  • Page 45
    ...The Company issues stand-by letters of credit provided by a $50 million sublimit under the Credit Facility that reduce available borrowings. These letters of credit are issued primarily to satisfy the requirements of workers compensation, general liability and other insurance policies. Substantially...

  • Page 46
    ... all employees and non-employee directors have the right to purchase shares of the Company's common stock monthly at a price equal to 85% of the fair market value of the stock, not to exceed 5% of the participants annual salary. Purchases of common stock under the plan during the years ended...

  • Page 47
    ... fair market value on the date of grant and expire on the earlier of termination of service to the Company as a director or seven years. Options granted under this plan become exercisable six months from the date of grant. A summary of outstanding stock options under this plan is as follows: number...

  • Page 48
    ... AUTOMOTIVE 2005 ANNUAL REPORT n o t e s t o c o n s o l i d a t e d f i n a n c i a l s t a t e m e n t s (continued) note 11 - income per common share The following table sets forth the computation of basic and diluted income per common share: (In thousands, except per share data) years ended...

  • Page 49
    ...,708 4,355 $70,063 2003 $56,015 3,935 5 $59,955 Federal income taxes at statutory rate State income taxes, net of federal tax benefit Other items, net The Company's provision for income taxes for the third quarter of 2005 included a non-cash tax adjustment of $6.1 million in the quarter resulting...

  • Page 50
    ...2005. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States...

  • Page 51
    ... of Little Rock Region Tom Connor Regional DC Director Joe Edwards Director of Store Installations Phyllis Evans Director of Store Operations Jason Frizzell Director of Knoxville Region David Glore Director of Ozark Sales John Grassham Director of St. Louis Region Julie Gray Director of Corporate...

  • Page 52
    ... Distribution Center Manager Les Keeth Accounts Payable Manager Jennifer Kent Store Design Manager Duane Keys Application Development Manager Marcus Kilmer Installer Marketing Manager Gus Krafve Investor Relations Manager Scott Kraus Regional Field Sales Manager Steve Lines Sales Training Manager...

  • Page 53
    ... Real Estate Site Acquisition Manager Arnulfo Vega Regional Field Sales Manager Darin Venosdel Application Development Manager Rob Verch Product Manager II Patton Walden Midstate Division Training Manager Scotty Weidman Product Manager II Matt Weldon PBE Field Sales Manager Larry Wiles Audio/Video...

  • Page 54
    ... - Scott Stember Stifel Nicolaus/Hanifen Imhoff, Inc. - David Schick William Blair & Company - Sharon Zackfia registrar and transfer agent UMB Bank 928 Grand Boulevard Kansas City, Missouri 64141-0064 Inquiries regarding stock transfers, lost certificates or address changes should be directed to...

  • Page 55
    ... supplier of auto parts in our market areas by offering our retail customers, professional installers and jobbers the best combination of inventory, price, quality and service; providing our team members with competitive wages and benefits, and working conditions which promote high achievement and...

  • Page 56
    233 South Patterson Spring field, Missouri 65802 417-862-3333 www.oreillyauto.com