O'Reilly Auto Parts 2009 Annual Report Download - page 43

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29
a non-cash charge to amortize the value assigned to CSK’s trade names and trademarks. Adjusted diluted earnings per share,
excluding the impact of the acquisition related charges, increased 38% to $2.26 for the year ended December 31, 2009, from $1.64 for
the same period one year ago. The table below outlines the impact of the acquisition related charges for the year ended December 31,
2009 and 2008 (in thousands, except per share data):
Net Income Diluted Earnings Per Share
2009 2008 2009 2008
Net income and diluted EPS excluding acquisition related charges
$
311,392
$
205,474
$
2.26
$
1.64
Acquisition related charges:
Debt prepayment costs, net of tax
--
4,402
--
0.04
Commitment fee for interim financing facility, net of tax
--
2,552
--
0.02
Adjustments to tax liabilities
--
3,142
--
0.02
Charge to conform vacation policies, net of tax
--
5,879
--
0.05
Amortization of trade names and trademarks, net of tax
3,894
3,267
0.03
0.03
Net income and diluted EPS $
307,498
$
186,232
$
2.23
$
1.48
The acquisition-related adjustment to EPS in the above paragraph and table present certain financial information not derived in
accordance with GAAP. We do not, nor do we suggest investors should, consider such non-GAAP financial measures in isolation
from, or as a substitute for, GAAP financial information. We believe that the presentation of adjusted net income and earnings per
share excluding acquisition-related charges provides meaningful supplemental information to both management and investors that is
indicative of the Company’s ongoing core operations. Management excludes these items in judging our performance and believes this
non-GAAP information is useful to gain an understanding of the recurring factors and trends affecting our business. Material
limitations of this non-GAAP measure are that such measures do not reflect actual GAAP amounts and amortization of acquisition-
related trade names and trademarks reflect charges to net income and earnings per share that will recur over the estimated useful lives
of the assets ranging from one to three years. We compensate for such limitations by presenting, in the table above, the accompanying
reconciliation to the most directly comparable GAAP measures.
2008 Compared to 2007
Sales increased $1.05 billion, or 42%, from $2.52 billion in 2007 to $3.58 billion in 2008, due to the acquisition of 1,342 CSK stores
and the addition of 150 net new O’Reilly stores opened during 2008. The following table presents the components of the increase in
sales for the year ended December 31, 2008 (in millions):
Increase in Sales for the Year
Ended December 31, 2008,
compared to the same period in
2007
Comparable store sales – O’Reilly stores $ 65.0
Stores opened throughout 2007, excluding
stores open at least one year that are
included in comparable stores sales 92.3
Sales of stores opened through 2008 61.8
Non-store sales including machinery, sales to
independent part stores and team members (1.1)
Acquired CSK stores 836.2
Total increase in sales $ 1,054.2
We believe that the increased sales achieved by our existing stores is the result of superior inventory availability, a broader selection of
products in most stores, targeted promotional and advertising efforts through a variety of media and localized promotional events,
continued improvement in the merchandising and layout of stores, compensation programs for all store team members that provide
incentives for performance and our continued focus on serving professional installers. Consolidated comparable store sales for stores
open at least one year increased 1.5% for the year ended December 31, 2008. This increase in 2008 was less than the prior year’s
increase of 3.7% and historical trends primarily due to challenging external macroeconomic factors in 2008 as well as a decline in
comparable store sales in the stores added in the CSK acquisition. The external macroeconomic factors which we believe negatively
impacted our sales were constraints on our customers’ discretionary income resulting from inflation, declining home and investment
asset values, higher gas prices in early 2008, increased unemployment and the impact of a contraction in the US economy.
Comparable store sales for O’Reilly stores, including CSK stores after conversion to the O’Reilly brand, but excluding the acquired,
yet-to-be-converted CSK stores, increased 2.6% for the year ended December 31, 2008. Comparable store sales for acquired CSK