O'Reilly Auto Parts 2003 Annual Report Download - page 31

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management’s discussion and analysis
of financial condition and results of operations (continued)
page 29
Stock-based compensation – We have elected to use the intrinsic value method of accounting for stock options issued under our
stock option plans and accordingly do not record an expense for such stock options. For purposes of pro forma disclosures under
the fair value method, the estimated fair value of the options is amortized to expense over the options’ vesting period.
Our pro forma information for the years ended December 31, is as follows:
(In thousands, except per share data) 2003 2002 2001
Net income as reported $100,087 $81,992 $66,352
Stock-based compensation expense as reported –––
Stock-based compensation expense under fair value method 9,204 7,217 5,406
Pro forma net income $ 90,883 $74,775 $60,946
Pro forma basic net income per share $1.69 $1.41 $1.17
Pro forma net income per share - assuming dilution $1.67 $1.39 $1.15
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, 2003 2002 2001
Product sales 100.0% 100.0% 100.0%
Cost of goods sold, including warehouse
and distribution expenses 57.8 57.8 57.2
Gross profit 42.2 42.2 42.8
Operating, selling, general and administrative expenses 31.3 31.6 32.4
Operating income 10.9 10.6 10.4
Other expense, net (0.3) (0.6) (0.6)
Income before income taxes 10.6 10.0 9.8
Provision for income taxes 4.0 3.7 3.7
Net income 6.6% 6.3% 6.1%
2003 compared to 2002
Product sales increased $199.3 million, or 15.2% from $1.31 billion in 2002 to $1.51 billion in 2003, primarily due to 128 net
additional stores opened during 2003, and a 7.8% increase in same-store product sales for stores open at least one year. 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 product sales.