O'Reilly Auto Parts 2011 Annual Report Download - page 43

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417
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(5)
74
33
Operating income:
Operating income for the year ended December 31, 2010, increased to $713 million (or 13.2% of sales) from $538 million (or 11.1%
of sales) for the same period one year ago, representing an increase of 33%. The increase in operating income was the result of
increased sales and gross profit, offset by the increased SG&A discussed above as well as a $21 million charge related to the legacy
DOJ investigation of CSK as discussed in Item 3, ―Legal Proceedings‖ and Note 12 ―Legal Matters‖ to the consolidated financial
statements. The increase in operating income as a percentage of sales was the result of our improvements in gross margin and
significant leverage on fixed SG&A costs from strong comparable store sales.
Other income and expense:
Interest expense for the year ended December 31, 2010, decreased to $39 million (or 0.7% of sales) from $45 million (or 0.9% of
sales) for the same period one year ago, representing a decrease of 13%. The decrease in interest expense during 2010 as compared to
2009 was the result of a lower level of average outstanding borrowings under our ABL Credit Facility. Included as a component of
―Other income‖ for the year ended December 31, 2010, was a nonrecurring, non-operating gain of $12 million related to the favorable
settlement of a note receivable acquired in the acquisition of CSK.
Income taxes:
Our provision for income taxes for the year ended December 31, 2010, increased to $270 million (39.2% effective tax rate) from $189
million (38.1% effective tax rate) for the same period one year ago, representing an increase of 43%. The increase in our provision for
income taxes was due to the increase in our taxable income. The increase in the effective rate was primarily the result of the charge
related to the CSK DOJ investigation of $21 million which was not deductible for tax purposes.
Net income:
As a result of the impacts discussed above, net income for the year ended December 31, 2010, increased to $419 million (or 7.8% of
sales) from $307 million (or 6.3% of sales) for the same period one year ago, representing an increase of 36%.
Earnings per share:
Our diluted earnings per common share for the year ended December 31, 2010, increased 32% to $2.95 on 142 million shares from
$2.23 on 138 million shares for the same period one year ago.
Adjustments for nonrecurring and non-operating events:
Our results for the year ended December 31, 2010, included charges related to the nonrecurring, non-operating gain related to the
settlement of a note receivable acquired from CSK discussed above, as well as the charges related to the legacy CSK DOJ
investigation discussed above. Adjusted operating income increased 37% to $734 million (13.6% of sales) for the year ended
December 31, 2010, from $538 million (11.1% of sales), for the same period one year ago. Adjusted net income increased 41% to
$433 million (8.0% of sales) for the year ended December 31, 2010, from $307 million (6.3% of sales), for the same period one year
ago. Adjusted diluted earnings per common share increased 37% to $3.05 for the year ended December 31, 2010, from $2.23 for the
same period one year ago. The table below outlines the impact of the charges related to the legacy CSK DOJ investigation and the
gain on the settlement of the note receivable for the years ended December 31, 2010 and 2009 (amounts in thousands, except per share
data):
GAAP Operating income $712,776
13.2 %$537,619 11.1 %
Legacy CSK DOJ investigation charge 20,900 0.4 %- - %
Non-GAAP adjusted operating income $733,676
13.6 %$537,619 11.1 %
GAAP net income $419,373 7.8 %$307,498 6.3 %
Legacy CSK DOJ investigation charge 20,900 0.4 %- - %
Gain on settlement of note receivable, net of tax (7,215) (0.2) %- - %
Non-GAAP adjusted net income $433,058 8.0 %$307,498 6.3 %
GAAP diluted earnings per common share $2.95 $2.23
Legacy CSK DOJ investigation charge 0.15 -
Gain on settlement of note receivable, net of tax (0.05) -
Non-GAAP adjusted diluted earnings per common share $3.05 $2.23
Weighted-average common shares outstanding - assuming dilution 141,992 137,882
For the Year Ended December 31,
2010
2009
Amount
% of Sales
Amount
% of Sales
The financial information presented in the paragraph and table above is not derived in accordance with 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 financial results and estimates excluding the impact of the charges for the legacy
CSK DOJ investigation and the nonrecurring, non-operating gain related to the settlement of a note receivable acquired in the
FORM 10-K