O'Reilly Auto Parts 2011 Annual Report Download - page 36

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Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
In Management’s Discussion and Analysis, we provide a historical and prospective narrative of our general financial condition, results
of operations, liquidity and certain other factors that may affect our future results, including:
an overview of the key drivers of the automotive aftermarket industry;
key events and recent developments within our company;
our results of operations for the years ended 2011, 2010 and 2009;
our liquidity and capital resources;
any off-balance sheet arrangements we utilize;
any contractual obligations to which we are committed;
our critical accounting estimates;
the inflation and seasonality of our business;
our quarterly results for the years ended December 31, 2011, and 2010; and
recent accounting pronouncements that may affect our company.
The review of Management’s Discussion and Analysis should be made in conjunction with our consolidated financial statements,
related notes and other financial information included elsewhere in this annual report.
FORWARD-LOOKING STATEMENTS
We claim the protection of the safe-harbor for forward-looking statements within the meaning of the Private Securities Litigation
Reform Act of 1995. You can identify these statements by forward-looking words such as ―expect,‖ ―believe,‖ ―anticipate,‖ ―should,‖
―plan,‖ ―intend,‖ ―estimate,‖ ―project,‖ ―will‖ or similar words. In addition, statements contained within this annual report that are not
historical facts are forward-looking statements, such as statements discussing among other things, expected growth, store
development, integration and expansion strategy, business strategies, future revenues and future performance. These forward-looking
statements are based on estimates, projections, beliefs and assumptions and are not guarantees of future events and results. Such
statements are subject to risks, uncertainties and assumptions, including, but not limited to, competition, product demand, the market
for auto parts, the economy in general, inflation, consumer debt levels, governmental regulations, our increased debt levels, credit
ratings on our public debt, our ability to hire and retain qualified employees, risks associated with the performance of acquired
businesses such as CSK Auto Corporation (―CSK‖), weather, terrorist activities, war and the threat of war. Actual results may
materially differ from anticipated results described or implied in these forward-looking statements. Please refer to the ―Risk Factors‖
section of this annual report on Form 10-K for the year ended December 31, 2011, for additional factors that could materially affect
our financial performance. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new
information, future events or otherwise.
OVERVIEW
We are a specialty retailer of automotive aftermarket parts, tools, supplies, equipment and accessories in the United States. We are
one of the largest automotive aftermarket specialty retailers, selling our products to both do-it-yourself (―DIY‖) customers and
professional service providers. Our stores carry an extensive product line consisting of new and remanufactured automotive hard
parts, maintenance items, accessories, a complete line of auto body paint and related materials, automotive tools and professional
service provider service equipment. Our extensive product line includes an assortment of products that are differentiated by quality
and price for most of the product lines we offer. For many of our product offerings, this quality differentiation reflects ―good‖,
―better‖, and ―best‖ alternatives. Our sales and total gross margin dollars are highest for the ―best‖ quality category of products.
Consumers’ willingness to select products at a higher point on the value spectrum is a driver of sales and profitability in our industry.
As of December 31, 2011, we operated 3,740 stores in 39 states.
Operating within the retail industry, we are influenced by a number of general macroeconomic factors including, but not limited to,
fuel costs, unemployment rates, consumer preferences and spending habits and competition. The difficult conditions that affected the
overall macroeconomic environment in recent years continue to impact O’Reilly and the retail sector in general. We believe that the
average consumer’s tendency has been to ―trade-down‖ to lower quality products during the recent challenging macroeconomic
conditions. We have ongoing initiatives aimed at tailoring our product offering to adjust to customers’ changing preferences;
however, we also continue to have initiatives focused on marketing and training to educate customers on the advantages of purchasing
up on the value spectrum.
We have ongoing initiatives targeted at marketing higher quality products to our customers and expect our customers to be more
willing to return to purchasing up on the value spectrum in the future as the U.S. economy recovers; however, we cannot predict
whether, when, or the manner in which, these economic conditions will change.
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FORM 10-K