O'Reilly Auto Parts 2000 Annual Report Download - page 18

2000 AR
16
Results of Operations
The following table sets forth certain income statement data as a
percentage of product sales for the years indicated:
Years ended December 31, 2000 1999 1998
Product sales 100.0% 100.0% 100.0%
Cost of goods sold, including
warehouse and distribution
expenses 57.0 56.9 58.2
Gross profit 43.0 43.1 41.8
Operating, selling, general
and administrative expenses 32.9 32.9 32.6
Operating income 10.1 10.2 9.2
Other expense, net (0.8) (0.5) (1.1)
Income before income taxes 9.3 9.7 8.1
Provision for income taxes 3.5 3.6 3.1
Net income 5.8% 6.1% 5.0%
2000 Compared to 1999
Product sales increased $136.3 million, or 18.1% from $754.1 million
in 1999 to $890.4 million in 2000, due to 101 net additional stores
opened during 2000, and a $28.0 million, or 4.0% increase in
same-store product sales for stores opened in both full periods.
We believe that the increased product sales achieved by the existing
stores are the result of our offering a broader selection of products
in most stores, an increased promotional and advertising effort
through a variety of media and localized promotional events, and
continued improvement in the merchandising and store layouts
of most stores. Also, our continued focus on serving professional
installers contributed to increased sales.
Gross profit increased 17.6% from $325.3 million (or 43.1% of
product sales) in 1999 to $382.7 million (or 43.0% of product
sales) in 2000.
Operating, selling, general and administrative expenses increased
$44.3 million from $248.4 million (or 32.9% of product sales) in
1999 to $292.7 million (or 32.9% of product sales) in 2000. The
increase in these expenses in dollar amount was primarily attributable
to increased salaries and benefits, rent and other costs associated
with the addition of employees and facilities to support the
increased level of our operations.
Other expense, net, increased by $3.0 million from $3.9 million in
1999 to $6.9 million in 2000. The increase was primarily due to
interest expense on increased borrowings under our credit facility.
Provision for income taxes increased from $27.4 million in 1999
(37.5% effective tax rate) to $31.5 million in 2000 (37.8% effective
tax rate). The increase in the dollar amount was primarily due to
the increase of income before income taxes. The nominal increase
in the effective tax rate was primarily due to changes in the
apportionment of sales between states with differing tax rates.
Principally as a result of the foregoing, net income in 2000 was
$51.7 million (or 5.8% of product sales), an increase of $6.1 million
(or 13.3%) from net income in 1999 of $45.6 million (or 6.1% of
product sales).
1999 Compared to 1998
Product sales increased $137.8 million, or 22.4% from $616.3 million
in 1998 to $754.1 million in 1999, due to 80 net additional stores
opened during 1999, and a $56.4 million, or 9.6% increase in
same-store product sales. We believe that the increased product
sales achieved by the existing stores are the result of our offering
of a broader selection of products in most stores, an increased
promotional and advertising effort through a variety of media and
localized promotional events, and continued improvement in the
merchandising and store layouts of most stores. Also, our continued
focus on serving professional installers contributed to increased sales.
Gross profit increased 26.2% from $257.9 million (or 41.8% of
product sales) in 1998 to $325.3 million (or 43.1% of product
sales) in 1999. The increase in gross profit margin was primarily
attributable to the continued improvements in our product acquisition
programs and improved buying power due to the number of net
new stores opened in 1999.
Operating, selling, general and administrative expenses increased
$47.4 million from $201.0 million (or 32.6% of product sales) in
1998 to $248.4 million (or 32.9% of product sales) in 1999. The
increase in these expenses in dollar amount and as a percentage of
sales primarily resulted from higher costs for employee medical
and workers’ compensation benefits, the continued conversion of
Hi-Lo Automotive, Inc. (“Hi/LO”) stores and distribution center, as
well as the addition of employees and facilities to support the
increased level of our operations.
Other expense, net, decreased by $3.1 million from $7.0 million in
1998 to $3.9 million in 1999. The decrease was primarily due to
the decrease in interest expense as a result of repayments of
indebtedness under our syndicated credit facility with a portion of
the net proceeds of our secondary offering.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS continued …
O'REILLY AUTOMOTIVE