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 ¨ | Smaller reporting company ¨ |
Emerging growth company ¨ |
Page | |
September 30, 2018 | December 31, 2017 | ||||||
(Unaudited) | (Note) | ||||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 40,019 | $ | 46,348 | |||
Accounts receivable, net | 242,692 | 216,251 | |||||
Amounts receivable from suppliers | 83,237 | 76,236 | |||||
Inventory | 3,139,621 | 3,009,800 | |||||
Other current assets | 54,462 | 49,037 | |||||
Total current assets | 3,560,031 | 3,397,672 | |||||
Property and equipment, at cost | 5,512,325 | 5,191,135 | |||||
Less: accumulated depreciation and amortization | 2,010,392 | 1,847,329 | |||||
Net property and equipment | 3,501,933 | 3,343,806 | |||||
Goodwill | 789,178 | 789,058 | |||||
Other assets, net | 43,572 | 41,349 | |||||
Total assets | $ | 7,894,714 | $ | 7,571,885 | |||
Liabilities and shareholders’ equity | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 3,384,098 | $ | 3,190,029 | |||
Self-insurance reserves | 75,440 | 71,695 | |||||
Accrued payroll | 89,721 | 77,147 | |||||
Accrued benefits and withholdings | 83,113 | 69,308 | |||||
Other current liabilities | 272,709 | 239,187 | |||||
Total current liabilities | 3,905,081 | 3,647,366 | |||||
Long-term debt | 3,174,327 | 2,978,390 | |||||
Deferred income taxes | 102,640 | 85,406 | |||||
Other liabilities | 214,287 | 207,677 | |||||
Shareholders’ equity: | |||||||
Common stock, $0.01 par value: | |||||||
Authorized shares – 245,000,000 | |||||||
Issued and outstanding shares – | |||||||
80,345,665 as of September 30, 2018, and | |||||||
84,302,187 as of December 31, 2017 | 803 | 843 | |||||
Additional paid-in capital | 1,265,827 | 1,265,043 | |||||
Retained deficit | (768,251 | ) | (612,840 | ) | |||
Total shareholders’ equity | 498,379 | 653,046 | |||||
Total liabilities and shareholders’ equity | $ | 7,894,714 | $ | 7,571,885 |
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Sales | $ | 2,482,717 | $ | 2,339,830 | $ | 7,221,471 | $ | 6,786,918 | |||||||
Cost of goods sold, including warehouse and distribution expenses | 1,166,962 | 1,109,536 | 3,415,820 | 3,225,415 | |||||||||||
Gross profit | 1,315,755 | 1,230,294 | 3,805,651 | 3,561,503 | |||||||||||
Selling, general and administrative expenses | 830,607 | 768,331 | 2,418,507 | 2,238,938 | |||||||||||
Operating income | 485,148 | 461,963 | 1,387,144 | 1,322,565 | |||||||||||
Other income (expense): | |||||||||||||||
Interest expense | (31,582 | ) | (24,324 | ) | (90,661 | ) | (64,555 | ) | |||||||
Interest income | 669 | 592 | 1,838 | 1,768 | |||||||||||
Other, net | 1,416 | 1,299 | 2,609 | 1,302 | |||||||||||
Total other expense | (29,497 | ) | (22,433 | ) | (86,214 | ) | (61,485 | ) | |||||||
Income before income taxes | 455,651 | 439,530 | 1,300,930 | 1,261,080 | |||||||||||
Provision for income taxes | 89,500 | 155,796 | 276,800 | 429,591 | |||||||||||
Net income | $ | 366,151 | $ | 283,734 | $ | 1,024,130 | $ | 831,489 | |||||||
Earnings per share-basic: | |||||||||||||||
Earnings per share | $ | 4.54 | $ | 3.26 | $ | 12.50 | $ | 9.28 | |||||||
Weighted-average common shares outstanding – basic | 80,593 | 86,947 | 81,939 | 89,641 | |||||||||||
Earnings per share-assuming dilution: | |||||||||||||||
Earnings per share | $ | 4.50 | $ | 3.22 | $ | 12.36 | $ | 9.15 | |||||||
Weighted-average common shares outstanding – assuming dilution | 81,410 | 88,025 | 82,841 | 90,869 |
For the Three Months Ended September 30, 2018 | ||||||||||||||||||
Common Stock | Additional Paid-In Capital | Retained Deficit | Total | |||||||||||||||
Shares | Par Value | |||||||||||||||||
Balance at June 30, 2018 | 80,988 | $ | 810 | $ | 1,247,837 | $ | (863,657 | ) | $ | 384,990 | ||||||||
Net income | — | — | — | 366,151 | 366,151 | |||||||||||||
Issuance of common stock under employee benefit plans, net of forfeitures and shares withheld to cover taxes | 13 | — | 3,224 | — | 3,224 | |||||||||||||
Net issuance of common stock upon exercise of stock options | 277 | 2 | 24,552 | — | 24,554 | |||||||||||||
Share based compensation | — | — | 4,653 | — | 4,653 | |||||||||||||
Share repurchases, including fees | (932 | ) | (9 | ) | (14,439 | ) | (270,745 | ) | (285,193 | ) | ||||||||
Balance at September 30, 2018 | 80,346 | $ | 803 | $ | 1,265,827 | $ | (768,251 | ) | $ | 498,379 | ||||||||
For the Nine Months Ended September 30, 2018 | ||||||||||||||||||
Common Stock | Additional Paid-In Capital | Retained Deficit | Total | |||||||||||||||
Shares | Par Value | |||||||||||||||||
Balance at December 31, 2017 | 84,302 | $ | 843 | $ | 1,265,043 | $ | (612,840 | ) | $ | 653,046 | ||||||||
Net income | — | — | — | 1,024,130 | 1,024,130 | |||||||||||||
Issuance of common stock under employee benefit plans, net of forfeitures and shares withheld to cover taxes | 47 | — | 10,799 | — | 10,799 | |||||||||||||
Net issuance of common stock upon exercise of stock options | 692 | 7 | 47,344 | — | 47,351 | |||||||||||||
Share based compensation | — | — | 14,113 | — | 14,113 | |||||||||||||
Share repurchases, including fees | (4,695 | ) | (47 | ) | (71,472 | ) | (1,179,541 | ) | (1,251,060 | ) | ||||||||
Balance at September 30, 2018 | 80,346 | $ | 803 | $ | 1,265,827 | $ | (768,251 | ) | $ | 498,379 | ||||||||
For the Three Months Ended September 30, 2017 | ||||||||||||||||||
Common Stock | Additional Paid-In Capital | Retained Deficit | Total | |||||||||||||||
Shares | Par Value | |||||||||||||||||
Balance at June 30, 2017 | 87,999 | $ | 880 | $ | 1,296,674 | $ | (428,242 | ) | $ | 869,312 | ||||||||
Net income | — | — | — | 283,734 | 283,734 | |||||||||||||
Issuance of common stock under employee benefit plans, net of forfeitures and shares withheld to cover taxes | 17 | — | 3,087 | — | 3,087 | |||||||||||||
Net issuance of common stock upon exercise of stock options | 65 | — | 4,379 | — | 4,379 | |||||||||||||
Share based compensation | — | — | 4,224 | — | 4,224 | |||||||||||||
Share repurchases, including fees | (2,743 | ) | (27 | ) | (40,554 | ) | (509,976 | ) | (550,557 | ) | ||||||||
Balance at September 30, 2017 | 85,338 | $ | 853 | $ | 1,267,810 | $ | (654,484 | ) | $ | 614,179 | ||||||||
For the Nine Months Ended September 30, 2017 | ||||||||||||||||||
Common Stock | Additional Paid-In Capital | Retained Earnings (Deficit) | Total | |||||||||||||||
Shares | Par Value | |||||||||||||||||
Balance at December 31, 2016 | 92,852 | $ | 929 | $ | 1,336,707 | $ | 289,500 | $ | 1,627,136 | |||||||||
Cumulative effective adjustment from adoption of ASU 2016-09 | — | — | 434 | (266 | ) | 168 | ||||||||||||
Net income | — | — | — | 831,489 | 831,489 | |||||||||||||
Issuance of common stock under employee benefit plans, net of forfeitures and shares withheld to cover taxes | 50 | — | 10,261 | — | 10,261 | |||||||||||||
Net issuance of common stock upon exercise of stock options | 483 | 4 | 24,784 | — | 24,788 | |||||||||||||
Share based compensation | — | — | 13,485 | — | 13,485 | |||||||||||||
Share repurchases, including fees | (8,047 | ) | (80 | ) | (117,861 | ) | (1,775,207 | ) | (1,893,148 | ) | ||||||||
Balance at September 30, 2017 | 85,338 | $ | 853 | $ | 1,267,810 | $ | (654,484 | ) | $ | 614,179 |
For the Nine Months Ended September 30, | |||||||
2018 | 2017 | ||||||
Operating activities: | |||||||
Net income | $ | 1,024,130 | $ | 831,489 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization of property, equipment and intangibles | 193,318 | 173,500 | |||||
Amortization of debt discount and issuance costs | 2,557 | 2,078 | |||||
Deferred income taxes | 17,234 | 41,848 | |||||
Share-based compensation programs | 15,144 | 14,835 | |||||
Other | 6,304 | 8,174 | |||||
Changes in operating assets and liabilities: | |||||||
Accounts receivable | (32,799 | ) | (28,761 | ) | |||
Inventory | (129,214 | ) | (208,338 | ) | |||
Accounts payable | 194,069 | 217,486 | |||||
Income taxes payable | 4,460 | 32,124 | |||||
Other | 46,816 | 2,984 | |||||
Net cash provided by operating activities | 1,342,019 | 1,087,419 | |||||
Investing activities: | |||||||
Purchases of property and equipment | (350,461 | ) | (347,756 | ) | |||
Proceeds from sale of property and equipment | 3,353 | 1,906 | |||||
Other | (716 | ) | (2,072 | ) | |||
Net cash used in investing activities | (347,824 | ) | (347,922 | ) | |||
Financing activities: | |||||||
