O'Reilly Auto Parts 2015 Annual Report Download - page 31

FORM 10-K
23
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Unless otherwise indicated, "we," "us," "our" and similar terms, as well as references to the "Company" or "O'Reilly," refer to O'Reilly
Automotive, Inc. and its subsidiaries.
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, 2015, 2014 and 2013;
• 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;
• our quarterly results for the years ended December 31, 2015, and 2014; 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.
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 economy in general, inflation,
product demand, the market for auto parts, competition, weather, risks associated with the performance of acquired businesses, our ability
to hire and retain qualified employees, consumer debt levels, our increased debt levels, credit ratings on public debt, governmental
regulations, terrorist activities, war and the threat of war. Actual results may materially differ from anticipated results described or implied
in these forward-looking statements. Please refer to the "Risk Factors" section of this annual report on Form 10-K for the year ended
December 31, 2015, 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.
OVERVIEW
We are a specialty retailer of automotive aftermarket parts, tools, supplies, equipment and accessories in the United States. We are one
of the largest U.S. automotive aftermarket specialty retailers, selling our products to both do-it-yourself ("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 margin 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. 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; professional paint shop mixing and related materials; and machine shops. As of December 31, 2015,
we operated 4,571 stores in 44 states.
Operating within the retail industry, we are influenced by a number of general macroeconomic factors including, but not limited to, fuel
costs, unemployment rates, consumer preferences and spending habits, and competition. We have ongoing initiatives aimed at tailoring
our product offering to adjust to customers' changing preferences and we also have 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.