O'Reilly Auto Parts 2015 Annual Report Download - page 4

O’REILLY AUTOMOTIVE 2015 ANNUAL REPORT • 2
Growth for the sake of growth, however, is not our focus;
rather, we are absolutely committed to sustainable, prot-
able growth. Our focus on actively managing our expenses
translated our robust sales performance into a record high
operating prot of 19.0% and diluted earnings per share
growth of 25%, which is our seventh consecutive year of
20% or greater earnings per share growth. We also returned
more than $1.1 billion to you, our shareholders, during
2015 in the form of share repurchases.
Since 1957, O’Reilly has been a Company dedicated to
providing unsurpassed levels of service to our customers.
Our customer service Culture, our single greatest competi-
tive advantage, was the driving force behind our record-
breaking performance in 2015 and will be the key to our
ongoing success in the future. Our ability to deliver
consistently outstanding customer service is
the direct result of our dedicated Team
Members, who are committed to living
the O’Reilly Culture Values every
day. Our top priority in 2016, and
beyond, will be to continue to iden-
tify, hire, and develop exceptional
Team Members, instilling in them
our Culture Values of hard work,
enthusiasm, professionalism,
teamwork, respect, and honesty.
At O’Reilly, this is what it means
to be a Professional Parts Person.
We value and appreciate each and
every customer who walks into
or calls our stores, from the do-
it-yourself customer to the profes-
sional service provider. Our custom-
ers depend on our Professional Parts
People to be knowledgeable, resourceful,
and friendly. Our Team is dedicated to liv-
ing the O’Reilly Culture and building strong and
lasting relationships with every customer in each market
we serve.
We understand our Team Members cannot provide great
service to customers unless they have access to the parts
our customers need. We lead the industry in parts avail-
ability, and our competitive advantage starts with a very
robust, tiered, regional distribution network made up of 26
distribution centers, which replenish our stores at least ve
nights a week from inventories that average 146,000 SKUs.
By servicing our stores ve nights a week, we are able to de-
ploy our inventory dollars in a greater breath of inventory
at the store level, versus carrying a greater depth of invento-
ry that would be required if our stores were replenished less
oen from the DCs. is breadth of inventory means we
will be much more likely to have a part in stock in the store
when a customer needs it. We further augment our store-
level inventory availability by providing more than 95% of
our stores with same day access to a broader selection of
hard-to-nd inventory through multiple daily deliveries
from either a DC or an expanded inventory HUB store,
which stock on average 44,000 SKUs. Our customer service
commitment is to “never say no,” and we will remain the
industry leader in parts availability, providing our Team
Members with the tools necessary to provide extremely
high levels of service and earn customers’ business.
Our dedicated Team’s focus on consistently providing top-
notch customer service allowed us to capitalize on 2015’s fa-
vorable industry backdrop. e biggest driver to long term
demand in our industry is total miles driven in
the U.S., and in 2015, miles driven increased
a very healthy 3.5%, leading to increased
wear and tear on vehicles and creating
demand for the products we provide.
e increase in miles driven has
been supported, in part, by very
favorable gasoline prices, as well
as a continued increase in U.S.
total employment levels. Another
driver for long-term industry
demand is the size and age of the
vehicle eet. Approximately 17.2
million new cars were sold in the
U.S. in 2015, while vehicle scrap-
page rates remained stable, result-
ing in a growing total eet. More
importantly, however, is the quality
of the new cars that have entered the
eet over the past decade. ese better-
engineered and manufactured vehicles
have the ability to stay on the road longer
and can be reliably driven at very high mileages
resulting in more routine maintenance cycles. e dynamic
of better quality new vehicles entering the eet and stable
scrappage rates has resulted in an increase in the average
vehicle age to 11.4 years. ese properly maintained, older
vehicles generate strong demand for our products and,
while the manufactured quality of these vehicles requires
less frequent repairs, when the repairs do occur the average
repair cost is greater, resulting in higher average ticket sales
for our business.
A strong industry backdrop and our Team’s outstanding
performance resulted in more than $867 million in free
cash ow generation for O’Reilly in 2015. As our consistent
track record of success has shown us, the best use of the
cash we generate is to reinvest in our Company by main-
“
Our Team
is dedicated to living
the O’Reilly Culture
and building strong
and lasting relationships
with every customer in
each market we serve.”
GREG HENSLEE
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