Proceeds from borrowings on revolving credit facility | 1,745,000 | 2,487,000 | |||||
Payments on revolving credit facility | (2,046,000 | ) | (2,218,000 | ) | |||
Proceeds from the issuance of long-term debt | 498,660 | 748,800 | |||||
Payment of debt issuance costs | (3,923 | ) | (7,490 | ) | |||
Repurchases of common stock | (1,251,060 | ) | (1,893,148 | ) | |||
Net proceeds from issuance of common stock | 58,955 | 34,186 | |||||
Other | (2,156 | ) | (156 | ) | |||
Net cash used in financing activities | (1,000,524 | ) | (848,808 | ) | |||
Net decrease in cash and cash equivalents | (6,329 | ) | (109,311 | ) | |||
Cash and cash equivalents at beginning of the period | 46,348 | 146,598 | |||||
Cash and cash equivalents at end of the period | $ | 40,019 | $ | 37,287 | |||
Supplemental disclosures of cash flow information: | |||||||
Income taxes paid | $ | 256,949 | $ | 359,838 | |||
Interest paid, net of capitalized interest | 102,025 | 72,252 |
• | 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, 2018 | |||||||||||||||
Quoted Prices in Active Markets for Identical Instruments (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total | ||||||||||||
Marketable securities | $ | 28,514 | $ | — | $ | — | $ | 28,514 |
December 31, 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 | $ | 25,706 | $ | — | $ | — | $ | 25,706 |
September 30, 2018 | December 31, 2017 | ||||||||||||||
Carrying Amount | Estimated Fair Value | Carrying Amount | Estimated Fair Value | ||||||||||||
Senior Notes | $ | 3,129,327 | $ | 3,119,604 | $ | 2,632,390 | $ | 2,728,167 |
September 30, 2018 | December 31, 2017 | ||||||
Revolving Credit Facility, weighted-average variable interest rate of 4.044% | $ | 45,000 | $ | 346,000 | |||
$500 million, 4.875% Senior Notes due 2021(1), effective interest rate of 4.953% | 498,170 | 497,565 | |||||
$300 million, 4.625% Senior Notes due 2021(2), effective interest rate of 4.645% | 299,173 | 298,961 | |||||
$300 million, 3.800% Senior Notes due 2022(3), effective interest rate of 3.845% | 298,482 | 298,214 | |||||
$300 million, 3.850% Senior Notes due 2023(4), effective interest rate of 3.851% | 298,760 | 298,583 | |||||
$500 million, 3.550% Senior Notes due 2026(5), effective interest rate of 3.570% | 496,126 | 495,792 | |||||
$750 million, 3.600% Senior Notes due 2027(6), effective interest rate of 3.619% | 743,718 | 743,275 | |||||
$500 million, 4.350% Senior Notes due 2028(7), effective interest rate of 4.383% | 494,898 | — | |||||
Long-term debt | $ | 3,174,327 | $ | 2,978,390 |
(1) | Net of unamortized discount of $0.8 million as of September 30, 2018, and $1.1 million as of December 31, 2017, and debt issuance costs of $1.0 million as of September 30, 2018, and $1.4 million as of December 31, 2017. |
(2) | Net of unamortized discount of $0.2 million as of September 30, 2018, and December 31, 2017, and debt issuance costs of $0.7 million as of September 30, 2018, and $0.8 million as of December 31, 2017. |
(3) | Net of unamortized discount of $0.5 million as of September 30, 2018, and $0.6 million as of December 31, 2017, and debt issuance costs of $1.0 million as of September 30, 2018, and $1.2 million as of December 31, 2017. |
(4) | Net of unamortized discount of less than $0.1 million as of September 30, 2018, and December 31, 2017, and debt issuance costs of $1.2 million as of September 30, 2018, and $1.4 million as of December 31, 2017. |
(5) | Net of unamortized discount of $0.7 million as of September 30, 2018, and December 31, 2017, and debt issuance costs of $3.2 million as of September 30, 2018, and $3.5 million as of December 31, 2017. |
(6) | Net of unamortized discount of $1.1 million as of September 30, 2018, and $1.2 million as of December 31, 2017, and debt issuance costs of $5.2 million as of September 30, 2018 and $5.6 million as of December 31, 2017. |
(7) | Net of unamortized discount of $1.3 million as of September 30, 2018, and debt issuance costs of $3.8 million as of September 30, 2018. |
Warranty liabilities, balance at December 31, 2017 | $ | 44,398 | |
Warranty claims | (68,104 | ) | |
Warranty accruals | 75,883 | ||
Warranty liabilities, balance at September 30, 2018 | $ | 52,177 |
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Shares repurchased | 932 | 2,743 | 4,695 | 8,047 | |||||||||||
Average price per share | $ | 306.22 | $ | 200.70 | $ | 266.48 | $ | 235.26 | |||||||
Total investment | $ | 285,183 | $ | 550,530 | $ | 1,251,013 | $ | 1,893,068 |
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Sales to do-it-yourself customers | $ | 1,408,140 | $ | 1,342,727 | $ | 4,053,137 | $ | 3,867,771 | |||||||
Sales to professional service provider customers | 1,040,728 | 960,421 | 3,058,127 | 2,812,602 | |||||||||||
Other sales and sales adjustments | 33,849 | 36,682 | 110,207 | 106,545 | |||||||||||
Total sales | $ | 2,482,717 | $ | 2,339,830 | $ | 7,221,471 | $ | 6,786,918 |
Shares | Weighted-Average Exercise Price | |||||
Outstanding at December 31, 2017 | 2,364 | $ | 137.08 | |||
Granted | 275 | 259.55 | ||||
Exercised | (710 | ) | 72.64 | |||
Forfeited | (29 | ) | 229.86 | |||
Outstanding at September 30, 2018 | 1,900 | $ | 177.49 | |||
Exercisable at September 30, 2018 | 1,187 | $ | 133.19 |
• | 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, | |||||
2018 | 2017 | ||||
Risk free interest rate | 2.61 | % | 1.98 | % | |
Expected life | 6.0 Years | 5.5 Years | |||
Expected volatility | 23.9 | % | 22.2 | % | |
Expected dividend yield | — | % | — | % |
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Compensation expense for stock options awarded | $ | 4,084 | $ | 3,679 | $ | 12,424 | $ | 11,826 | |||||||
Income tax benefit from compensation expense related to stock options | 1,010 | 1,402 | 3,074 | 4,507 |
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Compensation expense for shares issued under the ESPP | $ | 569 | $ | 545 | $ | 1,689 | $ | 1,659 | |||||||
Income tax benefit from compensation expense related to shares issued under the ESPP | 141 | 208 | 418 | 632 | |||||||||||
Compensation expense for restricted shares awarded | 339 | 258 | 1,031 | 1,350 | |||||||||||
Income tax benefit from compensation expense related to restricted awards | $ | 84 | $ | 98 | $ | 255 | $ | 515 |
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Numerator (basic and diluted): | |||||||||||||||
Net income | $ | 366,151 | $ | 283,734 | $ | 1,024,130 | $ | 831,489 | |||||||
Denominator: | |||||||||||||||
Weighted-average common shares outstanding – basic | 80,593 | 86,947 | 81,939 | 89,641 | |||||||||||
Effect of stock options (1) | 817 | 1,078 | 902 | 1,228 | |||||||||||
Weighted-average common shares outstanding – assuming dilution | 81,410 | 88,025 | 82,841 | 90,869 | |||||||||||
Earnings per share: | |||||||||||||||
Earnings per share-basic | $ | 4.54 | $ | 3.26 | $ | 12.50 | $ | 9.28 | |||||||
Earnings per share-assuming dilution | $ | 4.50 | $ | 3.22 | $ | 12.36 | $ | 9.15 | |||||||
Antidilutive potential common shares not included in the calculation of diluted earnings per share: | |||||||||||||||
Stock options (1) | 650 | 784 | 232 | 620 | |||||||||||
Weighted-average exercise price per share of antidilutive stock options (1) | $ | 264.65 | $ | 246.65 | $ | 268.22 | $ | 258.75 |
(1) | See Note 7 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 1.2%, 2.4% and 3.5% in 2017, 2016 and 2015, respectively, and through August of 2018, year-to-date miles driven increased 0.4%. 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 8.5% from 2007 to 2017, bringing the number of light vehicles on the road to 270 million by the end of 2017. For the year ended December 31, 2017, the seasonally adjusted annual rate of light vehicle sales in the U.S. (“SAAR”) was approximately 17.8 million, and for 2018, the SAAR is estimated to be approximately 17.4 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 4.2% to 5.7% annually. As a result, over the past decade, the average age of the U.S. vehicle population has increased, growing 21.9%, from 9.6 years in 2007 to 11.7 years in 2017. 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. The U.S. unemployment rate was 4.1% as of December 31, 2017, and as of September 30, 2018, the U.S. unemployment rate decreased to 3.7%. We believe total employment should remain at healthy levels supporting the trend of modest growth of total miles driven in the U.S. and the continued demand for automotive aftermarket products. |
