x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Missouri | 000-21318 | 27-4358837 | ||
(State or other jurisdiction | Commission file | (I.R.S. Employer | ||
of incorporation or organization) | number | Identification No.) |
Large accelerated filer x | Accelerated filer ¨ | |
Non-accelerated filer ¨ (Do not check if a smaller reporting company) | Smaller reporting company ¨ | |
Emerging growth company ¨ |
Page | |
September 30, 2017 | December 31, 2016 | ||||||
(Unaudited) | (Note) | ||||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 37,287 | $ | 146,598 | |||
Accounts receivable, net | 219,631 | 197,274 | |||||
Amounts receivable from suppliers | 79,491 | 82,105 | |||||
Inventory | 2,987,592 | 2,778,976 | |||||
Other current assets | 34,480 | 53,022 | |||||
Total current assets | 3,358,481 | 3,257,975 | |||||
Property and equipment, at cost | 5,114,804 | 4,832,342 | |||||
Less: accumulated depreciation and amortization | 1,822,123 | 1,708,911 | |||||
Net property and equipment | 3,292,681 | 3,123,431 | |||||
Goodwill | 787,210 | 785,399 | |||||
Other assets, net | 40,956 | 37,384 | |||||
Total assets | $ | 7,479,328 | $ | 7,204,189 | |||
Liabilities and shareholders’ equity | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 3,154,250 | $ | 2,936,656 | |||
Self-insurance reserves | 72,223 | 67,921 | |||||
Accrued payroll | 80,953 | 71,717 | |||||
Accrued benefits and withholdings | 65,574 | 74,454 | |||||
Income taxes payable | 6,175 | — | |||||
Other current liabilities | 249,325 | 249,901 | |||||
Total current liabilities | 3,628,500 | 3,400,649 | |||||
Long-term debt | 2,900,816 | 1,887,019 | |||||
Deferred income taxes | 131,847 | 90,166 | |||||
Other liabilities | 203,986 | 199,219 | |||||
Shareholders’ equity: | |||||||
Common stock, $0.01 par value: | |||||||
Authorized shares – 245,000,000 | |||||||
Issued and outstanding shares – | |||||||
85,338,294 as of September 30, 2017, and | |||||||
92,851,815 as of December 31, 2016 | 853 | 929 | |||||
Additional paid-in capital | 1,267,810 | 1,336,707 | |||||
Retained (deficit) earnings | (654,484 | ) | 289,500 | ||||
Total shareholders’ equity | 614,179 | 1,627,136 | |||||
Total liabilities and shareholders’ equity | $ | 7,479,328 | $ | 7,204,189 |
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Sales | $ | 2,339,830 | $ | 2,220,955 | $ | 6,786,918 | $ | 6,493,794 | |||||||
Cost of goods sold, including warehouse and distribution expenses | 1,109,536 | 1,050,929 | 3,225,415 | 3,099,010 | |||||||||||
Gross profit | 1,230,294 | 1,170,026 | 3,561,503 | 3,394,784 | |||||||||||
Selling, general and administrative expenses | 768,331 | 722,217 | 2,238,938 | 2,103,288 | |||||||||||
Operating income | 461,963 | 447,809 | 1,322,565 | 1,291,496 | |||||||||||
Other income (expense): | |||||||||||||||
Interest expense | (24,324 | ) | (18,706 | ) | (64,555 | ) | (52,228 | ) | |||||||
Interest income | 592 | 1,227 | 1,768 | 3,172 | |||||||||||
Other, net | 1,299 | 1,563 | 1,302 | 3,821 | |||||||||||
Total other expense | (22,433 | ) | (15,916 | ) | (61,485 | ) | (45,235 | ) | |||||||
Income before income taxes | 439,530 | 431,893 | 1,261,080 | 1,246,261 | |||||||||||
Provision for income taxes | 155,796 | 153,400 | 429,591 | 454,600 | |||||||||||
Net income | $ | 283,734 | $ | 278,493 | $ | 831,489 | $ | 791,661 | |||||||
Earnings per share-basic: | |||||||||||||||
Earnings per share | $ | 3.26 | $ | 2.93 | $ | 9.28 | $ | 8.25 | |||||||
Weighted-average common shares outstanding – basic | 86,947 | 94,891 | 89,641 | 95,994 | |||||||||||
Earnings per share-assuming dilution: | |||||||||||||||
Earnings per share | $ | 3.22 | $ | 2.90 | $ | 9.15 | $ | 8.14 | |||||||
Weighted-average common shares outstanding – assuming dilution | 88,025 | 96,120 | 90,869 | 97,309 |
For the Nine Months Ended September 30, | |||||||
2017 | 2016 | ||||||
(As Adjusted, Note) | |||||||
Operating activities: | |||||||
Net income | $ | 831,489 | $ | 791,661 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization of property, equipment and intangibles | 173,500 | 161,447 | |||||
Amortization of debt discount and issuance costs | 2,078 | 1,811 | |||||
Deferred income taxes | 41,848 | 4,439 | |||||
Share-based compensation programs | 14,835 | 14,371 | |||||
Other | 8,174 | 4,174 | |||||
Changes in operating assets and liabilities: | |||||||
Accounts receivable | (28,761 | ) | (35,312 | ) | |||
Inventory | (208,338 | ) | (158,877 | ) | |||
Accounts payable | 217,486 | 390,849 | |||||
Income taxes payable | 32,124 | 39,636 | |||||
Other | 2,984 | 60 | |||||
Net cash provided by operating activities | 1,087,419 | 1,214,259 | |||||
Investing activities: | |||||||
Purchases of property and equipment | (347,756 | ) | (356,234 | ) | |||
Proceeds from sale of property and equipment | 1,906 | 2,489 | |||||
Payments received on notes receivable | — | 1,047 | |||||
Other | (2,072 | ) | — | ||||
Net cash used in investing activities | (347,922 | ) | (352,698 | ) | |||
Financing activities: | |||||||
Proceeds from borrowings on revolving credit facility | 2,487,000 | — | |||||
Payments on revolving credit facility | (2,218,000 | ) | — | ||||
Proceeds from the issuance of long-term debt | 748,800 | 499,160 | |||||
Payment of debt issuance costs | (7,490 | ) | (4,125 | ) | |||
Repurchases of common stock | (1,893,148 | ) | (959,789 | ) | |||
Net proceeds from issuance of common stock | 34,186 | 47,419 | |||||
Other | (156 | ) | (207 | ) | |||
Net cash used in financing activities | (848,808 | ) | (417,542 | ) | |||
Net (decrease) increase in cash and cash equivalents | (109,311 | ) | 444,019 | ||||
Cash and cash equivalents at beginning of the period | 146,598 | 116,301 | |||||
Cash and cash equivalents at end of the period | $ | 37,287 | $ | 560,320 | |||
Supplemental disclosures of cash flow information: | |||||||
Income taxes paid | $ | 359,838 | $ | 416,901 | |||
Interest paid, net of capitalized interest | 72,252 | 59,547 |
• | Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity can access at the measurement date. |
• | Level 2 – Inputs other than quoted prices in active markets included within Level 1 that are observable for the asset or liability, either directly or indirectly. |
• | Level 3 – Unobservable inputs for the asset or liability. |
September 30, 2017 | |||||||||||||||
Quoted Prices in Active Markets for Identical Instruments (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total | ||||||||||||
Marketable securities | $ | 24,528 | $ | — | $ | — | $ | 24,528 |
December 31, 2016 | |||||||||||||||
Quoted Prices in Active Markets for Identical Instruments (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total | ||||||||||||
Marketable securities | $ | 20,462 | $ | — | $ | — | $ | 20,462 |
September 30, 2017 | December 31, 2016 | ||||||||||||||
Carrying Amount | Estimated Fair Value | Carrying Amount | Estimated Fair Value | ||||||||||||
Senior Notes | $ | 2,631,816 | $ | 2,733,350 | $ | 1,887,019 | $ | 1,977,510 |
September 30, 2017 | December 31, 2016 | ||||||
Revolving Credit Facility, weighted-average variable interest rate of 2.283% | $ | 269,000 | $ | — | |||
$500 million, 4.875% Senior Notes due 2021(1), effective interest rate of 4.957% | 497,363 | 496,758 | |||||
$300 million, 4.625% Senior Notes due 2021(2), effective interest rate of 4.646% | 298,891 | 298,679 | |||||
$300 million, 3.800% Senior Notes due 2022(3), effective interest rate of 3.845% | 298,126 | 297,868 | |||||
$300 million, 3.850% Senior Notes due 2023(4), effective interest rate of 3.851% | 298,525 | 298,355 | |||||
$500 million, 3.550% Senior Notes due 2026(5), effective interest rate of 3.570% | 495,682 | 495,359 | |||||
$750 million, 3.600% Senior Notes due 2027(6), effective interest rate of 3.619% | 743,229 | — | |||||
Long-term debt | $ | 2,900,816 | $ | 1,887,019 |
(1) | Net of unamortized discount of $1.2 million as of September 30, 2017, and $1.4 million as of December 31, 2016, and debt issuance costs of $1.5 million as of September 30, 2017, and $1.8 million as of December 31, 2016. |
(2) | Net of unamortized discount of $0.2 million as of September 30, 2017, and December 31, 2016, and debt issuance costs of $0.9 million as of September 30, 2017, and $1.1 million as of December 31, 2016. |
(3) | Net of unamortized discount of $0.6 million as of September 30, 2017, and $0.7 million as of December 31, 2016, and debt issuance costs of $1.3 million as of September 30, 2017, and $1.5 million as of December 31, 2016. |
(4) | Net of unamortized discount of less than $0.1 million as of September 30, 2017, and December 31, 2016, and debt issuance costs of $1.5 million as of September 30, 2017, and $1.6 million as of December 31, 2016. |
(5) | Net of unamortized discount of $0.7 million as of September 30, 2017, and $0.8 million as of December 31, 2016, and debt issuance costs of $3.6 million as of September 30, 2017, and $3.9 million as of December 31, 2016. |
(6) | Net of unamortized discount of $1.2 million as of September 30, 2017, and debt issuance costs of $5.6 million as of September 30, 2017. |
Warranty liabilities, balance at December 31, 2016 | $ | 36,623 | |
Warranty claims | (60,173 | ) | |
Warranty accruals | 65,450 | ||
Warranty liabilities, balance at September 30, 2017 | $ | 41,900 |
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Shares repurchased | 2,743 | 367 | 8,047 | 3,673 | |||||||||||
Average price per share | $ | 200.70 | $ | 281.04 | $ | 235.26 | $ | 261.32 | |||||||
Total investment | $ | 550,530 | $ | 102,941 | $ | 1,893,068 | $ | 959,743 |
Shares | Weighted-Average Exercise Price | |||||
Outstanding at December 31, 2016 | 2,800 | $ | 104.90 | |||
Granted | 240 | 257.39 | ||||
Exercised | (483 | ) | 51.35 | |||
Forfeited | (26 | ) | 207.45 | |||
Outstanding at September 30, 2017 | 2,531 | $ | 128.50 | |||
Exercisable at September 30, 2017 | 1,705 | $ | 75.65 |
• | Risk-free interest rate – The United States Treasury rates in effect at the time the options are granted for the options’ expected life. |
• |
• | Expected life – Represents the period of time that options granted are expected to be outstanding. The Company uses historical experience to estimate the expected life of options granted. |
• | Expected volatility – Measure of the amount, by which the Company’s stock price is expected to fluctuate, based on a historical trend. |
• | Expected dividend yield – The Company has not paid, nor does it have plans in the foreseeable future to pay, any dividends. |
For the Nine Months Ended September 30, | |||||
2017 | 2016 | ||||
Risk free interest rate | 1.98 | % | 1.45 | % | |
Expected life | 5.5 Years | 5.6 Years | |||
Expected volatility | 22.2 | % | 22.4 | % | |
Expected dividend yield | — | % | — | % |
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Compensation expense for stock options awarded | $ | 3,679 | $ | 3,653 | $ | 11,826 | $ | 11,793 | |||||||
Income tax benefit from compensation expense related to stock options | 1,402 | 1,365 | 4,507 | 4,405 |
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Compensation expense for shares issued under the ESPP | $ | 545 | $ | 538 | $ | 1,659 | $ | 1,610 | |||||||
Income tax benefit from compensation expense related to shares issued under the ESPP | 208 | 201 | 632 | 601 | |||||||||||
Compensation expense for restricted shares awarded | 258 | 327 | 1,350 | 968 | |||||||||||
Income tax benefit from compensation expense related to restricted awards | $ | 98 | $ | 122 | $ | 515 | $ | 361 |
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Numerator (basic and diluted): | |||||||||||||||
Net income | $ | 283,734 | $ | 278,493 | $ | 831,489 | $ | 791,661 | |||||||
Denominator: | |||||||||||||||
Weighted-average common shares outstanding – basic | 86,947 | 94,891 | 89,641 | 95,994 | |||||||||||
Effect of stock options (1) | 1,078 | 1,229 | 1,228 | 1,315 | |||||||||||
Weighted-average common shares outstanding – assuming dilution | 88,025 | 96,120 | 90,869 | 97,309 | |||||||||||
Earnings per share: | |||||||||||||||
Earnings per share-basic | $ | 3.26 | $ | 2.93 | $ | 9.28 | $ | 8.25 | |||||||
Earnings per share-assuming dilution | $ | 3.22 | $ | 2.90 | $ | 9.15 | $ | 8.14 | |||||||
Antidilutive potential common shares not included in the calculation of diluted earnings per share: | |||||||||||||||
Stock options (1) | 784 | 271 | 620 | 319 | |||||||||||
Weighted-average exercise price per share of antidilutive stock options (1) | $ | 246.65 | $ | 267.66 | $ | 258.75 | $ | 264.88 |
(1) | See Note 6 for further information concerning the terms of the Company’s share-based compensation plans. |
