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O’Reilly Automotive

O’Reilly AutomotiveORLYEarnings & Financial Report

Nasdaq · Consumer Discretionary · Retail-Auto & Home Supply Stores

O'Reilly Automotive, Inc., doing business as O'Reilly Auto Parts, is an American automotive part retailer that provides automotive parts, tools, supplies, equipment, and accessories to professional service providers and do-it-yourself customers. Founded in 1957 by the O’Reilly family, O'Reilly Auto Parts operates more than 6,400 stores in 48 states, Puerto Rico, Mexico, and Canada.

What changed in O’Reilly Automotive's 10-K — 2022 vs 2023

Top changes in O’Reilly Automotive's 2023 10-K

269 paragraphs added · 231 removed · 206 edited across 5 sections

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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A compromise of our security measures or those of a third-party party we entrust could result in information related to our customers, suppliers, Team Members or the Company being obtained or misused by unauthorized persons; damage to our reputation; adverse operational effects or interruptions; costs to the Company to address the breach, which could require extensive time and financial resources to resolve; or claims, litigation or possible regulatory action against us, all of which could have a material adverse impact on our results of operations, financial condition and cash flows. ​ In addition, the regulatory environment related to information security and data collection, processing, use and privacy is complex and constantly evolving.
A compromise of our security measures or those of a third-party we entrust could result in information related to our customers, suppliers, Team Members, or the Company being obtained or misused by unauthorized persons; damage to our reputation; adverse operational effects or interruptions; costs to the Company to address the breach, which could require extensive time and financial resources to resolve; or claims, litigation, or possible regulatory action against us, all of which could have a material adverse impact on our results of operations, financial condition, and cash flows. ​ In addition, the regulatory environment related to information security and data collection, processing, use, and privacy is complex and constantly evolving.
Examples of such risks include the following: ● We may not be able to continue to identify suitable acquisition targets or to acquire additional companies at favorable prices or on other favorable terms. ● Our management’s attention may be distracted. ● We may fail to retain key personnel from acquired businesses. ● We may assume unanticipated legal liabilities and other problems. ● We may not be able to successfully integrate the operations (accounting and billing functions, for example) of businesses we acquire to realize economic, operational and other benefits. ​ We may fail, or be unable, to discover liabilities of businesses that we acquire for which we or the subsequent owner or operator may be liable. ​ Litigation, governmental proceedings, environmental, employment and tax legislation and regulations may affect our business, financial condition, results of operations and cash flows.
Examples of such risks include the following: ● We may not be able to continue to identify suitable acquisition targets or to acquire additional companies at favorable prices or on other favorable terms. ● Our management’s attention may be distracted. ● We may fail to retain key personnel from acquired businesses. ● We may assume unanticipated legal liabilities and other problems. ● We may not be able to successfully integrate the operations (accounting and billing functions, for example) of businesses we acquire to realize economic, operational, and other benefits. ​ We may fail, or be unable, to discover liabilities of businesses that we acquire for which we or the subsequent owner or operator may be liable. ​ 22 ​ Litigation, governmental proceedings, environmental, employment, and tax legislation and regulations may affect our business, financial condition, results of operations, and cash flows.
If any of these events occur, or if unfavorable economic conditions challenge the consumer environment, our business, results of operations, financial condition and cash flows could be adversely affected. ​ 17 ​ Overall demand for products sold in the automotive aftermarket is dependent upon many factors including the total number of vehicle miles driven in the U.S., the total number of registered vehicles in the U.S., the age and quality of these registered vehicles and the level of unemployment in the U.S.
If any of these events occur, or if unfavorable economic conditions challenge the consumer environment, our business, results of operations, financial condition, and cash flows could be adversely affected. ​ Overall demand for products sold in the automotive aftermarket is dependent upon many factors, including the total number of vehicle miles driven in the U.S., the total number of registered vehicles in the U.S., the age and quality of these registered vehicles, and the level of unemployment in the U.S.
Failure to comply with ethical, social, product, labor, health and safety, accounting or environmental standards, or existing or future laws or regulations, as well as failure or perceived failure to achieve or make progress with environmental, social and governance goals, could also jeopardize our reputation and potentially lead to various adverse actions from consumer or environmental groups, employees or regulatory bodies, which could require us to incur substantial legal fees and costs.
Failure to comply with ethical, social, product, labor, health and safety, accounting or environmental standards, or existing or future laws or regulations, as well as failure or perceived failure to achieve or make progress with environmental, social, and governance goals, could also jeopardize our reputation and 19 ​ potentially lead to various adverse actions from consumer or environmental groups, employees or regulatory bodies, which could require us to incur substantial legal fees and costs.
Some online competitors may have a lower cost structure than we do, as a result of our strategy of providing an exceptional in-store experience and superior parts availability supported by our extensive store network and robust, regional distribution footprint, which could also create pricing pressure.
Some online competitors may have a lower cost structure than we do, as a result of our strategy of 18 ​ providing an exceptional in-store experience and superior parts availability supported by our extensive store network and robust, regional distribution footprint, which could also create pricing pressure.
The stock market and the price of our common stock may be subject to wide fluctuations based upon general economic and market conditions and potentially being targeted through the selling and buying of our common stock by a group of individuals, whose interests 19 ​ and reasoning behind such actions may not align with an average market participant.
The stock market and the price of our common stock may be subject to wide fluctuations based upon general economic and market conditions and potentially being targeted through the selling and buying of our common stock by a group of individuals, whose interests and reasoning behind such actions may not align with an average market participant.
These and other factors affecting our suppliers and our access to products could adversely affect our results of operations, financial condition and cash flows. ​ 18 ​ Business interruptions in our distribution centers or other facilities may affect our store hours, stability of systems we rely on, and/or availability and distribution of merchandise, which may affect our business.
These and other factors affecting our suppliers and our access to products could adversely affect our results of operations, financial condition, and cash flows. ​ Business interruptions in our distribution centers or other facilities may affect our store hours, stability of systems we rely on, and/or availability and distribution of merchandise, which may affect our business.
Although we seek to effectively 20 ​ maintain and safeguard our systems, and we seek to ensure our third-party service providers effectively maintain and safeguard their systems, such measures are not guaranteed to be successful.
Although we seek to effectively maintain and safeguard our systems, and we seek to ensure our third-party service providers effectively maintain and safeguard their systems, such measures are not guaranteed to be successful.
Our business, results of 21 ​ operations and cash flows could be materially adversely affected by the unexpected loss of the services of one or more of our key employees.
Our business, results of operations, and cash flows could be materially adversely affected by the unexpected loss of the services of one or more of our key employees.
Our ability to accomplish our growth objectives is dependent, in part, on matters beyond our control, such as weather conditions, zoning and other issues related to new store site development, the availability of qualified management personnel and general business and economic conditions. We cannot be sure that our growth plans for 2023 and beyond will be achieved.
Our ability to accomplish our growth objectives is dependent, in part, on matters beyond our control, such as weather conditions, zoning, and other issues related to new store site development, the availability of qualified management personnel, and general business and economic conditions. We cannot be sure that our growth plans for 2024 and beyond will be achieved.
The methods used to obtain unauthorized access are constantly evolving and may be difficult to anticipate or detect for long periods of time.
The methods used to obtain unauthorized access are constantly evolving and may be difficult to anticipate or detect for long periods of 21 ​ time.
There is no guarantee that the security measures that we and our third-party service providers and suppliers have implemented, or will introduce in the future, to protect against unauthorized access to secured data are adequate to safeguard against all data security breaches, or provide us with sufficient visibility to determine if a data security breaches has occurred.
There is no guarantee that the security measures that we and our third-party service providers and suppliers have implemented, or will introduce in the future, to protect against unauthorized access to secured data are adequate to safeguard against all data security breaches, or provide us with sufficient visibility to determine if data security breaches have occurred.
Decreased participation in our supplier financing programs would lead to an increase in working capital needed to operate the business, adversely affecting our cash flows. ​ RISK RELATED TO INFORMATION TECHNOLOGY AND DATA PRIVACY ​ Damage, failure or interruptions of information technology systems could adversely affect our business operations and results.
Decreased participation in our supplier financing programs would lead to an increase in working capital needed to operate the business, adversely affecting our cash flows. ​ RISKS RELATED TO INFORMATION TECHNOLOGY AND DATA PRIVACY ​ Damage, failure, or interruptions of information technology systems could adversely affect our business operations and results.
However, as we expand our geographic footprint, we will continue to evaluate our existing distribution system infrastructure and will adjust our distribution system capacity as needed to support our future growth. ​ Our corporate office operations occur primarily in Springfield, Missouri, and as of December 31, 2022, the total square footage was 0.6 million square feet, substantially all of which was owned. ​
However, as we expand our geographic footprint, we will continue to evaluate our existing distribution system infrastructure and will adjust our distribution system capacity as needed to support our future growth. ​ Our corporate office operations occur primarily in Springfield, Missouri, and as of December 31, 2023, the total square footage for our corporate office operations was 0.6 million square feet, substantially all of which was owned. ​
For example, our level of indebtedness could, among other things, ● make it more difficult to satisfy our financial obligations, including those relating to the senior unsecured notes and our credit facility; ● increase our vulnerability to adverse economic and industry conditions; ● limit our flexibility in planning for, or reacting to, changes and opportunities in our industry, which may place us at a competitive disadvantage; ● require us to dedicate a substantial portion of our cash flows to service the principal and interest on our debt, reducing the funds available for other business purposes, such as working capital, capital expenditures or other cash requirements; ● limit our ability to incur additional debt with acceptable terms, if at all; and ● expose us to fluctuations in interest rates, including changes that may result from the implementation of new benchmark rates that replace LIBOR. ​ In addition, the terms of our financing obligations include restrictions, such as affirmative, negative and financial covenants, conditions on borrowing and subsidiary guarantees.
For example, our level of indebtedness could, among other things, ● make it more difficult to satisfy our financial obligations, including those relating to the senior unsecured notes, commercial paper program, and our credit facility; ● increase our vulnerability to adverse economic and industry conditions; ● limit our flexibility in planning for, or reacting to, changes and opportunities in our industry, which may place us at a competitive disadvantage; ● require us to dedicate a substantial portion of our cash flows to service the principal and interest on our debt, reducing the funds available for other business purposes, such as working capital, capital expenditures, or other cash requirements; ● limit our ability to incur additional debt with acceptable terms, if at all; and 20 ​ ● expose us to fluctuations in interest rates, including changes that may result from the implementation of new benchmark rates to SOFR. ​ In addition, the terms of our financing obligations include restrictions, such as affirmative, negative and financial covenants, conditions on borrowing, and subsidiary guarantees.
A downgrade in our current credit rating from either rating agency could adversely affect our cost of capital by causing us to pay a higher interest rate on borrowed funds under our unsecured revolving credit facility and a higher facility fee on commitments under our unsecured revolving credit facility.
A downgrade in our current credit rating from either rating agency could adversely affect our cost of capital by causing us to pay a higher interest rate on borrowed funds under our unsecured revolving credit facility and commercial paper program and a higher facility fee on commitments under our unsecured revolving credit facility and commercial paper program.