Increase in Sales for the Three Months Ended September 30, 2018, Compared to the Same Period in 2017 | Increase in Sales for the Nine Months Ended September 30, 2018, Compared to the Same Period in 2017 | ||||||
Store sales: | |||||||
Comparable store sales | $ | 90 | $ | 265 | |||
Non-comparable store sales: | |||||||
Sales for stores opened throughout 2017, excluding stores open at least one year that are included in comparable store sales | 19 | 97 | |||||
Sales for stores opened throughout 2018 | 38 | 73 | |||||
Sales in 2017 for stores that have closed | (1 | ) | (4 | ) | |||
Non-store sales: | |||||||
Includes sales of machinery and sales to independent parts stores and Team Members | (3 | ) | 4 | ||||
Total increase in sales | $ | 143 | $ | 435 |
For the Nine Months Ended September 30, | |||||||
Liquidity: | 2018 | 2017 | |||||
Total cash provided by/(used in): | |||||||
Operating activities | $ | 1,342,019 | $ | 1,087,419 | |||
Investing activities | (347,824 | ) | (347,922 | ) | |||
Financing activities | (1,000,524 | ) | (848,808 | ) | |||
Net decrease in cash and cash equivalents | $ | (6,329 | ) | $ | (109,311 | ) | |
Capital expenditures | $ | 350,461 | $ | 347,756 | |||
Free cash flow (1) | $ | 958,584 | $ | 704,381 |
(1) | 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, | |||||||
2018 | 2017 | ||||||
GAAP net income | $ | 1,326,445 | $ | 1,077,519 | |||
Add: Interest expense | 117,455 | 83,258 | |||||
Rent expense | 312,793 | 295,083 | |||||
Provision for income taxes | 351,209 | 574,491 | |||||
Depreciation expense | 252,392 | 228,815 | |||||
Amortization expense | 1,271 | 1,104 | |||||
Non-cash share-based compensation | 19,710 | 19,323 | |||||
Non-GAAP EBITDAR | $ | 2,381,275 | $ | 2,279,593 | |||
Interest expense | $ | 117,455 | $ | 83,258 | |||
Capitalized interest | 8,670 | 8,298 | |||||
Rent expense | 312,793 | 295,083 | |||||
Total fixed charges | $ | 438,918 | $ | 386,639 | |||
Consolidated fixed charge coverage ratio | 5.43 | 5.90 | |||||
GAAP debt | $ | 3,174,327 | $ | 2,900,816 | |||
Stand-by letters of credit | 36,984 | 41,258 | |||||
Discount on senior notes | 4,498 | 3,894 | |||||
Debt issuance costs | 16,175 | 14,290 | |||||
Five-times rent expense | 1,563,965 | 1,475,415 | |||||
Non-GAAP adjusted debt | $ | 4,795,949 | $ | 4,435,673 | |||
Consolidated leverage ratio | 2.01 | 1.95 |
For the Nine Months Ended September 30, | ||||||||
2018 | 2017 | |||||||
Cash provided by operating activities | $ | 1,342,019 | $ | 1,087,419 | ||||
Less: | Capital expenditures | 350,461 | 347,756 | |||||
Excess tax benefit from share-based compensation | 32,974 | 35,282 | ||||||
Free cash flow | $ | 958,584 | $ | 704,381 |
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Shares repurchased | 932 | 2,743 | 4,695 | 8,047 | |||||||||||
Average price per share | $ | 306.22 | $ | 200.70 | $ | 266.48 | $ | 235.26 | |||||||
Total investment | $ | 285,183 | $ | 550,530 | $ | 1,251,013 | $ | 1,893,068 |
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, 2018, through July 31, 2018 | 469 | $ | 281.68 | 469 | $ | 617,589 | ||||||||
August 1, 2018, through August 31, 2018 | 240 | 321.24 | 240 | 540,651 | ||||||||||
September 1, 2018, through September 30, 2018 | 223 | 341.58 | 223 | $ | 464,376 | |||||||||
Total as of September 30, 2018 | 932 | $ | 306.22 | 932 |
(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 February 7, 2018, the Company’s Board of Directors 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 $10.8 billion. The additional authorization is effective for a three-year period, beginning on its announcement date. The authorization under the share repurchase program that currently has capacity is scheduled to expire on February 7, 2021. No other share repurchase programs existed during the nine months ended September 30, 2018. |
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, 2018 | /s/ | Gregory D. Johnson | |
Date | Gregory D. Johnson | ||
Chief Executive Officer | |||
(Principal Executive Officer) | |||
November 7, 2018 | /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, 2018 | /s/ | Gregory D. Johnson |
Gregory D. Johnson | ||
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, 2018 | /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/ | Gregory D. Johnson |
Gregory D. Johnson | |
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 | |
---|---|---|
Sep. 30, 2018 |
Oct. 29, 2018 |
|
Document and Entity Information | ||
Document type | 10-Q | |
Amendment flag | false | |
Document period end date | Sep. 30, 2018 | |
Document fiscal year focus | 2018 | |
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 small business | false | |
Entity emerging growth company | false | |
Entity common stock, shares outstanding | 80,104,348 |
Condensed Consolidated Balance Sheets - USD ($) $ in Thousands |
Sep. 30, 2018 |
Dec. 31, 2017 |
[1] | ||
---|---|---|---|---|---|
Assets | |||||
Cash and cash equivalents | $ 40,019 | $ 46,348 | |||
Accounts receivable, net | 242,692 | 216,251 | |||
Amounts receivable from suppliers | 83,237 | 76,236 | |||
Inventory | 3,139,621 | 3,009,800 | |||
Other current assets | 54,462 | 49,037 | |||
Total current assets | 3,560,031 | 3,397,672 | |||
Property and equipment, at cost | 5,512,325 | 5,191,135 | |||
Less: accumulated depreciation and amortization | 2,010,392 | 1,847,329 | |||
Net property and equipment | 3,501,933 | 3,343,806 | |||
Goodwill | 789,178 | 789,058 | |||
Other assets, net | 43,572 | 41,349 | |||
Total assets | 7,894,714 | 7,571,885 | |||
Liabilities and shareholders' equity | |||||
Accounts payable | 3,384,098 | 3,190,029 | |||
Self-insurance reserves | 75,440 | 71,695 | |||
Accrued payroll | 89,721 | 77,147 | |||
Accrued benefits and withholdings | 83,113 | 69,308 | |||
Other current liabilities | 272,709 | 239,187 | |||
Total current liabilities | 3,905,081 | 3,647,366 | |||
Long-term debt | 3,174,327 | 2,978,390 | |||
Deferred income taxes | 102,640 | 85,406 | |||
Other liabilities | 214,287 | 207,677 | |||
Shareholders' equity: | |||||
Common stock, $0.01 par value: Authorized shares - 245,000,000; Issued and outstanding shares - 80,345,665 as of September 30, 2018, and 84,302,187 as of December 31, 2017 | 803 | 843 | |||
Additional paid-in capital | 1,265,827 | 1,265,043 | |||
Retained deficit | (768,251) | (612,840) | |||
Total shareholders' equity | 498,379 | 653,046 | |||
Total liabilities and shareholders' equity | $ 7,894,714 | $ 7,571,885 | |||
|
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares |
Sep. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
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 | 80,345,665 | 84,302,187 |
Common stock, shares outstanding | 80,345,665 | 84,302,187 |
Condensed Consolidated Statements of Income - USD ($) shares in Thousands, $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Income Statement [Abstract] | ||||
Sales | $ 2,482,717 | $ 2,339,830 | $ 7,221,471 | $ 6,786,918 |
Cost of goods sold, including warehouse and distribution expenses | 1,166,962 | 1,109,536 | 3,415,820 | 3,225,415 |
Gross profit | 1,315,755 | 1,230,294 | 3,805,651 | 3,561,503 |
Selling, general and administrative expenses | 830,607 | 768,331 | 2,418,507 | 2,238,938 |
Operating income | 485,148 | 461,963 | 1,387,144 | 1,322,565 |
Other income (expense): | ||||
Interest expense | (31,582) | (24,324) | (90,661) | (64,555) |
Interest income | 669 | 592 | 1,838 | 1,768 |
Other, net | 1,416 | 1,299 | 2,609 | 1,302 |
Total other expense | (29,497) | (22,433) | (86,214) | (61,485) |
Income before income taxes | 455,651 | 439,530 | 1,300,930 | 1,261,080 |
Provision for income taxes | 89,500 | 155,796 | 276,800 | 429,591 |
Net income | $ 366,151 | $ 283,734 | $ 1,024,130 | $ 831,489 |
Earnings per share-basic: | ||||
Earnings per share - basic | $ 4.54 | $ 3.26 | $ 12.50 | $ 9.28 |
Weighted-average common shares outstanding - basic | 80,593 | 86,947 | 81,939 | 89,641 |
Earnings per share-assuming dilution: | ||||
Earnings per share - assuming dilution | $ 4.50 | $ 3.22 | $ 12.36 | $ 9.15 |
Weighted-average common shares outstanding - assuming dilution | 81,410 | 88,025 | 82,841 | 90,869 |
Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands |
9 Months Ended | ||||
---|---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