• | an overview of the key drivers of the automotive aftermarket industry; |
• | our liquidity and capital resources; |
• | any contractual obligations, to which we are committed; |
• | our critical accounting estimates; |
• | the inflation and seasonality of our business; and |
• | Number of Miles Driven – 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 Department of Transportation, the number of total miles driven in the U.S. increased 2.4%, 3.5% and 1.8% in 2016, 2015 and 2014, respectively, and through August of 2017, year-to-date miles driven increased 1.4%. We would expect to continue to see modest improvements in total miles driven in the U.S., supported by an increasing number of registered vehicles on the road, resulting in continued demand for automotive aftermarket products. |
• | Number of U.S. Registered Vehicles, New Light Vehicle Registrations and Average Vehicle Age – 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 7% from 2006 to 2016, bringing the number of light vehicles on the road to 264 million by the end of 2016. For the year ended December 31, 2016, the seasonally adjusted annual rate of light vehicle sales in the U.S. (“SAAR”) was approximately 18.3 million, and for 2017, the SAAR is estimated to be approximately 18.5 million, contributing to the continued growth in the total number of registered vehicles on the road. In the past decade, vehicle scrappage rates have remained relatively stable, ranging from 4.3% to 5.7% annually. As a result, over the past decade, the average age of the U.S. vehicle population has increased, growing 22%, from 9.5 years in 2006 to 11.6 years in 2016. We believe this increase in average age can be attributed to better engineered and manufactured vehicles, which can be reliably driven at higher mileages due to better quality power trains and interiors and exteriors, and the consumer’s willingness to invest in maintaining these higher-mileage, better built vehicles. As the average age of vehicles on the road increases, a larger percentage of miles are being driven by vehicles that are outside of a manufacturer warranty. These out-of-warranty, older vehicles generate strong demand for automotive aftermarket products as they go through more routine maintenance cycles, have more frequent mechanical failures and generally require more maintenance than newer vehicles. We believe consumers will continue to invest in these reliable, higher-quality, higher-mileage vehicles and these investments, along with an increasing total light vehicle fleet, will support continued demand for automotive aftermarket products. |
• | Unemployment – Unemployment, underemployment, the threat of future joblessness and the uncertainty surrounding the overall economic health of the U.S. have a negative impact on consumer confidence and the level of consumer discretionary spending. Long-term trends of high unemployment have historically impeded the growth of annual miles driven, as well as decrease consumer discretionary spending, both of which negatively impact demand for products sold in the automotive aftermarket industry. As of December 31, 2016, the U.S. unemployment rate was 4.7%, and as of September 30, 2017, the U.S. unemployment rate was 4.2%. We believe total employment should remain at healthy levels with marginal improvements, and we would expect to see an increase in commuter traffic with a growing work force, further aiding the positive trend of growth of total miles driven in the U.S. and demand for automotive aftermarket products. |
Increase in Sales for the Three Months Ended September 30, 2017, Compared to the Same Period in 2016 | Increase in Sales for the Nine Months Ended September 30, 2017, Compared to the Same Period in 2016 | ||||||
Store sales: | |||||||
Comparable store sales, including sales from the 48 acquired Bond stores | $ | 57 | $ | 144 | |||
Non-comparable store sales: | |||||||
Sales for stores opened throughout 2016, excluding stores open at least one year that are included in comparable store sales | 29 | 117 | |||||
Sales for stores opened throughout 2017 | 35 | 63 | |||||
Sales from Leap Day in 2016 | — | (25 | ) | ||||
Sales in 2016 for stores that have closed | (1 | ) | (4 | ) | |||
Non-store sales: | |||||||
Includes sales of machinery and sales to independent parts stores and Team Members | (1 | ) | (2 | ) | |||
Total increase in sales | $ | 119 | $ | 293 |
For the Nine Months Ended September 30, | |||||||
Liquidity: | 2017 | 2016 | |||||
Total cash provided by/(used in): | |||||||
Operating activities (1) | $ | 1,087,419 | $ | 1,214,259 | |||
Investing activities | (347,922 | ) | (352,698 | ) | |||
Financing activities (1) | (848,808 | ) | (417,542 | ) | |||
Net (decrease) increase in cash and cash equivalents | $ | (109,311 | ) | $ | 444,019 | ||
Capital expenditures | $ | 347,756 | $ | 356,234 | |||
Free cash flow (2) | $ | 704,381 | $ | 811,991 |
(1) | Prior period amount has been reclassified to conform to current period presentation, due to the Company’s adoption of a new accounting standard during the first quarter ended March 31, 2017. |
(2) | Calculated as net cash provided by operating activities, less capital expenditures and excess tax benefit from share-based compensation payments for the period. |
For the Twelve Months Ended September 30, | |||||||
2017 | 2016 | ||||||
GAAP net income | $ | 1,077,519 | $ | 1,010,237 | |||
Add: Interest expense | 83,258 | 66,340 | |||||
Rent expense | 295,083 | 279,863 | |||||
Provision for income taxes | 574,491 | 585,650 | |||||
Depreciation expense | 228,815 | 212,208 | |||||
Amortization expense | 1,104 | 1,430 | |||||
Non-cash share-based compensation | 19,323 | 19,614 | |||||
Non-GAAP EBITDAR | $ | 2,279,593 | $ | 2,175,342 | |||
Interest expense | $ | 83,258 | $ | 66,340 | |||
Capitalized interest | 8,298 | 7,976 | |||||
Rent expense | 295,083 | 279,863 | |||||
Total fixed charges | $ | 386,639 | $ | 354,179 | |||
Consolidated fixed charge coverage ratio | 5.90 | 6.14 | |||||
GAAP debt | $ | 2,900,816 | $ | 1,886,501 | |||
Stand-by letters of credit | 41,258 | 38,618 | |||||
Discount on senior notes | 3,894 | 3,295 | |||||
Debt issuance costs | 14,290 | 10,204 | |||||
Five-times rent expense | 1,475,415 | 1,399,315 | |||||
Non-GAAP adjusted debt | $ | 4,435,673 | $ | 3,337,933 | |||
Consolidated leverage ratio | 1.95 | 1.53 |
For the Nine Months Ended September 30, | ||||||||
2017 | 2016 | |||||||
Cash provided by operating activities (1) | $ | 1,087,419 | $ | 1,214,259 | ||||
Less: | Capital expenditures | 347,756 | 356,234 | |||||
Excess tax benefit from share-based compensation | 35,282 | 46,034 | ||||||
Free cash flow | $ | 704,381 | $ | 811,991 |
(1) | Prior period amount has been reclassified to conform to current period presentation, due to the Company’s adoption of a new accounting standard during the first quarter ended March 31, 2017. |
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Shares repurchased | 2,743 | 367 | 8,047 | 3,673 | |||||||||||
Average price per share | $ | 200.70 | $ | 281.04 | $ | 235.26 | $ | 261.32 | |||||||
Total investment | $ | 550,530 | $ | 102,941 | $ | 1,893,068 | $ | 959,743 |
Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Programs | Maximum Dollar Value of Shares that May Yet Be Purchased Under the Programs (1) | ||||||||||
July 1, 2017, through July 31, 2017 | — | $ | — | — | $ | 545,288 | ||||||||
August 1, 2017, through August 31, 2017 | 1,999 | 200.82 | 1,999 | 143,757 | ||||||||||
September 1, 2017, through September 30, 2017 | 744 | 200.38 | 744 | $ | 994,758 | |||||||||
Total as of September 30, 2017 | 2,743 | $ | 200.70 | 2,743 |
(1) | Under the Company’s share repurchase program, as approved by its Board of Directors, the Company may, from time to time, repurchase shares of its common stock, solely through open market purchases effected through a broker dealer at prevailing market prices, based on a variety of factors such as price, corporate trading policy requirements and overall market conditions. The Company’s Board of Directors may increase or otherwise modify, renew, suspend or terminate the share repurchase program at any time, without prior notice. As announced on May 10, 2017, and September 1, 2017, the Company’s Board of Directors each time approved a resolution to increase the authorization amount under the share repurchase program by an additional $1.0 billion, resulting in a cumulative authorization amount of $9.8 billion. Each additional authorization is effective for a three-year period, beginning on its respective announcement date. The authorization under the share repurchase program that currently has capacity is scheduled to expire on September 1, 2020. No other share repurchase programs existed during the nine months ended September 30, 2017. |
Exhibit No. | Description |
101.INS | XBRL Instance Document |
101.SCH | XBRL Taxonomy Extension Schema |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase |
101.DEF | XBRL Taxonomy Extension Definition Linkbase |
101.LAB | XBRL Taxonomy Extension Label Linkbase |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase |
* | Furnished (and not filed) herewith pursuant to Item 601(b)(32)(ii) of Regulation S-K. |
O’REILLY AUTOMOTIVE, INC. | |||
November 7, 2017 | /s/ | Greg L. Henslee | |
Date | Greg L. Henslee | ||
Chief Executive Officer | |||
(Principal Executive Officer) | |||
November 7, 2017 | /s/ | Thomas McFall | |
Date | Thomas McFall | ||
Executive Vice President and Chief Financial Officer | |||
(Principal Financial and Accounting Officer) |
1. | I have reviewed this report on Form 10-Q of O’Reilly Automotive, Inc.; |
2. | Based on my knowledge, this 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 report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: November 7, 2017 | /s/ | Greg L. Henslee |
Greg L. Henslee | ||
Chief Executive Officer (Principal Executive Officer) |
1. | I have reviewed this report on Form 10-Q of O’Reilly Automotive, Inc.; |
2. | Based on my knowledge, this 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 report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: November 7, 2017 | /s/ | Thomas McFall |
Thomas McFall | ||
Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) |
(1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; 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/ | Greg L. Henslee |
Greg L. Henslee | |
Chief Executive Officer |
(1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; 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/ | Thomas McFall |
Thomas McFall | |
Chief Financial Officer |
Document and Entity Information - shares |
9 Months Ended | |
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Sep. 30, 2017 |
Oct. 30, 2017 |
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Document and Entity Information | ||
Document type | 10-Q | |
Amendment flag | false | |
Document period end date | Sep. 30, 2017 | |
Document fiscal year focus | 2017 | |
Current fiscal year end date | --12-31 | |
Document fiscal period focus | Q3 | |
Entity registrant name | O REILLY AUTOMOTIVE INC | |
Entity central index key | 0000898173 | |
Entity filer category | Large Accelerated Filer | |
Entity common stock, shares outstanding | 85,027,697 |
Condensed Consolidated Balance Sheets - USD ($) $ in Thousands |
Sep. 30, 2017 |
Dec. 31, 2016 |
[1] | ||
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Assets | |||||
Cash and cash equivalents | $ 37,287 | $ 146,598 | |||
Accounts receivable, net | 219,631 | 197,274 | |||
Amounts receivable from suppliers | 79,491 | 82,105 | |||
Inventory | 2,987,592 | 2,778,976 | |||
Other current assets | 34,480 | 53,022 | |||
Total current assets | 3,358,481 | 3,257,975 | |||
Property and equipment, at cost | 5,114,804 | 4,832,342 | |||
Less: accumulated depreciation and amortization | 1,822,123 | 1,708,911 | |||
Net property and equipment | 3,292,681 | 3,123,431 | |||
Goodwill | 787,210 | 785,399 | |||
Other assets, net | 40,956 | 37,384 | |||
Total assets | 7,479,328 | 7,204,189 | |||
Liabilities and shareholders' equity | |||||
Accounts payable | 3,154,250 | 2,936,656 | |||
Self-insurance reserves | 72,223 | 67,921 | |||
Accrued payroll | 80,953 | 71,717 | |||
Accrued benefits and withholdings | 65,574 | 74,454 | |||
Income taxes payable | 6,175 | 0 | |||
Other current liabilities | 249,325 | 249,901 | |||
Total current liabilities | 3,628,500 | 3,400,649 | |||
Long-term debt | 2,900,816 | 1,887,019 | |||
Deferred income taxes | 131,847 | 90,166 | |||
Other liabilities | 203,986 | 199,219 | |||
Shareholders' equity: | |||||
