-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Hg8fH45iAbJjPnvVvlINI5yHNdBp76XjG3vZKCTpE0trwmy/YydnSqyyLGSHhSn5 yurChy4GXprgtbH4/7kj6A== 0000898173-02-000058.txt : 20021112 0000898173-02-000058.hdr.sgml : 20021111 20021112162328 ACCESSION NUMBER: 0000898173-02-000058 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20020930 FILED AS OF DATE: 20021112 FILER: COMPANY DATA: COMPANY CONFORMED NAME: O REILLY AUTOMOTIVE INC CENTRAL INDEX KEY: 0000898173 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-AUTO & HOME SUPPLY STORES [5531] IRS NUMBER: 440618012 STATE OF INCORPORATION: MO FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-21318 FILM NUMBER: 02817467 BUSINESS ADDRESS: STREET 1: 233 S PATTERSON CITY: SPRINGFIELD STATE: MO ZIP: 65802 BUSINESS PHONE: 4178622674 MAIL ADDRESS: STREET 1: 233 SOUTH PATTERSON CITY: SPRINGFIELD STATE: MO ZIP: 65802 10-Q 1 oreilly3rdqtr10q2002.txt O'REILLY AUTOMOTIVE, INC. 2002 3RD QUARTER 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2002 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____________ to _____________ Commission file number 0-21318 O'REILLY AUTOMOTIVE, INC. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Missouri 44-0618012 - -------------------------------------------------------------------------------- (State or other jurisdiction (I.R.S. Employer Identification No.) of incorporation or organization) 233 South Patterson Springfield, Missouri 65802 - -------------------------------------------------------------------------------- (Address of principal executive offices, Zip code) (417) 862-6708 - -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) Not applicable - -------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Common stock, $0.01 par value - 53,295,765 shares outstanding as of September 30, 2002. This report contains a total of 18 pages of which this page is number 1. O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES FORM 10-Q Quarter Ended September 30, 2002 TABLE OF CONTENTS PART I - FINANCIAL INFORMATION Page ------ ITEM 1 - FINANCIAL STATEMENTS (UNAUDITED) Condensed Consolidated Balance Sheets 3 Condensed Consolidated Statements of Income 4 Condensed Consolidated Statements of Cash Flows 5 Notes to Condensed Consolidated Financial Statements 6 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION 7 ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 10 ITEM 4 - CONTROLS AND PROCEDURES 10 PART II - OTHER INFORMATION ITEM 5 - OTHER INFORMATION 10 ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K 11 SIGNATURE PAGE 12 CERTIFICATIONS 13 EXHIBIT INDEX 15 Page 2 PART I FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except par value amounts) September 30, December 31, 2002 2001 -------------- -------------- (Unaudited) (Note) Assets Current assets: Cash $ 31,881 $ 15,041 Short-term investments 500 500 Accounts receivable, net 50,133 41,486 Amounts receivable from vendors 40,832 38,440 Inventory 490,402 447,793 Refundable income taxes -- 168 Deferred income taxes 2,588 3,908 Other current assets 3,482 3,327 -------------- -------------- Total current assets 619,818 550,663 Property and equipment, at cost 463,221 392,365 Accumulated depreciation and amortization 128,847 103,361 -------------- -------------- Net property and equipment 334,374 289,004 Notes receivable 2,016 2,557 Other assets 18,755 14,635 -------------- -------------- Total assets $ 974,963 $ 856,859 ============== ============== Liabilities and shareholders' equity Current liabilities: Note payable to bank $ -- $ 5,000 Income taxes payable 10,746 -- Accounts payable 92,643 61,875 Accrued payroll 13,015 12,866 Accrued benefits & withholdings 23,639 14,038 Other current liabilities 25,513 15,514 Current portion of long-tem debt 748 11,843 -------------- -------------- Total current liabilities 166,304 121,136 Long-term debt, less current portion 160,619 165,618 Deferred income taxes 12,723 9,141 Other liabilities 5,178 4,673 Shareholders' equity: Common stock, $0.01 par value: Authorized shares-90,000,000 Issued and outstanding shares- 53,295,765 shares at September 30, 2002, and 52,850,713 at December 31, 2001 533 528 Additional paid-in capital 267,353 256,795 Retained earnings 362,253 298,968 -------------- -------------- Total shareholders' equity 630,139 556,291 -------------- -------------- Total liabilities and shareholders' equity $ 974,963 $ 856,859 ============== ==============
NOTE: The balance sheet at December 31, 2001, has been derived from the audited financial statements at that date, but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. See notes to condensed consolidated financial statements. Page 3 O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, ----------------------- ----------------------- 2002 2001 2002 2001 ---------- ---------- ---------- ---------- (In thousands, except per share data) Product sales $ 359,579 $ 293,996 $ 998,249 $ 813,735 Cost of goods sold, including warehouse and distribution expenses 207,383 168,709 575,839 468,233 ---------- ---------- ---------- ---------- Gross profit 152,196 125,287 422,410 345,502 Operating, selling, general and administrative expenses 111,473 91,145 315,280 258,870 ---------- ---------- ---------- ---------- Operating income 40,723 34,142 107,130 86,632 Other expense, net (1,972) (1,764) (5,370) (5,362) ---------- ---------- ---------- ---------- Income before income taxes 38,751 32,378 101,760 81,270 Provision for income taxes 14,655 12,238 38,475 30,826 ---------- ---------- ---------- ---------- Net income $ 24,096 $ 20,140 $ 63,285 $ 50,444 ========== ========== ========== ========== Net income per common share $ 0.45 $ 0.38 $ 1.19 $ 0.97 ========== ========== ========== ========== Weighted-average common shares outstanding 53,187 52,404 53,044 51,942 ========== ========== ========== ========== Net income per common share - assuming dilution $ 0.45 $ 0.38 $ 1.18 $ 0.96 ========== ========== ========== ========== Adjusted weighted-average common shares outstanding - assuming dilution 53,715 53,205 53,675 52,563 ========== ========== ========== ==========