||||
Operating activities: | |||||
Net income | $ 1,024,130 | $ 831,489 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||
Depreciation and amortization of property, equipment and intangibles | 193,318 | 173,500 | |||
Amortization of debt discount and issuance costs | 2,557 | 2,078 | |||
Deferred income taxes | 17,234 | 41,848 | |||
Share-based compensation programs | 15,144 | 14,835 | |||
Other | 6,304 | 8,174 | |||
Changes in operating assets and liabilities: | |||||
Accounts receivable | (32,799) | (28,761) | |||
Inventory | (129,214) | (208,338) | |||
Accounts payable | 194,069 | 217,486 | |||
Income taxes payable | 4,460 | 32,124 | |||
Other | 46,816 | 2,984 | |||
Net cash provided by operating activities | 1,342,019 | 1,087,419 | |||
Investing activities: | |||||
Purchases of property and equipment | (350,461) | (347,756) | |||
Proceeds from sale of property and equipment | 3,353 | 1,906 | |||
Other | (716) | (2,072) | |||
Net cash used in investing activities | (347,824) | (347,922) | |||
Financing activities: | |||||
Proceeds from borrowings on revolving credit facility | 1,745,000 | 2,487,000 | |||
Payments on revolving credit facility | (2,046,000) | (2,218,000) | |||
Proceeds from issuance of long-term debt | 498,660 | 748,800 | |||
Payments of debt issuance costs | (3,923) | (7,490) | |||
Repurchases of common stock | (1,251,060) | (1,893,148) | |||
Net proceeds from issuance of common stock | 58,955 | 34,186 | |||
Other | (2,156) | (156) | |||
Net cash used in financing activities | (1,000,524) | (848,808) | |||
Net decrease in cash and cash equivalents | (6,329) | (109,311) | |||
Cash and cash equivalents at beginning of the period | 46,348 | [1] | 146,598 | ||
Cash and cash equivalents at end of the period | 40,019 | 37,287 | |||
Supplemental disclosures of cash flow information: | |||||
Income taxes paid | 256,949 | 359,838 | |||
Interest paid, net of capitalized interest | $ 102,025 | $ 72,252 | |||
|
Basis of Presentation |
9 Months Ended |
---|---|
Sep. 30, 2018 | |
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, 2018, are not necessarily indicative of the results that may be expected for the year ended December 31, 2018. 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, 2017. |
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 7 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, 2018, and December 31, 2017. The Company recorded an increase in fair value related to its marketable securities in the amount of $1.0 million for each of the three months ended September 30, 2018 and 2017, which was 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 $1.6 million and $2.6 million for the nine months ended September 30, 2018 and 2017, 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, 2018, and December 31, 2017 (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, 2018, and December 31, 2017, 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, 2018, and December 31, 2017. 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, 2018, and December 31, 2017, 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 (Level 2), 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, 2018, and December 31, 2017 (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. As of September 30, 2018, and December 31, 2017, 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 $37.0 million and $36.8 million, respectively, reducing the aggregate availability under the Credit Agreement 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, 2018, 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, 2018, the Company remained in compliance with all covenants under the Credit Agreement. Senior notes: On May 17, 2018, the Company issued $500 million aggregate principal amount of unsecured 4.350% Senior Notes due 2028 (“4.350% Senior Notes due 2028”) at a price to the public of 99.732% of their face value with UMB Bank, N.A. (“UMB”) as trustee. Interest on the 4.350% Senior Notes due 2028 is payable on June 1 and December 1 of each year, beginning on December 1, 2018, and is computed on the basis of a 360-day year. The Company has issued a cumulative $3.2 billion aggregate principal amount of unsecured senior notes, which are due between 2021 and 2028, 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, 2018. |
Warranties |
9 Months Ended | ||||||||||||||||||||||||
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Sep. 30, 2018 | |||||||||||||||||||||||||
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, 2018, and December 31, 2017. The following table identifies the changes in the Company’s aggregate product warranty liabilities for the nine months ended September 30, 2018 (in thousands):
|
Share Repurchase Program |
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Proceeds from (Repurchase of) Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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 February 7, 2018, the Company’s Board of Directors 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 $10.8 billion. The additional authorization is effective for a three-year period, beginning on its 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 for the three and nine months ended September 30, 2018 and 2017 (in thousands, except per share data):
As of September 30, 2018, the Company had $464.4 million remaining under its share repurchase program. Subsequent to the end of the third quarter and through November 7, 2018, the Company repurchased an additional 0.4 million shares of its common stock under its share repurchase program, at an average price of $333.80, for a total investment of $143.7 million. The Company has repurchased a total of 71.4 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, 2018, at an average price of $146.12, for a total aggregate investment of $10.4 billion. |
Revenue |
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Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue | NOTE 6 – REVENUE The table below identifies the Company’s revenues disaggregated by major customer type for the three and nine months ended September 30, 2018 and 2017 (in thousands):
The Company’s primary source of revenue is derived from the sale of automotive aftermarket parts and merchandise to its customers. Revenue is recognized when performance obligations under the terms of a contract with a customer are satisfied, in an amount representing the consideration the Company expects to receive in exchange for transferring goods to the customer. Generally, the Company’s performance obligations are satisfied when the customer takes possession of the merchandise, which normally occurs immediately at the point of sale or through same day delivery of the merchandise. All sales are recorded net of estimated returns allowances, discounts and taxes. The company does not recognize revenue related to product warranties; see Note 4 for information concerning the expected costs associated with the Company’s assurance warranty obligations. See Note 10 for information regarding the adoption implementation of Accounting Standard Update No. 2014-09, “Revenue from Contracts with Customers (Topic 606).” Over-the-counter retail sales to do-it-yourself (“DIY”) customers are recorded when the customer takes possession of the merchandise. Internet retail sales, included in sales to DIY customers, are recorded when the merchandise is shipped or when the customer picks up the merchandise at a store. Sales to professional service provider customers, also referred to as “commercial sales,” are recorded upon same-day delivery of the merchandise to the customer, generally at the customer’s place of business. Other sales and sales adjustments primarily includes sales to Team Members, wholesale sales to other retailers (“jobber sales”), equipment sales, discounts, rebates, deferred revenue adjustments relating to the Company’s retail loyalty program and adjustments to estimated sales returns allowances. Sales to Team Members are recorded when the Team Member takes possession of the merchandise. Jobber sales are recorded upon shipment of the merchandise from a regional distribution center with same-day delivery to the jobber customer’s location. The Company maintains a retail loyalty program named O’Reilly O’Rewards, which represents a performance obligation. The Company records a deferred