O REILLY AUTOMOTIVE INC

Previous wording

We are a specialty retailer of automotive aftermarket parts, tools, supplies, equipment, and accessories in the United States, Puerto Rico, and Mexico. We are one of the largest U.S. automotive aftermarket specialty retailers, selling our products to both DIY customers and professional service providers – our “dual market strategy.” Our goal is to achieve growth in sales and profitability by capitalizing on our competitive advantages, such as our dual market strategy, superior customer service provided by well-trained and technically proficient Team Members, and strategic distribution and hub store network that provides same day and over-night inventory access for our stores to offer a broad selection of product offerings. The successful execution of our growth strategy includes aggressively opening new stores, growing sales in existing stores, continually enhancing merchandising and store layouts, and implementing our Omnichannel initiatives. As of December 31, 2023, we operated 6,095 stores in 48 U.S. states and Puerto Rico and 62 stores in Mexico.

Current wording

We are a specialty retailer of automotive aftermarket parts, tools, supplies, equipment, and accessories in the United States, Puerto Rico, Mexico, and Canada. We are one of the largest U.S. automotive aftermarket specialty retailers, selling our products to both DIY customers and professional service providers – our “dual market strategy.” Our goal is to achieve growth in sales and profitability by capitalizing on our competitive advantages, such as our dual market strategy, superior customer service provided by well-trained and technically proficient Team Members, and strategic distribution and hub store network that provides same day and over-night inventory access for our stores to offer a broad selection of product offerings. The successful execution of our growth strategy includes aggressively opening new stores, growing sales in existing stores, continually enhancing merchandising and store layouts, and implementing our Omnichannel initiatives. As of December 31, 2024, we operated 6,265 stores in 48 U.S. states and Puerto Rico, 87 stores in Mexico, and 26 stores in Canada.

Previous wording

The number of total miles driven in the U.S. influences the demand for repair and maintenance products sold within the automotive aftermarket. In total, vehicles in the U.S. are driven approximately three trillion miles per year, resulting in ongoing wear and tear and a corresponding continued demand for the repair and maintenance products necessary to keep these vehicles in operation. 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 coronavirus pandemic, including work from home arrangements and reduced travel. Miles driven improved and increased 11.2% in 2021, and continued to improve and increased 0.9% in 2022, and in 2023, returned to more typical levels with an increase of 2.1%. Total miles driven can be impacted by macroeconomic factors, including rapid increases in fuel cost, but we are unable to predict the degree of impact these factors may have on miles driven in the future.

Current wording

The number of total miles driven in the U.S. influences the demand for repair and maintenance products sold within the automotive aftermarket. In total, vehicles in the U.S. are driven approximately three trillion miles per year, resulting in ongoing wear and tear and a corresponding continued demand for the repair and maintenance products necessary to keep these vehicles in operation. According to the U.S. Department of Transportation, the number of total miles driven in the U.S. increased 0.9% and 2.1% in 2022, and 2023, respectively, and year-to-date through November of 2024, miles driven increased 1.0%. Total miles driven can be impacted by macroeconomic factors, including rapid increases in fuel cost, but we are unable to predict the degree of impact these factors may have on miles driven in the future.

Previous wording

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 Auto Care Association, the total number of registered vehicles increased 13.9% from 2012 to 2022, bringing the number of light vehicles on the road to 283 million by the end of 2022. For the year ended December 31, 2023, the seasonally adjusted annual rate of light vehicle sales in the U.S. (“SAAR”) was approximately 15.8 million vehicles, contributing to the continued growth in the total number of registered vehicles on the road. From 2012 to 2022, vehicle scrappage rates have remained relatively stable, ranging from 4.1% to 5.7% annually. As a result, over the past decade, the average age of the U.S. vehicle population has increased, growing 9.9%, from 11.1 years in 2012 to 12.2 years in 2022. While the annual changes to the vehicle population resulting from new vehicle sales and the fluctuation in vehicle scrappage rates in any given year represent a small percentage of the total light vehicle population and have a muted impact on the total number and average age of vehicles on the road over the short term, we believe our business benefits from the current environment of elevated new and used vehicle prices, as consumers are more willing to continue to invest in their current vehicle.