NOTE: The income statement at September 30, 2001, has been derived from the quarterly results section of the Form 10-K for the year ended December 31, 2001, but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. See notes to condensed consolidated financial statements. Page 4 O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Nine Months Ended September 30, September 30, 2002 2001 -------------- -------------- (In thousands) Net cash provided by operating activities $ 105,124 $ 72,278 Investing activities: Purchases of property and equipment (72,610) (46,465) Proceeds from sale of property and equipment 1,446 6,755 Payments received on notes receivable 585 479 Investments in other assets (1,844) (977) -------------- -------------- Net cash used in investing activities (72,423) (40,208) Financing activities: Payments on notes payable to banks (5,000) (35,000) Proceeds from issuance of long-term debt 149,640 191,542 Payments on long-term debt (166,546) (177,020) Proceeds from issuance of common stock 6,045 12,483 -------------- -------------- Net cash used in financing activities (15,861) (7,995) -------------- -------------- Net increase in cash 16,840 24,075 Cash at beginning of period 15,041 9,204 -------------- -------------- Cash at end of period $ 31,881 $ 33,279 ============== ==============
See notes to condensed consolidated financial statements. Page 5 O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) September 30, 2002 1. Basis of Presentation The accompanying unaudited condensed consolidated financial statements of O'Reilly Automotive, Inc. and Subsidiaries (the "Company") have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months and nine months ended September 30, 2002, are not necessarily indicative of the results that may be expected for the year ended December 31, 2002. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2001. 2. Reclassifications Certain reclassifications have been made to the 2001 condensed consolidated financial statements in order to conform to the 2002 presentation. Page 6 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Unless otherwise indicated, "we," "us," "our" and similar terms, as well as references to the "Company" or "O'Reilly" refer to O'Reilly Automotive, Inc. and its subsidiaries. The fundamental objective of financial reporting is to provide useful information that allows a reader to comprehend the business activities of our company. To aid in that understanding, management has identified our "critical accounting policies." These policies have the potential to have a significant impact on our financial statements, either because of the significance of the financial statement item to which they relate, or because they require judgments and/or estimates of management in their application due to the uncertainty involved in measuring, at a specific point in time, events that are continuous in nature. A summary of these critical accounting policies can be found in the section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations" of our 2001 Annual Report on Form 10-K. In particular, the accounting for, and analysis with respect to, areas such as costs of goods sold, operating, selling, general and administrative expenses and credit operations are discussed. Results of Operations Product sales for the third quarter of 2002 increased by $65.6 million, or 22.3% over product sales for the third quarter of 2001, to $359.6 million. Product sales for the first nine months of 2002 increased by $184.5 million, or 22.7% over product sales for the first nine months of 2001, to $998.2 million. These increases were primarily due to the opening of 29 net, new stores during the third quarter of 2002 and 83 net, new stores during the first nine months of 2002, in addition to a 3.2% and 3.3% increase in comparable store product sales for the third quarter and first nine months of 2002, respectively. At September 30, 2002, we operated 958 stores compared to 764 stores at September 30, 2001. Gross profit increased $26.9 million, or 21.5% from $125.3 million (or 42.6% of product sales) in the third quarter of 2001 to $152.2 million (or 42.3% of product sales) in the third quarter of 2002. Gross profit for the first nine months increased $76.9 million, or 22.3% from $345.5 million (or 42.5% of product sales) in 2001 to $422.4 million (or 42.3% of product sales) in 2002. The increase in gross profit dollars was primarily a result of the increase in sales resulting primarily from the increases in the number of stores open during the third quarter and first nine months of 2002 compared to the same periods in 2001, and increased sales levels at existing stores. The decrease in gross profit as a percent of sales for both periods being compared is primarily due to increased independent jobber sales resulting from the Mid-State's acquisition which