O'Reilly Auto Parts 2014 Annual Report Download - page 36

FORM 10-K
29
Liquidity and related ratios:
The following table highlights our liquidity and related ratios as of December 31, 2014 and 2013 (dollars in millions):
December 31, Percentage
Change
Liquidity and Related Ratios 2014 2013
Current assets $ 3,067 $ 2,835 8.2 %
Current liabilities 2,831 2,423 16.8 %
Working capital (1) 236 412 (42.7)%
Total debt 1,397 1,396 0.1 %
Total equity $ 2,018 $ 1,966 2.6 %
Debt to equity (2) 0.69:1 0.71:1 (2.8)%
(1) Working capital is calculated as current assets less current liabilities.
(2) Debt to equity is calculated as total debt divided by total equity.
Current assets increased 8% and current liabilities increased 17% from 2013 to 2014. The increase in current assets was primarily due
to the increase in inventory, resulting from the opening of 200 net, new stores. The increase in current liabilities was primarily due to
the increase in accounts payable, resulting from inventory growth related to new store openings supported in part by our suppliers and
additional supplier participation in our enhanced supplier financing program during the year, which allowed us to obtain more favorable
payment terms. Our accounts payable to inventory ratio was 94.6% as of December 31, 2014, as compared to 86.6% in the prior year.
The following table identifies cash provided by/(used in) our operating, investing and financing activities for the years ended December 31,
2014, 2013 and 2012 (in thousands):
For the Year Ended
December 31,
Liquidity 2014 2013 2012
Total cash provided by/(used in):
Operating activities $ 1,190,430 $ 908,026 $ 1,251,555
Investing activities (423,402)(388,754) (317,407)
Financing activities (747,786)(536,082) (1,047,572)
Increase (decrease) in cash and cash equivalents $ 19,242 $(16,810) $ (113,424)
Capital expenditures $ 429,987 $ 395,881 $ 300,719
Free cash flow (a) 760,443 512,145 950,836
(a) Calculated as net cash provided by operating activities, less capital expenditures for the period.
Operating activities:
The increase in net cash provided by operating activities in 2014 compared to 2013 was primarily due to a greater decrease in net inventory
investment and larger increases in net income and accrued payroll-related liabilities in 2014 as compared to 2013. Net inventory investment
reflects our investment in inventory, net of the amount of accounts payable to suppliers. Our net inventory investment continues to
decrease as a result of the impact of our enhanced supplier financing programs. Our supplier financing programs enable us to reduce
overall supply chain costs and negotiate extended payment terms with our suppliers. Our accounts payable to inventory ratio was 94.6%,
86.6% and 84.7% as of December 31, 2014, 2013 and 2012, respectively. The larger increase in our accounts payable to inventory ratio
in 2014 was driven by continued strong supplier support. The increase in accrued payroll-related liabilities during 2014, as compared to
2013, was due to the timing of pay period end dates versus check dates and timing of payments for employer obligations under certain
benefit plans.
The decrease in cash provided by operating activities in 2013 compared to 2012 was primarily due to a smaller decrease in net inventory
investment and a smaller increase in income taxes payable, offset in part by an increase in net income for the year. Our accounts payable
to inventory ratio was 86.6%, 84.7% and 64.4% at December 31, 2013, 2012 and 2011, respectively. The smaller increase in our accounts
payable to inventory ratio in 2013 is the result of a smaller increase in the number of new suppliers added to our financing programs
versus the prior year. We launched our enhanced supplier financing program in January of 2011, and were able to add a large number of
suppliers to the program during 2011 and 2012. The smaller increase in income taxes payable was primarily the result of a prepaid tax
position at the beginning of 2012 versus a payable position at the beginning of 2013.