O'Reilly Auto Parts 2005 Annual Report Download - page 32

O’REILLY AUTOMOTIVE 2005 ANNUAL REPORT
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management’s discussion and analysis
of financial condition and results of operations (continued)
contractual obligations
We have other liabilities reflected in our balance sheet, including deferred income taxes and self-insurance accruals. The payment obligations associated
with these liabilities are not reflected in the financial commitments table due to the absence of scheduled maturities. Therefore, the timing of these
payments cannot be determined, except for amounts estimated to be payable in 2006 that are included in current liabilities. In addition, we have
commitments with various vendors for the purchase of inventory as of December 31, 2005. The financial commitments table excludes these commitments
because they are cancelable by their terms.
Our contractual obligations, including commitments for future payments under non-cancelable lease arrangements and short and long-term debt
arrangements, are summarized below and are fully disclosed in Notes 6 and 7 to the consolidated financial statements
payments due by period
before 1-3 4-5 over 5
(In thousands) total 1 year years years years
contractual obligations:
Long-term debt $100,774 $ 75,313 $25,050 $ 33 $ 378
Operating leases 339,685 42,251 73,555 55,237 168,642
Total contractual cash obligations $440,459 $117,564 $98,605 $55,270 $169,020
We believe that our existing cash and cash equivalents, cash expected to be provided by operating activities, available bank credit facilities and trade
credit will be sufficient to fund both our short-term and long-term capital needs for the foreseeable future.
inflation and seasonality
We attempt to mitigate the effects of merchandise cost increases principally by taking advantage of vendor incentive programs, economies of scale
resulting from increased volume of purchases and selective forward buying. As a result, we do not believe that our operations have been materially
affected by inflation. Our business is somewhat seasonal, primarily as a result of the impact of weather conditions on store sales. Store sales and profits
have historically been higher in the second and third quarters (April through September) of each year than in the first and fourth quarters.
quarterly results
The following table sets forth certain quarterly unaudited operating data for fiscal 2005 and 2004. The unaudited quarterly information includes all
adjustments which management considers necessary for a fair presentation of the information shown. In the prior year, we restated our quarterly
financial information for each of the first three quarters of 2004. Effective January 1, 2004, we changed our method of applying our LIFO accounting
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
revenues and expenses and is the prevelant method used by other entities within our industry. The cumulative effect of this change in application of
accounting method is $21,892,000 as of January 1, 2004, net of the related deferred tax effect of $13,303,000.
The unaudited operating data presented below should be read in conjunction with our consolidated financial statements and related notes included
elsewhere in this annual report, and the other financial information included therein.
(In thousands, except per share data) fiscal 2005
first second third fourth
quarter quarter quarter quarter
Product sales $466,239 $521,209 $542,906 $514,964
Gross profit 196,169 228,970 235,916 231,448
Operating income 53,581 68,127 67,585 63,231
Net income 33,213 42,923 48,623 39,507
Basic net income per common share 0.30 0.39 0.43 0.35
Net income per common share-assuming dilution 0.30 0.38 0.42 0.35