Current wording

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 Auto Care Association, the total number of registered vehicles increased 14.2% from 2013 to 2023, bringing the number of light vehicles on the road to 284 million by the end of 2023. For the year ended December 31, 2024, the seasonally adjusted annual rate of light vehicle sales in the U.S. (“SAAR”) was approximately 16.8 million vehicles, contributing to the continued growth in the total number of registered vehicles on the road. From 2013 to 2023, vehicle scrappage rates have remained relatively stable, ranging from 4.1% to 5.7% annually. As a result, over the past decade, the average age of the U.S. vehicle population has increased, growing 10.6%, from 11.3 years in 2013 to 12.5 years in 2023. While the annual changes to the vehicle population resulting from new vehicle sales and the fluctuation in vehicle scrappage rates in any given year represent a small percentage of the total light vehicle population and have a muted impact on the total number and average age of vehicles on the road over the short term, we believe our business benefits from the current environment of elevated new and used vehicle prices, as consumers are more willing to continue to invest in their current vehicle.

Previous wording

The following table includes income statement data as a percentage of sales, which is calculated independently and may not compute to presented totals due to rounding differences, for the years ended December 31, 2023 and 2022:

Current wording

The following table includes income statement data as a percentage of sales, which is each calculated independently and may not compute to presented totals due to rounding differences, for the years ended December 31, 2024 and 2023:

Previous wording

Sales for the year ended December 31, 2023, increased $1.40 billion, or 10%, to $15.81 billion from $14.41 billion for the same period in 2022. Comparable store sales for stores open at least one year increased 7.9% and 6.4% for the year ended December 31, 2023 and 2022, respectively. Comparable store sales are calculated based on changes in sales for U.S. stores open at least one year and exclude sales of specialty machinery, sales to independent parts stores, and sales to Team Members. Online sales, resulting from ship-to-home orders and pickup in-store orders for U.S. stores open at least one year are included in the comparable store sales calculation. We opened 186 and 187 net, new stores during the year ended December 31, 2023 and 2022, respectively. We anticipate new store growth will be 190 to 200 net, new store openings in 2024.

Current wording

Sales for the year ended December 31, 2024, increased $896 million, or 6%, to $16.71 billion from $15.81 billion for the same period in 2023. Comparable store sales for stores open at least one year increased 2.9% and 7.9% for the year ended December 31, 2024 and 2023, respectively. Comparable store sales are calculated based on changes in sales for U.S. stores open at least one year and exclude sales of specialty machinery, sales to independent parts stores, and sales to Team Members, as well as sales from Leap Day in the year ended December 31, 2024. Online sales, resulting from ship-to-home orders and pickup in-store orders for U.S. stores open at least one year are included in the comparable store sales calculation. We opened 198 and 186 net, new stores during the year ended December 31, 2024 and 2023, respectively. Additionally, we began operating 23 stores in Canada from the Vast Auto acquisition during the year ended December 31, 2024. We anticipate new store growth will be 200 to 210 net, new store openings in 2025.

Previous wording

The increase in sales for the year ended December 31, 2023, was primarily the result of the 7.9% increase in domestic comparable store sales and a $293 million increase in sales from new stores opened in 2022 and 2023 that are not considered comparable stores. Our comparable store sales increase for the year ended December 31, 2023, was driven by an increase in average ticket value for both professional service provider and DIY customers and positive transaction counts from professional service provider customers, partially offset by negative transaction counts from DIY customers. Average ticket values benefited from inflationary increases in average selling prices, as compared to the same period in 2022. Average ticket values also continue to be positively impacted by the increasing complexity and cost of replacement parts necessary to maintain the current population of better-engineered and more technically advanced vehicles. These better-engineered, more technically advanced vehicles require less frequent repairs, as the component parts are more durable and last for longer periods of time. The resulting decrease in repair frequency creates pressure on customer transaction counts; however, when repairs are needed, the cost of replacement parts is, on average, greater, which is a benefit to average ticket values. The increase in professional service provider customer transaction counts was driven by consistently exceptional execution of

