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, 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 June 30, 2026, we operated 6,541 stores in 48 U.S. states and Puerto Rico, 126 stores in Mexico, and 28 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 September 30, 2026, we operated 6,595 stores in 48 U.S. states and Puerto Rico, 134 stores in Mexico, and 29 stores in Canada.

Previous 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 1.0% and 0.9% in 2024 and 2025, respectively, and year-to-date through May of 2026, miles driven have increased 0.8%. 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 1.0% and 0.9% in 2024 and 2025, respectively, and year-to-date through August of 2026, miles driven have increased 0.5%. 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 U.S. registered vehicles increased 12.3% from 2015 to 2025, bringing the number of light vehicles on the road to 289 million by the end of 2025. 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, and for 2026, the SAAR is estimated to be approximately 16.5 million vehicles, contributing to the continued growth in the total number of registered vehicles on the road. From 2015 to 2025, 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 11.3%, from 11.5 years in 2015 to 12.8 years in 2025. 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.

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 12.3% from 2015 to 2025, bringing the number of light vehicles on the road to 289 million by the end of 2025. 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, and for 2026, the SAAR is estimated to again be approximately 16.0 million vehicles, contributing to the continued growth in the total number of registered vehicles on the road. From 2015 to 2025, 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 11.3%, from 11.5 years in 2015 to 12.8 years in 2025. 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 three months ended June 30, 2026, increased $367 million, or 8%, to $4.89 billion from $4.53 billion for the same period one year ago. Sales for the six months ended June 30, 2026, increased $791 million, or 9%, to $9.45 billion from $8.66 billion for the same period one year ago. Comparable store sales increased 6.0% and 4.1% for the three months ended June 30, 2026 and 2025, respectively. Comparable store sales increased 7.0% and 3.9% for the six months ended June 30, 2026 and 2025, respectively. Comparable store sales are calculated based on the change 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 for ship-to-home orders and pick-up-in-store orders for U.S. stores open at least one year are included in the comparable store sales calculation. We opened 51 and 110 net, new stores during the three and six months ended June 30, 2026, respectively, compared to opening 67 and 105 net, new stores during the three and six months ended June 30, 2025, respectively. We anticipate total new store growth to be 225 to 235 net, new store openings in 2026.

Current wording

Sales for the three months ended September 30, 2026, increased $416 million, or 9%, to $5.12 billion from $4.71 billion for the same period one year ago. Sales for the nine months ended September 30, 2026, increased $1.21 billion, or 9%, to $14.57 billion from $13.37 billion for the same period one year ago. Comparable store sales increased 7.2% and 5.6% for the three months ended September 30, 2026 and 2025, respectively. Comparable store sales increased 7.1% and 4.5% for the nine months ended September 30, 2026 and 2025, respectively. Comparable store sales are calculated based on the change 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 for ship-to-home orders and pick-up-in-store orders for U.S. stores open at least one year are included in the comparable store sales calculation. We opened 63 and 173 net, new stores during the three and nine months ended September 30, 2026, respectively, compared to opening 55 and 160 net, new stores during the three and nine months ended September 30, 2025, respectively. We anticipate total new store growth to be 225 to 235 net, new store openings in 2026. We anticipate total new store growth to be 265 to 275 net, new store openings in 2027.

Previous wording

The increase in sales for the three months ended June 30, 2026, was primarily the result of the 6.0% increase in domestic comparable store sales and a $100 million increase in sales from new stores opened in 2025 and 2026 that are not considered comparable stores. The increase in sales for the six months ended June 30, 2026, was primarily the result of the 7.0% increase in domestic comparable store sales and a $191 million increase in sales from new stores opened in 2025 and 2026 that are not considered comparable stores. Our comparable store sales increases for the three and six months ended June 30, 2026, were driven by an increase in average ticket values 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 2025. Average ticket values 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.

Current wording

The increase in sales for the three months ended September 30, 2026, was primarily the result of the 7.2% increase in domestic comparable store sales and a $94 million increase in sales from new stores opened in 2025 and 2026 that are not considered comparable stores. The increase in sales for the nine months ended September 30, 2026, was primarily the result of the 7.1% increase in domestic comparable store sales and a $285 million increase in sales from new stores opened in 2025 and 2026 that are not considered comparable stores. Our comparable store sales increases for the three and nine months ended September 30, 2026, were driven by an increase in average ticket values 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 2025. 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.