are at a lower gross margin. Operating, selling, general and administrative expenses ("OSG&A expenses") increased $20.3 million from $91.1 million (or 31.0% of product sales) in the third quarter of 2001 to $111.5 million (or 31.0% of product sales) in the third quarter of 2002. OSG&A expenses increased $56.4 million from $258.9 million (or 31.8% of product sales) in the first nine months of 2001 to $315.3 million (or 31.6% of product sales) in the first nine months of 2002. The dollar increase in OSG&A expenses resulted from the addition of team members and resources in order to support the increased level of our operations and the continuing conversion of the 82 net stores acquired from Mid-State Automotive Distributors, Inc. ("Mid-State") during the fourth quarter of 2001. Other expense, net increased by $208,000 in the third quarter of 2002 compared to the third quarter of 2001 and increased by $8,000 for the first nine months of 2002 compared to the first nine months of 2001. The overall increase in other expense, net in both periods being compared, is primarily due to an increase in interest expense. Our estimated provision for income taxes increased $2.4 million and $7.6 million for the third quarter and first nine months of 2002 compared to 2001, as a result of our increased taxable income. Our effective tax rate was 37.8% of income before income taxes for the third quarter and the first nine months of both 2002 and 2001. Principally, as a result of the foregoing, net income increased from $20.1 million or 6.9% of product sales in the third quarter of 2001 to $24.1 million or 6.7% of product sales in the third quarter of 2002. Net income increased from $50.4 million or 6.2% of product sales in the first nine months of 2001 to $63.3 million or 6.3% of product sales in the first nine months of 2002. Page 7 Liquidity and Capital Resources Net cash provided by operating activities increased from $72.3 million for the first nine months in 2001 to $105.1 million for the first nine months of 2002. This increase was principally the result of increased net income and an increase in accounts payable, income taxes payable, accrued expenses, and other current liabilities, partially offset by increases in accounts receivable and inventory. The increase in accounts payable was primarily attributable to the timing of payments and more favorable payment terms from vendors. The increase in inventory and accounts receivable is primarily due to our continuing store growth. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION (CONT.) Net cash used in investing activities increased from $40.2 million during the first nine months in 2001 to $72.4 million for the comparable period in 2002, primarily due to the increased purchases of property and equipment resulting from new store growth. Net cash used in financing activities was $15.9 million in the first nine months of 2002, compared to $8.0 million in the first nine months of 2001 primarily due to increased repayment of debt. We maintain an unsecured, three-year syndicated revolving credit facility in the amount of $150 million. The credit facility is guaranteed by all of our subsidiaries and may be increased to a total of $200 million at any time prior to January 29, 2004, subject to availability of such additional credit from either existing banks within the syndicate or other banks. At September 30, 2002, $61.0 million of the revolving credit facility was outstanding. Accordingly, we have aggregate availability of $89.0 million under the credit facility for additional borrowings. The credit facility, which bears interest at LIBOR plus 1.00% (2.88% at September 30, 2002), expires in July 2005. In August 2001, we completed a sale-leaseback with O'Reilly-Wooten 2000 LLC (an entity owned by certain shareholders of the Company). The transaction closed on September 1, 2001, with a purchase price of approximately $5.6 million for nine O'Reilly Auto Parts stores and did not result in a material gain or loss. The lease, which has been accounted for as an operating lease, calls for an initial term of 15 years with three five-year renewal options. On May 16, 2001, we completed a $100 million private placement of two series of unsecured senior notes ("Senior Notes"). The Series 2001-A Senior Notes were issued for $75 million, are due May 16, 2006, and bear interest at 7.72% per year. The Series 2001-B Senior Notes were issued for $25 million, are due May 16, 2008, and bears interest at 7.92% per year. The private placement agreement allows for a total of $200 million of Senior Notes issuable in series. Proceeds from the transaction were used to reduce outstanding borrowings under our revolving credit facility. Our continuing store expansion program requires significant capital expenditures and working capital principally for inventory requirements. The costs associated with the opening of a new store (including the cost of land acquisition, improvements, fixtures, inventory and computer equipment) are estimated to average approximately $900,000 to $1.1 million; however, such costs may be significantly reduced where we lease, rather than purchase, the store site. Although the cost to acquire the business of an independently owned parts store varies, depending primarily upon the amount of inventory and the amount, if any, of real estate being acquired, we estimate that the average cost to acquire such a business and convert it to one of our stores is approximately $400,000. We