revenue liability, based on a breakage adjusted, estimated redemption rate, and a corresponding reduction in revenue in periods when loyalty points are earned by members. The Company recognizes revenue and a corresponding reduction to the deferred revenue liability in periods when loyalty program issued coupons are redeemed by members, generally within a period of three months from issuance, or when unredeemed points expire, generally within 12 months after the date they were earned, which satisfies the Company’s performance obligation. As of September 30, 2018, and December 31, 2017, the Company had recorded a deferred revenue liability of $5.0 million and $4.7 million, respectively, related to its loyalty program, which were included in “Other liabilities” on the accompanying Condensed Consolidated Balance Sheets. During the three months ended September 30, 2018 and 2017, the Company recognized $4.3 million and $4.6 million, respectively, of deferred revenue related to its loyalty program, which were included in “Sales” on the accompanying Condensed Consolidated Statements of Income. During the nine months ended September 30, 2018 and 2017, the Company recognized $11.8 million and $12.9 million, respectively, of deferred revenue related to its loyalty program, which were included in “Sales” on the accompanying Condensed Consolidated Statements of Income. |
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 7 – 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, 2018 (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, 2018 and 2017:
The following table summarizes activity related to stock options awarded by the Company for the three and nine months ended September 30, 2018 and 2017 (in thousands, except per share data):
The weighted-average grant-date fair value of options granted during the nine months ended September 30, 2018, was $75.45 compared to $64.45 for the nine months ended September 30, 2017. The remaining unrecognized compensation expense related to unvested stock option awards at September 30, 2018, was $33.9 million, and the weighted-average period of time over which this cost will be recognized is 2.7 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, an employee incentive plan, which provides for the award of shares of restricted stock to certain of the Company’s affiliated directors, that vest evenly over a three-year period and are held in escrow until such vesting has occurred, 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 employee incentive plan and 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, 2018 and 2017 (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, 2018 or 2017. The Company expensed matching contributions under the 401(k) Plan in the amounts of $6.3 million and $5.7 million for the three months ended September 30, 2018 and 2017, 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 $18.2 million and $17.0 million for the nine months ended September 30, 2018 and 2017, respectively, which were included in “Selling, general and administrative expenses” 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 $28.5 million and $25.7 million as of September 30, 2018, and December 31, 2017, 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 each of the three months ended September 30, 2018 and 2017, 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 each of the nine months ended September 30, 2018 and 2017, 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 [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings per share | NOTE 8 – 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, 2018 and 2017 (in thousands, except per share data):
For the three and nine months ended September 30, 2018 and 2017, 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, 2018, the Company repurchased an additional 0.4 million shares of its common stock under its share repurchase program, at an average price of $333.80, for a total investment of $143.7 million. |
Legal Matters |
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Sep. 30, 2018 | |
Loss Contingency [Abstract] | |
Legal matters | NOTE 9 – 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. |
Recent Accounting Pronouncements |
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Sep. 30, 2018 | |
New Accounting Pronouncements and Changes in Accounting Principles [Abstract] | |
Recent accounting pronouncements | NOTE 10 - 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),” now codified in the Accounting Standards Codification (“Topic 606”). Under Topic 606, 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. Topic 606 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. The Company adopted this guidance using the modified retrospective transition method with its first quarter ended March 31, 2018. Results of the three and nine months ended September 30, 2018, were presented under Topic 606, while amounts in prior periods were not adjusted and continue to be reported under the accounting standard in effect for the prior periods. The adoption of Topic 606 did not have a material impact on the Company’s business process, internal controls, systems, consolidated financial condition, results of operations or cash flows; as such, a cumulative effective adjustment was not recorded to opening retained earnings. See Note 6 for information concerning the Company’s revenue recognition policy. 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. In July of 2018, the FASB issued ASU No. 2018-11, “Leases (Topic 842): Targeted Improvement” (“ASU 2018-11”), to provide an additional, optional transition method for adopting ASU 2016-02, which allows for an entity to choose to apply the new lease standard at adoption date and recognize a cumulative-effective adjustment to the opening balance of retained earnings in the period of adoption, while comparative periods presented will continue to be in accordance with current U.S. GAAP Topic 840. For public companies, Topic 842 is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period. The Company has established a task force, composed of multiple functional groups inside of the Company, which has reviewed the critical components of the standard and is implementing changes to systems and controls necessary to support the adoption of the new standard beginning with its first quarter ending March 31, 2019. The Company expects to adopt this guidance using the additional, optional transition method, the package of transitional practical expedients relating to the identification, classification and initial direct costs of leases commencing before the effective date of Topic 842, and the transitional practical expedient for the treatment of existing land easements; however, the Company does not expect to elect the hindsight transitional practical expedient. The Company expects to make an accounting policy election to not apply recognition requirements of the guidance to short-term leases. The Company expects the adoption of the new guidance to have a material impact on the total assets and liabilities reported on the Company’s consolidated balance sheet, and estimates right-of-use assets and lease liabilities will be within a range of $1.8 billion to $2.0 billion. This estimated range is based on the Company’s current lease portfolio and changes to the lease portfolio, including the total number of leases, lease commencement and end dates and lease termination expectations, as well as changes in anticipated lease discount rates, could impact this estimated range. The Company does not expect that the adoption of this new guidance will have a material impact on the Company’s results of operations, cash flows, liquidity or the Company’s covenant compliance under its existing credit agreement. 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 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 August of 2018, the FASB issued ASU No. 2018-15, “Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract” (“ASU 2018-15”). ASU 2018-15 aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. ASU 2018-15 is effective for annual reporting periods beginning after December 15, 2019, and interim periods within that reporting period, and allows for either retrospective or prospective adoption, with early adoption permitted. The Company early adopted this guidance with its third quarter ended September 30, 2018, using the prospective adoption method. The Company did not capitalize any implementation costs incurred in cloud computing arrangements that are service contracts during the third quarter ended September 30, 2018, and therefore, the adoption of this new guidance did not impact the Company’s consolidated financial condition, results of operations and cash flows during the period. The Company does not expect that the application of this new guidance will have a material impact on the Company’s consolidated financial condition, results of operations and cash flows. |