We have entered into separate master lease agreements with each of the affiliated entities for the occupancy of the stores covered thereby. 22 ​ Such master lease agreements with two of the five affiliated entities have been modified to extend the term of the lease agreement for specific stores.
We have entered into separate master lease agreements with each of the affiliated entities for the occupancy of the stores covered thereby. Such master lease agreements with three of the five affiliated entities have been modified to extend the term of the lease agreement for specific stores.
We have an unsecured revolving credit facility and unsecured senior notes, which could have important consequences for our financial health.
We have an unsecured revolving credit facility, unsecured commercial paper program, and unsecured senior notes, which could have important consequences for our financial health.
In addition to many of the risks we face in our U.S. operations, international operations present a unique set of risks and challenges, including local laws and customs, U.S. laws applicable to foreign operations and political and socio-economic conditions.
In addition to many of the risks we face in our U.S. operations, international operations present a unique set of risks and challenges, including local laws and customs, various and potentially complex international tax regulations and compliance requirements, U.S. laws applicable to foreign operations, and political and socio-economic conditions.
(2) Terms expiring on dates ranging from October 31, 2024, to June 30, 2035. ​ In addition, we operate six small distribution centers in Mexico; these distribution centers do not serve U.S. stores and are immaterial in the aggregate.
(2) Terms expiring on dates ranging from October 31, 2024, to June 30, 2035. ​ In addition, we operate six satellite warehouses in Mexico; these facilities do not serve domestic stores and are immaterial in the aggregate.
Properties ​ Stores, distribution centers and other properties: Of the 5,971 stores we operated at December 31, 2022, 2,465 stores were owned, 3,436 stores were leased from unaffiliated parties, 38 of which were located in Mexico, and 70 stores were leased from entities that include one or more of our affiliated directors or members of their immediate family.
Properties ​ Stores, distribution centers, and other properties: Of the 6,157 stores we operated at December 31, 2023, 2,544 stores were owned, 3,543 stores were leased from unaffiliated parties, 50 of which were located in Mexico, and 70 stores were leased from entities that include one or more of our affiliated directors or members of their immediate family.
DCs is approximately 6,075 stores, providing a growth capacity of 150 to 300 U.S. stores. We believe the growth capacity in our DCs will provide us with the DC infrastructure needed for near-term expansion.
The ideal store servicing capability of our existing 29 U.S. DCs is approximately 6,125 stores; including our planned DC relocation projects discussed above, our total DC network provides a growth capacity of approximately 150 to 300 domestic stores. We believe the growth capacity in our DCs will provide us with the DC infrastructure needed for near-term expansion.
Further enhancing our distribution capabilities in 2023, we plan to open our first DC in Puerto Rico and a large DC in Guadalajara, Mexico. ​ We believe that our present facilities are in good condition, are sufficiently insured and are adequate for the conduct of our current operations. The store servicing capability of our 28 existing U.S.
Further enhancing our distribution capabilities in 2024, we plan to relocate our Springfield DC and Atlanta DC to larger, more efficient facilities that will increase store servicing capabilities. ​ We believe that our present facilities are in good condition, are sufficiently insured, and are adequate for the conduct of our current operations.
We believe that the lease agreements with the affiliated entities are on terms comparable to those of third parties. ​ The following table provides information regarding our U.S. regional DCs in operation as of December 31, 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating Square Footage (1) Principal Use ​ Nature of Occupancy ​ Number of Locations ​ (in thousands) Distribution center ​ Owned ​ 21 9,599 Distribution center ​ Leased (2) ​ 7 2,483 Total ​ ​ ​ 28 12,082 (1) DC operating square footage includes floor and mezzanine operating square footage and excludes subleased square footage.
See Note 15 “Related Parties” to the Consolidated Financial Statements for further information on master lease agreements. ​ The following table provides information regarding our regional DCs in operation as of December 31, 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating Square Footage (1) Principal Use ​ Nature of Occupancy ​ Number of Locations ​ (in thousands) Distribution center ​ Owned ​ 22 9,727,584 Distribution center ​ Leased (2) ​ 8 2,853,583 Total ​ ​ ​ 30 12,581,167 (1) DC operating square footage includes floor and mezzanine operating square footage and excludes subleased square footage.
The master lease agreements or modifications thereto expire on dates ranging from December 31, 2023, to December 31, 2029.
The master lease agreements or modifications thereto expire on dates ranging from April 30, 2024, to December 31, 2029. We believe that the lease agreements with the affiliated entities are on terms comparable to those of third parties.
Removed
Unresolved Staff Comments ​ None. ​ Item 2.
Added
Unresolved Staff Comments ​ None. ​ It em 1C. Cybersecurity ​ We execute a comprehensive approach to cybersecurity risk management, helping ensure the data customers and other stakeholders entrust to us remains safe and secure. Our board of directors (the “Board”), Compliance Committee, and Information Security Program leaders are actively involved in the oversight of our cybersecurity risk management program.
Added
As described in more detail below, we have established standards, policies, practices, and processes focused on identifying, assessing, managing, mitigating, and responding to material risks from cybersecurity threats.
Added
To date, the Company is not aware of any cybersecurity incidents that have materially affected, or are reasonably likely to materially affect, our business strategies, results of operations, financial condition, or cash flows.
Added
However, while we have devoted financial and personnel resources to implement and maintain security measures to meet regulatory requirements and customer expectations, and we intend to continue to make investments to maintain the security of our data and cybersecurity infrastructure, we cannot provide absolute assurance that any potential future cybersecurity threats or incidents will not materially affect us or our business strategies, results of operations, financial condition, or cash flows.
Added
For further discussion on cybersecurity related risks, see the “Risk Factors” section of Item 1A of this annual report on Form 10-K. ​ RISK MANAGEMENT AND STRATEGY ​ We execute a holistic approach to our standards, policies, practices, and processes for identifying, assessing, managing, mitigating, and responding to material risks from cybersecurity threats, all of which are integrated into our overall risk management program.
Added
Our cybersecurity program is informed by industry-wide recognized standards, such as The National Institute of Standards and Technology (NIST) Cybersecurity Framework. ​ We have implemented best practices and established numerous programs and controls to reduce cybersecurity risk. Our Information Security Program includes physical, administrative, and technical safeguards.
Added
Some key components of the Information Security Program include: ● Security awareness training for Team Members. ● A dedicated security operations team to monitor, analyze, and respond to security threats. ● Security governance to manage and maintain security processes. ● Intrusion, detection, and prevention systems. ● A vulnerability management program to identify and remediate security liabilities. 23 ​ ● A configuration management program to harden systems based on industry standards. ● Industry-leading email security, endpoint detection, and response platforms. ● Threat intelligence from multiple resources to identify and anticipate emerging threats. ● Network and web application firewalls. ● Multi-factor authentication. ● Network segmentation to isolate and safeguard critical systems and sensitive data. ​ On an ongoing basis we conduct cybersecurity risk assessments, including compiling, reviewing, and acting on information garnered from internal stakeholders, known security vulnerabilities, and data from external sources.
Added
The results of these assessments are used to drive alignment on, and prioritization of, initiatives to enhance our security controls, make recommendations to improve processes, and inform a broader enterprise-level risk assessment that is presented to our Board, Audit Committee, and members of management. ​ We routinely assess our systems and processes for modifications in advance of evolving state privacy regulations and other applicable industry standards and regularly update our privacy and information security policies to remain current with industry-leading practices.
Added
We are continually adapting to the ever-changing cyber risk landscape and have a dedicated team of information security professionals committed to maintaining the highest levels of systems and data security. The Company conducts and has engaged external information security firms to conduct assessments, including penetration tests, to continually improve security controls and ensure security controls.
Added
We continue to expand and grow our security team and their skillsets and make regular enhancements to our Information Security Program. ​ In addition, we engage with our third-party business partners to enforce our internal cybersecurity practices.
Added
We rely on all third-party business partners to maintain appropriate security programs; however, we cannot ensure in all circumstances that their efforts will be successful. We assess third-party cybersecurity controls through a detailed cybersecurity assessment and review and include security and privacy addendums to our contracts, where applicable.
Added
We also require that our third parties report material cybersecurity incidents to us, allowing us the ability to assess the impact of any reported incident on our operations. ​ Additionally, we developed a business continuity and disaster recovery program to help minimize the impact from certain types of cybersecurity risks.
Added
The Company’s incident response plans include emergency response, systems recovery, and other plans that would be enacted in the event of certain types of cybersecurity attacks.
Added
Our business continuity and disaster recovery plans are updated regularly and tested each year or as needed. ​ GOVERNANCE ​ Board Oversight ​ Our Board, in coordination with the Audit Committee, oversees our management of cybersecurity risk.
Added
The Board receives regular reports from management about the prevention, detection, assessment, mitigation, and remediation of cybersecurity risks and incidents, including analysis of material security risks or information security vulnerabilities. Our Audit Committee directly oversees our Information Security Program.
Added
The Audit Committee is composed of Board members with diverse expertise, including risk management, technology, and finance experience, which provides them with the necessary qualifications to effectively oversee cybersecurity risks.
Added
The Audit Committee receives on a quarterly basis, or as needed, comprehensive updates from management on cybersecurity risks, including risk assessments, cybersecurity maturity assessments, progress of risk reduction initiatives, enhancements to cybersecurity programs and initiatives, business continuity planning, PCI compliance, any relevant internal or industry cybersecurity incidents, and compliance with regulatory requirements and industry standards, as applicable. ​ Management’s Role ​ A cross-functional Compliance Committee comprised of O’Reilly executive and senior leadership, including our Chief Information Officer (“CIO”), have responsibility for assessing and managing material cybersecurity risks and oversees our enterprise security, privacy, and risk priorities, including ensuring alignment on security decisions across the Company.
Added
The Compliance Committee meets quarterly, or as needed, to review security performance metrics, identify security risks, assess the status of approved security enhancements, and discuss future changes necessary to execute best practice, among other items. The Compliance Committee also considers and makes recommendations on security policies and procedures, security service requirements, and risk mitigation strategies to senior management.
Added
We have an established escalation process to help ensure senior management and the Board are timely informed of any potential cybersecurity issues or incidents.
Added
Our comprehensive monitoring, analysis, response, and communication protocols are designed to ensure the highest level of management is informed of cybersecurity risks and that the Board has comprehensive oversight and information necessary to provide guidance on critical cybersecurity issues. ​ 24 ​ Our Compliance Committee members have decades of business and leadership experience managing risk, including cybersecurity risks, that collectively enables them to effectively oversee comprehensive cybersecurity risks.
Added
Our CIO has served in various roles in information technology for more than 30 years, including serving as a chief information officer for a technology company, and has a degree in information management systems.
Added
Information Security Program leaders and Team Members who support our Information Security Program have relevant educational and technical certifications, such as Certified Information Security Manager (CISM) and Certified Information Systems Security Professional (CISSP), and applicable industry experience, including cybersecurity threat assessment and detection, mitigation technologies, cybersecurity training, incident response, cyber forensics, insider threats, and regulatory compliance.
Added
For further details about our CIO’s background, see the “Information About Our Executive Officers” section of Item 1 of this annual report on Form 10-K. ​ Item 2.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Although the Company cannot ascertain the amount of liability that it may incur from legal 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. ​ Item 4.
