O'Reilly Auto Parts 2011 Annual Report Download - page 23

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13
Competition
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 the stores identified below:
national retail and wholesale automotive parts chains (such as AutoZone, Inc., Advance Auto Parts, NAPA, CARQUEST and the
Pep Boys - Manny, Moe and Jack, Inc.)
regional retail and wholesale automotive parts chains
independently owned parts stores
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
mass merchandisers that carry automotive replacement parts, maintenance items and accessories (such as Wal-Mart Stores, Inc.)
We compete on the basis of customer service, which includes merchandise selection and availability, technical proficiency and
helpfulness of store personnel, price, store layout and convenient and accessible store locations. Our dual market strategy requires
significant capital expenditures to support, such as the capital expenditures required for the distribution network, store network and
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
vendor incentive programs, economies of scale resulting from increased volume of purchases and selective forward buying. To the
extent our acquisition cost increases due to base commodity 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 various federal, state and local laws and governmental regulations relating to our business, including 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 oil and battery recycling programs. We currently provide a recycling
program for batteries and the collection of used lubricants at certain of our stores as a service to our customers pursuant to agreements
with third-party vendors. The batteries and used lubricants are collected by our associates, deposited into vendor-supplied containers
and pallets, and then disposed of by the third-party vendors. In general, our agreements with such vendors 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 vendor.
Compliance with any such laws and regulations has not had a material adverse effect on our operations to date. We cannot give any
assurance, however, that we will not incur significant expenses in the future in order to comply with any such laws or regulations.
EXECUTIVE OFFICERS OF THE REGISTRANT
The following paragraphs discuss information about our executive officers who are not also directors:
Gregory L. Henslee, age 51, Chief Executive Officer and Co-President, has been an O’Reilly Team Member for 27 years. Mr.
Henslee’s O’Reilly career started as a parts specialist, and during his first five years he served in several positions in retail store
operations, including district manager. From there he advanced to Computer Operations Manager, and over the next 15 years, he
served as Director of Computer Operations/Loss Prevention, Vice President of Store Operations and as Senior Vice President. In
1999, he became President of Merchandise, Distribution, Information Systems and Loss Prevention, and has been in his current
positions of Chief Executive Officer and Co-President since 2005.
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FORM 10-K