O'Reilly Auto Parts 2001 Annual Report Download - page 18

O’REILLY AUTOMOTIVE 2001 ANNUAL REPORT
A MODEL YEAR
Page 16
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
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, 2001 2000 1999
Product sales 100.0% 100.0% 100.0%
Cost of goods sold, including warehouse
and distribution expenses 57.2 57.0 56.9
Gross profit 42.8 43.0 43.1
Operating, selling, general and
administrative expenses 32.4 32.9 32.9
Operating income 10.4 10.1 10.2
Other expense, net (0.6) (0.8) (0.5)
Income before income taxes 9.8 9.3 9.7
Provision for income taxes 3.7 3.5 3.6
Net income 6.1% 5.8% 6.1%
2001 COMPARED TO 2000
Product sales increased $201.7 million, or 22.7% from $890.4 million
in 2000 to $1.09 billion in 2001, primarily due to 121 net additional
stores opened during 2001, an 8.8% increase in same-store product
sales for stores open at least one year and the acquisition of 82
stores in connection with the purchase of Mid-State, effective
October 1, 2001. 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 22.2% from $382.7 million (or 43.0% of
product sales) in 2000 to $467.8 million (or 42.8% of product sales)
in 2001.
Operating, selling, general and administrative expenses increased
$61.3 million from $292.7 million (or 32.9% of product sales) in 2000
to $354.0 million (or 32.4% of product sales) in 2001. 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 $234,000 from $6.9 million in
2000 to $7.1 million in 2001. The increase was primarily due to interest
expense on increased debt levels related to the issuing of $100 million
of senior notes, partially offset by lower interest expense on borrow-
ings under the revolving credit facility due to lower interest rates.
Provision for income taxes increased from $31.5 million in 2000
(37.8% effective tax rate) to $40.4 million in 2001 (37.8% effective tax
rate). The increase in the dollar amount was due to the increase in
the amount of income before income taxes.
Principally as a result of the foregoing, net income in 2001 was
$66.4 million (or 6.1% of product sales), an increase of $14.6 million
(or 28.3%) from net income in 2000 of $51.7 million (or 5.8% of
product sales).
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 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 con-
tributed 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.