Current wording

The increase in sales for the year ended December 31, 2024, was primarily the result of the 2.9% increase in domestic comparable store sales, a $275 million increase in sales from new stores opened in 2023 and 2024 that are not considered comparable stores, sales from the acquired Vast Auto stores, and sales from one additional day due to Leap Day. Our comparable store sales increase for the year ended December 31, 2024, was driven by an increase in average ticket value for both professional service provider and DIY customers and positive transaction counts from professional service provider customers, partially offset by negative transaction counts from DIY customers. Average ticket values benefited from inflationary increases in average selling prices, as compared to the same period in 2023. Average ticket values also continue to be positively impacted by the increasing complexity and cost of replacement parts necessary to maintain the current population of better-engineered and more technically advanced vehicles. These better-engineered, more technically advanced vehicles require less frequent repairs, as the component parts are more durable and last for longer periods of time. The resulting decrease in repair frequency creates pressure on customer transaction counts; however, when repairs are needed, the cost

Previous wording

See Note 12 “Revenue” to the Consolidated Financial Statements for further information concerning the Company’s sales.

Current wording

See Note 2 “Business Combination” to the Consolidated Financial Statements for further information concerning the recent acquisition of Vast Auto. See Note 14 “Revenue” to the Consolidated Financial Statements for further information concerning the Company’s sales.

Previous wording

Gross profit for the year ended December 31, 2023, increased 10% to $8.10 billion (or 51.3% of sales) from $7.38 billion (or 51.2% of sales) for the same period in 2022. The increase in gross profit dollars for the year ended December 31, 2023, was primarily the result of new store sales and the increase in comparable store sales at existing stores. The increase in gross profit as a percentage of sales for the year ended December 31, 2023, was due to improved acquisition costs, partially offset by the impact from the rollout of our professional pricing initiative in the first quarter of 2022, which was a strategic investment aimed at ensuring we are more competitively priced on the professional side of our business; a greater percentage of our total sales mix generated from professional service provider customers, which carry a lower gross margin than DIY sales; and a greater benefit in the prior year from selling through inventory purchased prior to recent acquisition cost increases and corresponding selling price increases.

Current wording

Gross profit for the year ended December 31, 2024, increased 6% to $8.55 billion (or 51.2% of sales) from $8.10 billion (or 51.3% of sales) for the same period in 2023. The increase in gross profit dollars for the year ended December 31, 2024, was primarily the result of increase in comparable store sales at existing stores, sales from new and acquired stores, and one additional day due to Leap Day. The decrease in gross profit as a percentage of sales for the year ended December 31, 2024, was due to the inclusion of the lower gross margin sales from the acquired Vast Auto business and a greater percentage of our total sales mix being generated from professional service provider customers, which carry a lower gross margin than DIY sales, partially offset by improved acquisition costs.

Previous wording

Selling, general and administrative expenses (“SG&A”) for the year ended December 31, 2023, increased 11% to $4.92 billion (or 31.1% of sales) from $4.43 billion (or 30.7% of sales) for the same period in 2022. The increase in total SG&A dollars for the year ended December 31, 2023, was the result of additional Team Members, facilities and vehicles to support our increased sales and store count. The increase in SG&A as a percentage of sales for the year ended December 31, 2023, was primarily the result of increased store staffing, wage rates, and enhanced benefits to support superior service levels, depreciation costs on accelerated refreshment of store delivery vehicle fleet, investment initiatives aimed at refreshing the image and appearance of our stores, increased expense for the market value performance of the Company’s Deferred Compensation Plan, increased cost for self-insured auto liability exposure, which was driven by inflation in claim costs, and the costs associated with the resumption of our annual in-person leadership conference. See Note 13 “Share-Based Compensation and Benefit Plans” to the Consolidated Financial Statements for further information concerning the Company’s Deferred Compensation Plan.