Although the Company cannot ascertain the amount of liability that it may incur from legal 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. ​ 25 ​ Item 4.
Mine Safety Disclosures ​ Not applicable. ​ 23 ​ PART II ​
Mine Safety Disclosures ​ Not applicable. ​ 26 ​ PART II ​

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Item 4. Mine Safety Disclosures 23 PART II ​ Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 24 Item 6. [Reserved] 25 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 26
Item 4. Mine Safety Disclosures 26 PART II ​ Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities 27 Item 6. [Reserved] 28 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 29

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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No other share repurchase programs existed during the twelve months ended December 31, 2022.
No other share repurchase programs existed during the twelve months ended December 31, 2023.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities ​ Common stock: Shares of the Company’s common stock are traded on The Nasdaq Global Select Market (“Nasdaq”) under the symbol “ORLY.” The Company’s common stock began trading on April 22, 1993; no cash dividends have been declared since that time, and the Company does not anticipate paying any cash dividends in the foreseeable future. ​ As of February 16, 2023, the Company had approximately 827,000 shareholders of common stock based on the number of holders of record and an estimate of individual participants represented by security position listings. ​ Sales of unregistered securities: There were no sales of unregistered securities during the year ended December 31, 2022. ​ Issuer purchases of equity securities: The following table identifies all repurchases during the fourth quarter ended December 31, 2022, of any of the Company’s securities registered under Section 12 of the Securities Exchange Act of 1934, as amended, by or on behalf of the Company or any affiliated purchaser (in thousands, except per share price data): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total Number of Maximum Dollar Value ​ ​ Total ​ Average ​ Shares Purchased as ​ of Shares that May Yet ​ ​ Number of ​ Price Paid ​ Part of Publicly ​ Be Purchased Under the Period ​ Shares Purchased ​ per Share ​ Announced Programs ​ Programs (1) October 1, 2022, to October 31, 2022 236 ​ $ 730.16 236 ​ $ 471,502 November 1, 2022, to November 30, 2022 58 ​ 831.62 58 ​ 1,923,010 December 1, 2022, to December 31, 2022 241 ​ 830.22 241 ​ $ 1,723,320 Total as of December 31, 2022 535 ​ $ 786.19 535 ​ (1) The authorizations under the share repurchase program that currently have capacity are scheduled to expire on May 16, 2025 and November 11, 2025.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities ​ Common stock: Shares of the Company’s common stock are traded on The Nasdaq Global Select Market (“Nasdaq”) under the symbol “ORLY.” The Company’s common stock began trading on April 22, 1993; no cash dividends have been declared since that time, and the Company does not anticipate paying any cash dividends in the foreseeable future. ​ As of February 15, 2023, the Company had approximately 1,024,000 shareholders of common stock based on the number of holders of record and an estimate of individual participants represented by security position listings. ​ Sales of unregistered securities: There were no sales of unregistered securities during the year ended December 31, 2023. ​ Issuer purchases of equity securities: The following table identifies all repurchases during the fourth quarter ended December 31, 2023, of any of the Company’s securities registered under Section 12 of the Securities Exchange Act of 1934, as amended, by or on behalf of the Company or any affiliated purchaser (in thousands, except per share price data): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total Number of Maximum Dollar Value ​ ​ Total ​ Average ​ Shares Purchased as ​ of Shares that May Yet ​ ​ Number of ​ Price Paid ​ Part of Publicly ​ Be Purchased Under the Period ​ Shares Purchased ​ per Share ​ Announced Programs ​ Programs (1) October 1, 2023, to October 31, 2023 462 ​ $ 910.21 462 ​ $ 711,908 November 1, 2023, to November 30, 2023 68 ​ 965.09 68 ​ 2,646,346 December 1, 2023, to December 31, 2023 77 ​ 961.39 77 ​ $ 2,572,201 Total as of December 31, 2023 607 ​ $ 922.86 607 ​ (1) The authorizations under the share repurchase program that currently have capacity are scheduled to expire on May 23, 2026, and November 16, 2026.
See Note 9 “Share Repurchase Program” to the Consolidated Financial Statements for further information on our share repurchases. ​ 24 ​ Stock performance graph: The graph below shows the cumulative total shareholder return assuming the investment of $100, on December 31, 2017, and the reinvestment of dividends thereafter, if any, in the Company’s common stock versus the Standard and Poor’s S&P 500 Retail Index (“S&P 500 Retail Index”) and the Standard and Poor’s S&P 500 Index (“S&P 500”). ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, Company/Index 2017 2018 2019 2020 2021 2022 O’Reilly Automotive, Inc. ​ $ 100 ​ $ 143 ​ $ 182 ​ $ 188 ​ $ 294 ​ $ 351 S&P 500 Retail Index ​ 100 ​ 113 ​ 141 ​ 206 ​ 245 ​ 159 S&P 500 ​ $ 100 ​ $ 94 ​ $ 121 ​ $ 140 ​ $ 178 ​ $ 144 ​ ​ ​
See Note 10 “Share Repurchase Program” to the Consolidated Financial Statements for further information on our share repurchases. ​ 27 ​ Stock performance graph: The graph below shows the cumulative total shareholder return assuming the investment of $100, on December 31, 2018, and the reinvestment of dividends thereafter, if any, in the Company’s common stock versus the Standard and Poor’s S&P 500 Retail Index (“S&P 500 Retail Index”) and the Standard and Poor’s S&P 500 Index (“S&P 500”). ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, Company/Index 2018 2019 2020 2021 2022 2023 O’Reilly Automotive, Inc. ​ $ 100 ​ $ 127 ​ $ 131 ​ $ 205 ​ $ 245 ​ $ 276 S&P 500 Retail Index ​ 100 ​ 126 ​ 183 ​ 217 ​ 141 ​ 199 S&P 500 ​ $ 100 ​ $ 129 ​ $ 150 ​ $ 190 ​ $ 153 ​ $ 190 ​ ​ ​

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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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.
The consolidated fixed charge coverage ratio includes a calculation of earnings before interest, taxes, depreciation, amortization, rent, and non-cash share-based compensation expense to fixed charges. Fixed charges include interest expense, capitalized interest, and rent expense. The consolidated leverage ratio includes a calculation of adjusted debt to earnings before interest, taxes, depreciation, amortization, rent, and non-cash share-based compensation expense.
Adjusted debt includes outstanding debt, outstanding stand-by letters of credit and similar instruments and five-times rent expense and excludes any premium or discount recorded in conjunction with the issuance of long-term debt.
Adjusted debt includes outstanding debt, outstanding stand-by letters of credit, and similar instruments, and five-times rent expense and excludes any premium or discount recorded in conjunction with the issuance of long-term debt.
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.
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 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, as the guidance pertains to disclosure. ​ NOTE 2 – FAIR VALUE MEASUREMENTS ​ 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 obligations under the Company’s nonqualified deferred compensation plan.
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, as the guidance pertains to disclosure only. ​ NOTE 2 – FAIR VALUE MEASUREMENTS ​ 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 obligations under the Company’s nonqualified deferred compensation plan.
Total miles driven can be impacted by macroeconomic factors, including rapid increases in fuel cost, but we are unable to predict the degree of impact these factors may have on miles driven in the future. ​ Size and Age of the Vehicle Fleet 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.
Total miles driven can be impacted by macroeconomic factors, including rapid increases in fuel cost, but we are unable to predict the degree of impact these factors may have on miles driven in the future. ​ 29 ​ Size and Age of the Vehicle Fleet 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.
The estimate is sensitive to assumptions such as the projected cost inflation, claim growth patterns and exposure forecasts. ​ How We Addressed the Matter in Our Audit ​ We obtained an understanding, evaluated the design of controls over the Company’s self-insurance estimation process and tested the operating effectiveness of those controls including management’s controls over reviewing the appropriateness of assumptions and the completeness and accuracy of the data underlying the reserves. ​ To test the Company’s determination of the estimated self-insurance reserves, we performed audit procedures that included, among others, involving a specialist to assist in the development of an independent actuarial 42 ​ estimate for certain of the reserve balances based upon current industry and economic trends, comparing certain selected assumptions used by management to our independent estimates which were developed with the assistance of our specialists, testing the underlying data used by management in the development of the reserves and testing the mathematical accuracy of the calculations. ​ ​ /s/ Ernst & Young LLP ​ We have served as the Company’s auditor since 1992.
The estimate is sensitive to assumptions such as the projected cost inflation, claim growth patterns and exposure forecasts. ​ ​ How We Addressed the Matter in Our Audit ​ We obtained an understanding, evaluated the design of controls over the Company’s self-insurance estimation process and tested the operating effectiveness of those controls including management’s controls over reviewing the appropriateness of assumptions and the completeness and accuracy of the data underlying the reserves. ​ 44 ​ To test the Company’s determination of the estimated self-insurance reserves, we performed audit procedures that included, among others, involving a specialist to assist in the development of an independent actuarial estimate for certain of the reserve balances based upon current industry and economic trends, comparing certain selected assumptions used by management to our independent estimates which were developed with the assistance of our specialists, testing the underlying data used by management in the development of the reserves and testing the mathematical accuracy of the calculations. ​ ​ /s/ Ernst & Young LLP ​ We have served as the Company’s auditor since 1992.
Finite-lived intangibles are carried at amortized cost and amortization is calculated using the straight-line method, generally over the estimated useful lives of the intangibles. See Note 6 for further information concerning the Company’s goodwill and other intangibles. ​ Leases: The Company leases certain office space, retail stores, distribution centers and equipment under long-term, non-cancelable operating leases.
Finite-lived intangibles are carried at amortized cost and amortization is calculated using the straight-line method, generally over 52 ​ the estimated useful lives of the intangibles. See Note 6 for further information concerning the Company’s goodwill and other intangibles. ​ Leases: The Company leases certain office space, retail stores, distribution centers, and equipment under long-term, non-cancelable operating leases.
Costs associated with the opening of new distribution centers, which consist primarily of payroll and occupancy costs, are included in “Cost of goods sold, including warehouse and distribution expenses” on the accompanying Consolidated Statements of Income as incurred. ​ Interest expense: The Company capitalizes interest costs as a component of construction in progress, based on the weighted-average interest rates incurred on its long-term borrowings.
Costs associated with the opening 55 ​ of new distribution centers, which consist primarily of payroll and occupancy costs, are included in “Cost of goods sold, including warehouse and distribution expenses” on the accompanying Consolidated Statements of Income as incurred. ​ Interest expense: The Company capitalizes interest costs as a component of construction in progress, based on the weighted-average interest rates incurred on its long-term borrowings.
We believe that the presentation of our free cash flow, consolidated fixed charge coverage ratio and consolidated leverage ratio provides meaningful supplemental information to both management and investors and reflects the required covenants under the Credit Agreement. We include these items in judging our performance and believe this non-GAAP information is useful to investors as well.
We believe that the presentation of our free cash flow, consolidated fixed charge coverage ratio, and consolidated leverage ratio provides meaningful supplemental information to both management and investors and reflects the required covenants under the Credit Agreement. We include these items in judging our performance and believe this non-GAAP information is useful to investors as 37 ​ well.
