O'Reilly Auto Parts 2013 Annual Report Download - page 32

FORM 10-K
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We believe these ongoing initiatives targeted at marketing higher quality products will result in our customers’ willingness 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.
We believe the key drivers of current and future demand of the products sold within the automotive aftermarket include the number of
U.S. miles driven, number of U.S. registered vehicles, new light vehicle registrations, average vehicle age and unemployment.
 Number of Miles Driven - The number of total miles driven in the U.S. influences the demand for repair and maintenance
products sold within the automotive aftermarket. According to the Department of Transportation, prior to 2007, the annual
number of total miles driven in the U.S. had steadily increased; however, since that time, as the U.S. experienced difficult
macroeconomic conditions and historically high levels of unemployment, the number of total miles driven in the U.S. have
remained relatively flat. Although total miles driven have not significantly increased since 2007, vehicles in the U.S. continue
to be driven approximately three trillion miles per year, resulting in ongoing wear and tear and continued demand for the repair
and maintenance products sold within the automotive aftermarket. In addition, we believe that as the U.S. economy continues
to recover and the level of unemployment declines, total miles driven in the U.S. will return to a period of annual growth,
supporting continued demand for automotive aftermarket products.
 Number of U.S. Registered Vehicles, New Light Vehicle Registrations and Average Vehicle Age - The total number of
vehicles on the road and the average age of the vehicle population heavily influence the demand for products sold within the
automotive aftermarket industry. As reported by the Automotive Aftermarket Industry Association (“AAIA”), the total number
of registered vehicles has increased 8% over the past decade, from 229 million light vehicles in 2002 to 247 million light vehicles
in 2012. Annual new light vehicle registrations declined 14% over the past decade, from 16.7 million registrations in 2002 to
14.3 million registrations in 2012; however, the seasonally adjusted annual rate (the “SAAR”) of sales of light vehicles in the
U.S. increased to 15 million as of December 31, 2013, indicating that the trend of declining new light vehicle registrations has
reversed. In addition, during the past decade, vehicle scrappage rates remained relatively stable, ranging from just 4.6% to 5.7%
annually. The stable scrappage rates over the past decade have contributed to an increase in the average age of the U.S. vehicle
population over that period, growing 16%, from 9.6 years in 2002 to 11.1 years in 2012. We believe this increase in average
age can be attributed to better engineered and manufactured vehicles, which can be reliably driven at higher mileages due to
better quality power trains and interiors and exteriors, and the consumer’s willingness to invest in maintaining these higher-
mileage, better built vehicles. As the average age of the vehicle on the road increases, a larger percentage of miles are being
driven by vehicles which are outside of a manufacturer warranty. These out-of-warranty, older vehicles generate strong demand
for automotive aftermarket products as they go through more routine maintenance cycles, have more frequent mechanical failures
and generally require more maintenance than newer vehicles. As the U.S. economy recovers, we believe consumers will continue
to invest in these reliable, higher-quality, higher-mileage vehicles and these investments, along with an increasing total light
vehicle fleet, will support continued demand for automotive aftermarket products.
 Unemployment - Unemployment, underemployment, the threat of future joblessness and the continued uncertainty surrounding
the overall economic health of the U.S. have had a negative impact on consumer confidence and the level of consumer discretionary
spending. Long-term trends of high unemployment could continue to impede the growth of annual miles driven, as well as
decrease consumer discretionary spending, both of which negatively impact demand for products sold in the automotive
aftermarket industry. However, as of December 31, 2013, the U.S. unemployment rate decreased to 6.7%, its lowest rate in over
five years. We believe that as the economy continues to recover, unemployment rates should decline and we would expect to
see a corresponding increase in commuter traffic as unemployed individuals return to work. Aided by the anticipated increase
in commuter miles, we believe overall annual U.S. miles driven should return to a period of annual growth, resulting in continued
demand for automotive aftermarket products.
We remain confident in our ability to gain market share in our existing markets and grow our business in new markets by focusing on
our dual market strategy and the core O’Reilly values of hard work and excellent customer service.
KEY EVENTS AND RECENT DEVELOPMENTS
Several key events have had or may have a significant impact on our operations and are identified below:
 Under the Company’s share repurchase program, as approved by the Board of Directors in January of 2011, the Company may,
from time to time, repurchase shares of its common stock, solely through open market purchases effected through a broker dealer
at prevailing market prices, based on a variety of factors such as price, corporate trading policy requirements and overall market
conditions. The Company and its Board of Directors may increase or otherwise modify, renew, suspend or terminate the share
repurchase program at any time, without prior notice. The Company’s Board of Directors approved resolutions to increase the
authorization under the share repurchase program by an additional $500 million, which was announced on May 29, 2013, and
an additional $500 million, which was announced on February 5, 2014, raising the cumulative authorization under the share
repurchase program to $4.0 billion. These additional $500 million authorizations are effective for a three-year period following