O'Reilly Auto Parts 2012 Annual Report Download - page 10

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Free Cash Flow and Share Repurchases
Through our focus on a combination of profitable growth and
increased productivity of our net inventory investment, we
generated a record $950 million in free cash flow during 2012,
which represented a 20% increase over our 2011 record free
cash flow of $791 million. This significant achievement is due in
large part to the execution of the comprehensive financing plan
we established at the beginning of 2011, when we received our
inaugural investment grade credit ratings and re-launched a
very attractive supplier financing program. We have been very
pleased with the success of the supplier financing program
over the past two years, which has allowed us to decrease our
working capital requirements by $781 million, and we will work
to continue to grow this program in the future.
In August of 2012, we issued $300 million in investment-grade,
credit-rated senior notes. This issuance was a component of our
comprehensive financing plan aimed at optimizing our capital
structure, and we will continue to incrementally increase our
leverage as we cautiously, but constructively, move closer to
our targeted leverage ratio of 2.00 to 2.25 times adjusted debt to
adjusted EBITDAR. We are steadfastly committed to maintaining
and improving our investment grade credit ratings, and will
ensure we maintain adequate liquidity to execute our profitable
growth plans.
By effectively executing our comprehensive financing plan and
generating record free cash flow, we have been able to directly
return $2.6 billion in value to our shareholders over the past two
years by repurchasing 34 million shares at an average price of
$76.37. These share repurchases, along with our strong top-line
sales growth and record 15.8% operating margin, generated
an outstanding 25% increase in 2012 adjusted diluted earnings
per share. After we have invested in our profitable growth and
exhausted any potentially accretive acquisition opportunities, we
expect to continue to directly return value to our shareholders in
2013 through share repurchases.
Looking Forward to 2013
As we look ahead to 2013, we are excited about the opportunities
to continue to profitably grow market share and enhance
shareholder value. We continue to identify and mentor the
next generation of store managers and are confident that the
190 new stores we will open from coast to coast will be staffed
with great leaders, supported by strong teams, who are ready
to provide industry leading customer service. We will continue
our growth into central Florida, which will be supported by a
new, state-of-the-art distribution center scheduled to open in
Lakeland, Florida, during the first quarter of 2014. Our recently
acquired VIP stores will be converted to our systems and signage
during the year, and we are anxious to begin implementing
our Dual Market Strategy as we use these acquired stores
as a springboard for expansion in the New England market.
Most importantly, we will continue to perpetuate our
Culture throughout the Company and remain focused on the
fundamental tool that has been the backbone to our success and
will be the catalyst of our future profitable growth - consistent,
superior customer service.
We are very grateful to each of our shareholders for your
ongoing support and are honored that you have placed your
trust in O’Reilly, and we remain committed to continuing our
long track record of strong and profitable growth. Finally, we
would like to again thank our Team Members for their many
contributions to our continued success. We are very proud of
our strong financial performance in 2012 and we look forward to
another great year in 2013.
8
O’REILLY AUTOMOTIVE 2012 ANNUAL REPORT
GREG HENSLEE
Chief Executive Officer
and President
THOMAS MCFALL
Chief Financial Officer
and Executive Vice President of Finance
Experienced Management Team
With more than 285 years of automotive industry
experience, O’Reilly’s executive management team
provides something that not all companies can brag
about – proven leaders who know the ins and outs of
their business from having worked in virtually every
facet of the Company.
Front row, left to right: Tony Bartholomew,
Randy Johnson, Greg Henslee, Jeff Shaw, Tom McFall
Back row, left to right: David O’Reilly, Ted Wise,
Mike Swearengin, Greg Johnson, Steve Jasinski