plan to finance our expansion program through cash expected to be provided from operating activities and available borrowings under our existing credit facilities. For the first nine months of 2002, 83 net, new stores were opened. The Company plans to open 17 additional stores during the remainder of 2002. The funds required for such planned expansions are expected to be provided by operating activities and the existing and available bank credit facilities. We believe that our existing cash, short-term investments, cash expected to be provided by operating activities, available bank credit facilities and trade credit will be sufficient to fund both our short-term and long-term capital and liquidity needs for the foreseeable future. New Accounting Standards On January 1, 2002, the Company adopted SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." This new standard supersedes both SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for the Long-Lived Assets to Be Disposed Of," and sections of Accounting Principles Board Opinion 30, providing one accounting model with which to review for asset impairment. SFAS 144 retains much of the recognition and measurement provision of SFAS 121, but removes goodwill from its scope. It also alters the criteria of classifying long-lived assets to be disposed of by sale and changes the method for accounting for the disposal of long-lived assets if other than through sale. Finally, while this statement retains the basic presentation provisions for the disposal of a segment of a business or discontinued operation, it broadens the definition of a discontinued operation to include a component of an entity. Page 8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION (CONT.) The Company does not expect that the adoption of the statement will have a significant impact on the Company's financial position or results of operations. Inflation and Seasonality We have been successful, in many cases, in reducing the effects of merchandise cost increases principally by taking advantage of vendor incentive programs, economies of scale resulting from increased volume of purchases and selective forward buying. As a result, we do not believe our operations have been materially affected by inflation. Our business is seasonal to some extent primarily as a result of the impact of weather conditions on store sales. Store sales and profits have historically been higher in the second and third quarters (April through September) of each year than in the first and fourth quarters. Forward-Looking Statements Certain statements contained in the "Management's Discussion and Analysis of Results of Operations and Financial Condition" section of this report are forward-looking statements, as such term is defined under the Private Securities Litigation Reform Act of 1995. These statements discuss, among other things, expected growth, store development and expansion strategy, business strategies, future revenues and future performance. These forward-looking statements are based on estimates, projections, beliefs and assumptions and are not guarantees of future events and results. Such statements are subject to risks, uncertainties and assumptions, including, but not limited to, competition, product demand, the market for auto parts, the economy in general, inflation, consumer debt levels, governmental approvals, our ability to hire and retain qualified employees, risks associated with the integration of acquired businesses, weather, terrorist activities, war and the threat of war. Actual results may materially differ from anticipated results described in these forward-looking statements. Please refer to the Risk Factors sections of the company's Form 10-K for the year ended December 31, 2001, for more details and the risk factors set forth as exhibit 99.1 of this report. Page 9 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK On March 22, 2002, the Company entered into a receive-fixed, pay-float interest rate swap agreement ("Reverse Swap") to effectively convert a portion of its fixed rate long-term debt to a floating rate basis, thereby taking advantage of historically low floating interest rates. Pursuant to this Reverse Swap agreement, the Company agreed to exchange, at specified intervals, the difference between the fixed and the floating interest amounts calculated on the notional amount of the Reverse Swap agreement, which totaled $37.5 million. The Company's floating interest rate under the Reverse Swap agreement was 2.06% and the counterparty's fixed interest rate was 5.07% at June 14, 2002. The Company determined that the Reverse Swap was a perfectly matched derivative under the guidelines of the Financial Accounting Standards Board Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities." On June 14, 2002, the Company terminated the Reverse Swap and received a settlement payment in the amount of approximately $1 million dollars. The settlement payment is being amortized against interest expense through May 15, 2006, which is the expiration of the underlying (matched) debt. We are subject to interest rate risk to the extent we borrow against our credit facility with variable interest rates. Assuming the current level of borrowings at variable rates and assuming a two-percentage point change in the average interest rates under these borrowings, it is estimated that our interest expense for the quarter ended September 30, 2002, would have increased by approximately $305,000. In