O REILLY AUTOMOTIVE INC

Previous wording

The review of Management’s Discussion and Analysis should be made in conjunction with our consolidated financial statements, related notes and other financial information, forward-looking statements, and other risk factors included elsewhere in this annual report.

Current wording

The review of Management’s Discussion and Analysis should be made in conjunction with our consolidated financial statements, related notes and other financial information, forward-looking statements, and other risk factors included elsewhere in this annual report on Form 10-K.

Previous 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.

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 North American 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, 2025, we operated 6,447 stores in 48 U.S. states and Puerto Rico, 112 stores in Mexico, and 26 stores in Canada.

Previous wording

Our stores also offer enhanced services and programs to our customers, including used oil, oil filter, and battery recycling; battery, wiper, and bulb replacement; battery diagnostic testing; electrical and module testing; check engine light code extraction; loaner tool program; drum and rotor resurfacing; custom hydraulic hoses; professional paint shop mixing and related materials; and machine shops.

Current wording

Our stores also offer enhanced services and programs to our customers, including used oil, oil filter, and battery recycling; battery, wiper, and bulb replacement; battery diagnostic testing; electrical and module testing; check engine light code extraction through our trusted VeriScan technology, which provides diagnostic information with possible repair fixes; referrals to trusted local repair shops; loaner tool program; drum and rotor resurfacing; custom hydraulic hoses; professional paint shop mixing and related materials; and machine shops.

Previous wording

Inflationary cost pressures impact our business; however, historically we have been successful, in many cases, in reducing the effects of merchandise cost increases, principally by taking advantage of supplier incentive programs, economies of scale resulting from increased volume of purchases, and selective forward buying. To the extent our acquisition costs increase due to base commodity price increases or other input cost increases affecting the entire industry, we have typically been able to pass along these cost increases through higher selling prices for the affected products. As a result, we do not believe inflation has had a material adverse effect on our operations.

Current wording

While inflationary cost pressures can impact our business, including inflation resulting from changes in tariff rates, historically we have been successful in reducing the effects of merchandise cost increases, principally by taking advantage of supplier incentive programs, economies of scale resulting from increased volume of purchases, and selective forward buying. To the extent our acquisition costs increase due to base commodity price increases or other input cost increases affecting the entire industry, we have typically been able to pass along these cost increases through higher selling prices for the affected products. As a result, we do not believe inflation has had a material adverse effect on our operating results.

Previous wording

We believe the key drivers of demand over the long-term for the products sold within the automotive aftermarket include the number of U.S. miles driven, number of U.S. registered vehicles, annual rate of light vehicle sales, and average vehicle age.

Current wording

We believe the key drivers of demand over the long-term for the products sold within the automotive aftermarket include the number of miles driven, number of registered vehicles, annual rate of light vehicle sales, and average vehicle age:

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. 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.

Current wording

The number of total miles driven influences the demand for repair and maintenance products sold within the automotive aftermarket. In the U.S., vehicles 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 2.1%, 1.0%, and 0.9% in 2023, 2024, and 2025, respectively. 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 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.

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 U.S. registered vehicles increased 13.4% from 2014 to 2024, bringing the number of light vehicles on the road to 286 million by the end of 2024. For the year ended December 31, 2025, the seasonally adjusted annual rate of light vehicle sales in the U.S. (“SAAR”) was approximately 16.0 million vehicles, contributing to the continued growth in the total number of registered vehicles on the road. From 2014 to 2024, U.S. vehicle scrappage rates have remained relatively stable, ranging from 4.1% to 5.6% annually. As a result, over the past decade, the average age of the U.S. vehicle population has increased 10.5%, from 11.4 years in 2014 to 12.6 years in 2024. 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 rising average new and used vehicle prices, as consumers are generally more willing to continue to invest in their current vehicle.

Previous 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.

Current wording

Sales for the year ended December 31, 2025, increased $1.07 billion, or 6%, to $17.78 billion from $16.71 billion for the same period in 2024. Comparable store sales increased 4.7% and 2.9% for the year ended December 31, 2025 and 2024, 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 207 and 198 net, new stores during the year ended December 31, 2025 and 2024, respectively. Additionally, we began operating 23 stores in Canada from the Groupe Del Vasto (“Vast Auto”) acquisition during the year ended December 31, 2024. We anticipate new store growth will be 225 to 235 net, new store openings in 2026.