Current wording

Selling, general and administrative expenses (“SG&A”) for the year ended December 31, 2024, increased 8% to $5.30 billion (or 31.7% of sales) from $4.92 billion (or 31.1% of sales) for the same period in 2023. The increase in total SG&A dollars for the year ended December 31, 2024, was the result of additional Team Members and vehicles to support our increased sales and store count, an additional charge to adjust self-insurance reserves for historical auto liability claims, SG&A associated with the Vast Auto operations, and one additional day due to Leap Day. The increase in SG&A as a percentage of sales for the year ended December 31, 2024, was principally due to the self-insurance reserve adjustment, depreciation costs for accelerated refreshment of store related capital expenditures, and information technology investments.

Previous wording

As a result of the impacts discussed above, operating income for the year ended December 31, 2023, increased 8% to $3.19 billion (or 20.2% of sales) from $2.95 billion (or 20.5% of sales) for the same period in 2022.

Current wording

As a result of the impacts discussed above, operating income for the year ended December 31, 2024, increased 2% to $3.25 billion (or 19.5% of sales) from $3.19 billion (or 20.2% of sales) for the same period in 2023.

Previous wording

Total other expense for the year ended December 31, 2023, increased 17% to $182 million (or 1.1% of sales), from $156 million (or 1.1% of sales) for the same period in 2022. The increase in total other expense for the year ended December 31, 2023, was the result of increased interest expense on higher average outstanding borrowings, partially offset by an increase in the value of our trading securities, as compared to a decrease in the same period in 2022. See Note 8 “Financing” to the Consolidated Financial Statements for further information concerning the Company’s borrowings. See Note 2 “Fair Value Measurements” to the Consolidated Financial Statements for further information concerning the Company’s trading securities.

Current wording

Total other expense for the year ended December 31, 2024, increased 13% to $206 million (or 1.2% of sales), from $182 million (or 1.1% of sales) for the same period in 2023. The increase in total other expense for the year ended December 31, 2024, was the result of increased interest expense on higher average outstanding borrowings, as compared to a decrease in the same period in 2023. See Note 10 “Financing” to the Consolidated Financial Statements for further information concerning the Company’s borrowings. See Note 4 “Fair Value Measurements” to the Consolidated Financial Statements for further information concerning the Company’s trading securities.

Previous wording

Our provision for income taxes for the year ended December 31, 2023, increased 5% to $658 million (21.9% effective tax rate) from $626 million (22.4% effective tax rate) for the same period in 2022. The increase in our provision for income taxes for the year ended December 31, 2023, was the result of higher taxable income, partially offset by higher excess tax benefits from share-based compensation. The decrease in our effective tax rate for the year ended December 31, 2023, primarily was the result of higher excess tax benefits from share-based compensation. See Note 16 “Income Taxes” to the Consolidated Financial Statements for further information concerning the Company’s income taxes.

Current wording

Our provision for income taxes for the year ended December 31, 2024, was flat at $658 million compared to the same period in 2023. Our effective tax rate for the year ended December 31, 2024, decreased to 21.6% from 21.9% for the same period in 2023. The decrease in our effective tax rate for the year ended December 31, 2024, was primarily the result of a greater benefit from renewable energy tax credits and higher excess tax benefits from share-based compensation. See Note 18 “Income Taxes” to the Consolidated Financial Statements for further information concerning the Company’s income taxes.

Previous wording

As a result of the impacts discussed above, net income for the year ended December 31, 2023, increased to $2.35 billion (or 14.8% of sales), from $2.17 billion (or 15.1% of sales) for the same period in 2022.

Current wording

As a result of the impacts discussed above, net income for the year ended December 31, 2024, increased to $2.39 billion (or 14.3% of sales), from $2.35 billion (or 14.8% of sales) for the same period in 2023.

Previous wording

Our diluted earnings per common share for the year ended December 31, 2023, increased 15% to $38.47 on 61 million shares from $33.44 on 65 million shares for the same period in 2022.