Diluted earnings per share is calculated by dividing the weighted-average number of common shares outstanding plus the common stock equivalents associated with the potential impact of dilutive stock options. Certain common stock equivalents that 54 ​ could potentially dilute basic earnings per share in the future were not included in the fully diluted computation because they would have been antidilutive.
Diluted earnings per share is calculated by dividing the weighted-average number of common shares outstanding plus the common stock equivalents associated with the potential impact of dilutive stock options. Certain common stock equivalents that could potentially dilute basic earnings per share in the future were not included in the fully diluted computation because they would have been antidilutive.
See Note 7 for further information concerning the Company’s letters of credit commitments. ​ Debt financing commitments: Each series of senior notes is redeemable in whole, at any time, or in part, from time to time, at the Company’s option upon not less than 30 nor more than 60 days notice at a redemption price, plus any accrued and unpaid interest to, but not including, the redemption date, equal to the greater of (i) 100% of the principal amount thereof or (ii) the sum of the present values of the remaining scheduled payments of principal and interest thereon discounted to the redemption date on a semiannual basis at the applicable Treasury Yield plus basis points identified in the indenture governing such series of senior notes; provided, that on or after the date that is three months prior to the maturity date of the series of senior notes, such series of senior notes is redeemable at a redemption price equal to par plus accrued and unpaid interest to, but not including, the redemption date.
See Note 8 for further information concerning the Company’s letters of credit commitments. ​ Debt financing commitments: Each series of senior notes is redeemable in whole, at any time, or in part, from time to time, at the Company’s option upon not less than 30 nor more than 60 days notice at a redemption price, plus any accrued and unpaid interest to, but not including, the redemption date, equal to the greater of (i) 100% of the principal amount thereof or (ii) the sum of the present values of the remaining scheduled payments of principal and interest thereon discounted to the redemption date on a semiannual basis at the applicable Treasury Yield plus basis points identified in the indenture governing such series of senior notes; provided, that on or after the date that is three months prior to the maturity date of the series of senior notes, such series of senior notes is redeemable at a redemption price equal to par plus accrued and unpaid interest to, but not including, the redemption date.
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with U.S. generally accepted accounting principles. ​ We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 28, 2023 expressed an unqualified opinion thereon. ​ Basis for Opinion ​ These financial statements are the responsibility of the Company’s management.
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with U.S. generally accepted accounting principles. ​ We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control— Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 28, 2024 expressed an unqualified opinion thereon. ​ Basis for Opinion ​ These financial statements are the responsibility of the Company’s management.
In our opinion, O’Reilly Automotive, Inc. and Subsidiaries (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on the COSO criteria. ​ We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2022 and 2021, the related consolidated statements of income, comprehensive income, shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2022, and the related notes and our report dated February 28, 2023 expressed an unqualified opinion thereon. ​ Basis for Opinion ​ The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting.
In our opinion, O’Reilly Automotive, Inc. and Subsidiaries (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on the COSO criteria. ​ We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2023 and 2022, the related consolidated statements of income, comprehensive income, shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2023, and the related notes and our report dated February 28, 2024 expressed an unqualified opinion thereon. ​ Basis for Opinion ​ The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting.
When the implicit rate of a lease is available, the implicit rate is used in the calculation and not the Company’s incremental borrowing rate. ​ ​ 57 ​ NOTE 6 – GOODWILL AND OTHER INTANGIBLES ​ Goodwill: Goodwill is reviewed for impairment annually during the fourth quarter, or more frequently if events or changes in circumstances indicate that impairment may exist.
When the implicit rate of a lease is available, the implicit rate is used in the calculation and not the Company’s incremental borrowing rate. ​ ​ NOTE 6 – GOODWILL AND OTHER INTANGIBLES ​ Goodwill: Goodwill is reviewed for impairment annually during the fourth quarter, or more frequently if events or changes in circumstances indicate that impairment may exist.
See Note 11 for further information concerning the Company’s revenue. ​ Cost of goods sold and selling, general and administrative expenses: Below follows the primary costs classified in each major expense category. ​ Cost of goods sold, including warehouse and distribution expenses: ● Total cost of merchandise sold, including freight expenses associated with acquiring merchandise and with moving merchandise inventories from the Company’s distribution centers to the stores; and defective merchandise and warranty costs. ● Supplier allowances and incentives, including allowances that are not reimbursements for specific, incremental and identifiable costs; and cash discounts on payments to suppliers. ● Costs associated with the Company’s supply chain, including payroll and benefit costs; warehouse occupancy costs; transportation costs; depreciation; and inventory shrinkage. ​ Selling general and administrative expenses: ● Payroll benefit costs for store and corporate Team Members; ● Occupancy costs of store and corporate facilities; ● Depreciation and amortization related to store and corporate assets; ● Vehicle expenses for store and Hub delivery services; ● Self-insurance costs; ● Closed store expenses; and ● Other administrative costs, including accounting, legal and other professional services; bad debt, banking and credit card fees; supplies; travel; and advertising costs ​ Advertising expenses: Advertising expense consists primarily of expenses related to the Company’s integrated marketing program, which includes radio, in-store, digital and social media promotions, as well as sports and event sponsorships and direct mail and newspaper promotional distribution.
See Note 12 for further information concerning the Company’s revenue. ​ Cost of goods sold and selling, general and administrative expenses: Below follows the primary costs classified in each major expense category. ​ Cost of goods sold, including warehouse and distribution expenses: ● Total cost of merchandise sold, including freight expenses associated with acquiring merchandise and with moving merchandise inventories from the Company’s distribution centers to the stores and defective merchandise and warranty costs. ● Supplier allowances and incentives, including allowances that are not reimbursements for specific, incremental, and identifiable costs and cash discounts on payments to suppliers. ● Costs associated with the Company’s supply chain, including payroll and benefit costs, warehouse occupancy costs, transportation costs, depreciation, and inventory shrinkage. ​ Selling general and administrative expenses: ● Payroll benefit costs for store and corporate Team Members; ● Occupancy costs of store and corporate facilities; ● All expenses associated with Hub stores; ● Depreciation and amortization related to store and corporate assets; ● Vehicle expenses for store and Hub delivery services; ● Self-insurance costs; ● Closed store expenses; and ● Other administrative costs, including accounting, legal, and other professional services; bad debt, banking, and credit card fees; supplies; travel; and advertising costs. ​ Advertising expenses: Advertising expense consists primarily of expenses related to the Company’s integrated marketing program, which includes radio, in-store, digital, and social media promotions, as well as sports and event sponsorships and direct mail and newspaper promotional distribution.
A potential impairment has occurred if the projected future undiscounted cash flows realized from the best possible use of the asset are less than the carrying value of the asset. The estimate of cash flows includes management’s assumptions of cash inflows and outflows directly resulting from the use of that asset in operations.
A potential impairment has occurred if the projected future undiscounted cash flows realized from the best possible use of the asset group are less than the carrying value of the asset group. The estimate of cash flows includes management’s assumptions of cash inflows and outflows directly resulting from the use of that asset group in operations.
Employee stock 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. Employee stock options granted under the plans expire after 10 years and typically vest 25% per year, over four years.
Employee stock 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. Employee stock options granted under the plans expire after 10 years and typically 65 ​ vest 25% per year, over four years.
Future changes, such as continued broad-based inflation and rapid increases in fuel costs that exceed wage growth, may negatively impact our consumers’ level of disposable income, and we cannot predict the degree these changes, or other future changes, may have on our business or industry. ​ We believe the key drivers of demand over the long-term for the products sold within the automotive aftermarket include the number of U.S. miles driven, number of U.S. registered vehicles, annual rate of light vehicle sales and average vehicle age. ​ 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.
Future changes, such as continued broad-based inflation and rapid fuel cost increases that exceed wage growth, may negatively impact our consumers’ level of disposable income, and we cannot predict the degree these changes, or other future changes, may have on our business or industry. ​ We believe the key drivers of demand over the long-term for the products sold within the automotive aftermarket include the number of U.S. miles driven, number of U.S. registered vehicles, annual rate of light vehicle sales, and average vehicle age. ​ 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.
However, there can be no assurance that we will continue to generate cash flows or maintain liquidity at or above recent levels, as we are unable to predict decreased demand for our 31 ​ products or changes in customer buying patterns.
However, there can be no assurance that we will continue to generate cash flows or maintain liquidity at or above recent levels, as we are unable to predict decreased demand for our products or changes in customer buying patterns.
Generally, the 52 ​ 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.
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.
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.
Other sales and sales adjustments primarily includes sales to Team Members, wholesale sales to other retailers (“jobber sales”), equipment sales, discounts, rebates, deferred revenue 54 ​ 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.
The Company recognizes compensation expense over the requisite service period for its share-based plans based on the fair value of the awards on the date of the grant, award or issuance and 53 ​ accounts for forfeitures as they occur.
The Company recognizes compensation expense over the requisite service period for its share-based plans based on the fair value of the awards on the date of the grant, award, or issuance and accounts for forfeitures as they occur.
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” of the annual report on Form 10-K for the year ended December 31, 2021, filed with the Securities and Exchange Commission (the “SEC”) on February 28, 2022, which is available free of charge on the SEC’s website at www.sec.gov by searching with our ticker symbol “ORLY” or at our internet address, www.OReillyAuto.com , by clicking “Investor Relations” located at the bottom of the page. ​ LIQUIDITY AND CAPITAL RESOURCES ​ Our long-term business strategy requires capital to invest open new stores, fund strategic acquisitions, expand distribution infrastructure, operate and maintain our existing stores, develop enhanced information technology systems and tools and may include the opportunistic repurchase of shares of our common stock through our Board-approved share repurchase program.
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” of the annual report on Form 10-K for the year ended December 31, 2022, filed with the Securities and Exchange Commission (the “SEC”) on February 28, 2023, which is available free of charge on the SEC’s website at www.sec.gov by searching with our ticker symbol “ORLY” or at our internet address, www.OReillyAuto.com, by clicking “Investor Relations” located at the bottom of the page. ​ LIQUIDITY AND CAPITAL RESOURCES ​ Our long-term business strategy requires capital to maintain and enhance our existing stores, invest to open new stores, fund strategic acquisitions, expand distribution infrastructure, develop enhanced information technology systems and tools, and may include the opportunistic repurchase of shares of our common stock through our Board-approved share repurchase program.
If events or market conditions exist that would more likely than not indicate that impairment may be necessary, a detailed quantitative assessment would be performed. ​ Based on our qualitative assessment, we do not believe there has been a change of events or circumstances that would indicate that a calculation of fair value of indefinite long-lived assets is required as of December 31, 2022.
If events or market conditions exist that would more likely than not indicate that impairment may be necessary, a detailed quantitative assessment would be performed. ​ Based on our qualitative assessment, we do not believe there has been a change of events or circumstances that would indicate that a calculation of fair value of indefinite long-lived assets is required as of December 31, 2023.
These covenants are, however, subject to a number of important limitations and exceptions. As of December 31, 2022, we were in compliance with the covenants applicable to our senior notes. ​ The Credit Agreement contains certain covenants, including limitations on indebtedness, a minimum consolidated fixed charge coverage ratio of 2.50:1.00 and a maximum consolidated leverage ratio of 3.50:1.00.