Common stock, $0.01 par value: Authorized shares - 245,000,000; Issued and outstanding shares - 85,338,294 as of September 30, 2017, and 92,851,815 as of December 31, 2016 | 853 | 929 | |||
Additional paid-in capital | 1,267,810 | 1,336,707 | |||
Retained (deficit) earnings | (654,484) | 289,500 | |||
Total shareholders' equity | 614,179 | 1,627,136 | |||
Total liabilities and shareholders' equity | $ 7,479,328 | $ 7,204,189 | |||
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Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares |
Sep. 30, 2017 |
Dec. 31, 2016 |
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Statement of Financial Position [Abstract] | ||
Common stock, par value | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 245,000,000 | 245,000,000 |
Common stock, shares issued | 85,338,294 | 92,851,815 |
Common stock, shares outstanding | 85,338,294 | 92,851,815 |
Condensed Consolidated Statements of Income - USD ($) shares in Thousands, $ in Thousands |
3 Months Ended | 9 Months Ended | ||
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Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
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Income Statement [Abstract] | ||||
Sales | $ 2,339,830 | $ 2,220,955 | $ 6,786,918 | $ 6,493,794 |
Cost of goods sold, including warehouse and distribution expenses | 1,109,536 | 1,050,929 | 3,225,415 | 3,099,010 |
Gross profit | 1,230,294 | 1,170,026 | 3,561,503 | 3,394,784 |
Selling, general and administrative expenses | 768,331 | 722,217 | 2,238,938 | 2,103,288 |
Operating income | 461,963 | 447,809 | 1,322,565 | 1,291,496 |
Other income (expense): | ||||
Interest expense | (24,324) | (18,706) | (64,555) | (52,228) |
Interest income | 592 | 1,227 | 1,768 | 3,172 |
Other, net | 1,299 | 1,563 | 1,302 | 3,821 |
Total other expense | (22,433) | (15,916) | (61,485) | (45,235) |
Income before income taxes | 439,530 | 431,893 | 1,261,080 | 1,246,261 |
Provision for income taxes | 155,796 | 153,400 | 429,591 | 454,600 |
Net income | $ 283,734 | $ 278,493 | $ 831,489 | $ 791,661 |
Earnings per share-basic: | ||||
Earnings per share - basic | $ 3.26 | $ 2.93 | $ 9.28 | $ 8.25 |
Weighted-average common shares outstanding - basic | 86,947 | 94,891 | 89,641 | 95,994 |
Earnings per share-assuming dilution: | ||||
Earnings per share - assuming dilution | $ 3.22 | $ 2.90 | $ 9.15 | $ 8.14 |
Weighted-average common shares outstanding - assuming dilution | 88,025 | 96,120 | 90,869 | 97,309 |
Basis of Presentation |
9 Months Ended |
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Sep. 30, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of presentation | NOTE 1 - BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements of O’Reilly Automotive, Inc. and its subsidiaries (the “Company” or “O’Reilly”) have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”) 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 U.S. GAAP 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 and nine months ended September 30, 2017, are not necessarily indicative of the results that may be expected for the year ended December 31, 2017. 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, 2016. Certain prior period amounts have been reclassified to conform to current period presentation. These reclassifications had no effect on reported totals for assets, liabilities, shareholders’ equity, cash flows or net income. See Note 9 “Recent Accounting Pronouncements” to the condensed consolidated financial statements in this report for more information. |
Fair Value Measurements |
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Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair value measurements | NOTE 2 – FAIR VALUE MEASUREMENTS The Company uses the fair value hierarchy, which prioritizes the inputs used to measure the fair value of certain of its financial instruments. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement). The Company uses the income and market approaches to determine the fair value of its assets and liabilities. The three levels of the fair value hierarchy are set forth below:
Financial assets and liabilities measured at fair value on a recurring basis: The Company invests in various marketable securities with the intention of selling these securities to fulfill its future unsecured obligation under the Company’s nonqualified deferred compensation plan. See Note 6 for further information concerning the Company’s benefit plans. The Company’s marketable securities were accounted for as trading securities and the carrying amount of its marketable securities were included in “Other assets, net” on the accompanying Condensed Consolidated Balance Sheets as of September 30, 2017, and December 31, 2016. The Company recorded an increase in fair value related to its marketable securities in the amounts of $1.0 million and $0.9 million for the three months ended September 30, 2017 and 2016, respectively, which were included in “Other income (expense)” on the accompanying Condensed Consolidated Statements of Income. The Company recorded an increase in fair value related to its marketable securities in the amounts of $2.6 million and $1.4 million for the nine months ended September 30, 2017 and 2016, respectively, which were included in “Other income (expense)” on the accompanying Condensed Consolidated Statements of Income. The tables below identify the estimated fair value of the Company’s marketable securities, determined by reference to quoted market prices (Level 1), as of September 30, 2017, and December 31, 2016 (in thousands):
Non-financial assets and liabilities measured at fair value on a nonrecurring basis: Certain long-lived non-financial assets and liabilities may be required to be measured at fair value on a nonrecurring basis in certain circumstances, including when there is evidence of impairment. These non-financial assets and liabilities may include assets acquired in a business combination or property and equipment that are determined to be impaired. As of September 30, 2017, and December 31, 2016, the Company did not have any non-financial assets or liabilities that had been measured at fair value subsequent to initial recognition. Fair value of financial instruments: The carrying amounts of the Company’s senior notes and unsecured revolving credit facility borrowings are included in “Long-term debt” on the accompanying Condensed Consolidated Balance Sheets as of September 30, 2017, and December 31, 2016. See Note 3 for further information concerning the Company’s senior notes and unsecured revolving credit facility. The table below identifies the estimated fair value of the Company’s senior notes, using the market approach. The fair value as of September 30, 2017, and December 31, 2016, was determined by reference to quoted market prices of the same or similar instruments (Level 2) (in thousands):
The carrying amount of the Company’s unsecured revolving credit facility approximates fair value, as borrowings under the facility bear variable interest at current market rates. The accompanying Condensed Consolidated Balance Sheets include other financial instruments, including cash and cash equivalents, accounts receivable, amounts receivable from suppliers and accounts payable. Due to the short-term nature of these financial instruments, the Company believes that the carrying values of these instruments approximate their fair values. |
Financing |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Financing | NOTE 3 – FINANCING The following table identifies the amounts included in “Long-term debt” on the accompanying Condensed Consolidated Balance Sheets as of September 30, 2017, and December 31, 2016 (in thousands):
Unsecured revolving credit facility: On April 5, 2017, the Company entered into a credit agreement (the “Credit Agreement”). The Credit Agreement provides for a $1.2 billion unsecured revolving credit facility (the “Revolving Credit Facility”) arranged by JPMorgan Chase Bank, N.A., which is scheduled to mature in April 2022. The Credit Agreement includes a $200 million sub-limit for the issuance of letters of credit and a $75 million sub-limit for swing line borrowings under the Revolving Credit Facility. As described in the Credit Agreement governing the Revolving Credit Facility, the Company may, from time to time, subject to certain conditions, increase the aggregate commitments under the Revolving Credit Facility by up to $600 million, provided that the aggregate amount of the commitments does not exceed $1.8 billion at any time. In conjunction with the closing of the Credit Agreement, the Company’s previous credit agreement, which was originally entered into on January 14, 2011, as amended, was terminated (the “Terminated Credit Agreement”), and all outstanding loans and commitments, including the guarantees of each of the subsidiary guarantors, under the Terminated Credit Agreement were terminated and replaced by the loans and commitments under the Credit Agreement. None of the Company’s subsidiaries are guarantors or obligors under the Credit Agreement. As of September 30, 2017, and December 31, 2016, the Company had outstanding letters of credit, primarily to support obligations related to workers’ compensation, general liability and other insurance policies, in the amounts of $41.3 million and $38.7 million, respectively, reducing the aggregate availability under the credit agreements by those amounts. Borrowings under the Revolving Credit Facility (other than swing line loans) bear interest, at the Company’s option, at either an Alternate Base Rate or an Adjusted LIBO Rate (both as defined in the Credit Agreement) plus an applicable margin. Swing line loans made under the Revolving Credit Facility bear interest at an Alternate Base Rate plus the applicable margin for Alternate Base Rate loans. In addition, the Company pays a facility fee on the aggregate amount of the commitments under the Credit Agreement in an amount equal to a percentage of such commitments. The interest rate margins and facility fee are based upon the better of the ratings assigned to the Company’s debt by Moody’s Investor Service, Inc. and Standard & Poor’s Ratings Services, subject to limited exceptions. As of September 30, 2017, based upon the Company’s current credit ratings, its margin for Alternate Base Rate loans was 0.000%, its margin for Eurodollar Revolving Loans was 0.900% and its facility fee was 0.100%. The Credit Agreement contains certain covenants, including limitations on subsidiary 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, five-times rent expense and excludes any premium or discount recorded in conjunction with the issuance of long-term debt. In the event that the Company should default on any covenant (subject to customary grace periods, cure rights and materiality thresholds) contained in 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 lenders. As of September 30, 2017, the Company remained in compliance with all covenants under the Credit Agreement. Senior notes: On August 17, 2017, the Company issued $750 million aggregate principal amount of unsecured 3.600% Senior Notes due 2027 (“3.600% Senior Notes due 2027”) at a price to the public of 99.840% of their face value with UMB Bank, N.A. (“UMB”) as trustee. Interest on the 3.600% Senior Notes due 2027 is payable on March 1 and September 1 of each year, beginning on March 1, 2018, and is computed on the basis of a 360-day year. The Company has issued a cumulative $2.7 billion aggregate principal amount of unsecured senior notes, which are due between 2021 and 2027, with UMB as trustee. Interest on the senior notes, ranging from 3.550% to 4.875%, is payable semi-annually and is computed on the basis of a 360-day year. Each of the senior notes is subject to certain customary covenants, with which the Company complied as of September 30, 2017. In connection with entering into the Credit Agreement (under which none of the Company’s subsidiaries are guarantors or obligors), and upon termination of the Terminated Credit Agreement, the guarantees by the Company’s subsidiary guarantors with respect to all of the Company’s then outstanding senior notes were automatically released in accordance with the terms of the respective indentures governing these senior notes. The 3.600% Senior Notes due 2027 also are not guaranteed by any of the Company’s subsidiaries. |
Warranties |
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Sep. 30, 2017 | |||||||||||||||||||||||||
Product Warranties Disclosures [Abstract] | |||||||||||||||||||||||||