Previous 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

Current wording

The increase in sales for the year ended December 31, 2025, was primarily the result of the 4.7% increase in domestic comparable store sales, a $354 million increase in sales from new stores opened in 2024 and 2025 that are not considered comparable stores, partially offset by the effect of sales from one additional day in the prior year due to Leap Day. Our comparable store sales increase for the year ended December 31, 2025, was driven by an increase in average ticket value for both professional service provider and DIY customers and an increase in transaction counts for professional service provider customers, partially offset by a decrease in transaction counts for DIY customers. Average ticket values benefited from increases in average selling prices on a same-SKU basis, as compared to the same period in 2024, driven by increases in acquisition costs of inventory, principally resulting from increased tariffs, which were passed on in selling prices. 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 decrease in DIY customer transaction counts was driven by pressured consumer spending on discretionary categories and broader industry pressure on certain hard part categories.

Previous 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.

Current wording

See Note 13 “Revenue” to the Consolidated Financial Statements for further information concerning the Company’s sales.

Previous 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.

Current wording

Gross profit for the year ended December 31, 2025, increased 7% to $9.17 billion (or 51.6% of sales) from $8.55 billion (or 51.2% of sales) for the same period in 2024. The increase in gross profit dollars for the year ended December 31, 2025, was primarily the result of increase in comparable store sales at existing stores and sales from new stores, partially offset by prior year gross profit dollars generated from one additional day due to Leap Day. The increase in gross profit as a percentage of sales for the year ended December 31, 2025, was due to improved acquisition costs and distribution operating efficiencies, partially offset by a greater percentage of our total sales mix being generated from professional service provider customers, which carry a lower gross margin percentage than DIY sales.

Previous 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.

Current wording

Selling, general and administrative expenses (“SG&A”) for the year ended December 31, 2025, increased 8% to $5.71 billion (or 32.1% of sales) from $5.30 billion (or 31.7% of sales) for the same period in 2024. The increase in total SG&A dollars for the year ended December 31, 2025, was the result of additional Team Members and vehicles to support our increased sales and store count, partially offset by prior year incremental SG&A expenses incurred from one additional day due to Leap Day. The increase in SG&A as a percentage of sales for the year ended December 31, 2025, was principally due to broad inflationary pressure in costs, primarily relating to medical and casualty insurance programs, and enhancements to store-level compensation and benefits.

Previous 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.

Current wording

As a result of the impacts discussed above, operating income for the year ended December 31, 2025, increased 6% to $3.46 billion (or 19.5% of sales) from $3.25 billion (or 19.5% of sales) for the same period in 2024.

Previous 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.

Current wording

Total other expense for the year ended December 31, 2025, increased 7% to $220 million (or 1.2% of sales), from $206 million (or 1.2% of sales) for the same period in 2024. The increase in total other expense for the year ended December 31, 2025, was the result of increased interest expense on higher average outstanding borrowings. See Note 9 “Financing” to the Consolidated Financial Statements for further information concerning the Company’s borrowings.

Previous 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.

Current wording

Our provision for income taxes for the year ended December 31, 2025, increased 7% to $702 million (21.7% effective tax rate) from $658 million (21.6% effective tax rate) for the same period in 2024. The increase in our provision for income taxes for the year ended December 31, 2025, was primarily the result of higher taxable income and lower excess tax benefits from share-based compensation. The increase in our effective tax rate for the year ended December 31, 2025, was primarily the result of lower excess tax benefits from share-based compensation partially offset by higher transferable federal renewable energy tax credits. See Note 17 “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, 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.

Current wording

As a result of the impacts discussed above, net income for the year ended December 31, 2025, increased to $2.54 billion (or 14.3% of sales), from $2.39 billion (or 14.3% of sales) for the same period in 2024.

Previous 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.

Current wording

Our diluted earnings per common share for the year ended December 31, 2025, increased 10% to $2.97 on 856 million shares from $2.71 on 881 million shares for the same period in 2024.

Previous 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

Current wording

A discussion of the changes in our results of operations for the year ended December 31, 2024, as compared to the year ended December 31, 2023, 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, 2024, filed with the Securities and Exchange Commission (the “SEC”) on February 28, 2025, 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.

Previous wording

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 7 “Leases,” Note 15 “Share-Based Compensation and Benefit Plans,” Note 16 “Commitments,” and Note 18 “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

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 6 “Leases,” Note 14 “Share-Based Compensation and Benefit Plans,” Note 15 “Commitments,” and Note 17 “Income Taxes” to the Consolidated Financial Statements for further information on our leasing arrangements, share-based compensation payments, commitments, and uncertain tax positions, respectively, which are not reflected in the table below.

Previous 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.

Current wording

Cash and cash equivalents balances held outside of the U.S. were $19.1 million and $17.2 million as of December 31, 2025 and 2024, respectively, which was generally utilized to support the liquidity needs of foreign operations in Mexico and Canada.