These covenants are, however, subject to a number of important limitations and exceptions. As of December 31, 2023, we were in compliance with the covenants applicable to our senior notes. ​ The Credit Agreement contains certain covenants, including limitations on indebtedness, a minimum consolidated fixed charge coverage ratio of 2.50:1.00 and a maximum consolidated leverage ratio of 3.50:1.00.
As of December 31, 2022, the Company had invested in six unconsolidated tax credit fund entities that were considered to be VIEs and concluded it was not the primary beneficiary of any of the entities, as it did not have the power to control the activities that most significantly impact the entities, and has therefore accounted for these investments using the equity method.
As of December 31, 2023, the Company had invested in six unconsolidated tax credit fund entities that were considered to be VIEs and concluded it was not the primary beneficiary of any of the entities, as it did not have the power to control the activities that most significantly impact the entities, and has therefore accounted for these investments using the equity method.
We compensate for such limitations by presenting, in the tables above, a reconciliation to the most directly comparable GAAP measures. ​ Share repurchase program: See Note 9 “Share Repurchase Program” to the Consolidated Financial Statements for information on our share repurchase program. ​ CRITICAL ACCOUNTING ESTIMATES ​ The preparation of our financial statements in accordance with GAAP requires the application of certain estimates and judgments by management.
We compensate for such limitations by presenting, in the tables above, a reconciliation to the most directly comparable GAAP measures. ​ Share repurchase program: See Note 10 “Share Repurchase Program” to the Consolidated Financial Statements for information on our share repurchase program. ​ CRITICAL ACCOUNTING ESTIMATES ​ The preparation of our financial statements in accordance with GAAP requires the application of certain estimates and judgments by management.
We do not, nor do we suggest investors should, consider such non-GAAP financial measures in isolation from, or as a substitute for, GAAP financial 35 ​ information.
We do not, nor do we suggest investors should, consider such non-GAAP financial measures in isolation from, or as a substitute for, GAAP financial information.
See Note 12 for further information concerning the Company’s benefit plans. ​ Variable Interest Entities: The Company invests in certain tax credit funds that promote renewable energy. These investments generate a return primarily through the realization of federal tax credits and other tax benefits. The Company accounts for the tax attributes of its renewable energy investments using the deferral method.
See Note 13 for further information concerning the Company’s benefit plans. ​ Variable Interest Entities: The Company invests in certain tax credit funds that promote renewable energy. These investments generate a return primarily through the realization of federal tax credits and other tax benefits. The Company accounts for the tax attributes of its renewable energy investments using the deferral method.
The remainder was included in “Other liabilities” on the accompanying Consolidated Balance Sheets as of December 31, 2022 and 2021. ​ 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.
The remainder was included in “Other liabilities” on the accompanying Consolidated Balance Sheets as of December 31, 2023 and 2022. ​ 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.
The Company did not establish a valuation allowance for deferred tax assets as of December 31, 2022 and 2021, as it was considered more likely than not that deferred tax assets were realizable through a combination of future taxable income, the realization of deferred tax liabilities and tax planning strategies. ​ The Company regularly reviews its potential tax liabilities for tax years subject to audit.
The Company did not establish a valuation allowance for deferred tax assets as of December 31, 2023 and 2022, as it was considered more likely than not that deferred tax assets were realizable through a combination of future taxable income, the realization of deferred tax liabilities and tax planning strategies. ​ The Company regularly reviews its potential tax liabilities for tax years subject to audit.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. ​ /s/ Ernst & Young LLP ​ Kansas City, Missouri February 28, 2023 41 ​ REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ​ To the Shareholders and the Board of Directors of O’Reilly Automotive, Inc. and Subsidiaries ​ Opinion on the Financial Statements ​ We have audited the accompanying consolidated balance sheets of O’Reilly Automotive, Inc. and Subsidiaries (the Company) as of December 31, 2022 and 2021, the related consolidated statements of income, comprehensive income, shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2022, and the related notes (collectively referred to as the “consolidated financial statements”).
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. ​ /s/ Ernst & Young LLP ​ Kansas City, Missouri February 28, 2024 43 ​ REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ​ To the Shareholders and the Board of Directors of O’Reilly Automotive, Inc. ​ Opinion on the Financial Statements ​ We have audited the accompanying consolidated balance sheets of O’Reilly Automotive, Inc. and Subsidiaries (the Company) as of December 31, 2023 and 2022, the related consolidated statements of income, comprehensive income, shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2023, and the related notes (collectively referred to as the “consolidated financial statements”).
All shares repurchased under the share repurchase program are retired and recorded under the par value method on the accompanying Consolidated Balance Sheets. See Note 9 for further information concerning the Company’s share repurchase program. ​ Revenue recognition: The Company’s primary source of revenue is derived from the sale of automotive aftermarket parts and merchandise to its customers.
All shares repurchased under the share repurchase program are retired and recorded under the par value method on the accompanying Consolidated Balance Sheets. See Note 10 for further information concerning the Company’s share repurchase program. ​ Revenue recognition: The Company’s primary source of revenue is derived from the sale of automotive aftermarket parts and merchandise to its customers.
The investments in this plan were stated at fair value based on quoted market prices, were accounted for as trading securities and were included in “Other assets, net” on the accompanying Consolidated Balance Sheets as of December 31, 2022 and 2021. See Note 2 for further information concerning the fair value measurements of the Company’s marketable securities.
The investments in this plan were stated at fair value based on quoted market prices, were accounted for as trading securities, and were included in “Other assets, net” on the accompanying Consolidated Balance Sheets as of December 31, 2023 and 2022. See Note 2 for further information concerning the fair value measurements of the Company’s marketable securities.
See Note 12 for further information concerning the Company’s share-based compensation and benefit plans. ​ Pre-opening expenses: Costs associated with the opening of new stores, which consist primarily of payroll and occupancy costs, are charged to “Selling, general and administrative expenses” on the accompanying Consolidated Statements of Income as incurred.
See Note 13 for further information concerning the Company’s share-based compensation and benefit plans. ​ Pre-opening expenses: Costs associated with the opening of new stores, which consist primarily of payroll and occupancy costs, are charged to “Selling, general and administrative expenses” on the accompanying Consolidated Statements of Income as incurred.
Generally, these lease agreements provide for renewal options for an additional five years at the option of the Company and the lease agreements are periodically modified to further extend the lease term for specific stores under the agreements. Lease payments under these operating leases totaled $4.7 million for each of the years ended December 31, 2022, 2021 and 2020.
Generally, these lease agreements provide for renewal options for an additional five years at the option of the Company and the lease agreements are periodically modified to further extend the lease term for specific stores under the agreements. Lease payments under these operating leases totaled $4.7 million for each of the years ended December 31, 2023, 2022, and 2021.
Management’s Discussion and Analysis of Financial Condition and Results of Operations ​ In Management’s Discussion and Analysis, we provide a historical and prospective narrative of our general financial condition, results of operations, liquidity and certain other factors that may affect our future results, including ● an overview of the key drivers and other influences on the automotive aftermarket industry; ● our results of operations for the years ended December 31, 2022 and 2021; ● our liquidity and capital resources; ● our critical accounting estimates; and ● recent accounting pronouncements that may affect our Company. ​ The review of Management’s Discussion and Analysis should be made in conjunction with our consolidated financial statements, related notes and other financial information, forward-looking statements and other risk factors included elsewhere in this annual report. ​ OVERVIEW ​ We are a specialty retailer of automotive aftermarket parts, tools, supplies, equipment and accessories in the United States and Mexico.
Management’s Discussion and Analysis of Financial Condition and Results of Operations ​ In Management’s Discussion and Analysis, we provide a historical and prospective narrative of our general financial condition, results of operations, liquidity, and certain other factors that may affect our future results, including ● an overview of the key drivers and other influences on the automotive aftermarket industry; ● our results of operations for the years ended December 31, 2023 and 2022; ● our liquidity and capital resources; ● our critical accounting estimates; and ● recent accounting pronouncements that may affect our Company. ​ The review of Management’s Discussion and Analysis should be made in conjunction with our consolidated financial statements, related notes and other financial information, forward-looking statements, and other risk factors included elsewhere in this annual report. ​ OVERVIEW ​ We are a specialty retailer of automotive aftermarket parts, tools, supplies, equipment, and accessories in the United States, Puerto Rico, and Mexico.
Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures. ​ Under the supervision and with the participation of the Company’s principal executive officer and principal financial officer, management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2022.
Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures. ​ Under the supervision and with the participation of the Company’s principal executive officer and principal financial officer, management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2023.
(2) See Note 13 “Commitments” and Note 1 “Summary of Significant Accounting Policies” to the Consolidated Financial Statements for further information on our self-insurance reserves. ​ Due to the absence of scheduled maturities, the nature of the account or the commitment’s cancellation terms, the timing of payments for certain deferred income taxes, uncertain tax positions and commitments related to future payments under the Company’s nonqualified compensation plan cannot be determined and are therefore excluded from the above table, except for amounts estimated to be payable in 2023, which are included in “Current liabilities” on our Consolidated Balance Sheets. ​ Off-balance sheet arrangements are transactions, agreements, or other contractual arrangements with an unconsolidated entity, for which we have an obligation to the entity that is not recorded in our consolidated financial statements.
(2) See Note 14 “Commitments” and Note 1 “Summary of Significant Accounting Policies” to the Consolidated Financial Statements for further information on our self-insurance reserves. ​ Due to the absence of scheduled maturities, the nature of the account or the commitment’s cancellation terms, the timing of payments for certain deferred income taxes, uncertain tax positions, and commitments related to future payments under the Company’s nonqualified compensation plan cannot be determined and are therefore excluded from the above table, except for amounts estimated to be payable in 2024, which are included in “Current liabilities” on our Consolidated Balance Sheets. ​ 34 ​ Off-balance sheet arrangements are transactions, agreements, or other contractual arrangements with an unconsolidated entity, for which we have an obligation to the entity that is not recorded in our consolidated financial statements.
See Note 12 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 Consolidated Balance Sheets as of December 31, 2022 and 2021.
See Note 12 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 Consolidated Balance Sheets as of December 31, 2023 and 2022.
Management does not believe there is a reasonable likelihood that the Company will be unable to collect the amounts receivable from suppliers and the Company did not record a reserve for uncollectable amounts from suppliers in the consolidated financial statements as of December 31, 2022 or 2021. ​ Inventory: Inventory, which consists of automotive hard parts, maintenance items, accessories and tools, is stated at the lower of cost or market.
Management does not believe there is a reasonable likelihood that the Company will be unable to collect the aggregate amounts receivable from suppliers, and the Company did not record a reserve for uncollectable amounts from suppliers in the consolidated financial statements as of December 31, 2023 or 2022. ​ Inventory: Inventory, which consists of automotive hard parts, maintenance items, accessories, and tools, is stated at the lower of cost or market.
AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2022 ​ NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ​ Nature of business: O’Reilly Automotive, Inc. and Subsidiaries, collectively, “O’Reilly” or the “Company,” is a specialty retailer and supplier of automotive aftermarket parts.
AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2023 ​ NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ​ Nature of business: O’Reilly Automotive, Inc. and Subsidiaries, collectively, “O’Reilly” or the “Company,” is a specialty retailer and supplier of automotive aftermarket parts.
See Note 6 “Goodwill and Other Intangibles” to the Consolidated Financial Statements for further information on our finite and indefinite long-lived assets. ​ RECENT ACCOUNTING PRONOUNCEMENTS ​ See Note 1 “Summary of Significant Accounting Policies” to the Consolidated Financial Statements for information about recent accounting pronouncements. ​ ​ 37 ​ Item 7A.
See Note 6 “Goodwill and Other Intangibles” to the Consolidated Financial Statements for further information on our finite and indefinite long-lived assets. ​ RECENT ACCOUNTING PRONOUNCEMENTS ​ See Note 1 “Summary of Significant Accounting Policies” to the Consolidated Financial Statements for information about recent accounting pronouncements. ​ ​ 39 ​ Item 7A.
The fair value of our fixed rate debt was estimated at $4.1 billion as of December 31, 2022 and 2021, respectively, which was determined by reference to quoted market prices. ​ Cash equivalents risk: We invest certain of our excess cash balances in short-term, highly-liquid instruments with maturities of 90 days or less.
The fair value of our fixed rate debt was estimated at $4.7 billion and $4.1 billion as of December 31, 2023 and 2022, respectively, which was determined by reference to quoted market prices. ​ Cash equivalents risk: We invest certain of our excess cash balances in short-term, highly-liquid instruments with maturities of 90 days or less.
See Note 4 for further information concerning the Company’s property and equipment. ​ Goodwill and other intangibles: The accompanying Consolidated Balance Sheets at December 31, 2022 and 2021, include goodwill and other intangible assets recorded as the result of acquisitions.
See Note 4 for further information concerning the Company’s property and equipment. ​ Goodwill and other intangibles: The accompanying Consolidated Balance Sheets at December 31, 2023 and 2022, include goodwill and other intangible assets recorded as the result of acquisitions.
We believe that our audits provide a reasonable basis for our opinion. ​ Critical Audit Matters ​ The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.
We believe that our audits provide a reasonable basis for our opinion. ​ Critical Audit Matter ​ The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.
As of December 31, 2022 and 2021, the Company had no outstanding borrowings under its Revolving Credit Facility. ​ 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, which will vary from 0.000% to 0.250% in the case of loans bearing interest at the Alternate Base Rate and 0.680% to 1.250% in the case of loans bearing interest at the Adjusted LIBO Rate, in each case based upon the better of the ratings assigned to our debt by Moody’s Investor Service, Inc. and Standard & Poor’s Rating Services, subject to limited exceptions.
As of December 31, 2023 and 2022, the Company had no outstanding borrowings under its Revolving Credit Facility. ​ 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 Term SOFR Rate (both as defined in the Credit Agreement) plus an applicable margin, which will vary from 0.000% to 0.250% in the case of loans bearing interest at the Alternate Base Rate and 0.680% to 1.250% in the case of loans bearing interest at the Adjusted Term SOFR Rate, in each case based upon the better of the ratings assigned to our debt by Moody’s Investor Service, Inc. and Standard & Poor’s Rating Services, subject to limited exceptions.
See Note 10 for further information concerning the Company’s accumulated other comprehensive income. ​ Accounts receivable: The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of the Company’s customers to make required payments.
See Note 11 for further information concerning the Company’s accumulated other comprehensive income. ​ Accounts receivable: The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of the Company’s customers to make required payments.
See Note 15 for further information concerning the Company’s income taxes. ​ Earnings per share: Basic earnings per share is calculated by dividing net income by the weighted-average number of common shares outstanding during the fiscal period.
See Note 16 for further information concerning the Company’s income taxes. ​ Earnings per share: Basic earnings per share is calculated by dividing net income by the weighted-average number of common shares outstanding during the fiscal period.
Quantitative and Qualitative Disclosures about Market Risk ​ Interest rate risk: We are subject to interest rate risk to the extent we borrow against our unsecured revolving credit facility (the “Revolving Credit Facility”) with variable interest rates based on either an Alternative Base Rate or Adjusted LIBO Rate, as defined in the credit agreement governing the Revolving Credit Facility.
Quantitative and Qualitative Disclosures about Market Risk ​ Interest rate risk: We are subject to interest rate risk to the extent we borrow against our unsecured revolving credit facility (the “Revolving Credit Facility”) with variable interest rates based on either an Alternative Base Rate or Adjusted Term SOFR Rate, as defined in the credit agreement governing the Revolving Credit Facility.
Financial Statements and Supplementary Data ​ Index ​ ​ ​ ​ Page Management’s Report on Internal Control over Financial Reporting 40 Report of Independent Registered Public Accounting Firm : Internal Control over Financial Reporting (PCAOB ID: 42) 41 Report of Independent Registered Public Accounting Firm : Financial Statements (PCAOB ID: 42) 42 Consolidated Balance Sheets 44 Consolidated Statements of Income 45 Consolidated Statements of Comprehensive Income 46 Consolidated Statements of Shareholders’ Equity 47 Consolidated Statements of Cash Flows 48 Notes to Consolidated Financial Statements 49 ​ ​ ​ 39 ​ MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING ​ The management of O’Reilly Automotive, Inc. and Subsidiaries (the “Company”), under the supervision and with the participation of the Company’s principal executive officer and principal financial officer and effected by the Company’s Board of Directors, is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13(a)-15(f) or 15(d)-15(f) under the Securities Exchange Act of 1934, as amended.
Financial Statements and Supplementary Data ​ Index ​ ​ ​ ​ Page Management’s Report on Internal Control over Financial Reporting 42 Report of Independent Registered Public Accounting Firm : Internal Control over Financial Reporting (PCAOB ID: 42) 43 Report of Independent Registered Public Accounting Firm : Financial Statements (PCAOB ID: 42) 44 Consolidated Balance Sheets 46 Consolidated Statements of Income 47 Consolidated Statements of Comprehensive Income 48 Consolidated Statements of Shareholders’ Equity 49 Consolidated Statements of Cash Flows 50 Notes to Consolidated Financial Statements 51 ​ ​ ​ 41 ​ MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING ​ The management of O’Reilly Automotive, Inc. and Subsidiaries (the “Company”), under the supervision and with the participation of the Company’s principal executive officer and principal financial officer and effected by the Company’s Board of Directors, is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13(a)-15(f) or 15(d)-15(f) under the Securities Exchange Act of 1934, as amended.
If the carrying amount of an asset exceeds its estimated future 36 ​ cash flows, an impairment charge is recognized for the amount by which the carrying amount of the asset exceeds the fair value of the assets. ​ As a component of the indefinite long-lived assets evaluation, we perform a qualitative assessment to determine if events or circumstances that could affect the inputs used to determine the fair value of the intangible asset have occurred, as well as if they continue to support an indefinite useful life.
If the carrying amount of an asset group exceeds its estimated future cash flows, an impairment charge is recognized for the amount by which the carrying amount of the asset group exceeds the fair value of the asset groups. ​ 38 ​ As a component of the indefinite long-lived assets evaluation, we perform a qualitative assessment to determine if events or circumstances that could affect the inputs used to determine the fair value of the intangible asset have occurred, as well as if they continue to support an indefinite useful life.
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” of the annual report on Form 10-K for the year ended December 31, 2021, filed with the Securities and Exchange Commission (the “SEC”) on February 28, 2022, which is available free of charge on the SEC’s website at www.sec.gov by searching with our ticker symbol “ORLY” or at our internet address, www.OReillyAuto.com , by clicking “Investor Relations” located at the bottom of the page. ​ Debt instruments: See Note 7 “Financing” to the Consolidated Financial Statements for information concerning the Company’s credit agreement, unsecured revolving credit facility, outstanding letters of credit and unsecured senior notes. ​ Debt covenants: The indentures governing our senior notes contain covenants that limit our ability and the ability of certain of our subsidiaries to, among other things, create certain liens on assets to secure certain debt and enter into certain sale and leaseback transactions, and limit our ability to merge or consolidate with another company or transfer all or substantially all of our property, in each case as set forth in the 33 ​ indentures.
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” of the annual report on Form 10-K for the year ended December 31, 2022, filed with the Securities and Exchange Commission (the “SEC”) on February 28, 2023, which is available free of charge on the SEC’s website at www.sec.gov by searching with our ticker symbol “ORLY” or at our internet address, www.OReillyAuto.com, by clicking “Investor Relations” located at the bottom of the page. ​ 35 ​ Debt instruments: See Note 8 “Financing” to the Consolidated Financial Statements for information concerning the Company’s credit agreement, unsecured revolving credit facility, outstanding letters of credit, commercial paper program, and unsecured senior notes. ​ Debt covenants: The indentures governing our senior notes contain covenants that limit our ability and the ability of certain of our subsidiaries to, among other things, create certain liens on assets to secure certain debt and enter into certain sale and leaseback transactions, and limit our ability to merge or consolidate with another company or transfer all or substantially all of our property, in each case as set forth in the indentures.
See Note 8 for further information concerning the Company’s aggregate product warranty liabilities. ​ Litigation accruals: The Company is currently involved in litigation incidental to the ordinary conduct of the Company’s business.
See Note 9 for further information concerning the Company’s aggregate product warranty liabilities. ​ Litigation accruals: The Company is currently involved in litigation incidental to the ordinary conduct of the Company’s business.
We expect to fund our short- and long-term cash and capital requirements with our primary sources of liquidity, which include funds generated from the normal course of our business operations, borrowings under our unsecured revolving credit facility and senior note offerings.
We expect to fund our short- and long-term cash and capital requirements with our primary sources of liquidity, which include funds generated from the normal course of our business operations, borrowings under our unsecured revolving credit facility and our commercial paper program, and senior note offerings.
The Company’s 50 ​ qualitative assessment found no evidence to suggest it is more likely than not that its fair value is less than its carrying amount, including goodwill, as of December 31, 2022 and 2021. As such, no goodwill impairment adjustment was required as of December 31, 2022 and 2021.
The Company’s qualitative assessment found no evidence to suggest it is more likely than not that its fair value is less than its carrying amount, including goodwill, as of December 31, 2023 and 2022. As such, no goodwill impairment adjustment was required as of December 31, 2023 and 2022.
Under ASU 2022-04, a buyer in a supplier finance program would be required to disclose sufficient information about the program to allow a user of financial statements to understand the program’s nature, activity during the period, changes from period to period and potential magnitude.
ASU 2022-04 enhances the transparency of supplier finance programs. Under ASU 2022-04, a buyer in a supplier finance program would be required to disclose sufficient information about the program to allow a user of financial statements to understand the program’s nature, activity during the period, changes from period to period, and potential magnitude.
Original issuance discounts, net of accretion, totaled $6.3 million and $4.4 million as of December 31, 2022 and 2021, respectively. ​ See Note 7 for further information concerning debt issuance costs and original issuance discounts associated with the Company’s issuances of long-term debt instruments. ​ Income taxes: The Company accounts for income taxes using the liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements.