Current wording

Our diluted earnings per common share for the year ended December 31, 2024, increased 6% to $40.66 on 59 million shares from $38.47 on 61 million shares for the same period in 2023.

Previous wording

A discussion of the changes in our results of operations for the year ended December 31, 2022, as compared to the year ended December 31, 2021, has been omitted from this Form 10-K but may be found in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of the annual report on Form 10-K for the year ended December 31, 2022, filed with the Securities and Exchange Commission (the “SEC”) on February 28, 2023, which is available free of charge on the SEC’s website at www.sec.gov by searching with our ticker symbol “ORLY” or at our internet address, www.OReillyAuto.com, by clicking “Investor Relations” located at the bottom of the page.

Current wording

A discussion of the changes in our results of operations for the year ended December 31, 2023, as compared to the year ended December 31, 2022, has been omitted from this Form 10-K but may be found in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of the annual report on Form 10-K for the year ended December 31, 2023, filed with

Previous wording

Our material contractual cash obligations as of December 31, 2023, included commitments for short and long-term debt arrangements and interest payments related to long-term debt, future minimum payments under non-cancelable lease arrangements, self-insurance reserves, projected obligations related to future payments under the Company’s nonqualified deferred compensation plan, purchase obligations for construction contract commitments, uncertain tax positions and associated estimated interest and penalties, payments for certain deferred income taxes, the obligation to purchase renewable energy tax credits, and commitments for the purchase of inventory. We expect to fund these various commitments and obligations primarily with operating cash flows expected to be generated in the normal course of business or through borrowings under our unsecured revolving credit facility and commercial paper program. See Note 5 “Leases,” Note 13 “Share-Based Compensation and Benefit Plans,” Note 14 “Commitments,” and Note 16 “Income Taxes” to the Consolidated Financial Statements for further information on our leasing arrangements, share-based compensation payments, construction commitments, and uncertain tax positions, respectively, which are not reflected in the table below.

Current wording

Our material contractual cash obligations as of December 31, 2024, included commitments for short and long-term debt arrangements and interest payments related to long-term debt, future minimum payments under non-cancelable lease arrangements, self-insurance reserves, projected obligations related to future payments under the Company’s nonqualified deferred compensation plan, purchase obligations for construction contract commitments, uncertain tax positions and associated estimated interest and penalties, payments for certain deferred income taxes, the obligation to purchase renewable energy tax credits, and payments for the purchase of inventory.

Previous wording

We do not have any off-balance sheet financing that has, or is reasonably likely to have, a material, current, or future effect on our financial condition, cash flows, results of operations, liquidity, capital expenditures, or capital resources.

Current wording

Other than the commitments discussed in Note 16 “Commitments” to the Consolidated Financial Statements, we do not have any off-balance sheet financing that has, or is reasonably likely to have, a material, current, or future effect on our financial condition, cash flows, results of operations, liquidity, capital expenditures, or capital resources.

Previous wording

Cash and cash equivalents balances held outside of the U.S. were $3.3 million and $11.1 million as of December 31, 2023 and 2022, respectively, which was generally utilized to support the liquidity needs of foreign operations in Mexico.

Current wording

Cash and cash equivalents balances held outside of the U.S. were $17.2 million and $3.3 million as of December 31, 2024 and 2023, respectively, which was generally utilized to support the liquidity needs of foreign operations in Mexico and Canada.

Previous wording

The decrease in net cash provided by operating activities in 2023 compared to 2022 was primarily due to an increase in net inventory investment, compared to a decrease in 2022, partially offset by an increase in operating income and the timing of payment for transferrable federal renewable energy tax credits.

Current wording

The increase in net cash provided by operating activities in 2024 compared to 2023 was primarily due to an increase in operating income, decrease in net inventory, compared to an investment in net inventory in 2023, a decrease in accounts receivable balance, and an increase in accrued benefits, partially offset by the timing of payments for the purchase of transferrable federal renewable energy tax credits.