Fair Value Measurements (Policies) |
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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) |
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Sep. 30, 2018 | |
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. |
Revenue (Policies) |
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Sep. 30, 2018 | |
Revenue from Contract with Customer [Abstract] | |
Revenue, policy | Revenue is recognized when performance obligations under the terms of a contract with a customer are satisfied, in an amount representing the consideration the Company expects to receive in exchange for transferring goods to the customer. Generally, the Company’s performance obligations are satisfied when the customer takes possession of the merchandise, which normally occurs immediately at the point of sale or through same day delivery of the merchandise. All sales are recorded net of estimated returns allowances, discounts and taxes. |
Recent Accounting Pronouncements (Policies) |
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Sep. 30, 2018 | |
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),” now codified in the Accounting Standards Codification (“Topic 606”). Under Topic 606, 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. Topic 606 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. The Company adopted this guidance using the modified retrospective transition method with its first quarter ended March 31, 2018. Results of the three and nine months ended September 30, 2018, were presented under Topic 606, while amounts in prior periods were not adjusted and continue to be reported under the accounting standard in effect for the prior periods. The adoption of Topic 606 did not have a material impact on the Company’s business process, internal controls, systems, consolidated financial condition, results of operations or cash flows; as such, a cumulative effective adjustment was not recorded to opening retained earnings. See Note 6 for information concerning the Company’s revenue recognition policy. 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. In July of 2018, the FASB issued ASU No. 2018-11, “Leases (Topic 842): Targeted Improvement” (“ASU 2018-11”), to provide an additional, optional transition method for adopting ASU 2016-02, which allows for an entity to choose to apply the new lease standard at adoption date and recognize a cumulative-effective adjustment to the opening balance of retained earnings in the period of adoption, while comparative periods presented will continue to be in accordance with current U.S. GAAP Topic 840. For public companies, Topic 842 is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period. The Company has established a task force, composed of multiple functional groups inside of the Company, which has reviewed the critical components of the standard and is implementing changes to systems and controls necessary to support the adoption of the new standard beginning with its first quarter ending March 31, 2019. The Company expects to adopt this guidance using the additional, optional transition method, the package of transitional practical expedients relating to the identification, classification and initial direct costs of leases commencing before the effective date of Topic 842, and the transitional practical expedient for the treatment of existing land easements; however, the Company does not expect to elect the hindsight transitional practical expedient. The Company expects to make an accounting policy election to not apply recognition requirements of the guidance to short-term leases. The Company expects the adoption of the new guidance to have a material impact on the total assets and liabilities reported on the Company’s consolidated balance sheet, and estimates right-of-use assets and lease liabilities will be within a range of $1.8 billion to $2.0 billion. This estimated range is based on the Company’s current lease portfolio and changes to the lease portfolio, including the total number of leases, lease commencement and end dates and lease termination expectations, as well as changes in anticipated lease discount rates, could impact this estimated range. The Company does not expect that the adoption of this new guidance will have a material impact on the Company’s results of operations, cash flows, liquidity or the Company’s covenant compliance under its existing credit agreement. 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 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 August of 2018, the FASB issued ASU No. 2018-15, “Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract” (“ASU 2018-15”). ASU 2018-15 aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. ASU 2018-15 is effective for annual reporting periods beginning after December 15, 2019, and interim periods within that reporting period, and allows for either retrospective or prospective adoption, with early adoption permitted. The Company early adopted this guidance with its third quarter ended September 30, 2018, using the prospective adoption method. The Company did not capitalize any implementation costs incurred in cloud computing arrangements that are service contracts during the third quarter ended September 30, 2018, and therefore, the adoption of this new guidance did not impact the Company’s consolidated financial condition, results of operations and cash flows during the period. The Company does not expect that the application of this new guidance will have a material impact on the Company’s consolidated financial condition, results of operations and cash flows. |
Fair Value Measurements (Tables) |
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Valuation of marketable securities |
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Valuation of senior notes |
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Financing (Tables) |
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Warranties (Tables) |
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Product warranty liabilities |
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Share Repurchase Program (Tables) |
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Schedule of shares repurchased |
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Revenue (Tables) |
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Disaggregation of revenue |
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Share-Based Compensation and Benefit Plans (Tables) |
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Summary of activity of share-based compensation |
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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) |
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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 | |||
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Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
Dec. 31, 2017 |
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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 | $ 1.0 | $ 1.6 | $ 2.6 | |
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, 2018 |
Dec. 31, 2017 |
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Fair Value Measurements | ||
Estimated fair value of marketable securities | $ 28,514 | $ 25,706 |
Fair value, inputs, Level 1 [Member] | ||
Fair Value Measurements | ||
Estimated fair value of marketable securities | 28,514 | 25,706 |
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, 2018 |
Dec. 31, 2017 |
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Fair Value Measurements | ||
Carrying amount of senior notes | $ 3,129,327 | $ 2,632,390 |
Fair value, inputs, Level 2 [Member] | ||
Fair Value Measurements | ||