the event of an adverse change in interest rates, management would likely take actions that would mitigate our exposure to interest rate risk particularly if our borrowing levels increase to any significant extent; however, due to the uncertainty of the actions that would be taken and their possible effects, this analysis assumes no such action. Further, this analysis does not consider the effects of the change in the level of overall economic activity that could exist in such an environment. ITEM 4. CONTROLS AND PROCEDURES (a) Our chief executive officer and chief financial officer have reviewed and evaluated the Company's disclosure controls and procedures within 90 days of the filing date of this Quarterly Report. Based on such review and evaluation, the officers believe that the disclosure controls and procedures are designed effectively to ensure that the information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934, as amended, (1.) is recorded, processed, summarized and reported within the time period specified in the SEC's rules and forms and that the information required to be discussed by the Company in the reports that it files and submits under the Securities Exchange Act of 1934, as amended, and (2.) is documented and communicated to the Company's management, including the officers, as appropriate to allow timely decisions regarding required disclosure. (b) Changes in internal controls . There were no significant changes in the Company's internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. PART II - OTHER INFORMATION ITEM 5. OTHER INFORMATION On July 29, 2002, we completed an unsecured, three-year syndicated credit facility in the amount of $150 million lead by Wells Fargo Bank as the Administrative Agent which replaced our previous revolving credit facility. The credit facility is guaranteed by all of our subsidiaries. The facility may be increased to a total of $200 million at any time prior to January 29, 2004, subject to availability of such additional credit from either existing banks within the syndicate or new banks. The credit facility currently bears interest at LIBOR plus 1% and expires in July 2005. The credit agreement was filed as Exhibit 10.28 to our quarterly report on Form 10-Q for the quarter ended June 30, 2002. On January 1, 2002, the Company adopted SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." This new standard supersedes both SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for the Long-Lived Assets to Be Disposed Of," and sections of Accounting Principles Board Opinion 30, providing one accounting model with which to review for asset impairment. Page 10 ITEM 5. OTHER INFORMATION (CONT.) SFAS 144 retains much of the recognition and measurement provision of SFAS 121, but removes goodwill from its scope. It also alters the criteria of classifying long-lived assets to be disposed of by sale and changes the method for accounting for the disposal of long-lived assets if other than through sale. Finally, while this statement retains the basic presentation provisions for the disposal of a segment of a business or discontinued operation, it broadens the definition of a discontinued operation to include a component of an entity. The Company does not expect that the adoption of the statement will have a significant impact on the Company's financial position or results of operations. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: See Exhibit Index on page 12 hereof. Page 11 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. O'REILLY AUTOMOTIVE, INC. November 12, 2002 /s/ David E. O'Reilly - ----------------- ----------------------------------------------------- Date David E. O'Reilly, Co-Chairman of the Board and Chief Executive Officer (Principal Executive Officer) November 12, 2002 /s/ James R. Batten - ----------------- ----------------------------------------------------- Date James R. Batten, Vice-President of Finance and Chief Financial Officer (Principal Financial and Accounting Officer) Page 12 CERTIFICATIONS I, David E. O'Reilly, Co-Chairman of the Board, President and Chief Executive Officer of O'Reilly Automotive, Inc. (O'Reilly), certify that: 1. I have reviewed this quarterly report on Form 10-Q of O'Reilly; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of O'Reilly as of, and for, the periods presented in this quarterly report; 4. O'Reilly's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for O'Reilly and we have: a) designed such disclosure controls and procedures to ensure that material information relating to O'Reilly, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of O'Reilly's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. O'Reilly's other certifying officer and I have disclosed, based on our most recent evaluation, to O'Reilly's auditors and the audit committee of O'Reilly's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect O'Reilly's ability to record, process, summarize and report financial data and have identified for O'Reilly's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in O'Reilly's internal controls; and 6. O'Reilly's other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: November 12, 2002 /s/ David E. O'Reilly ---------------------------------------- David E. O'Reilly, Co-Chairman of the Board and Chief Executive Officer (Principal Executive Officer) Page 13 CERTIFICATIONS I, James R. Batten, Vice President of Finance and Chief Financial Officer of O'Reilly