Previous wording

The increase in net cash used in investing activities in 2023 compared to 2022 was primarily the result of an increase in capital expenditures, partially offset by a decrease in equity tax credit investments. The increase in capital expenditures was primarily due to an increase in store and distribution enhancement and expansion projects, as well as an increase in vehicle fleet upgrade investments, in 2023 versus 2022.

Current wording

The increase in net cash used in investing activities in 2024 compared to 2023 was primarily the result of the acquisition of Vast Auto and an increase in capital expenditures. The increase in capital expenditures was primarily due to an increase in distribution enhancement and expansion projects, as well as an increase in the number of owned new store openings.

Previous wording

We opened 186 and 187 net, new stores in 2023 and 2022, respectively. We plan to open 190 to 200 net, new stores in 2024. The costs associated with the expected openings of owned store locations in 2024, including the cost of land acquisition, building construction, fixtures, vehicles, net inventory investment, and computer equipment, are estimated to average approximately $3.0 million to $3.3 million per store; however, such costs may be significantly lower where we lease, rather than purchase, the store site and higher where we build a Hub, as they require a larger inventory investment and are generally larger in size.

Current wording

We opened 198 and 186 net, new stores in 2024 and 2023, respectively. We plan to open 200 to 210 net, new stores in 2025. The costs associated with the expected openings of owned store locations in 2025, including the cost of land acquisition, building construction, fixtures, vehicles, net inventory investment, and computer equipment, are estimated to average approximately $3.0 million to $3.3 million per store. However, such costs may be significantly lower where we lease, rather than purchase, the store site and higher where we build a Hub, as they require a larger inventory investment and are generally larger in size.

Previous wording

The decrease in net cash used in financing activities in 2023 compared to 2022 was primarily attributable to larger net borrowings in 2023 and a lower level of repurchases of our common stock in 2023.

Current wording

The increase in net cash used in financing activities in 2024 compared to 2023 was primarily attributable to decreased net borrowings in 2024, partially offset by a lower level of repurchases of our common stock in 2024.

Previous wording

We had a consolidated fixed charge coverage ratio of 6.42 times and 6.71 times as of December 31, 2023 and 2022, respectively, and a consolidated leverage ratio of 1.93 times and 1.73 times as of December 31, 2023 and 2022, respectively, remaining in compliance with all covenants related to the borrowing arrangements.

Current wording

We had a consolidated fixed charge coverage ratio of 6.11 times and 6.42 times as of December 31, 2024 and 2023, respectively, and a consolidated leverage ratio of 1.89 times and 1.93 times as of December 31, 2024 and 2023, respectively, remaining in compliance with all covenants related to the borrowing arrangements.

Previous wording

Our self-insurance reserve estimate included on our Consolidated Balance Sheets decreased $19 million from 2022 to 2023, which is primarily due to having resolved and paid out older, higher-than-expected self-insured auto liability claims, partially offset by our growing operations, inflation, increases in healthcare costs, the number of vehicles, and the number of hours worked, as well as our historical claims experience. If the underlying assumptions in management’s estimate changed self-insurance reserves by 10% from our estimated reserves at December 31, 2023, the financial impact would have been approximately $21 million or 0.7% of pretax income for the year ended December 31, 2023. See Note 1 “Summary of Significant Accounting Policies” to the Consolidated Financial Statements for further information on our self-insurance reserves.

Current wording

Our self-insurance reserve estimate included on our Consolidated Balance Sheets increased $54 million from 2023 to 2024, which is primarily due to inflation in claim development costs, as well as our growing operations, increases in healthcare costs, the number of vehicles, and the number of hours worked, partially offset by having resolved and paid out claims throughout 2024. If the underlying assumptions in management’s estimate changed self-insurance reserves by 10% from our estimated reserves at December 31, 2024, the financial impact would have been approximately $27 million or 0.9% of pretax income for the year ended December 31, 2024. See Note 1 “Summary of Significant Accounting Policies” to the Consolidated Financial Statements for further information on our self-insurance reserves.