Warranties | NOTE 4 – WARRANTIES The Company provides warranties on certain merchandise it sells with warranty periods ranging from 30 days to limited lifetime warranties. The risk of loss arising from warranty claims is typically the obligation of the Company’s suppliers. Certain suppliers provide upfront allowances to the Company in lieu of accepting the obligation for warranty claims. For this merchandise, when sold, the Company bears the risk of loss associated with the cost of warranty claims. Differences between supplier allowances received by the Company, in lieu of warranty obligations and estimated warranty expense, are recorded as an adjustment to cost of sales. Estimated warranty costs, which are recorded as obligations at the time of sale, are based on the historical failure rate of each individual product line. The Company’s historical experience has been that failure rates are relatively consistent over time and that the ultimate cost of warranty claims to the Company has been driven by volume of units sold as opposed to fluctuations in failure rates or the variation of the cost of individual claims. The Company’s product warranty liabilities are included in “Other current liabilities” on the accompanying Condensed Consolidated Balance Sheets as of September 30, 2017, and December 31, 2016. The following table identifies the changes in the Company’s aggregate product warranty liabilities for the nine months ended September 30, 2017 (in thousands):
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Share Repurchase Program |
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Share repurchase program | NOTE 5 – SHARE REPURCHASE PROGRAM In January of 2011, the Company’s Board of Directors approved a share repurchase program. Under the program, the Company may, from time to time, repurchase shares of its common stock, solely through open market purchases effected through a broker dealer at prevailing market prices, based on a variety of factors such as price, corporate trading policy requirements and overall market conditions. The Company’s Board of Directors may increase or otherwise modify, renew, suspend or terminate the share repurchase program at any time, without prior notice. As announced on May 10, 2017, and September 1, 2017, the Company’s Board of Directors each time approved a resolution to increase the authorization amount under the share repurchase program by an additional $1.0 billion, resulting in a cumulative authorization amount of $9.8 billion. Each additional authorization is effective for a three-year period, beginning on its respective announcement date. The following table identifies shares of the Company’s common stock that have been repurchased as part of the Company’s publicly announced share repurchase program (in thousands, except per share data):
As of September 30, 2017, the Company had $994.8 million remaining under its share repurchase program. Subsequent to the end of the third quarter and through November 7, 2017, the Company repurchased an additional 0.4 million shares of its common stock under its share repurchase program, at an average price of $209.61, for a total investment of $85.2 million. The Company has repurchased a total of 65.4 million shares of its common stock under its share repurchase program since the inception of the program in January of 2011 and through November 7, 2017, at an average price of $135.17, for a total aggregate investment of $8.8 billion. |
Share-Based Compensation and Benefit Plans |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-based compensation and benefit plans | NOTE 6 – SHARE-BASED COMPENSATION AND BENEFIT PLANS The Company recognizes share-based compensation expense based on the fair value of the grants, awards or shares at the time of the grant, award or issuance. Share-based compensation includes stock option awards issued under the Company’s employee incentive plans and director stock plan, restricted stock awarded under the Company’s employee incentive plans and director stock plan and stock issued through the Company’s employee stock purchase plan. Stock options: The Company’s stock-based incentive plans provide for the granting of stock options for the purchase of common stock of the Company to directors and certain key employees of the Company. Options are granted at an exercise price that is equal to the closing market price of the Company’s common stock on the date of the grant. Director options granted under the plans expire after seven years and are fully vested after six months. Employee options granted under the plans expire after ten years and typically vest 25% per year, over four years. The Company records compensation expense for the grant-date fair value of the option awards evenly over the vesting period or the minimum required service period. The table below identifies stock option activity under these plans during the nine months ended September 30, 2017 (in thousands, except per share data):
The fair value of each stock option award is estimated on the date of the grant using the Black-Scholes option pricing model. The Black-Scholes model requires the use of assumptions, including the risk free rate, expected life, expected volatility and expected dividend yield.
The table below identifies the weighted-average assumptions used for grants awarded during the nine months ended September 30, 2017 and 2016:
The following table summarizes activity related to stock options awarded by the Company for the three and nine months ended September 30, 2017 and 2016 (in thousands, except per share data):
The weighted-average grant-date fair value of options granted during the nine months ended September 30, 2017, was $64.45 compared to $64.00 for the nine months ended September 30, 2016. The remaining unrecognized compensation expense related to unvested stock option awards at September 30, 2017, was $28.6 million, and the weighted-average period of time over which this cost will be recognized is 2.6 years. Other share-based compensation plans: The Company sponsors other share-based compensation plans: an employee stock purchase plan (the “ESPP”), which permits all eligible employees to purchase shares of the Company’s common stock at 85% of the fair market value, and a director stock plan, which provides for the award of shares of restricted stock to the Company’s independent directors, that vest evenly over a three-year period and are held in escrow until such vesting has occurred. The fair value of shares issued under the ESPP is based on the average of the high and low market prices of the Company’s common stock during the offering periods, and compensation expense is recognized based on the discount between the fair value and the employee purchase price for the shares sold to employees. The fair value of shares awarded under the director stock plan is based on the closing market price of the Company’s common stock on the date of the award, and compensation expense is recorded evenly over the vesting period or the minimum required service period. The table below summarizes activity related to the Company’s other share-based compensation plans for the three and nine months ended September 30, 2017 and 2016 (in thousands):
Profit sharing and savings plan: The Company sponsors a contributory profit sharing and savings plan (the “401(k) Plan”) that covers substantially all employees who are at least 21 years of age and have completed one year of service. The Company makes matching contributions equal to 100% of the first 2% of each employee’s wages that are contributed and 25% of the next 4% of each employee’s wages that are contributed. An employee generally must be employed on December 31 to receive that year’s Company matching contribution, with the matching contribution funded annually at the beginning of the subsequent year following the year in which the matching contribution was earned. The Company may also make additional discretionary profit sharing contributions to the plan on an annual basis as determined by the Board of Directors. The Company did not make any discretionary contributions to the 401(k) Plan during the three or nine months ended September 30, 2017 or 2016. The Company expensed matching contributions under the 401(k) Plan in the amounts of $5.7 million and $5.3 million for the three months ended September 30, 2017 and 2016, respectively, which were included in “Selling, general and administrative expenses” on the accompanying Condensed Consolidated Statements of Income. The Company expensed matching contributions under the 401(k) Plan in the amounts of $17.0 million and $15.5 million for the nine months ended September 30, 2017 and 2016, respectively, which were included in “Selling, general and administrative expense” on the accompanying Condensed Consolidated Statements of Income. Nonqualified deferred compensation plan: The Company sponsors a nonqualified deferred compensation plan (the “Deferred Compensation Plan”) for highly compensated employees whose contributions to the 401(k) Plan are limited due to the application of the annual limitations under the Internal Revenue Code. The Deferred Compensation Plan provides these employees with the opportunity to defer the full 6% of matched compensation, including salary and incentive based compensation that was precluded under the Company’s 401(k) Plan, which is then matched by the Company using the same formula as the 401(k) Plan. An employee generally must be employed on December 31 to receive that year’s Company matching contribution, with the matching contribution funded annually at the beginning of the subsequent year following the year in which the matching contribution was earned. In the event of bankruptcy, the assets of this plan are available to satisfy the claims of general creditors. The Company has an unsecured obligation to pay, in the future, the value of the deferred compensation and Company match, adjusted to reflect the performance, whether positive or negative, of selected investment measurement options chosen by each participant during the deferral period. The liability for compensation deferred under the Deferred Compensation Plan was $24.5 million and $20.5 million as of September 30, 2017, and December 31, 2016, respectively, which was included in “Other liabilities” on the accompanying Condensed Consolidated Balance Sheets. The Company expensed matching contributions under the Deferred Compensation Plan in the amount of less than $0.1 million for the three months ended September 30, 2017 and 2016, which were included in “Selling, general and administrative expenses” on the accompanying Condensed Consolidated Statements of Income. The Company expensed matching contributions under the Deferred Compensation Plan in the amount of $0.1 million for the nine months ended September 30, 2017 and 2016, which were included in “Selling, general and administrative expenses” on the accompanying Condensed Consolidated Statements of Income. |
Earnings Per Share |
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Earnings per share | NOTE 7 – EARNINGS PER SHARE The following table illustrates the computation of basic and diluted earnings per share for the three and nine months ended September 30, 2017 and 2016 (in thousands, except per share data):
For the three and nine months ended September 30, 2017 and 2016, the computation of diluted earnings per share did not include certain securities. These securities represent underlying stock options not included in the computation of diluted earnings per share, because the inclusion of such equity awards would have been antidilutive. Subsequent to the end of the third quarter and through November 7, 2017, the Company repurchased an additional 0.4 million shares of its common stock under its share repurchase program, at an average price of $209.61, for a total investment of $85.2 million. |
Legal Matters |
9 Months Ended |
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Sep. 30, 2017 | |
Loss Contingency [Abstract] | |