Previous wording

Gross profit for the three months ended June 30, 2026, increased 8% to $2.52 billion (or 51.4% of sales) from $2.33 billion (or 51.4% of sales) for the same period one year ago. Gross profit for the six months ended June 30, 2026, increased 9% to $4.86 billion (or 51.5% of sales) from $4.45 billion (or 51.4% of sales) for the same period one year ago. The increases in gross profit dollars for the three and six months ended June 30, 2026, were primarily the result of the increase in comparable store sales at existing stores and sales from new stores. The increases in gross profit as a percentage of sales for the three and six months ended June 30, 2026, were primarily 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.

Current wording

Gross profit for the three months ended September 30, 2026, increased 10% to $2.68 billion (or 52.4% of sales) from $2.44 billion (or 51.9% of sales) for the same period one year ago. Gross profit for the nine months ended September 30, 2026, increased 10% to $7.55 billion (or 51.8% of sales) from $6.89 billion (or 51.5% of sales) for the same period one year ago. The increases in gross profit dollars for the three and nine months ended September 30, 2026, were primarily the result of the increase in comparable store sales at existing stores, sales from new stores, and $39 million of tariff refunds. The increases in gross profit as a percentage of sales for the three and nine months ended September 30, 2026, were primarily due to tariff refunds, improved acquisition costs for select product categories, and leverage of distribution operating costs on strong comparable store sales, 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, and an increased mix of petroleum-based commodity categories, which carry a lower gross margin percentage.

Previous wording

Selling, general and administrative expenses (“SG&A”) for the three months ended June 30, 2026, increased 8% to $1.53 billion (or 31.3% of sales) from $1.41 billion (or 31.2% of sales) for the same period one year ago. SG&A for the six months ended June 30, 2026, increased 9% to $3.04 billion (or 32.1% of sales) from $2.79 billion (or 32.2% of sales) for the same period one year ago. The increases in total SG&A dollars for the three and six months ended June 30, 2026, were primarily the result of additional Team Members and operating expenses to support our increased sales and store count. The increase in SG&A as a percentage of sales for the three months ended June 30, 2026, was principally due to inflationary pressure in costs and higher costs relating to medical and casualty insurance programs, partially offset by leverage of store operating costs on strong comparable store sales. The decrease in SG&A as a percentage of sales for the six months ended June 30, 2026, was principally due to leverage of store operating costs on strong comparable store sales, partially offset by inflationary pressure in costs and higher costs relating to medical and casualty insurance programs.

Current wording

Selling, general and administrative expenses (“SG&A”) for the three months ended September 30, 2026, increased 8% to $1.58 billion (or 30.9% of sales) from $1.46 billion (or 31.1% of sales) for the same period one year ago. SG&A for the nine months ended September 30, 2026, increased 9% to $4.62 billion (or 31.7% of sales) from $4.26 billion (or 31.8% of sales) for the same period one year ago. The increases in total SG&A dollars for the three and nine months ended September 30, 2026, were primarily the result of additional Team Members and operating expenses to support our increased sales and store count. The decrease in SG&A as a percentage of sales for the three months ended September 30, 2026, was principally due to leverage of store operating costs on strong comparable store sales, partially offset by inflationary pressure in costs. The decrease in SG&A as a percentage of sales for the nine months ended September 30, 2026, was principally due to leverage of store operating costs on strong comparable store sales, partially offset by inflationary pressure in costs and higher costs relating to casualty insurance programs.

Previous wording

As a result of the impact discussed above, operating income for the three months ended June 30, 2026, increased 8% to $986 million (or 20.2% of sales), from $914 million (or 20.2% of sales) for the same period one year ago. As a result of the impacts discussed above, operating income for the six months ended June 30, 2026, increased 10% to $1.83 billion (or 19.3% of sales) from $1.66 billion (or 19.1% of sales) for the same period one year ago.

