O REILLY AUTOMOTIVE INC Management's Discussion and Analysis of Financial Condition and Resultsof Operations (form 10-Q)

Published: 2022-08-08 16:35:18 ET ORLY

Unless otherwise indicated, "we," "us," "our" and similar terms, as well as references to the "Company" or "O'Reilly," refer to O'Reilly Automotive, Inc. and its subsidiaries.

? an overview of the key drivers and other influences on the automotive

aftermarket industry;

? our results of operations for the three and six months ended June 30, 2022 and

2021;

? our liquidity and capital resources;

? our critical accounting estimates; and

? recent accounting pronouncements that may affect our Company.

FORWARD-LOOKING STATEMENTS

OVERVIEW

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

According to the U.S. Department of Transportation, the number of total miles driven in the U.S. decreased 13.2% in 2020, as a result of responses to the COVID-19 pandemic, including work from home arrangements and reduced travel.

However for 2021, miles driven improved and increased 11.2%, and year-to-date through May of 2022, miles driven have continued to improve and increased 3.8%.

Size and Age of the Vehicle Fleet

The following table presents the components of the increase in sales for the three and six months ended June 30, 2022 (in millions):

As of June 30, 2022, we operated 5,873 stores in 47 U.S. states and 27 stores in

Selling, general and administrative expenses:

Operating income:

Other income and expense:

Income taxes:

Net income:

Earnings per share:

LIQUIDITY AND CAPITAL RESOURCES

(82)

Net (decrease) increase in cash and cash equivalents $ (108,209) $

(1) Calculated as net cash provided by operating activities, less capital

expenditures and excess tax benefit from share-based compensation payments,

and investment in tax credit equity investments for the period.

Operating activities:

Investing activities:

Financing activities:

See Note 5 "Financing" to the Condensed Consolidated Financial Statements for information concerning the Company's credit agreement, unsecured revolving credit facility, outstanding letters of credit and unsecured senior notes.

Debt covenants:

The table below outlines the calculations of the consolidated fixed charge coverage ratio and consolidated leverage ratio covenants, as defined in the Credit Agreement governing the Revolving Credit Facility, for the twelve months ended June 30, 2022 and 2021 (dollars in thousands):

6.58

3,825,177

84,045

4,700

20,123

1,818,830

5,752,875

1.66

(1) The table below outlines the calculation of Rent expense and reconciles Rent

expense to Total lease cost, per Accounting Standard Codification 842 ("ASC

842") the most directly comparable GAAP financial measure, for the

twelve months ended June 30, 2022 and 2021 (in thousands):

Total lease cost, per ASC 842, for the twelve months ended June 30, 2022

$ 380,417

Total lease cost, per ASC 842, for the twelve months ended June 30, 2021

$ 363,766

Share repurchase program:

See Note 7 "Share Repurchase Program" to the Consolidated Financial Statements for information on our share repurchase program.

CRITICAL ACCOUNTING ESTIMATES

RECENT ACCOUNTING PRONOUNCEMENTS

See Note 13 "Recent Accounting Pronouncements" to the Condensed Consolidated Financial Statements for information about recent accounting pronouncements.