Legal matters | NOTE 8 – LEGAL MATTERS O’Reilly is currently involved in litigation incidental to the ordinary conduct of the Company’s business. The Company accrues for litigation losses in instances where a material adverse outcome is probable and the Company is able to reasonably estimate the probable loss. The Company accrues for an estimate of material legal costs to be incurred in pending litigation matters. Although the Company cannot ascertain the amount of liability that it may incur from any of these matters, it does not currently believe that, in the aggregate, these matters, taking into account applicable insurance and accruals, will have a material adverse effect on its consolidated financial position, results of operations or cash flows in a particular quarter or annual period. As previously reported, on June 18, 2015, a jury in Greene County, Missouri, returned an unfavorable verdict in a litigated contract dispute in the matter Meridian Creative Alliance vs. O’Reilly Automotive Stores, Inc. et. al. in the amount of $12.5 million. As previously reported, the verdict was appealed, reversed in part and remanded to the trial court for a new trial. The matter has been set for trial to commence May 7, 2018, in the Circuit Court of Greene County, Missouri. The Company will continue to vigorously defend the matter. As of September 30, 2017, the Company had accrued $18.6 million with respect to this matter. |
Recent Accounting Pronouncements |
9 Months Ended |
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Sep. 30, 2017 | |
New Accounting Pronouncements and Changes in Accounting Principles [Abstract] | |
Recent accounting pronouncements | NOTE 9 - RECENT ACCOUNTING PRONOUNCEMENTS In May of 2014, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standard Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”). Under ASU 2014-09, an entity is required to follow a five-step process to determine the amount of revenue to recognize when promised goods or services are transferred to customers. ASU 2014-09 offers specific accounting guidance for costs to obtain or fulfill a contract with a customer. In addition, an entity is required to disclose sufficient information to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. In August of 2015, the FASB issued ASU No. 2015-14, “Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date” (“ASU 2015-14”), to defer the effective date of ASU 2014-09 by one year. For public companies, ASU 2015-14 changes ASU 2014-09 to be effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. These ASUs can be adopted retrospectively or as a cumulative-effective adjustment at the date of adoption, with early adoption allowed, but not before December 15, 2016. The Company will adopt this guidance beginning with its first quarter ending March 31, 2018. The Company has established a task force, composed of multiple functional groups inside of the Company, which is currently in the process of evaluating critical components of this new guidance and the potential impact of the guidance on the Company’s financial position, results of operations and cash flows. Based on the preliminary work completed, the Company is considering the potential implications of the new standard on the Company’s recognition of customer related accounts receivable, warranty costs that are not the responsibility of the Company’s suppliers, the application of the Company’s retail O’Rewards loyalty program and all applicable financial statement disclosures required by the new guidance. At this time, the task force has not completed its evaluation of the impact or means of adoption. In February of 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)” (“ASU 2016-02”). Under ASU 2016-02, an entity will be required to recognize right-of-use assets and lease liabilities on its balance sheet and disclose key information about leasing arrangements. ASU 2016-02 offers specific accounting guidance for a lessee, a lessor and sale and leaseback transactions. Lessees and lessors are required to disclose qualitative and quantitative information about leasing arrangements to enable a user of the financial statements to assess the amount, timing and uncertainty of cash flows arising from leases. For public companies, ASU 2016-02 is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period, and requires a modified retrospective adoption, with early adoption permitted. The Company will adopt this guidance beginning with its first quarter ending March 31, 2019. The Company has established a task force, composed of multiple functional groups inside of the Company, which is currently in the process of evaluating critical components of this new guidance and the potential impact of the guidance on the Company’s financial position, results of operations and cash flows. Based on the preliminary work completed, the Company is considering the potential implications of the new standard on determining the discount rate to be used in valuing new and existing leases, the treatment of existing favorable and unfavorable lease agreements acquired in connection with previous acquisitions, procedural and operational changes that may be necessary to comply with the provisions of the guidance and all applicable financial statement disclosures required by the new guidance, all of which are areas that could potentially be impacted by adoption of the guidance. At this time, the task force has not completed its full evaluation; however, the Company believes the adoption of the new guidance will have a material impact on the total assets and total liabilities reported on the Company’s consolidated balance sheets. In March of 2016, the FASB issued ASU 2016-09, “Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting” (“ASU 2016-09”). Under ASU 2016-09, several aspects of the accounting for share-based payment transactions, including tax consequence, classification of awards as equity or liabilities, and classification on the statement of cash flows, were changed. The Company adopted this guidance with its first quarter ending March 31, 2017. Upon adoption of ASU 2016-09, the Company elected to change its accounting policy to account for forfeitures as they occur; this change was applied using the modified retrospective transition method with a cumulative effect adjustment of $0.3 million to opening “Retained earnings” on the accompanying Condensed Consolidated Balance Sheet as of September 30, 2017. The Company applied the amendments related to the presentation of tax withholdings on the statements of cash flows using the retrospective transition method, which resulted in $0.2 million of tax withholdings being reclassified from “Net cash provided by operating activities” to “Net cash used in financing activities” on the accompanying Condensed Consolidated Statement of Cash Flows for the nine months ended September 30, 2016. The Company elected to apply the amendments related to the presentation of excess tax benefits on the statements of cash flows using the retrospective transition method, which resulted in $46.0 million of excess tax benefits related to share-based compensation being reclassified from “Net cash used in financing activities” to “Net cash provided by operating activities” in the accompanying Condensed Consolidated Statement of Cash Flows for the nine months ended September 30, 2016. ASU 2016-09 amendments related to accounting for excess tax benefits in the income statement have been adopted prospectively, resulting in the reduction of $2.8 million and $35.3 million in “Provision for income taxes” in the accompanying Condensed Consolidated Statement of Income for the three and nine months ended September 30, 2017, respectively, which lowered the Company’s effective tax rate, increased dilutive shares outstanding and increased diluted earnings per share for the three and nine months ended September 30, 2017, by $0.02 and $0.35, respectively. In June of 2016, the FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”). Under ASU 2016-13, businesses and other organizations are required to present financial assets, measured at amortized costs basis, at the net amount expected to be collected. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis, such as trade receivables. The measurement of expected credit loss will be based on historical experience, current conditions, and reasonable and supportable forecasts that affect the collectibility of the reported amount. For public companies, ASU 2016-13 is effective for annual reporting periods beginning after December 15, 2019, including interim periods within that reporting period, and requires a modified retrospective adoption, with early adoption permitted. The Company will adopt this guidance beginning with its first quarter ending March 31, 2020. The application of this new guidance is not expected to have a material impact on the Company’s consolidated financial condition, results of operations or cash flows. In August of 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (a consensus of the FASB Emerging Issues Task Force)” (“ASU 2016-15”). ASU 2016-15 reduces the existing diversity in practice for eight specific parts on cash flow statement presentation and classification: debt prepayment or debt extinguishment costs; settlement of zero-coupon debt instruments; contingent consideration payments made after a business combination; proceeds from the settlement of insurance claims; proceeds from the settlement of corporate-owned life insurance (COLI) policies; distributions received from equity method investments; beneficial interests in securitization transactions; and separately identifiable cash flows and application of the predominance principle. For public companies, ASU 2016-15 is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period, and requires retrospective adoption, with early adoption permitted. The Company will adopt this guidance beginning with its first quarter ending March 31, 2018. The application of this new guidance is not expected to have a material impact on the Company’s consolidated financial condition, results of operations or cash flows. In January of 2017, the FASB issued ASU No. 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business” (“ASU 2017-01”). ASU 2017-01 revises the definition of a business in the Accounting Standards Codification and clarifies the guidance for determining whether the purchase or disposal of an asset or group of assets qualifies as the purchase or disposal of a business. For public companies, ASU 2017-01 is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period, and requires prospective adoption, with early adoption permitted with certain conditions. The Company will adopt this guidance beginning with its first quarter ending March 31, 2018. The application of this new guidance is not expected to have a material impact on the Company’s consolidated financial condition, results of operations or cash flows. In January of 2017, the FASB issued ASU No. 2017-04, “Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment” (“ASU 2017-04”). ASU 2017-04 eliminates the second step in the previous process for goodwill impairment testing; instead, the test is now a one-step process that calls for goodwill impairment loss to be measured as the excess of the reporting unit’s carrying amount over its fair value. For public companies, ASU 2017-04 is effective for annual reporting periods beginning after December 15, 2019, including interim periods within that reporting period, and requires prospective adoption, with early adoption after January 1, 2017. The Company will adopt this guidance beginning with its first quarter ending March 31, 2019. The application of this new guidance is not expected to have a material impact on the Company’s consolidated financial condition, results of operations or cash flows. In May of 2017, the FASB issued ASU No. 2017-09, “Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting” (“ASU 2017-09”). ASU 2017-09 provides clarity and reduces both the diversity in practice and cost and complexity when applying stock compensation guidance to a change to the terms or conditions of a share-based payment award. For public companies, ASU 2017-09 is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period, and requires prospective adoption, with early adoption permitted. The Company will adopt this guidance beginning with its first quarter ending March 31, 2018. The application of this new guidance is not expected to have a material impact on the Company’s consolidated financial condition, results of operations or cash flows. |
Fair Value Measurements (Policies) |
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Sep. 30, 2017 | |||||||||||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Abstract] | |||||||||||||
Fair value of financial instruments, policy | The Company uses the fair value hierarchy, which prioritizes the inputs used to measure the fair value of certain of its financial instruments. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement). The Company uses the income and market approaches to determine the fair value of its assets and liabilities. The three levels of the fair value hierarchy are set forth below:
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Warranties (Policies) |
9 Months Ended |
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Sep. 30, 2017 | |
Product Warranties Disclosures [Abstract] | |
Warranties, policy | The Company provides warranties on certain merchandise it sells with warranty periods ranging from 30 days to limited lifetime warranties. The risk of loss arising from warranty claims is typically the obligation of the Company’s suppliers. Certain suppliers provide upfront allowances to the Company in lieu of accepting the obligation for warranty claims. For this merchandise, when sold, the Company bears the risk of loss associated with the cost of warranty claims. Differences between supplier allowances received by the Company, in lieu of warranty obligations and estimated warranty expense, are recorded as an adjustment to cost of sales. Estimated warranty costs, which are recorded as obligations at the time of sale, are based on the historical failure rate of each individual product line. The Company’s historical experience has been that failure rates are relatively consistent over time and that the ultimate cost of warranty claims to the Company has been driven by volume of units sold as opposed to fluctuations in failure rates or the variation of the cost of individual claims. |
Recent Accounting Pronouncements (Policies) |
9 Months Ended |
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Sep. 30, 2017 | |
New Accounting Pronouncements and Changes in Accounting Principles [Abstract] | |
Recent accounting pronouncements, policy | In May of 2014, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standard Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”). Under ASU 2014-09, an entity is required to follow a five-step process to determine the amount of revenue to recognize when promised goods or services are transferred to customers. ASU 2014-09 offers specific accounting guidance for costs to obtain or fulfill a contract with a customer. In addition, an entity is required to disclose sufficient information to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. In August of 2015, the FASB issued ASU No. 2015-14, “Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date” (“ASU 2015-14”), to defer the effective date of ASU 2014-09 by one year. For public companies, ASU 2015-14 changes ASU 2014-09 to be effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. These ASUs can be adopted retrospectively or as a cumulative-effective adjustment at the date of adoption, with early adoption allowed, but not before December 15, 2016. The Company will adopt this guidance beginning with its first quarter ending March 31, 2018. The Company has established a task force, composed of multiple functional groups inside of the Company, which is currently in the process of evaluating critical components of this new guidance and the potential impact of the guidance on the Company’s financial position, results of operations and cash flows. Based on the preliminary work completed, the Company is considering the potential implications of the new standard on the Company’s recognition of customer related accounts receivable, warranty costs that are not the responsibility of the Company’s suppliers, the application of the Company’s retail O’Rewards loyalty program and all applicable financial statement disclosures required by the new guidance. At this time, the task force has not completed its evaluation of the impact or means of adoption. In February of 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)” (“ASU 2016-02”). Under ASU 2016-02, an entity will be required to recognize right-of-use assets and lease liabilities on its balance sheet and disclose key information about leasing arrangements. ASU 2016-02 offers specific accounting guidance for a lessee, a lessor and sale and leaseback transactions. Lessees and lessors are required to disclose qualitative and quantitative information about leasing arrangements to enable a user of the financial statements to assess the amount, timing and uncertainty of cash flows arising from leases. For public companies, ASU 2016-02 is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period, and requires a modified retrospective adoption, with early adoption permitted. The Company will adopt this guidance beginning with its first quarter ending March 31, 2019. The Company has established a task force, composed of multiple functional groups inside of the Company, which is currently in the process of evaluating critical components of this new guidance and the potential impact of the guidance on the Company’s financial position, results of operations and cash flows. Based on the preliminary work completed, the Company is considering the potential implications of the new standard on determining the discount rate to be used in valuing new and existing leases, the treatment of existing favorable and unfavorable lease agreements acquired in connection with previous acquisitions, procedural and operational changes that may be necessary to comply with the provisions of the guidance and all applicable financial statement disclosures required by the new guidance, all of which are areas that could potentially be impacted by adoption of the guidance. At this time, the task force has not completed its full evaluation; however, the Company believes the adoption of the new guidance will have a material impact on the total assets and total liabilities reported on the Company’s consolidated balance sheets. In March of 2016, the FASB issued ASU 2016-09, “Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting” (“ASU 2016-09”). Under ASU 2016-09, several aspects of the accounting for share-based payment transactions, including tax consequence, classification of awards as equity or liabilities, and classification on the statement of cash flows, were changed. The Company adopted this guidance with its first quarter ending March 31, 2017. Upon adoption of ASU 2016-09, the Company elected to change its accounting policy to account for forfeitures as they occur; this change was applied using the modified retrospective transition method with a cumulative effect adjustment of $0.3 million to opening “Retained earnings” on the accompanying Condensed Consolidated Balance Sheet as of September 30, 2017. The Company applied the amendments related to the presentation of tax withholdings on the statements of cash flows using the retrospective transition method, which resulted in $0.2 million of tax withholdings being reclassified from “Net cash provided by operating activities” to “Net cash used in financing activities” on the accompanying Condensed Consolidated Statement of Cash Flows for the nine months ended September 30, 2016. The Company elected to apply the amendments related to the presentation of excess tax benefits on the statements of cash flows using the retrospective transition method, which resulted in $46.0 million of excess tax benefits related to share-based compensation being reclassified from “Net cash used in financing activities” to “Net cash provided by operating activities” in the accompanying Condensed Consolidated Statement of Cash Flows for the nine months ended September 30, 2016. ASU 2016-09 amendments related to accounting for excess tax benefits in the income statement have been adopted prospectively, resulting in the reduction of $2.8 million and $35.3 million in “Provision for income taxes” in the accompanying Condensed Consolidated Statement of Income for the three and nine months ended September 30, 2017, respectively, which lowered the Company’s effective tax rate, increased dilutive shares outstanding and increased diluted earnings per share for the three and nine months ended September 30, 2017, by $0.02 and $0.35, respectively. In June of 2016, the FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”). Under ASU 2016-13, businesses and other organizations are required to present financial assets, measured at amortized costs basis, at the net amount expected to be collected. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis, such as trade receivables. The measurement of expected credit loss will be based on historical experience, current conditions, and reasonable and supportable forecasts that affect the collectibility of the reported amount. For public companies, ASU 2016-13 is effective for annual reporting periods beginning after December 15, 2019, including interim periods within that reporting period, and requires a modified retrospective adoption, with early adoption permitted. The Company will adopt this guidance beginning with its first quarter ending March 31, 2020. The application of this new guidance is not expected to have a material impact on the Company’s consolidated financial condition, results of operations or cash flows. In August of 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (a consensus of the FASB Emerging Issues Task Force)” (“ASU 2016-15”). ASU 2016-15 reduces the existing diversity in practice for eight specific parts on cash flow statement presentation and classification: debt prepayment or debt extinguishment costs; settlement of zero-coupon debt instruments; contingent consideration payments made after a business combination; proceeds from the settlement of insurance claims; proceeds from the settlement of corporate-owned life insurance (COLI) policies; distributions received from equity method investments; beneficial interests in securitization transactions; and separately identifiable cash flows and application of the predominance principle. For public companies, ASU 2016-15 is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period, and requires retrospective adoption, with early adoption permitted. The Company will adopt this guidance beginning with its first quarter ending March 31, 2018. The application of this new guidance is not expected to have a material impact on the Company’s consolidated financial condition, results of operations or cash flows. In January of 2017, the FASB issued ASU No. 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business” (“ASU 2017-01”). ASU 2017-01 revises the definition of a business in the Accounting Standards Codification and clarifies the guidance for determining whether the purchase or disposal of an asset or group of assets qualifies as the purchase or disposal of a business. For public companies, ASU 2017-01 is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period, and requires prospective adoption, with early adoption permitted with certain conditions. The Company will adopt this guidance beginning with its first quarter ending March 31, 2018. The application of this new guidance is not expected to have a material impact on the Company’s consolidated financial condition, results of operations or cash flows. In January of 2017, the FASB issued ASU No. 2017-04, “Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment” (“ASU 2017-04”). ASU 2017-04 eliminates the second step in the previous process for goodwill impairment testing; instead, the test is now a one-step process that calls for goodwill impairment loss to be measured as the excess of the reporting unit’s carrying amount over its fair value. For public companies, ASU 2017-04 is effective for annual reporting periods beginning after December 15, 2019, including interim periods within that reporting period, and requires prospective adoption, with early adoption after January 1, 2017. The Company will adopt this guidance beginning with its first quarter ending March 31, 2019. The application of this new guidance is not expected to have a material impact on the Company’s consolidated financial condition, results of operations or cash flows. In May of 2017, the FASB issued ASU No. 2017-09, “Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting” (“ASU 2017-09”). ASU 2017-09 provides clarity and reduces both the diversity in practice and cost and complexity when applying stock compensation guidance to a change to the terms or conditions of a share-based payment award. For public companies, ASU 2017-09 is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period, and requires prospective adoption, with early adoption permitted. The Company will adopt this guidance beginning with its first quarter ending March 31, 2018. The application of this new guidance is not expected to have a material impact on the Company’s consolidated financial condition, results of operations or cash flows. |
Fair Value Measurements (Tables) |