Current wording

As a result of the impact discussed above, operating income for the three months ended September 30, 2026, increased 13% to $1.10 billion (or 21.4% of sales), from $976 million (or 20.7% of sales) for the same period one year ago. As a result of the impacts discussed

Previous wording

Total other expense for the three months ended June 30, 2026, increased 16% to $62 million (or 1.3% of sales) from $53 million (or 1.2% of sales) for the same period one year ago. Total other expense for the six months ended June 30, 2026, increased 12% to $123 million (or 1.3% of sales) from $110 million (or 1.3% of sales) for the same period one year ago. The increases in total other expense for the three and six months ended June 30, 2026, were the result of increased interest expense on higher average outstanding borrowings.

Current wording

Total other expense for the three months ended September 30, 2026, increased 45% to $76 million (or 1.5% of sales) from $52 million (or 1.1% of sales) for the same period one year ago. Total other expense for the nine months ended September 30, 2026, increased 23% to $199 million (or 1.4% of sales) from $163 million (or 1.2% of sales) for the same period one year ago. The increases in total other expense for the three and nine months ended September 30, 2026, were primarily the result of increased interest expense on higher average outstanding borrowings.

Previous wording

Our provision for income taxes for the three months ended June 30, 2026, increased 8% to $209 million (22.6% effective tax rate) from $193 million (22.4% effective tax rate) for the same period one year ago. Our provision for income taxes for the six months ended June 30, 2026, increased 14% to $385 million (22.6% effective tax rate) from $339 million (21.9% effective tax rate) for the same period one year ago. The increases in our provision for income taxes for the three and six months ended June 30, 2026, were the result of the higher taxable income and lower excess tax benefits from share-based compensation. The increases in our effective tax rate for the three and six months ended June 30, 2026, were primarily the result of lower excess tax benefits from share-based compensation.

Current wording

Our provision for income taxes for the three months ended September 30, 2026, increased 20% to $237 million (23.1% effective tax rate) from $198 million (21.4% effective tax rate) for the same period one year ago. Our provision for income taxes for the nine months ended September 30, 2026, increased 16% to $621 million (22.8% effective tax rate) from $536 million (21.7% effective tax rate) for the same period one year ago. The increases in our provision for income taxes for the three and nine months ended September 30, 2026, were the result of the higher taxable income and lower excess tax benefits from share-based compensation. The increases in our effective tax rate for the three and nine months ended September 30, 2026, were primarily the result of lower excess tax benefits from share-based compensation.

Previous wording

As a result of the impacts discussed above, net income for the three months ended June 30, 2026, increased 7% to $715 million (or 14.6% of sales) from $669 million (or 14.8% of sales) for the same period one year ago. As a result of the impacts discussed above, net income for the six months ended June 30, 2026, increased 9% to $1.32 billion (or 14.0% of sales) from $1.21 billion (or 13.9% of sales) for the same period one year ago.

Current wording

As a result of the impacts discussed above, net income for the three months ended September 30, 2026, increased 8% to $786 million (or 15.3% of sales) from $726 million (or 15.4% of sales) for the same period one year ago. As a result of the impacts discussed above, net income for the nine months ended September 30, 2026, increased 9% to $2.10 billion (or 14.4% of sales) from $1.93 billion (or 14.5% of sales) for the same period one year ago.

Previous wording

Our diluted earnings per common share for the three months ended June 30, 2026, increased 10% to $0.86 on 829 million shares from $0.78 on 858 million shares for the same period one year ago. Our diluted earnings per common share for the six months ended June 30, 2026, increased 13% to $1.58 on 836 million shares from $1.40 on 861 million shares for the same period one year ago.

Current wording

Our diluted earnings per common share for the three months ended September 30, 2026, increased 14% to $0.97 on 812 million shares from $0.85 on 853 million shares for the same period one year ago. Our diluted earnings per common share for the nine months ended September 30, 2026, increased 13% to $2.54 on 828 million shares from $2.25 on 858 million shares for the same period one year ago.

Previous wording

The following table identifies cash provided by/(used in) our operating, investing and financing activities for the six months ended June 30, 2026 and 2025 (in thousands):

Current wording

The following table identifies cash provided by/(used in) our operating, investing and financing activities for the nine months ended September 30, 2026 and 2025 (in thousands):

Previous wording

The increase in net cash provided by operating activities during the six months ended June 30, 2026, compared to the same period in 2025, was primarily due to the timing of payment for transferrable federal renewable energy tax credits and an increase in operating income, partially offset by a prepaid income taxes position at the end of the current period, versus an increase in a net taxes payable position for the same period in 2025.

