O'Reilly Auto Parts 2015 Annual Report Download - page 32

FORM 10-K
24
We believe the key drivers of current and future demand of the products sold within the automotive aftermarket include the number of
U.S. miles driven, number of U.S. registered vehicles, new light vehicle registrations, average vehicle age and unemployment.
• Number of Miles Driven – The number of total miles driven in the U.S. influences the demand for repair and maintenance
products sold within the automotive aftermarket. According to the Department of Transportation, prior to 2007, the annual
number of total miles driven in the U.S. had steadily increased; however, between 2008 and 2013, as the U.S. experienced
difficult macroeconomic conditions and historically high levels of unemployment, the number of total miles driven in the U.S.
remained relatively flat. In 2014, as the U.S. economy began to recover, miles driven also improved increasing 1.7%, and for
2015, miles driven increased 3.5%. In total, vehicles in the U.S. are driven approximately three trillion miles per year, resulting
in ongoing wear and tear and continued demand for the repair and maintenance products sold within the automotive aftermarket.
We believe that as total employment continues to improve, total miles driven in the U.S. should continue to increase in line with
the historical trend of long-term annual growth.
• Number of U.S. Registered Vehicles, New Light Vehicle Registrations and Average Vehicle Age – The total number of
vehicles on the road and the average age of the vehicle population heavily influence the demand for products sold within the
automotive aftermarket industry. As reported by The Auto Care Association, the total number of registered vehicles increased
6% from 2004 to 2014, bringing the number of light vehicles on the road to 253 million by the end of 2014. For the year ended
December 31, 2015, the seasonally adjusted annual rate of light vehicles sales in the U.S. ("SAAR") was approximately 17.2
million, contributing to the continued growth in the total number of registered vehicles on the road. In the past decade, vehicle
scrappage rates have remained relatively stable, ranging from 4.6% to 5.7% annually. As a result, over the past decade, the
average age of the U.S. vehicle population has increased, growing 21%, from 9.4 years in 2004 to 11.4 years in 2014. We believe
this increase in average age can be attributed to better engineered and manufactured vehicles, which can be reliably driven at
higher mileages due to better quality power trains and interiors and exteriors, and the consumer's willingness to invest in
maintaining these higher-mileage, better built vehicles. As the average age of the vehicle on the road increases, a larger percentage
of miles are being driven by vehicles that are outside of a manufacturer warranty. These out-of-warranty, older vehicles generate
strong demand for automotive aftermarket products as they go through more routine maintenance cycles, have more frequent
mechanical failures and generally require more maintenance than newer vehicles. We believe consumers will continue to invest
in these reliable, higher-quality, higher-mileage vehicles and these investments, along with an increasing total light vehicle fleet,
will support continued demand for automotive aftermarket products.
• Unemployment – Unemployment, underemployment, the threat of future joblessness and the uncertainty surrounding the overall
economic health of the U.S. have a negative impact on consumer confidence and the level of consumer discretionary spending.
Long-term trends of high unemployment have historically impeded the growth of annual miles driven, as well as decrease
consumer discretionary spending, both of which negatively impact demand for products sold in the automotive aftermarket
industry. As of December 31, 2014, the U.S. unemployment rate was 5.6%, and as of December 31, 2015, the U.S. unemployment
rate decreased to 5.0%, its lowest rate in over seven years. We believe, total employment should continue to increase, and we
would expect to see a corresponding increase in commuter traffic as unemployed individuals return to work further aiding the
positive long-term trend of growth of total miles driven in the U.S. and demand for automotive aftermarket products. Aided by
the anticipated increase in commuter miles, we believe overall annual U.S. miles driven should continue to increase in line with
the historical trend of long-term annual growth, resulting in continued demand for automotive aftermarket products.
We remain confident in our ability to gain market share in our existing markets and grow our business in new markets by focusing on
our dual market strategy and the core O'Reilly values of hard work and excellent customer service.
KEY EVENTS AND RECENT DEVELOPMENTS
Several key events have had or may have a significant impact on our operations and are identified below:
• Under the Company's share repurchase program, as approved by our Board of Directors in January of 2011, we may, from time
to time, repurchase shares of our common stock, solely through open market purchases effected through a broker dealer at
prevailing market prices, based on a variety of factors such as price, corporate trading policy requirements and overall market
conditions. Our Board of Directors may increase or otherwise modify, renew, suspend or terminate the share repurchase program
at any time, without prior notice. As announced on February 4, 2015, May 29, 2015, and February 10, 2016, our Board of
Directors each time approved a resolution to increase the authorization amount under our share repurchase program by an
additional $500 million, $500 million and $750 million, respectively, resulting in a cumulative authorization amount of $6.25
billion. Each additional authorization is effective for a three-year period, beginning on its respective announcement date. As
of February 26, 2016, we had repurchased approximately 52.1 million shares of our common stock at an aggregate cost of $5.56
billion under this program.