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Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Valuation of marketable securities |
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Valuation of senior notes |
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Financing (Tables) |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Outstanding financing facilities |
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Warranties (Tables) |
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Sep. 30, 2017 | |||||||||||||||||||||||||
Product Warranties Disclosures [Abstract] | |||||||||||||||||||||||||
Product warranty liabilities |
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Share Repurchase Program (Tables) |
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Proceeds from (Repurchase of) Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of shares repurchased |
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Share-Based Compensation and Benefit Plans (Tables) |
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Restricted stock [Member] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-Based Compensation and Benefit Plans | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of activity of share-based compensation |
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Stock option [Member] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-Based Compensation and Benefit Plans | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of stock options |
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Black-Scholes option pricing model |
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Summary of activity of share-based compensation |
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Earnings Per Share (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Computation of basic and diluted earnings per share |
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Fair Value Measurements (Narrative) (Details) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
Dec. 31, 2016 |
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Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Abstract] | |||||
Increase in fair value of marketable securities | $ 1.0 | $ 0.9 | $ 2.6 | $ 1.4 | |
Non-financial assets and liabilities measured at fair value on a nonrecurring basis | $ 0.0 | $ 0.0 | $ 0.0 |
Fair Value Measurements (Fair Value of Marketable Securities) (Details) - USD ($) $ in Thousands |
Sep. 30, 2017 |
Dec. 31, 2016 |
---|---|---|
Fair Value Measurements | ||
Estimated fair value of marketable securities | $ 24,528 | $ 20,462 |
Fair value, inputs, Level 1 [Member] | ||
Fair Value Measurements | ||
Estimated fair value of marketable securities | 24,528 | 20,462 |
Fair value, inputs, Level 2 [Member] | ||
Fair Value Measurements | ||
Estimated fair value of marketable securities | 0 | 0 |
Fair value, inputs, Level 3 [Member] | ||
Fair Value Measurements | ||
Estimated fair value of marketable securities | $ 0 | $ 0 |
Fair Value Measurements (Fair Value of Senior Notes) (Details) - USD ($) $ in Thousands |
Sep. 30, 2017 |
Dec. 31, 2016 |
---|---|---|
Fair Value Measurements | ||
Carrying amount of senior notes | $ 2,631,816 | $ 1,887,019 |
Fair value, inputs, Level 2 [Member] | ||
Fair Value Measurements | ||
Estimated fair value of senior notes | $ 2,733,350 | $ 1,977,510 |
Financing (Unsecured Revolving Credit Facility) (Narrative) (Details) - Line of credit facility [Member] - Unsecured debt [Member] - USD ($) $ in Millions |
6 Months Ended | |
---|---|---|
Sep. 30, 2017 |
Dec. 31, 2016 |
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Unsecured Revolving Credit Facility | ||
Credit agreement description | On April 5, 2017, the Company entered into a credit agreement (the “Credit Agreement”). The Credit Agreement provides for a $1.2 billion unsecured revolving credit facility (the “Revolving Credit Facility”) arranged by JPMorgan Chase Bank, N.A., which is scheduled to mature in April 2022. The Credit Agreement includes a $200 million sub-limit for the issuance of letters of credit and a $75 million sub-limit for swing line borrowings under the Revolving Credit Facility. As described in the Credit Agreement governing the Revolving Credit Facility, the Company may, from time to time, subject to certain conditions, increase the aggregate commitments under the Revolving Credit Facility by up to $600 million, provided that the aggregate amount of the commitments does not exceed $1.8 billion at any time. | |
Credit agreement inception date | Apr. 05, 2017 | |
Current maximum borrowing capacity under credit facility | $ 1,200.0 | |
Line of credit facility expiration date | Apr. 05, 2022 | |
Maximum aggregate increase to credit facility allowable | $ 600.0 | |
Maximum aggregate capacity of credit facility allowable | 1,800.0 | |
Letters of credit | $ 41.3 | $ 38.7 |
Line of credit facility fee percentage | 0.10% | |
Covenant description for debt instrument | The Credit Agreement contains certain covenants, including limitations on subsidiary 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, five-times rent expense and excludes any premium or discount recorded in conjunction with the issuance of long-term debt. In the event that the Company should default on any covenant (subject to customary grace periods, cure rights and materiality thresholds) contained in 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 lenders. | |
Line of credit facility covenant compliance | As of September 30, 2017, the Company remained in compliance with all covenants under the Credit Agreement. | |
Spread over Alternate Base rate [Member] | ||
Unsecured Revolving Credit Facility | ||
Line of credit current interest rate | 0.00% | |
Spread over Eurodollar Revolving rate [Member] | ||
Unsecured Revolving Credit Facility | ||
Line of credit current interest rate | 0.90% | |
Through maturity [Member] | ||
Unsecured Revolving Credit Facility | ||
Minimum debt instrument consolidated fixed charge coverage ratio covenant | 250.00% | |
Maximum debt instrument consolidated leverage ratio covenant | 350.00% | |
Letter of credit [Member] | ||
Unsecured Revolving Credit Facility | ||
Line of credit facility sublimit | $ 200.0 | |
Swing line revolver [Member] | ||
Unsecured Revolving Credit Facility | ||
Line of credit facility sublimit | $ 75.0 |
Financing (Senior Notes) (Narrative) (Details) $ in Thousands |
9 Months Ended | |
---|---|---|
Aug. 17, 2017
USD ($)
d
Rate
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Sep. 30, 2017
USD ($)
d
Rate
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Financing | ||
Unsecured senior notes description | The Company has issued a cumulative $2.7 billion aggregate principal amount of unsecured senior notes, which are due between 2021 and 2027, with UMB as trustee. Interest on the senior notes, ranging from 3.550% to 4.875%, is payable semi-annually and is computed on the basis of a 360-day year. | |
Debt instrument covenant description | Each of the senior notes is subject to certain customary covenants, with which the Company complied as of September 30, 2017. | |
$750 million, 3.600% Senior Notes due 2027 [Member] | ||
Financing | ||
Senior notes maturity, year | 2027 | |
Interest rate of senior notes | 3.60% | 3.60% |
Number of days in annual interest calculation period | d | 360 | |
Issuance date of senior notes | Aug. 17, 2017 | |
Face amount of senior notes | $ | $ 750,000 | |
Percentage of face value of debt instrument | 99.84% | |
Senior notes [Member] | ||
Financing | ||
Aggregate principle of unsecured senior notes | $ | $ 2,700,000 | |
Number of days in annual interest calculation period | d | 360 | |
Senior notes [Member] | $750 million, 3.600% Senior Notes due 2027 [Member] | ||
Financing | ||
Face amount of senior notes | $ | $ 750,000 | |
Minimum [Member] | Senior notes [Member] | ||
Financing | ||
Senior notes maturity, year | 2021 | |
Interest rate of senior notes | 3.55% | |
Maximum [Member] | Senior notes [Member] | ||
Financing | ||
Senior notes maturity, year | 2027 | |
Interest rate of senior notes | 4.875% |
Financing (Outstanding Financing Facilities) (Details) - USD ($) $ in Thousands |
9 Months Ended | 12 Months Ended | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2017 |
Dec. 31, 2016 |
Aug. 17, 2017 |
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Financing | |||||||||||||||||||
Senior notes | $ 2,631,816 | $ 1,887,019 | |||||||||||||||||
Long-term debt | 2,900,816 | 1,887,019 | [1] | ||||||||||||||||
$500 million, 4.875% Senior Notes due 2021 [Member] | |||||||||||||||||||
Financing | |||||||||||||||||||
Senior notes, unamortized discount | 1,200 | 1,400 | |||||||||||||||||
Senior notes, unamortized debt issuance costs | $ 1,500 | $ 1,800 | |||||||||||||||||
Interest rate of senior notes | 4.875% | 4.875% | |||||||||||||||||
Senior notes maturity, year | 2021 | 2021 | |||||||||||||||||
Senior notes, effective interest rate | 4.957% | ||||||||||||||||||
$300 million, 4.625% Senior Notes due 2021 [Member] | |||||||||||||||||||
Financing | |||||||||||||||||||
Senior notes, unamortized discount | $ 200 | $ 200 | |||||||||||||||||
Senior notes, unamortized debt issuance costs | $ 900 | $ 1,100 | |||||||||||||||||
Interest rate of senior notes | 4.625% | 4.625% | |||||||||||||||||
Senior notes maturity, year | 2021 | 2021 | |||||||||||||||||
Senior notes, effective interest rate | 4.646% | ||||||||||||||||||
$300 million, 3.800% Senior Notes due 2022 [Member] | |||||||||||||||||||
Financing | |||||||||||||||||||
Senior notes, unamortized discount | $ 600 | $ 700 | |||||||||||||||||
Senior notes, unamortized debt issuance costs | $ 1,300 | $ 1,500 | |||||||||||||||||
Interest rate of senior notes | 3.80% | 3.80% | |||||||||||||||||
Senior notes maturity, year | 2022 | 2022 | |||||||||||||||||
Senior notes, effective interest rate | 3.845% | ||||||||||||||||||
$300 million, 3.850% Senior Notes due 2023 [Member] | |||||||||||||||||||
Financing | |||||||||||||||||||
Senior notes, unamortized discount | $ 100 | $ 100 | |||||||||||||||||
Senior notes, unamortized debt issuance costs | $ 1,500 | $ 1,600 | |||||||||||||||||
Interest rate of senior notes | 3.85% | 3.85% | |||||||||||||||||
Senior notes maturity, year | 2023 | 2023 | |||||||||||||||||
Senior notes, effective interest rate | 3.851% | ||||||||||||||||||
$500 million, 3.550% Senior Notes due 2026 [Member] | |||||||||||||||||||
Financing | |||||||||||||||||||
Senior notes, unamortized discount | $ 700 | $ 800 | |||||||||||||||||
Senior notes, unamortized debt issuance costs | $ 3,600 | $ 3,900 | |||||||||||||||||
Interest rate of senior notes | 3.55% | 3.55% | |||||||||||||||||
Senior notes maturity, year | 2026 | 2026 | |||||||||||||||||
Senior notes, effective interest rate | 3.57% | ||||||||||||||||||
$750 million, 3.600% Senior Notes due 2027 [Member] | |||||||||||||||||||
Financing | |||||||||||||||||||
Senior notes, unamortized discount | $ 1,200 | ||||||||||||||||||
Senior notes, unamortized debt issuance costs | $ 5,600 | ||||||||||||||||||
Senior notes, face amount | $ 750,000 | ||||||||||||||||||
Interest rate of senior notes | 3.60% | 3.60% | |||||||||||||||||
Senior notes maturity, year | 2027 | ||||||||||||||||||
Senior notes, effective interest rate | 3.619% | ||||||||||||||||||
Revolving Credit Facility [Member] | |||||||||||||||||||
Financing | |||||||||||||||||||
Unsecured revolving credit facility | $ 269,000 | $ 0 | |||||||||||||||||
Unsecured revolving credit facility, weighted-average variable interest rate | 2.283% | ||||||||||||||||||
Senior notes [Member] | $500 million, 4.875% Senior Notes due 2021 [Member] | |||||||||||||||||||
Financing | |||||||||||||||||||
Senior notes | [2] | $ 497,363 | 496,758 | ||||||||||||||||
Senior notes, face amount | 500,000 | 500,000 | |||||||||||||||||
Senior notes [Member] | $300 million, 4.625% Senior Notes due 2021 [Member] | |||||||||||||||||||
Financing | |||||||||||||||||||
Senior notes | [3] | 298,891 | 298,679 | ||||||||||||||||
Senior notes, face amount | 300,000 | 300,000 | |||||||||||||||||
Senior notes [Member] | $300 million, 3.800% Senior Notes due 2022 [Member] | |||||||||||||||||||
Financing | |||||||||||||||||||
Senior notes | [4] | 298,126 | 297,868 | ||||||||||||||||
Senior notes, face amount | 300,000 | 300,000 | |||||||||||||||||
Senior notes [Member] | $300 million, 3.850% Senior Notes due 2023 [Member] | |||||||||||||||||||
Financing | |||||||||||||||||||
Senior notes | [5] | 298,525 | 298,355 | ||||||||||||||||
Senior notes, face amount | 300,000 | 300,000 | |||||||||||||||||
Senior notes [Member] | $500 million, 3.550% Senior Notes due 2026 [Member] | |||||||||||||||||||