Current wording

The increase in net cash provided by operating activities during the nine months ended September 30, 2026, compared to the same period in 2025, was primarily due to an increase in operating income and the timing of payment for transferable federal renewable energy tax credits.

Previous wording

The decrease in net cash used in investing activities during the six months ended June 30, 2026, compared to the same period in 2025, was the result of a decrease in capital expenditures, which was primarily attributable to the timing of store and distribution expansion and enhancement projects in the current period compared to the same period in 2025.

Current wording

The decrease in net cash used in investing activities during the nine months ended September 30, 2026, compared to the same period in 2025, was the result of a decrease in capital expenditures, which was primarily attributable to the timing of store and distribution expansion and enhancement projects in the current period compared to the same period in 2025.

Previous wording

The increase in net cash used in financing activities during the six months ended June 30, 2026, compared to the same period in 2025, was attributable to an increase in repurchases of our common stock and the redemption of $500 million aggregate principal amount of senior notes, partially offset by the issuance of $850 million aggregate principal amount of senior notes in the current period and net borrowings on the Company’s commercial paper program.

Current wording

The increase in net cash used in financing activities during the nine months ended September 30, 2026, compared to the same period in 2025, was attributable to an increase in repurchases of our common stock, a net paydown on the Company’s commercial paper program in the current period, versus net borrowings on commercial paper during the same period in 2025, and the repayment at maturity of $500 million aggregate principal amount of senior notes, partially offset by the issuance of $2.5 billion aggregate principal amount of senior notes in the current period.

Previous wording

We had a consolidated fixed charge coverage ratio of 6.11 times and 6.02 times as of June 30, 2026 and 2025, respectively, and a consolidated leverage ratio of 2.07 times and 1.95 times as of June 30, 2026 and 2025, respectively, remaining in compliance with all covenants related to the borrowing arrangements.

Current wording

We had a consolidated fixed charge coverage ratio of 6.06 times and 6.03 times as of September 30, 2026 and 2025, respectively, and a consolidated leverage ratio of 2.16 times and 1.93 times as of September 30, 2026 and 2025, respectively, remaining in compliance with all covenants related to the borrowing arrangements.

Previous wording

The table below outlines the calculation of Free cash flow and reconciles Free cash flow to Net cash provided by operating activities, the most directly comparable GAAP financial measure, for the six months ended June 30, 2026 and 2025 (in thousands):

Current wording

The table below outlines the calculation of Free cash flow and reconciles Free cash flow to Net cash provided by operating activities, the most directly comparable GAAP financial measure, for the nine months ended September 30, 2026 and 2025 (in thousands):

Previous wording

Free cash flow, the consolidated fixed charge coverage ratio, and the consolidated leverage ratio discussed and presented in the tables above are not derived in accordance with United States generally accepted accounting principles (“GAAP”). We do not, nor do we suggest investors should, consider such non-GAAP financial measures in isolation from, or as a substitute for, GAAP financial information. We believe that the presentation of our free cash flow, consolidated fixed charge coverage ratio, and consolidated leverage ratio provides meaningful supplemental information to both management and investors and reflects the required covenants under the Credit Agreement. We include these items in judging our performance and believe this non-GAAP information is useful to investors as well. Material limitations of these non-GAAP measures are that such measures do not reflect actual GAAP amounts. We compensate for such limitations by presenting, in the tables above, a reconciliation to the most directly comparable GAAP measures.

Current wording

Free cash flow, the consolidated fixed charge coverage ratio, and the consolidated leverage ratio discussed and presented in the tables above are not derived in accordance with United States generally accepted accounting principles (“GAAP”). We do not, nor do we suggest investors should, consider such non-GAAP financial measures in isolation from, or as a substitute for, GAAP financial information. We believe that the presentation of our free cash flow, consolidated fixed charge coverage ratio, and consolidated leverage ratio provides meaningful supplemental information to both management and investors and reflects the required covenants under the Credit Agreement. We include these items in judging our performance and believe this non-GAAP information is useful to investors as