O'Reilly Auto Parts 2002 Annual Report Download

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2002 Annual Report 1
O’REILLY AUTOMOTIVE 2002 ANNUAL REPORT
Our growth strategies are perfectly aligned with the needs of the
automotive industry. Our operating strategies give us the competitive
advantage. Our culture is the key to our growth.
driven by
demand

Table of contents

  • Page 1
    ... omot iv e indus t r y. O ur operat ing s t rat egies giv e us t he c ompet it iv e adv ant age. O ur c ult ur e is t he k ey t o our grow t h. 2002 Annual Repor t 1

  • Page 2
    OUR INDUSTRY DRIVES demand

  • Page 3
    ... number of licensed drivers, vehicles on the road and a growing popularity for road travel. O UR INDUS T RY X X X X X AGE OF AUTO FLEET NOW 8.9 YEARS MILES DRIVEN 2.8 TRILLION INCREASE IN SUV AND LIGHT TRUCK POPULATION OVER 216 MILLION VEHICLES REGISTERED MORE CARS IN PRIME REPAIR AGE 2001 1 2002...

  • Page 4
    DEMAND DRIVES results

  • Page 5
    ... demand for auto parts and accessories. Our 2-4-Your Future initiative, representing our goal to reach $2 billion in sales per year by December 31, 2005, demonstrates this commitment. EARNINGS PER SHARE (assuming dilution) NUMBERS OF STORES PRODUCT SALES (in billions) $1.31 2002 3 $1.53 $0.62...

  • Page 6
    .... 981 ST ORES 9 DIST RIBUT ION CENT ERS OV ER 14, 000 T EAM MEMBERS Each O'Reilly store is clean, well-lighted and conveniently located. But, more important, is having the right parts available for our customers at a price that represents true value. A fleet of 81 heavy trucks, 91 tractors...

  • Page 7
    ... 2 4 STORES Des M oines DIST RIBUT ION CENT ER ILLINOIS 1 0 STORES Kansas City INDIANA 5 STORES KANSAS 5 5 STORES M ISSOURI 1 3 0 STORES KENTUCKY 1 1 STORES Nashville Little Rock Springfield OKLAHOM A 9 9 STORES Oklahoma City ARKANSAS 6 7 STORES TENNESSEE 6 1 STORES Knoxville Dallas TEXAS...

  • Page 8
    ... LT U R E . C ompet it iv e A dv ant age: S T R AT E G I C D I S T R I B U T I O N SY ST EMS Our promise is to have the r i g h t p a r t fo r t h e r i g h t p r i c e a t t h e ...in-w in at t it ude ar e v alues t hat our t eam embrac es . O ur t eam k now s t hat t o r eac h our 2 -4 -Your Fut ur...

  • Page 9
    ...later, O'Reilly Auto Parts has nearly 1,000 stores in 16 states, over 14,000 team members and overnight service on over 100,000 inventory items from nine distribution centers. Over the years much has changed, but the O'Reilly Culture remains the same. Excellent customer service from our professional...

  • Page 10
    ... on assets. Our distribution centers are strategically located in Little Rock, Arkansas; Des Moines, Iowa; Kansas City and Springfield, Missouri; Oklahoma City, Oklahoma; Knoxville and Nashville, Tennessee; and Houston and Dallas, Texas. Combined, these nine distribution centers contain 1,945,690...

  • Page 11
    ..., tools and equipment to meet the needs of their businesses. Our DIY customers have grown to trust and rely on the quality and service that they receive from our professional parts people. Not only are O'Reilly stores conveniently located and provide a large inventory with a low-price guarantee...

  • Page 12
    C OMPET IT IV E A DVA NTA GE: strategic distribution systems

  • Page 13
    O'Reilly meets the demands of our customers with a sophisticated point-of-sale system allowing stores to order even hard-to-find parts directly from one of our nine distribution centers. Parts are shipped and delivered daily to all of our stores. 2002 Annual Repor t 11

  • Page 14
    C OMPET IT IV E A DVA NTA GE: dual market strategy

  • Page 15
    O'Reilly successfully balances serving both professional installers and do-it-yourself customers. This strategy allows for greater market penetration in the areas that we serve and provides unparalleled access to a broad range of parts. 2002 Annual Repor t 13

  • Page 16
    C OMPET IT IV E A DVA NTA GE: team o'reilly

  • Page 17
    O'Reilly team members are among the most dedicated in the industry, continually focusing on customer service and taking pride in a job well done. 2002 Annual Repor t 15

  • Page 18
    ... us t o me r s e r v ic e is mo r e t han jus t me e t ing t he bas ic ne e ds o f o ur c us t o me rs , it ' s abo ut g o ing t he e x t ra mile . T his is w hy o ur t e am striv es for per fection in ev ery area: competitiv e prices, fully stocked s helv es , friendly t eam members , broad inv ent...