Estimated fair value of senior notes | $ 3,119,604 | $ 2,728,167 |
Financing (Unsecured Revolving Credit Facility) (Narrative) (Details) - Line of credit facility [Member] - Unsecured debt [Member] - USD ($) $ in Millions |
9 Months Ended | |
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Sep. 30, 2018 |
Dec. 31, 2017 |
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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 | $ 37.0 | $ 36.8 |
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, 2018, 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 | |
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May 17, 2018
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Financing | ||
Unsecured senior notes description | The Company has issued a cumulative $3.2 billion aggregate principal amount of unsecured senior notes, which are due between 2021 and 2028, 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, 2018. | |
Senior notes [Member] | ||
Financing | ||
Aggregate principle of unsecured senior notes | $ | $ 3,200,000 | |
Number of days in annual interest calculation period | d | 360 | |
Senior notes [Member] | $500 million, 4.350% Senior Notes due 2028 [Member] | ||
Financing | ||
Senior notes maturity, year | 2028 | 2028 |
Interest rate of senior notes | 4.35% | 4.35% |
Number of days in annual interest calculation period | d | 360 | |
Issuance date of senior notes | May 17, 2018 | |
Face amount of senior notes | $ | $ 500,000 | $ 500,000 |
Percentage of face value of debt instrument | 99.732% | |
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 | 2028 | |
Interest rate of senior notes | 4.875% |
Financing (Outstanding Financing Facilities) (Details) - USD ($) $ in Thousands |
9 Months Ended | 12 Months Ended | |||||||||||||||||||
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May 17, 2018 |
Sep. 30, 2018 |
Dec. 31, 2017 |
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Financing | |||||||||||||||||||||
Senior notes | $ 3,129,327 | $ 2,632,390 | |||||||||||||||||||
Long-term debt | 3,174,327 | 2,978,390 | [1] | ||||||||||||||||||
$500 million, 4.875% Senior Notes due 2021 [Member] | |||||||||||||||||||||
Financing | |||||||||||||||||||||
Senior notes, unamortized discount | 800 | 1,100 | |||||||||||||||||||
Senior notes, unamortized debt issuance costs | 1,000 | 1,400 | |||||||||||||||||||
$300 million, 4.625% Senior Notes due 2021 [Member] | |||||||||||||||||||||
Financing | |||||||||||||||||||||
Senior notes, unamortized discount | 200 | 200 | |||||||||||||||||||
Senior notes, unamortized debt issuance costs | 700 | 800 | |||||||||||||||||||
$300 million, 3.800% Senior Notes due 2022 [Member] | |||||||||||||||||||||
Financing | |||||||||||||||||||||
Senior notes, unamortized discount | 500 | 600 | |||||||||||||||||||
Senior notes, unamortized debt issuance costs | 1,000 | 1,200 | |||||||||||||||||||
$300 million, 3.850% Senior Notes due 2023 [Member] | |||||||||||||||||||||
Financing | |||||||||||||||||||||
Senior notes, unamortized discount | 100 | 100 | |||||||||||||||||||
Senior notes, unamortized debt issuance costs | 1,200 | 1,400 | |||||||||||||||||||
$500 million, 3.550% Senior Notes due 2026 [Member] | |||||||||||||||||||||
Financing | |||||||||||||||||||||
Senior notes, unamortized discount | 700 | 700 | |||||||||||||||||||
Senior notes, unamortized debt issuance costs | 3,200 | 3,500 | |||||||||||||||||||
$750 million, 3.600% Senior Notes due 2027 [Member] | |||||||||||||||||||||
Financing | |||||||||||||||||||||
Senior notes, unamortized discount | 1,100 | 1,200 | |||||||||||||||||||
Senior notes, unamortized debt issuance costs | 5,200 | 5,600 | |||||||||||||||||||
$500 million, 4.350% Senior Notes due 2028 [Member] | |||||||||||||||||||||
Financing | |||||||||||||||||||||
Senior notes, unamortized discount | 1,300 | ||||||||||||||||||||
Senior notes, unamortized debt issuance costs | 3,800 | ||||||||||||||||||||
Revolving Credit Facility [Member] | |||||||||||||||||||||
Financing | |||||||||||||||||||||
Unsecured revolving credit facility | $ 45,000 | 346,000 | |||||||||||||||||||
Unsecured revolving credit facility, weighted-average variable interest rate | 4.044% | ||||||||||||||||||||
Senior notes [Member] | $500 million, 4.875% Senior Notes due 2021 [Member] | |||||||||||||||||||||
Financing | |||||||||||||||||||||
Senior notes | [2] | $ 498,170 | 497,565 | ||||||||||||||||||
Senior notes, face amount | $ 500,000 | $ 500,000 | |||||||||||||||||||
Interest rate of senior notes | 4.875% | 4.875% | |||||||||||||||||||
Senior notes maturity, year | 2021 | 2021 | |||||||||||||||||||
Senior notes, effective interest rate | 4.953% | ||||||||||||||||||||
Senior notes [Member] | $300 million, 4.625% Senior Notes due 2021 [Member] | |||||||||||||||||||||
Financing | |||||||||||||||||||||
Senior notes | [3] | $ 299,173 | $ 298,961 | ||||||||||||||||||
Senior notes, face amount | $ 300,000 | $ 300,000 | |||||||||||||||||||
Interest rate of senior notes | 4.625% | 4.625% | |||||||||||||||||||
Senior notes maturity, year | 2021 | 2021 | |||||||||||||||||||
Senior notes, effective interest rate | 4.645% | ||||||||||||||||||||
Senior notes [Member] | $300 million, 3.800% Senior Notes due 2022 [Member] | |||||||||||||||||||||
Financing | |||||||||||||||||||||
Senior notes | [4] | $ 298,482 | $ 298,214 | ||||||||||||||||||
Senior notes, face amount | $ 300,000 | $ 300,000 | |||||||||||||||||||
Interest rate of senior notes | 3.80% | 3.80% | |||||||||||||||||||
Senior notes maturity, year | 2022 | 2022 | |||||||||||||||||||
Senior notes, effective interest rate | 3.845% | ||||||||||||||||||||
Senior notes [Member] | $300 million, 3.850% Senior Notes due 2023 [Member] | |||||||||||||||||||||
Financing | |||||||||||||||||||||
Senior notes | [5] | $ 298,760 | $ 298,583 | ||||||||||||||||||
Senior notes, face amount | $ 300,000 | $ 300,000 | |||||||||||||||||||
Interest rate of senior notes | 3.85% | 3.85% | |||||||||||||||||||
Senior notes maturity, year | 2023 | 2023 | |||||||||||||||||||
Senior notes, effective interest rate | 3.851% | ||||||||||||||||||||
Senior notes [Member] | $500 million, 3.550% Senior Notes due 2026 [Member] | |||||||||||||||||||||
Financing | |||||||||||||||||||||
Senior notes | [6] | $ 496,126 | $ 495,792 | ||||||||||||||||||
Senior notes, face amount | $ 500,000 | $ 500,000 | |||||||||||||||||||
Interest rate of senior notes | 3.55% | 3.55% | |||||||||||||||||||
Senior notes maturity, year | 2026 | 2026 | |||||||||||||||||||
Senior notes, effective interest rate | 3.57% | ||||||||||||||||||||
Senior notes [Member] | $750 million, 3.600% Senior Notes due 2027 [Member] | |||||||||||||||||||||
Financing | |||||||||||||||||||||
Senior notes | [7] | $ 743,718 | $ 743,275 | ||||||||||||||||||
Senior notes, face amount | $ 750,000 | $ 750,000 | |||||||||||||||||||
Interest rate of senior notes | 3.60% | 3.60% | |||||||||||||||||||
Senior notes maturity, year | 2027 | 2027 | |||||||||||||||||||
Senior notes, effective interest rate | 3.619% | ||||||||||||||||||||
Senior notes [Member] | $500 million, 4.350% Senior Notes due 2028 [Member] | |||||||||||||||||||||
Financing | |||||||||||||||||||||
Senior notes | [8] | $ 494,898 | |||||||||||||||||||
Senior notes, face amount | $ 500,000 | $ 500,000 | |||||||||||||||||||
Interest rate of senior notes | 4.35% | 4.35% | |||||||||||||||||||
Senior notes maturity, year | 2028 | 2028 | |||||||||||||||||||
Senior notes, effective interest rate | 4.383% | ||||||||||||||||||||
|
Warranties (Product Warranty Liabilities) (Details) $ in Thousands |
9 Months Ended |
---|---|
Sep. 30, 2018
USD ($)
| |
Product Warranties Disclosures [Abstract] | |
Warranty liabilities, balance at December 31, 2017 | $ 44,398 |
Warranty claims | (68,104) |
Warranty accruals | 75,883 |
Warranty liabilities, balance at September 30, 2018 | $ 52,177 |
Share Repurchase Program (Narrative) (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands |
1 Months Ended | 3 Months Ended | 9 Months Ended | 94 Months Ended | |||
---|---|---|---|---|---|---|---|
Feb. 07, 2018 |
Nov. 07, 2018 |
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
Nov. 07, 2018 |
|
Share Repurchase Program | |||||||
Increase in authorized amount | $ 1,000,000 | ||||||
Cumulative authorized amount | $ 10,800,000 | ||||||
Authorization effective period | 3 years | ||||||