Original issuance discounts, net of accretion, totaled $7.1 million and $6.3 million as of December 31, 2023 and 2022, respectively. ​ See Note 8 for further information concerning debt issuance costs and original issuance discounts associated with the Company’s issuances of long-term debt instruments. ​ Income taxes: The Company accounts for income taxes using the liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements.
The increase in gross profit dollars for the year ended December 31, 2022, was primarily the result of new store sales and the increase in comparable store sales at existing stores.
The increase in gross profit dollars for the year ended December 31, 2023, was primarily the result of new store sales and the increase in comparable store sales at existing stores.
Additionally, these factors could also impact our ability to meet the debt covenants of our credit agreement and, therefore, negatively impact the funds available under our unsecured revolving credit facility. ​ Our material contractual cash obligations as of December 31, 2022, included commitments for short and long-term debt arrangements and interest payments related to long-term debt, future minimum payments under non-cancelable lease arrangements, self-insurance reserves, projected obligations related to future payments under the Company’s nonqualified deferred compensation plan, purchase obligations for construction contract commitments, uncertain tax positions and associated estimated interest and penalties, payments for certain deferred income taxes and commitments for the purchase of inventory.
Additionally, these factors could also impact our ability to meet the debt covenants of our credit agreement and, therefore, negatively impact the funds available under our unsecured revolving credit facility. ​ Our material contractual cash obligations as of December 31, 2023, included commitments for short and long-term debt arrangements and interest payments related to long-term debt, future minimum payments under non-cancelable lease arrangements, self-insurance reserves, projected obligations related to future payments under the Company’s nonqualified deferred compensation plan, purchase obligations for construction contract commitments, uncertain tax positions and associated estimated interest and penalties, payments for certain deferred income taxes, the obligation to purchase renewable energy tax credits, and commitments for the purchase of inventory.
Fletcher Chief Executive Officer ​ Executive Vice President and February 28, 2023 ​ Chief Financial Officer ​ ​ February 28, 2023 ​ ​ ​ ​ ​ 40 ​ REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ​ To the Shareholders and the Board of Directors of O’Reilly Automotive, Inc. and Subsidiaries ​ Opinion on Internal Control Over Financial Reporting ​ We have audited O’Reilly Automotive, Inc. and Subsidiaries’ internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria).
Fletcher Chief Executive Officer ​ Executive Vice President and February 28, 2024 ​ Chief Financial Officer ​ ​ February 28, 2024 ​ ​ ​ ​ ​ 42 ​ REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ​ To the Shareholders and the Board of Directors of O’Reilly Automotive, Inc. ​ Opinion on Internal Control Over Financial Reporting ​ We have audited O’Reilly Automotive, Inc. and Subsidiaries’ internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria).
We expect to fund these various commitments and obligations primarily with operating cash flows expected to be generated in the normal course of business or through borrowings under our unsecured revolving credit facility.
We expect to fund these various commitments and obligations primarily with operating cash flows expected to be generated in the normal course of business or through borrowings under our unsecured revolving credit facility and commercial paper program.
Accounts receivable due from Team Members was approximately $0.8 million and $0.7 million as of December 31, 2022 and 2021, respectively. ​ Amounts receivable from suppliers: The Company receives concessions from its suppliers through a variety of programs and arrangements, including allowances for new stores and warranties, volume purchase rebates and co-operative advertising.
Accounts receivable due from Team Members was approximately $0.9 million and $0.8 million as of December 31, 2023 and 2022, respectively. ​ Amounts receivable from suppliers: The Company receives concessions from its suppliers through a variety of programs and arrangements, including allowances for new stores and warranties, volume purchase rebates, and co-operative advertising.
While the annual changes to the vehicle population resulting from new vehicle sales and the fluctuation in vehicle scrappage rates in any given year represent a small percentage of the total light vehicle population and have a muted impact on the total number and average age of vehicles on the road over the short term, we believe our business benefits from the current environment of new vehicle scarcity and higher than typical used vehicle prices, as consumers are more willing to continue to invest in their current vehicle. ​ We believe the increase in average vehicle age over the long term can be attributed to better engineered and manufactured vehicles, which can be reliably driven at higher mileages due to better quality power trains, interiors and exteriors, and the consumer’s willingness to invest in maintaining these higher-mileage, better built vehicles.
While the annual changes to the vehicle population resulting from new vehicle sales and the fluctuation in vehicle scrappage rates in any given year represent a small percentage of the total light vehicle population and have a muted impact on the total number and average age of vehicles on the road over the short term, we believe our business benefits from the current environment of elevated new and used vehicle prices, as consumers are more willing to continue to invest in their current vehicle. ​ We believe the increase in average vehicle age over the long term can be attributed to better engineered and manufactured vehicles, which can be reliably driven at higher mileages due to better quality power trains, interiors and exteriors, coupled with consumers’ willingness to invest in maintaining these higher-mileage, better built vehicles.
A 10% change in average exchange rates would not have had a material impact on our results of operations. ​ ​ 38 ​ Item 8.
A 10% change in average exchange rates would not have had a material impact on our results of operations. ​ ​ 40 ​ Item 8.
As of December 31, 2022, 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.
As of December 31, 2023, based upon the Company’s current credit ratings, its margin for Alternate Base Rate loans was 0.000%, its margin for Term Benchmark 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.
Share-based compensation includes stock option awards, restricted stock awards and stock appreciation rights issued under the Company’s incentive plans and stock issued through the Company’s employee stock purchase plan. ​ The table below identifies the shares that have been authorized for issuance and the shares available for future issuance under the Company plans, as of December 31, 2022 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2022 ​ Total Shares Authorized for Shares Available for Future Plans ​ Issuance under the Plans ​ Issuance under the Plans Incentive Plans 35,650 5,575 Employee Stock Purchase Plan 4,250 438 Profit Sharing and Savings Plan 4,200 349 ​ Stock options: The Company’s incentive plans provide for the granting of stock options for the purchase of common stock of the Company to certain key employees of the Company.
Share-based compensation includes stock option awards, restricted stock awards, and stock appreciation rights issued under the Company’s incentive plans and stock issued through the Company’s employee stock purchase plan. ​ The table below identifies the shares that have been authorized for issuance and the shares available for future issuance under the Company plans, as of December 31, 2023 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2023 ​ Total Shares Authorized for Shares Available for Future Plans ​ Issuance under the Plans ​ Issuance under the Plans Incentive Plans 35,650 5,492 Employee Stock Purchase Plan 4,250 412 Profit Sharing and Savings Plan 4,200 349 ​ Stock options: The Company’s incentive plans provide for the granting of stock options for the purchase of common stock of the Company to certain key employees of the Company.
The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates. ​ ​ ​ ​ ​ Valuation of Self-insurance Reserves Description of the Matter ​ At December 31, 2022, the Company’s self-insurance reserve was $233 million.
The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. ​ ​ ​ ​ ​ Valuation of Self-insurance Reserves Description of the Matter ​ At December 31, 2023, the Company’s self-insurance reserve was $214 million.
As of December 31, 2022, the Company remained in compliance with all covenants under the Credit Agreement. ​ In addition to the letters of credit issued under the Credit Agreement described above, as of December 31, 2022, the Company had other outstanding letters of credit, primarily to support obligations under workers’ compensation, general liability and other insurance policies, in the amount of $96.6 million.
As of December 31, 2023, the Company remained in compliance with all covenants under the Credit Agreement. ​ In addition to the letters of credit issued under the Credit Agreement described above, as of December 31, 2023 and 2022, the Company had other outstanding letters of credit, primarily to support obligations under workers’ compensation, general liability, and other insurance policies, in the amount of $106.8 million and $96.6 million, respectively.
As of December 31, 2022 and 2021, the Company did not have any material 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 Consolidated Balance Sheets as of December 31, 2022 and 2021. ​ 55 ​ The table below identifies the estimated fair value of the Company’s senior notes, using the market approach.
As of December 31, 2023 and 2022, the Company did not have any material 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, unsecured revolving credit facility borrowings, and commercial paper program borrowings are included in “Long-term debt” on the accompanying Consolidated Balance Sheets as of December 31, 2023 and 2022. ​ The table below identifies the estimated fair value of the Company’s senior notes, using the market approach.
During the years ended December 31, 2022, 2021 and 2020, the Company recognized investment tax credits in the amount of $167.6 million, $177.1 million and $170.5 million, respectively, all of which were realized through reductions in cash income taxes paid and were reflected as a component of the change in Income taxes payable on the accompanying Consolidated Statements of Cash Flows for the respective years.
During the year ended December 31, 2023, 2022, and 2021, the Company recognized investment tax credits in the amount of $336.5 million, $167.6 million and $177.1 million, respectively, all of which were realized through reductions in cash income taxes paid and were reflected as a component of the change in Income taxes payable on the accompanying Consolidated Statements of Cash Flows for the respective years.
The Company expensed matching contributions under the Deferred Compensation Plan in the amount of $0.2 million for each of the years ended December 31, 2022, 2021 and 2020, respectively, which were included in “Selling, general and administrative expenses” on the accompanying Consolidated Statements of Income. ​ Stock appreciation rights: The Company’s incentive plans provide for the granting of stock appreciation rights, which expire after 10 years and vest 25% per year, over four years, and are settled in cash.
The Company expensed matching contributions under the Deferred Compensation Plan in the amount of less than $0.1 million, $0.2 million, and $0.2 million for the for the year ended December 31, 2023, 2022, and 2021, respectively, which were included in “Selling, general and administrative expenses” on the accompanying Consolidated Statements of Income. ​ Stock appreciation rights: The Company’s incentive plans provide for the granting of stock appreciation rights, which expire after 10 years and vest 25% per year, over four years, and are settled in cash.
See Note 7 for further information concerning the Company’s debt financing commitments. ​ 65 ​ Self-insurance reserves: The Company uses a combination of insurance and self-insurance mechanisms to provide for potential liabilities for Team Member health care benefits, workers’ compensation, vehicle liability, general liability and property loss.
See Note 8 for further information concerning the Company’s debt financing commitments. ​ 68 ​ Self-insurance reserves: The Company uses a combination of insurance and self-insurance mechanisms to provide for potential liabilities for Team Member health care benefits, workers’ compensation, vehicle liability, general liability, and property loss.
The weighted-average remaining lease term and weighted-average discount rate for the Company’s operating leases was 9.6 years and 4.0%, respectively, as of December 31, 2022. ​ The present value discount component of the future minimum lease payments under the Company’s operating leases, in the table above, was primarily calculated using the Company’s incremental borrowing rate based on information available at the lease commencement or modification date.
The weighted-average remaining lease term and weighted-average discount rate for the Company’s operating leases was 9.4 years and 4.3%, respectively, as of December 31, 2023. ​ The present value discount component of the future minimum lease payments under the Company’s operating leases, in the table above, was primarily calculated using the Company’s incremental borrowing rate based on information available at the lease commencement or modification date.
For the years ended December 31, 2022, 2021 and 2020, the Company recorded aggregate amortization expense related to its intangible assets in the amounts of $4.8 million, $4.9 million and $5.3 million, respectively. ​ Indefinite-lived intangible assets, such as trade names, are reviewed for impairment annually during the fourth quarter, or more frequently if events or changes in circumstances indicate that impairment may exist.