  • Page 19
    2002 Annual Repor t 17

  • Page 20
    18 O ' R e i l l y A u t o m o t i v e

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    2002 Annual Repor t 21

  • Page 24
    22 O ' R e i l l y A u t o m o t i v e

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  • Page 27
    ... rong indus t r y t r ends . O ur s t or e ex pans ion plans c all for 1 3 0 new new s t or es in 2 0 0 3 , loc at ed primarily w it hin t he new mark et s r elat ing t o t he M id-S t at e ac quis it ion in 2 0 0 1 . T hes e ex pans ion plans ar e s uppor t ed by a s t rong balanc e s heet and v er...

  • Page 28
    ... DECEMBER 31, 2002 2001 2000 INCOME STATEMENT DATA: Product sales Cost of goods sold, including warehouse and distribution expenses Gross profit Operating, selling, general and administrative expenses Operating income Other income (expense), net Provision for income taxes Income from continuing...

  • Page 29
    ...,782 $ 80,471 153,604 231 358 133,870 $ 41,416 87,327 311 461 70,224 $ 41,193 73,112 495 732 57,805 2002 Annual Repor t 27

  • Page 30
    ... ("DIY") customers and professional installers. Our stores carry an extensive product line consisting of new and remanufactured automotive hard parts, maintenance items and accessories, and a complete line of auto body paint and related materials, automotive tools and professional service equipment...

  • Page 31
    ...reductions in payroll, benefits and other OSG&A expenses through management's expense control initiatives. Other expense, net, increased by $215,000 from $7.1 million in 2001 to $7.3 million in 2002. The increase was primarily due to interest expense on increased borrowings under our credit facility...

  • Page 32
    ... in cash provided by operating activities in 2002 compared to 2001 is primarily due to increases in net income, accounts payable, income taxes payable, accrued payroll and accrued benefits and withholdings, partially offset by increases in receivables and inventory. The increase in cash provided by...

  • Page 33
    ... in 2003 as new stores. We remodeled or relocated 27 stores in 2002, 16 stores in 2001 and 8 stores in 2000. Three new distribution centers were acquired; two in October 2001, located in Nashville, Tennessee and Knoxville, Tennessee, and one in October 2000, located in Little Rock, Arkansas. Our...

  • Page 34
    ... Stockholder Rights Plan was filed on May 28, 2002, with the Securities and Exchange Commission, as Exhibit 99.1 to our report on Form 8-K. NEW ACCOUNTING STANDARDS In August 2001, the Financial Accounting Standards Board issued Statements of Financial Accounting Standards No. 144, Ac c o unting fo...

  • Page 35
    ... 2002, the Financial Accounting Standards Board issued Statement No. 148, Ac c o unting fo r Sto c kBas e d Co mpe ns atio n - Trans itio n and Dis c lo s ure , amending SFAS 123, Ac c o unting fo r Sto c k-Bas e d Co mpe ns atio n. SFAS 148 gives companies electing to expense employee stock...

  • Page 36
    ... 34,517 392,365 103,361 289,004 2,557 14,635 $1,009,419 $ 856,859 Current liabilities: Notes payable to bank Income taxes payable Accounts payable Accrued payroll Accrued benefits and withholdings Other current liabilities Current portion of long-term debt Total current liabilities Long-term debt...

  • Page 37
    ... ENDED DECEMBER 31, 2002 2001 2000 Product sales Cost of goods sold, including warehouse and distribution expenses Operating, selling, general and administrative expenses Operating income Other income (expense): Interest expense Interest income Other, net Income before income taxes Provision for...

  • Page 38
    ... under stock option plans Tax benefit of stock options exercised Net income Balance at December 31, 2001 Issuance of common stock under employee benefit plans Issuance of common stock under stock option plans Tax benefit of stock options exercised Net income Balance at December 31, 2002 Se e ac...

  • Page 39
    ... stock contributed to employee benefit plans Tax benefit of stock options exercised Changes in operating assets and liabilities, net of the effects of the acquisition: Accounts receivable Amounts receivable from vendors Inventory Refundable income taxes Other current assets Accounts payable Income...

  • Page 40
    ...automotive aftermarket parts, tools, supplies and accessories to both the "DIY" customer and the professional installer throughout Alabama, Arkansas, Florida, Georgia, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Mississippi, Missouri, Nebraska, North Carolina, Oklahoma, Tennessee and Texas...