Previous 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.

Current wording

The decrease in net cash provided by operating activities in 2025 compared to 2024 was primarily due to the timing of payment for transferrable federal renewable energy tax credits, partially offset by an increase in operating income.

Previous 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.

Current wording

The decrease in net cash used in investing activities in 2025 compared to 2024 was primarily the result of the acquisition of Vast Auto in 2024, partially offset by an increase in capital expenditures. The increase in capital expenditures was primarily due to distribution enhancement and expansion projects and an increase in investments in new store growth.

Previous 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.

Current wording

We opened 207 and 198 net, new stores in 2025 and 2024, respectively. We plan to open 225 to 235 net, new stores in 2026. The costs associated with the expected openings of owned store locations in 2026, including the cost of land acquisition, building construction, fixtures, vehicles, net inventory investment, and computer equipment, are estimated to average approximately $3.2 million to $3.5 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 are larger in size.

Previous 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.

Current wording

The decrease in net cash used in financing activities in 2025 compared to 2024 was primarily attributable to net borrowings on the Company’s commercial paper program in 2025 versus net paydown on commercial paper in 2024, partially offset by the issuance of senior notes in 2024.

Previous wording

The Credit Agreement contains certain covenants, including limitations on indebtedness, a minimum consolidated fixed charge coverage ratio of 2.50:1.00 and a maximum consolidated leverage ratio of 3.50:1.00. The consolidated fixed charge coverage ratio includes a calculation of earnings before interest, taxes, depreciation, amortization, rent, and non-cash share-based compensation expense to fixed charges. Fixed charges include interest expense, capitalized interest, and rent expense. The consolidated leverage ratio includes a calculation of adjusted debt to earnings before interest, taxes, depreciation, amortization, rent, and non-cash share-based compensation expense. Adjusted debt includes outstanding debt, outstanding stand-by letters of credit and similar instruments, and five-times rent expense and excludes any premium or discount recorded in conjunction with the issuance of long-term debt. In the event that we should default on any covenant contained within the Credit Agreement, certain actions may be taken, including, but not limited to, possible termination of commitments, immediate payment of outstanding principal amounts plus accrued interest and other amounts payable under the Credit Agreement, and litigation from our lenders.

Current wording

As discussed in Note 9 “Financing” to the Consolidated Financial Statements, the Company is party to a credit agreement dated June 15, 2021, as amended and restated by the First Amended and Restated Credit Agreement as of March 31, 2025 (the “Credit Agreement”). The Credit Agreement contains certain covenants, including limitations on indebtedness, a minimum consolidated fixed charge coverage ratio of 2.50:1.00 and a maximum consolidated leverage ratio of 3.50:1.00. The consolidated fixed charge coverage ratio includes a calculation of earnings before interest, taxes, depreciation, amortization, rent, and non-cash share-based compensation expense to fixed charges. Fixed charges include interest expense, capitalized interest, and rent expense. The consolidated leverage ratio includes a calculation of adjusted debt to earnings before interest, taxes, depreciation, amortization, rent, and non-cash share-based compensation expense. Adjusted debt includes outstanding debt, outstanding stand-by letters of credit and similar instruments, and five-times rent expense and excludes any premium or discount recorded in conjunction with the issuance of long-term debt. In the event that we should default on any covenant contained within the Credit Agreement, certain actions may be taken, including, but not limited to, possible termination of commitments, immediate payment of outstanding principal amounts plus accrued interest and other amounts payable under the Credit Agreement, and litigation from our lenders.

Previous 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.

Current wording

We had a consolidated fixed charge coverage ratio of 6.08 times and 6.11 times as of December 31, 2025 and 2024, respectively, and a consolidated leverage ratio of 1.92 times and 1.89 times as of December 31, 2025 and 2024, respectively, remaining in compliance with all covenants related to the borrowing arrangements.

Previous wording

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 years ended December 31, 2024 and 2023 (dollars in thousands):

Current wording

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 our revolving credit facility, for the years ended December 31, 2025 and 2024 (dollars in thousands):

Previous 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.

Current wording

Our self-insurance reserve estimate included on our Consolidated Balance Sheets increased $175 million from 2024 to 2025, which is primarily due to general litigation accruals, inflation in claim development costs, 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 2025. If the underlying assumptions in management’s estimate changed self-insurance reserves by 10% from our estimated reserves at December 31, 2025, the financial impact would have been approximately $44 million or 1.4% of pretax income for the year ended December 31, 2025. See Note 1 “Summary of Significant Accounting Policies” to the Consolidated Financial Statements for further information on our self-insurance reserves.