Remaining balance under share repurchase program | $ 464,400 | $ 464,400 | |||||
Common stock repurchased, shares | 932 | 2,743 | 4,695 | 8,047 | |||
Common stock repurchased, average price per share | $ 306.22 | $ 200.70 | $ 266.48 | $ 235.26 | |||
Common stock repurchased, value | $ 285,183 | $ 550,530 | $ 1,251,013 | $ 1,893,068 | |||
Subsequent event [Member] | |||||||
Share Repurchase Program | |||||||
Common stock repurchased, shares | 400 | 71,400 | |||||
Common stock repurchased, average price per share | $ 333.80 | $ 146.12 | |||||
Common stock repurchased, value | $ 143,700 | $ 10,400,000 |
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, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Proceeds from (Repurchase of) Equity [Abstract] | ||||
Shares repurchased | 932 | 2,743 | 4,695 | 8,047 |
Average price per share | $ 306.22 | $ 200.70 | $ 266.48 | $ 235.26 |
Total investment | $ 285,183 | $ 550,530 | $ 1,251,013 | $ 1,893,068 |
Revenue (Narrative) (Details) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
Dec. 31, 2017 |
|
Loyalty program, points [Member] | |||||
Revenue | |||||
Deferred revenue, period expected to be recognized within | 12 months | 12 months | |||
Loyalty program, coupon [Member] | |||||
Revenue | |||||
Deferred revenue, period expected to be recognized within | 3 months | 3 months | |||
Loyalty program [Member] | |||||
Revenue | |||||
Deferred revenue | $ 5.0 | $ 5.0 | $ 4.7 | ||
Deferred revenue, recognized | $ 4.3 | $ 4.6 | $ 11.8 | $ 12.9 |
Revenue (Disaggregation of Revenue) (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Disaggregation of Revenue | ||||
Disaggregated sales | $ 2,482,717 | $ 2,339,830 | $ 7,221,471 | $ 6,786,918 |
DIY customer [Member] | ||||
Disaggregation of Revenue | ||||
Disaggregated sales | 1,408,140 | 1,342,727 | 4,053,137 | 3,867,771 |
Professional service provider customer [Member] | ||||
Disaggregation of Revenue | ||||
Disaggregated sales | 1,040,728 | 960,421 | 3,058,127 | 2,812,602 |
Other customers and sales adjustments [Member] | ||||
Disaggregation of Revenue | ||||
Disaggregated sales | $ 33,849 | $ 36,682 | $ 110,207 | $ 106,545 |
Share-Based Compensation and Benefit Plans (Stock Options) (Narrative) (Details) - Stock option [Member] - USD ($) $ / shares in Units, $ in Millions |
9 Months Ended | |
---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
|
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 | $ 75.45 | $ 64.45 |
Remaining unrecognized compensation expense | $ 33.9 | |
Weighted-average period for cost recognition | 2 years 8 months 22 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, 2018
Rate
| |
Restricted stock [Member] | Employee [Member] | |
Share-Based Compensation and Benefit Plans | |
Other employee benefit plan, description | an employee incentive plan, which provides for the award of shares of restricted stock to certain of the Company’s affiliated directors, that vest evenly over a three-year period and are held in escrow until such vesting has occurred |
Vesting period | 3 years |
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, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
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 | $ 6.3 | $ 5.7 | $ 18.2 | $ 17.0 |
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, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
Dec. 31, 2017 |
|
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 | $ 28.5 | $ 28.5 | $ 25.7 | ||
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 shares in Thousands |
9 Months Ended |
---|---|
Sep. 30, 2018 | |
Share-Based Compensation and Benefit Plans | |
Outstanding at December 31, 2017, shares | 2,364 |
Outstanding at December 31, 2017, weighted-average exercise price | $ 137.08 |
Granted, shares | 275 |
Granted, weighted-average exercise price | $ 259.55 |
Exercised, shares | (710) |
Exercised, weighted-average exercise price | $ 72.64 |
Forfeited, shares | (29) |
Forfeited, weighted-average exercise price | $ 229.86 |
Outstanding at September 30, 2018, shares | 1,900 |
Outstanding at September 30, 2018, weighted-average exercise price | $ 177.49 |
Exercisable at September 30, 2018, shares | 1,187 |
Exercisable at September 30, 2018, weighted-average exercise price | $ 133.19 |
Share-Based Compensation and Benefit Plans (Black-Scholes Option Pricing Model) (Details) - Stock option [Member] |
9 Months Ended | |
---|---|---|
Sep. 30, 2018
Rate
|
Sep. 30, 2017
Rate
|
|
Share-Based Compensation and Benefit Plans | ||
Risk-free interest rate | 2.61% | 1.98% |
Expected life | 5 years 11 months 20 days | 5 years 5 months 16 days |
Expected volatility | 23.90% | 22.20% |
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, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Share-Based Compensation and Benefit Plans | ||||
Compensation expense for share-based compensation | $ 4,084 | $ 3,679 | $ 12,424 | $ 11,826 |
Income tax benefit from compensation expense for share-based compensation | $ 1,010 | $ 1,402 | $ 3,074 | $ 4,507 |
Share-Based Compensation and Benefit Plans (Other Share-Based Compensation Activity) (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Employee stock purchase plan [Member] | ||||
Share-Based Compensation and Benefit Plans | ||||
Compensation expense for share-based compensation | $ 569 | $ 545 | $ 1,689 | $ 1,659 |
Income tax benefit from compensation expense for share-based compensation | 141 | 208 | 418 | 632 |
Restricted stock [Member] | ||||
Share-Based Compensation and Benefit Plans | ||||
Compensation expense for share-based compensation | 339 | 258 | 1,031 | 1,350 |
Income tax benefit from compensation expense for share-based compensation | $ 84 | $ 98 | $ 255 | $ 515 |
Earnings Per Share (Narrative) (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands |
1 Months Ended | 3 Months Ended | 9 Months Ended | 94 Months Ended | ||
---|---|---|---|---|---|---|
Nov. 07, 2018 |
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
Nov. 07, 2018 |
|
Earnings Per Share | ||||||
Common stock repurchased, shares | 932 | 2,743 | 4,695 | 8,047 | ||
Common stock repurchased, average price per share | $ 306.22 | $ 200.70 | $ 266.48 | $ 235.26 | ||
Common stock repurchased, value | $ 285,183 | $ 550,530 | $ 1,251,013 | $ 1,893,068 | ||
Subsequent event [Member] | ||||||
Earnings Per Share | ||||||
Common stock repurchased, shares | 400 | 71,400 | ||||
Common stock repurchased, average price per share | $ 333.80 | $ 146.12 | ||||
Common stock repurchased, value | $ 143,700 | $ 10,400,000 |
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, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
||||
Numerator (basic and diluted): | |||||||
Net income | $ 366,151 | $ 283,734 | $ 1,024,130 | $ 831,489 | |||
Denominator: | |||||||
Weighted-average common shares outstanding - basic | 80,593 | 86,947 | 81,939 | 89,641 | |||
Effect of stock options | [1] | 817 | 1,078 | 902 | 1,228 | ||
Weighted-average common shares outstanding - assuming dilution | 81,410 | 88,025 | 82,841 | 90,869 | |||
Earnings per share - basic | $ 4.54 | $ 3.26 | $ 12.50 | $ 9.28 | |||
Earnings per share - assuming dilution | $ 4.50 | $ 3.22 | $ 12.36 | $ 9.15 | |||
Antidilutive stock options | [1] | 650 | 784 | 232 | 620 | ||
Weighted-average exercise price | [1] | $ 264.65 | $ 246.65 | $ 268.22 | $ 258.75 | ||
|
Recent Accounting Pronouncements (Narrative) (Details) - USD ($) $ in Billions |
3 Months Ended | 9 Months Ended | |
---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2018 |
Jan. 01, 2019 |
|
ASU 2016-02 [Member] | Forecast [Member] | Minimum [Member] | |||
Recent Accounting Pronouncements | |||
Operating lease, right-of-use asset | $ 1.8 | ||
Operating lease, liability | 1.8 | ||
ASU 2016-02 [Member] | Forecast [Member] | Maximum [Member] | |||
Recent Accounting Pronouncements | |||
Operating lease, right-of-use asset | 2.0 | ||
Operating lease, liability | $ 2.0 | ||
Adoption of ASU 2014-09 (Topic 606) [Member] | |||
Recent Accounting Pronouncements | |||
Financial statement impact from adoption | $ 0.0 | ||
Cumulative effect adjustment to opening Retained earnings | $ 0.0 | $ 0.0 | |
Adoption of ASU 2018-15 [Member] | |||
Recent Accounting Pronouncements | |||
Financial statement impact from adoption | 0.0 | ||
Capitalized implementation costs | $ 0.0 |
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