Financing | |||||||||||||||||||
Senior notes | [6] | 495,682 | 495,359 | ||||||||||||||||
Senior notes, face amount | 500,000 | $ 500,000 | |||||||||||||||||
Senior notes [Member] | $750 million, 3.600% Senior Notes due 2027 [Member] | |||||||||||||||||||
Financing | |||||||||||||||||||
Senior notes | [7] | 743,229 | |||||||||||||||||
Senior notes, face amount | $ 750,000 | ||||||||||||||||||
|
Warranties (Product Warranty Liabilities) (Details) $ in Thousands |
9 Months Ended |
---|---|
Sep. 30, 2017
USD ($)
| |
Product Warranties Disclosures [Abstract] | |
Warranty liabilities, beginning balance | $ 36,623 |
Warranty claims | (60,173) |
Warranty accruals | 65,450 |
Warranty liabilities, ending balance | $ 41,900 |
Share Repurchase Program (Narrative) (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands |
1 Months Ended | 3 Months Ended | 9 Months Ended | 82 Months Ended | ||||
---|---|---|---|---|---|---|---|---|
Sep. 01, 2017 |
May 10, 2017 |
Nov. 07, 2017 |
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
Nov. 07, 2017 |
|
Share Repurchase Program | ||||||||
Increase in authorized amount | $ 1,000,000 | $ 1,000,000 | ||||||
Cumulative authorized amount | $ 9,800,000 | |||||||
Authorization effective period | 3 years | 3 years | ||||||
Remaining balance under share repurchase program | $ 994,800 | $ 994,800 | ||||||
Common stock repurchased, shares | 2,743 | 367 | 8,047 | 3,673 | ||||
Common stock repurchased, average price per share | $ 200.70 | $ 281.04 | $ 235.26 | $ 261.32 | ||||
Common stock repurchased, value | $ 550,530 | $ 102,941 | $ 1,893,068 | $ 959,743 | ||||
Subsequent event [Member] | ||||||||
Share Repurchase Program | ||||||||
Common stock repurchased, shares | 400 | 65,400 | ||||||
Common stock repurchased, average price per share | $ 209.61 | $ 135.17 | ||||||
Common stock repurchased, value | $ 85,200 | $ 8,800,000 |
Share Repurchase Program (Schedule Of Shares Repurchased) (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Proceeds from (Repurchase of) Equity [Abstract] | ||||
Shares repurchased | 2,743 | 367 | 8,047 | 3,673 |
Average price per share | $ 200.70 | $ 281.04 | $ 235.26 | $ 261.32 |
Total investment | $ 550,530 | $ 102,941 | $ 1,893,068 | $ 959,743 |
Share-Based Compensation and Benefit Plans (Stock Options) (Narrative) (Details) - Stock option [Member] - USD ($) $ / shares in Units, $ in Millions |
9 Months Ended | |
---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Share-Based Compensation and Benefit Plans | ||
Vesting of options, description | The Company’s stock-based incentive plans provide for the granting of stock options for the purchase of common stock of the Company to directors and certain key employees of the Company. Options are granted at an exercise price that is equal to the closing market price of the Company’s common stock on the date of the grant. Director options granted under the plans expire after seven years and are fully vested after six months. Employee options granted under the plans expire after ten years and typically vest 25% per year, over four years. The Company records compensation expense for the grant-date fair value of the option awards evenly over the vesting period or the minimum required service period. | |
Weighted-average grant-date fair value of options awarded | $ 64.45 | $ 64.00 |
Remaining unrecognized compensation expense | $ 28.6 | |
Weighted-average period for cost recognition | 2 years 7 months 12 days | |
Employee stock option [Member] | ||
Share-Based Compensation and Benefit Plans | ||
Options expiration period | 10 years | |
Vesting period | 4 years | |
Option vesting rate per year | 25.00% | |
Director [Member] | ||
Share-Based Compensation and Benefit Plans | ||
Options expiration period | 7 years | |
Vesting period | 6 months |
Share-Based Compensation and Benefit Plans (Other Share-Based Compensation) (Narrative) (Details) |
9 Months Ended |
---|---|
Sep. 30, 2017
Rate
| |
Restricted stock [Member] | Director [Member] | |
Share-Based Compensation and Benefit Plans | |
Other employee benefit plan, description | a director stock plan, which provides for the award of shares of restricted stock to the Company’s independent directors, that vest evenly over a three-year period and are held in escrow until such vesting has occurred |
Vesting period | 3 years |
Employee stock purchase plan [Member] | |
Share-Based Compensation and Benefit Plans | |
Other employee benefit plan, description | an employee stock purchase plan (the “ESPP”), which permits all eligible employees to purchase shares of the Company’s common stock at 85% of the fair market value |
Employee stock purchase plan, stock purchase percentage | 85.00% |
Share-Based Compensation and Benefit Plans (Profit Sharing and Savings Plan) (Narrative) (Details) - Profit sharing and savings plan [Member] - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Share-Based Compensation and Benefit Plans | ||||
Profit sharing and savings plan, description | The Company sponsors a contributory profit sharing and savings plan (the “401(k) Plan”) that covers substantially all employees who are at least 21 years of age and have completed one year of service. The Company makes matching contributions equal to 100% of the first 2% of each employee’s wages that are contributed and 25% of the next 4% of each employee’s wages that are contributed. | |||
Profit sharing and savings plan, employer discretionary contribution | $ 0.0 | $ 0.0 | $ 0.0 | $ 0.0 |
Profit sharing and savings plan, cost recognized | $ 5.7 | $ 5.3 | $ 17.0 | $ 15.5 |
Employee's first 2% of contributed wages [Member] | ||||
Share-Based Compensation and Benefit Plans | ||||
Profit sharing and savings plan, Company match | 100.00% | |||
Employee's next 4% of contributed wages [Member] | ||||
Share-Based Compensation and Benefit Plans | ||||
Profit sharing and savings plan, Company match | 25.00% |
Share-Based Compensation and Benefit Plans (Nonqualified Deferred Compensation Plan) (Narrative) (Details) - Nonqualified deferred compensation plan [Member] - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
Dec. 31, 2016 |
|
Share-Based Compensation and Benefit Plans | |||||
Deferred compensation plan, description | The Company sponsors a nonqualified deferred compensation plan (the “Deferred Compensation Plan”) for highly compensated employees whose contributions to the 401(k) Plan are limited due to the application of the annual limitations under the Internal Revenue Code. The Deferred Compensation Plan provides these employees with the opportunity to defer the full 6% of matched compensation, including salary and incentive based compensation that was precluded under the Company’s 401(k) Plan, which is then matched by the Company using the same formula as the 401(k) Plan. | ||||
Deferred compensation plan, obligation | $ 24.5 | $ 24.5 | $ 20.5 | ||
Deferred compensation plan, cost recognized | $ 0.1 | $ 0.1 | $ 0.1 | $ 0.1 |
Share-Based Compensation and Benefit Plans (Summary Of Stock Options) (Details) - Stock option [Member] shares in Thousands |
9 Months Ended |
---|---|
Sep. 30, 2017
$ / shares
shares
| |
Share-Based Compensation and Benefit Plans | |
Outstanding at December 31, 2016, shares | shares | 2,800 |
Outstanding at December 31, 2016, weighted-average exercise price | $ / shares | $ 104.90 |
Granted, shares | shares | 240 |
Granted, weighted-average exercise price | $ / shares | $ 257.39 |
Exercised, shares | shares | (483) |
Exercised, weighted-average exercise price | $ / shares | $ 51.35 |
Forfeited, shares | shares | (26) |
Forfeited, weighted-average exercise price | $ / shares | $ 207.45 |
Outstanding at September 30, 2017, shares | shares | 2,531 |
Outstanding at September 30, 2017, weighted-average exercise price | $ / shares | $ 128.50 |
Exercisable at September 30, 2017, shares | shares | 1,705 |
Exercisable at September 30, 2017, weighted-average exercise price | $ / shares | $ 75.65 |
Share-Based Compensation and Benefit Plans (Black-Scholes Option Pricing Model) (Details) - Stock option [Member] |
9 Months Ended | |
---|---|---|
Sep. 30, 2017
Rate
|
Sep. 30, 2016
Rate
|
|
Share-Based Compensation and Benefit Plans | ||
Risk-free interest rate | 1.98% | 1.45% |
Expected life | 5 years 5 months 16 days | 5 years 6 months 24 days |
Expected volatility | 22.20% | 22.40% |
Expected dividend yield | 0.00% | 0.00% |
Share-Based Compensation and Benefit Plans (Stock Option Activity) (Details) - Stock option [Member] - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Share-Based Compensation and Benefit Plans | ||||
Compensation expense for share-based compensation | $ 3,679 | $ 3,653 | $ 11,826 | $ 11,793 |
Income tax benefit from compensation expense for share-based compensation | $ 1,402 | $ 1,365 | $ 4,507 | $ 4,405 |
Share-Based Compensation and Benefit Plans (Other Share-Based Compensation Activity) (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Employee stock purchase plan [Member] | ||||
Share-Based Compensation and Benefit Plans | ||||
Compensation expense for share-based compensation | $ 545 | $ 538 | $ 1,659 | $ 1,610 |
Income tax benefit from compensation expense for share-based compensation | 208 | 201 | 632 | 601 |
Restricted stock [Member] | ||||
Share-Based Compensation and Benefit Plans | ||||
Compensation expense for share-based compensation | 258 | 327 | 1,350 | 968 |
Income tax benefit from compensation expense for share-based compensation | $ 98 | $ 122 | $ 515 | $ 361 |
Earnings Per Share (Narrative) (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands |
1 Months Ended | 3 Months Ended | 9 Months Ended | 82 Months Ended | ||
---|---|---|---|---|---|---|
Nov. 07, 2017 |
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
Nov. 07, 2017 |
|
Earnings Per Share | ||||||
Common stock repurchased, shares | 2,743 | 367 | 8,047 | 3,673 | ||
Common stock repurchased, average price per share | $ 200.70 | $ 281.04 | $ 235.26 | $ 261.32 | ||
Common stock repurchased, value | $ 550,530 | $ 102,941 | $ 1,893,068 | $ 959,743 | ||
Subsequent event [Member] | ||||||
Earnings Per Share | ||||||
Common stock repurchased, shares | 400 | 65,400 | ||||
Common stock repurchased, average price per share | $ 209.61 | $ 135.17 | ||||
Common stock repurchased, value | $ 85,200 | $ 8,800,000 |
Earnings Per Share (Computation of Basic and Diluted Earnings Per Share) (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands |
3 Months Ended | 9 Months Ended | |||||
---|---|---|---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
||||
Numerator (basic and diluted): | |||||||
Net income | $ 283,734 | $ 278,493 | $ 831,489 | $ 791,661 | |||
Denominator: | |||||||
Weighted-average common shares outstanding - basic | 86,947 | 94,891 | 89,641 | 95,994 | |||
Effect of stock options | [1] | 1,078 | 1,229 | 1,228 | 1,315 | ||
Weighted-average common shares outstanding - assuming dilution | 88,025 | 96,120 | 90,869 | 97,309 | |||
Earnings per share - basic | $ 3.26 | $ 2.93 | $ 9.28 | $ 8.25 | |||
Earnings per share - assuming dilution | $ 3.22 | $ 2.90 | $ 9.15 | $ 8.14 | |||
Antidilutive stock options | [1] | 784 | 271 | 620 | 319 | ||
Weighted-average exercise price | [1] | $ 246.65 | $ 267.66 | $ 258.75 | $ 264.88 | ||
|
Legal Matters (Narrative) (Details) $ in Millions |
9 Months Ended |
---|---|
Sep. 30, 2017
USD ($)
| |
Loss Contingency [Abstract] | |
Name of plaintiff | Meridian Creative Alliance |
Awarded to plaintiff | $ 12.5 |
Loss contingency accrual, provision | $ 18.6 |
Recent Accounting Pronouncements Recent Accounting Pronouncements (Narrative) (Details) - Adoption of ASU 2016-09 [Member] - USD ($) $ / shares in Units, $ in Millions |
3 Months Ended | 9 Months Ended | |
---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Recent Accounting Pronouncements | |||
Change in accounting policy, description | Upon adoption of ASU 2016-09, the Company elected to change its accounting policy to account for forfeitures as they occur; this change was applied using the modified retrospective transition method with a cumulative effect adjustment | ||
Excess tax benefit from share-based compensation | $ 2.8 | $ 35.3 | |
Reclassification or adjustment due to the adoption of a accounting pronouncement [Member] | |||
Recent Accounting Pronouncements | |||
Cumulative effect adjustment to opening Retained earnings | $ (0.3) | $ (0.3) | |
Tax withholdings for share-based compensation | $ 0.2 | ||
Excess tax benefit from share-based compensation | $ 46.0 | ||
Effect on diluted earnings per share | $ 0.02 | $ 0.35 |
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