Automotive, Inc. (O'Reilly), certify that: 1. I have reviewed this quarterly report on Form 10-Q of O'Reilly; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of O'Reilly as of, and for, the periods presented in this quarterly report; 4. O'Reilly's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for O'Reilly and we have: a) designed such disclosure controls and procedures to ensure that material information relating to O'Reilly, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of O'Reilly's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. O'Reilly's other certifying officer and I have disclosed, based on our most recent evaluation, to O'Reilly's auditors and the audit committee of O'Reilly's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect O'Reilly's ability to record, process, summarize and report financial data and have identified for O'Reilly's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in O'Reilly's internal controls; and 6. O'Reilly's other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: November 12, 2002 /s/ James R. Batten ---------------------------------------- James R. Batten, Vice President of Finance and Chief Financial Officer (Principal Financial and Accounting Officer) Page 14 EXHIBIT INDEX Number Description Page - ------ ----------- ---- 99.1 Certain Risk Factors, filed herewith 16 99.2 Certificate of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith. 17 99.3 Certificate of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith. 18
Page 15 O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES Exhibit 99.1 - Certain Risk Factors The following factors could affect our actual results, including revenues, expenses and net income, and could cause them to differ from any forward-looking statements made by or on behalf of us. Competition We compete with a large number of retail and wholesale automotive aftermarket product suppliers. The distribution of automotive aftermarket products is a highly competitive industry, particularly in the more densely populated market areas served by us. Competitors include national and regional automotive parts chains, independently owned parts stores (some of which are associated with national auto parts distributors or associations), automobile dealerships, mass or general merchandise, discount and convenience chains that carry automotive products, independent warehouse distributors and parts stores and national warehouse distributors and associations. Some of our competitors are larger and have greater financial resources than us. No Assurance of Future Growth We believe that our ability to open additional stores at an accelerated rate will be a significant factor in achieving our growth objectives for the future. Our ability to accomplish this growth is dependent, in part, on matters beyond our control, such as weather conditions, zoning and other issues related to new store site development, the availability of qualified management personnel and general business and economic conditions. No assurance can be given that our current growth rate can be maintained. Dependence Upon Key and Other Personnel The success of our company has been largely dependent on the efforts of certain key personnel, including David E. O'Reilly, Lawrence P. O'Reilly, Ted F. Wise, and Greg Henslee. The loss of the services of one or more of these individuals could have a material adverse effect on the business and results of operations. Additionally, in order to successfully implement and manage our growth strategy, we will be dependent upon our ability to continue to attract and retain qualified personnel. There can be no assurance that we will be able to continue to attract such personnel. Concentration of Ownership by Management Our executive officers and directors as a group beneficially own a substantial percentage of the outstanding shares of our common stock. These officers and directors have the ability to exercise effective voting control of the company, including the election of all of our directors, and to effectively determine the vote on any matter being voted on by our shareholders, including any merger, sale of assets or other change in control of the company. Page 16 O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES Exhibit 99.2 - CEO Certification O'REILLY AUTOMOTIVE, INC. CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of O'Reilly Automotive, Inc. (the "Company") on Form 10-Q for the period ending September 30, 2002, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, David E. O'Reilly, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ David E. O'Reilly - ------------------------------------- David E. O'Reilly Chief Executive Officer November 12, 2002 This certification is made solely for purposes of 18 U.S.C. Section 1350, and not for any other purpose. Page 17 O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES Exhibit 99.3 - CFO Certification O'REILLY AUTOMOTIVE, INC. CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of O'Reilly Automotive, Inc. (the "Company") on Form 10-Q for the period ending September 30, 2002, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, James R. Batten, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ James R. Batten - ------------------------------------- James R. Batten Chief Financial Officer November 12, 2002 This certification is made solely for purposes of 18 U.S.C. Section 1350, and not for any other purpose. Page 18 -----END PRIVACY-ENHANCED MESSAGE-----