For the year ended December 31, 2023, 2022, and 2021, the Company recorded aggregate amortization expense related to its intangible assets in the amounts of $3.0 million, $4.8 million and $4.9 million, respectively. ​ Indefinite-lived intangible assets, such as trade names, are reviewed for impairment annually during the fourth quarter, or more frequently if events or changes in circumstances indicate that impairment may exist.
Although unrecognized tax benefits for individual tax positions may increase or decrease during 2023, the Company expects a reduction of $5.7 million of unrecognized tax benefits during the one-year period subsequent to December 31, 2022, resulting from settlement or expiration of the statute of limitations. ​ The Company’s United States federal income tax returns for tax years 2019 and beyond remain subject to examination by the Internal Revenue Service.
Although unrecognized tax benefits for individual tax positions may increase or decrease during 2024, the Company expects a reduction of $7.3 million of unrecognized tax benefits during the one-year period subsequent to December 31, 2023, resulting from settlement or expiration of the statute of limitations. ​ The Company’s United States federal income tax returns for tax years 2020 and beyond remain subject to examination by the Internal Revenue Service.
Total interest costs capitalized for the years ended December 31, 2022, 2021 and 2020, were $5.5 million, $7.0 million and $10.2 million, respectively. ​ In conjunction with the issuance or amendment of long-term debt instruments, the Company incurs various costs, including debt registration fees, accounting and legal fees and underwriter and book runner fees.
Total interest costs capitalized for the year ended December 31, 2023, 2022, and 2021, were $7.2 million, $5.5 million and $7.0 million, respectively. ​ In conjunction with the issuance or amendment of long-term debt instruments, the Company incurs various costs, including debt registration fees, accounting and legal fees, and underwriter and book runner fees.
During the years ended December 31, 2022, 2021 and 2020, the Company recognized $12.2 million, $13.6 million and $14.4 million, respectively, of revenue related to its loyalty program, which were included in “Sales” on the accompanying Consolidated Statements of Income. ​ See Note 8 for information concerning the expected costs associated with the Company’s assurance warranty obligations. ​ NOTE 12 – 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.
During the year ended December 31, 2023, 2022, and 2021, the Company recognized $13.9 million, $12.2 million and $13.6 million, respectively, of revenue related to its loyalty program, which were included in “Sales” on the accompanying Consolidated Statements of Income. ​ See Note 9 for information concerning the expected costs associated with the Company’s assurance warranty obligations. ​ NOTE 13 – SHARE-BASED COMPENSATION AND BENEFIT PLANS ​ The Company recognizes share-based compensation expense based on the fair value of the grants, awards, or shares at the time of the grant, award, or issuance.
As a result, we do not believe inflation has had a material adverse effect on our operations. ​ We remain confident in our ability to gain market share in our existing markets and grow our business in new markets by focusing on our dual market strategy and the core O’Reilly values of hard work and excellent customer service. ​ ​ ​ 27 ​ RESULTS OF OPERATIONS ​ The table below compares the Company’s selected financial data over a ten-year period: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended December 31, 2022 2021 2020 2019 2018 2017 2016 2015 2014 2013 (In thousands, except per share, Team Members, stores and ratio data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ SELECT INCOME STATEMENT RELATED DATA: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Percentage increase in comparable store sales (a)(b) 6.4 % 13.3 % 10.9 % 4.0 % 3.8 % 1.4 % 4.8 % 7.5 % 6.0 % 4.6 % Sales ($) 14,409,860 13,327,563 11,604,493 10,149,985 9,536,428 8,977,726 8,593,096 7,966,674 7,216,081 6,649,237 Gross profit 7,381,706 7,019,949 6,085,692 5,394,691 5,039,966 4,720,683 4,509,011 4,162,643 3,708,901 3,369,001 Operating income 2,954,491 2,917,168 2,419,336 1,920,726 1,815,184 1,725,400 1,699,206 1,514,021 1,270,374 1,103,485 Net income ($) (c)(d) 2,172,650 2,164,685 1,752,302 1,391,042 1,324,487 1,133,804 1,037,691 931,216 778,182 670,292 Earnings per share – basic ($) 33.75 31.39 23.74 18.07 16.27 12.82 10.87 9.32 7.46 6.14 Earnings per share – assuming dilution ($) (c)(d) 33.44 31.10 23.53 17.88 16.10 12.67 10.73 9.17 7.34 6.03 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ SELECT BALANCE SHEET AND CASH FLOW RELATED DATA: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total assets ($) (e) 12,627,979 11,718,707 11,596,642 10,717,160 7,980,789 7,571,885 7,204,189 6,676,684 6,532,083 6,057,895 Total debt ($) (e) ​ 4,371,653 3,826,978 4,123,217 3,890,527 3,417,122 2,978,390 1,887,019 1,390,018 1,388,422 1,386,895 Shareholders’ equity ($) (c) (1,060,752) (66,423) 140,258 397,340 353,667 653,046 1,627,136 1,961,314 2,018,418 1,966,321 Inventory turnover (f) 1.7 1.7 1.5 1.4 1.4 1.4 1.5 1.5 1.4 1.4 Accounts payable to inventory (g) 134.9 % 127.4 % 114.5 % 104.4 % 105.7 % 106.0 % 105.7 % 99.1 % 94.6 % 86.6 % Cash provided by operating activities ($) (h) 3,148,250 3,207,310 2,836,603 1,708,479 1,727,555 1,403,687 1,510,713 1,345,488 1,190,430 908,026 Capital expenditures ($) 563,342 442,853 465,579 628,057 504,268 465,940 476,344 414,020 429,987 395,881 Free cash flow ($) (h)(i) 2,371,123 2,548,922 2,189,995 1,020,649 1,188,584 889,059 978,375 868,390 760,443 512,145 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ SELECT OPERATING DATA: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Number of Team Members at year end 87,377 82,852 77,654 82,484 78,882 75,552 74,580 71,621 67,569 61,909 Total number of stores at year end (j)(k) 5,971 5,784 5,616 5,460 5,219 5,019 4,829 4,571 4,366 4,166 Number of U.S. stores at year end (j) ​ 5,929 5,759 5,594 5,439 5,219 5,019 4,829 4,571 4,366 4,166 Number of Mexico stores at year end (k) ​ 42 25 22 21 — — — — — — Store square footage at year end (a)(l) ​ 44,604 43,185 41,668 40,227 38,455 36,685 35,123 33,148 31,591 30,077 Sales per weighted-average store ($) (a)(m) 2,415 2,298 2,057 1,881 1,842 1,807 1,826 1,769 1,678 1,614 Sales per weighted-average square foot ($) (a)(l)(n) 322 307 277 255 251 248 251 244 232 224 ​ (a) Represents O’Reilly’s U.S. operations only.
As a result, we do not believe inflation has had a material adverse effect on our operations. ​ We remain confident in our ability to gain market share in our existing markets and grow our business in new markets by focusing on our dual market strategy and the core O’Reilly values of hard work and excellent customer service. ​ ​ ​ 30 ​ RESULTS OF OPERATIONS ​ The table below compares the Company’s selected financial data over a ten-year period: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended December 31, 2023 2022 2021 2020 2019 2018 2017 2016 2015 2014 (In thousands, except per share, Team Members, stores and ratio data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ SELECT INCOME STATEMENT RELATED DATA: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Percentage increase in comparable store sales (a)(b) 7.9 % 6.4 % 13.3 % 10.9 % 4.0 % 3.8 % 1.4 % 4.8 % 7.5 % 6.0 % Sales ($) 15,812,250 14,409,860 13,327,563 11,604,493 10,149,985 9,536,428 8,977,726 8,593,096 7,966,674 7,216,081 Gross profit 8,104,803 7,381,706 7,019,949 6,085,692 5,394,691 5,039,966 4,720,683 4,509,011 4,162,643 3,708,901 Operating income 3,186,376 2,954,491 2,917,168 2,419,336 1,920,726 1,815,184 1,725,400 1,699,206 1,514,021 1,270,374 Net income ($) (c)(d) 2,346,581 2,172,650 2,164,685 1,752,302 1,391,042 1,324,487 1,133,804 1,037,691 931,216 778,182 Earnings per share – basic ($) 38.80 33.75 31.39 23.74 18.07 16.27 12.82 10.87 9.32 7.46 Earnings per share – assuming dilution ($) (c)(d) 38.47 33.44 31.10 23.53 17.88 16.10 12.67 10.73 9.17 7.34 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ SELECT BALANCE SHEET AND CASH FLOW RELATED DATA: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total assets ($) (e) 13,872,995 12,627,979 11,718,707 11,596,642 10,717,160 7,980,789 7,571,885 7,204,189 6,676,684 6,532,083 Total debt ($) (e) ​ 5,570,125 4,371,653 3,826,978 4,123,217 3,890,527 3,417,122 2,978,390 1,887,019 1,390,018 1,388,422 Shareholders’ (deficit) equity ($) (c) (1,739,278) (1,060,752) (66,423) 140,258 397,340 353,667 653,046 1,627,136 1,961,314 2,018,418 Inventory turnover (f) 1.7 1.7 1.7 1.5 1.4 1.4 1.4 1.5 1.5 1.4 Accounts payable to inventory (g) 130.8 % 134.9 % 127.4 % 114.5 % 104.4 % 105.7 % 106.0 % 105.7 % 99.1 % 94.6 % Cash provided by operating activities ($) (h) 3,034,084 3,148,250 3,207,310 2,836,603 1,708,479 1,727,555 1,403,687 1,510,713 1,345,488 1,190,430 Capital expenditures ($) 1,006,264 563,342 442,853 465,579 628,057 504,268 465,940 476,344 414,020 429,987 Free cash flow ($) (h)(i) 1,987,720 2,371,123 2,548,922 2,189,995 1,020,649 1,188,584 889,059 978,375 868,390 760,443 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ SELECT OPERATING DATA: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Number of Team Members at year end 90,189 87,377 82,852 77,654 82,484 78,882 75,552 74,580 71,621 67,569 Total number of stores at year end (j)(k) 6,157 5,971 5,784 5,616 5,460 5,219 5,019 4,829 4,571 4,366 Number of domestic stores at year end (j) ​ 6,095 5,929 5,759 5,594 5,439 5,219 5,019 4,829 4,571 4,366 Number of Mexico stores at year end (k) ​ 62 42 25 22 21 — — — — — Store square footage at year end (a)(l) ​ 46,681 44,604 43,185 41,668 40,227 38,455 36,685 35,123 33,148 31,591 Sales per weighted-average store ($) (a)(m) 2,578 2,415 2,298 2,057 1,881 1,842 1,807 1,826 1,769 1,678 Sales per weighted-average square foot ($) (a)(l)(n) 340 322 307 277 255 251 248 251 244 232 ​ (a) Represents O’Reilly’s U.S. operations only.
During the years ended December 31, 2022, 2021 and 2020, the Company recorded tax expense related to an increase in its liability for interest and penalties in the amounts of $1.5 million, $1.6 million and $2.2 million, respectively.
During the year ended December 31, 2023, 2022, and 2021, the Company recorded tax expense related to an increase in its liability for interest and penalties in the amounts of $2.1 million, $1.5 million and $1.6 million, respectively.

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