  • Page 41
    ...December 2002, the Financial Accounting Standards Board issued Statement No. 148, Ac c o unting fo r Sto c kBas e d Co mpe ns atio n - Trans itio n and Dis c lo s ure , amending SFAS 123, Ac c o unting fo r Sto c k-Bas e d Co mpe ns atio n. SFAS 148 gives companies electing to expense employee stock...

  • Page 42
    ... or results of operations. Shareholder Rights Plan On May 17, 2002, the Board of Directors adopted a Shareholder Rights Plan. One Right was distributed for each share of common stock, par value $.01 per share, of the Company held by stockholders of record as of the close of business on May 31...

  • Page 43
    ...DEBT On July 29, 2002, the Company completed an unsecured, three-year syndicated credit facility (the "Credit Facility") in the amount of $150 million led by Wells Fargo Bank as the Administrative Agent replacing a five-year syndicated credit facility. The Credit Facility is guaranteed by all of our...

  • Page 44
    ... shareholders of the Company). The transaction closed on September 1, 2001, with a purchase price of approximately $5.6 million for nine O'Reilly Auto Parts stores and did not result in a material gain or loss. The lease, which has been accounted for as an operating lease, calls for an initial...

  • Page 45
    ... certain health benefits to qualified retired employees. According to the terms of this plan, retirees' annual benefits are limited to $1,000 per employee starting at age 66 for employees with 20 or more years of service. Post-retirement benefit costs for each of the years ended December 31, 2002...

  • Page 46
    ...exercisable at December 31, 2002, 2001 and 2000, respectively. The Company also maintains a stock option plan for non-employee directors of the Company under which 300,000 shares of common stock are reserved for future issuance. All director stock options are granted at fair market value on the date...

  • Page 47
    ... Company's pro forma information for the years ended December 31, is as follows: (In tho us ands , e xc e pt pe r s hare data) 2002 2001 2000 Net income as reported Stock-based compensation expense as reported Stock-based compensation expense under fair value method Pro forma net income Pro forma...

  • Page 48
    ... for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax assets and liabilities are as follows at December 31: (In tho us ands ) 2002 2001 Deferred tax assets: Current: Allowance for doubtful accounts Inventory carrying...

  • Page 49
    ... 31, 2002, and 2001, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2002, in conformity with accounting principles generally accepted in the United States. Kansas City, Missouri February 21, 2003 2002 Annual Repor...

  • Page 50
    ...in the 2002 Annual Report to Shareholders of O'Reilly Automotive, Inc. and Subsidiaries. Our audits also included the consolidated financial statements schedule of O'Reilly Automotive, Inc. and Subsidiaries listed in Item 14(a). These schedules are the responsibility of the Company's management. Our...

  • Page 51
    ...Bragg Director of Oklahoma Region Mary Brown Director of Human Resources Mike Chapman Director of Dallas/Fort Worth Region Keith Childers Director of Little Rock Region Ken Cope Director of Nashville Region Charlie Downs Director of Store Expansion Joe Edwards Director of Store Installation Phyllis...

  • Page 52
    ... Service Equipment Sales Manager Lori Fuzzell Customer Service Manager Art Glidewell Dallas Distribution Center Manager David Glore Ozark Sales Manager Garry Glossip Store Accounting Manager Ron Greenway Tax Manager Larry Gregory Real Estate Store Maintenance Manager Kevin Greven Retail Marketing...

  • Page 53
    ... Reaves Benefits Manager Art Rodriguez Regional Sales Manager Chuck Rogers Installer Systems Manager Mary Sabor Distribution Center Administrative Services Manager Rick Samsel Inventory Control Manager Joyce Schultz Houston Office Manager Tom Seboldt Senior Product Manager Bill Seiber Knoxville...

  • Page 54
    ... N CORPORATE ADDRESS 233 South Patterson Springfield, Missouri 65802 417/862-3333 Web site - www.oreillyauto.com REGISTRAR AND TRANSFER AGENT UMB Bank 928 Grand Boulevard Kansas City, Missouri 64141-0064 Inquiries regarding stock transfers, lost certificates or address changes should be directed to...

  • Page 55
    ... supplier of auto parts in our market areas by offering our retail customers, professional installers and jobbers the best combination of inventory, price, quality and service; providing our team members with competitive wages and benefits, and working conditions which promote high achievement and...

  • Page 56
    233 South Patterson Springfield, Missouri 65802 417-862-3333 www.oreillyauto.com 1 O'Reilly Automotive