O'Reilly Automotive, Inc. (ORLY)

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O'Reilly Automotive (ORLY)

Q4 2012 Earnings Call

February 07, 2013 11:00 am ET


Thomas G. McFall - Chief Financial Officer, Principal Accounting Officer and Executive Vice President of Finance

Gregory L. Henslee - Chief Executive Officer and President

Jeff M. Shaw - Executive Vice-President of Store Operations and Sales


Colin McGranahan - Sanford C. Bernstein & Co., LLC., Research Division

Daniel R. Wewer - Raymond James & Associates, Inc., Research Division

Scot Ciccarelli - RBC Capital Markets, LLC, Research Division

Daniel Hofkin - William Blair & Company L.L.C., Research Division

Michael Lasser - UBS Investment Bank, Research Division

Alan M. Rifkin - Barclays Capital, Research Division

Gary Balter - Crédit Suisse AG, Research Division

Matthew J. Fassler - Goldman Sachs Group Inc., Research Division

Christopher Horvers - JP Morgan Chase & Co, Research Division



Hello. My name is Yumicki, and I will be your conference operator today. At this time, I'd like to welcome everyone to the O'Reilly Automotive Fourth Quarter and Full Year 2012 Earnings Release Call. [Operator Instructions]

I will now turn the call over to Tom McFall, Chief Financial Officer. Please go ahead.

Thomas G. McFall

Thank you, Yumicki. Good morning, everyone, and welcome to our conference call. Before I introduce Greg Henslee, our CEO, we have a brief statement.

The company claims the protection under the Safe Harbor for forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. You can identify those statements by forward-looking words such as expect, believe, anticipate, should, plan, intend, estimate, project, will or similar words. In addition, statements contained within the earnings release and on this conference call, that are not historical facts, are forward-looking statements, such as statements discussing, among other things, expected growth, store development, integration and expansion strategy, business strategies, future revenues and future performance. These forward-looking statements are based on estimates, projections, beliefs and assumptions and are not guarantees of future events and results.

Such statements are subject to risks, uncertainties and assumptions, including, but not limited to, competition, product demand, the market for auto parts, the economy in general, inflation, consumer debt levels, governmental regulations, the company's increased debt levels, credit ratings on the company's public debt, the company's ability to hire and retain qualified employees, risks associated with the performance of acquired businesses, weather, terrorist activities, war and the threat of war.

Actual results may materially differ from anticipated results, described or implied, in these forward-looking statements. Please refer to the Risk Factors section of the annual report on Form 10-K for the year ended December 31, 2011 for additional factors that could materially affect the company's financial performance. These forward looking statements speak only as of the date they were made, and the company undertakes no obligation to publicly update any forward-looking statements, whether a result of new information, future events or otherwise, except as required by applicable law.

At this time, I'd like to introduce Greg Henslee.

Gregory L. Henslee

Thanks, Tom. Good morning, everyone, and welcome to the O'Reilly Auto Parts fourth quarter conference call. Participating on the call with me this morning is, of course, Tom McFall, our Chief Financial Officer; and Jeff Shaw, our Executive Vice President of Store Operations and Sales. David O'Reilly, our Executive Chairman, is also present. As many of you know, in mid-December, we announced that Ted Wise transitioned from his long-time role as Chief Operating Officer to Executive Vice President of Expansion. Ted continues to be a very actively-involved member of our executive management team. But now, he is specifically focusing his time and efforts in the areas of new store growth, maintaining our existing installed store base and new market expansion. Ted's level of passion for the business has not diminished a bit, and he remains extremely committed to the success of our company, although he will be working at a slightly reduced schedule.

Moving forward, Ted will continue to attend our quarterly conference calls. However, he is currently enjoying his new role and reduced schedule by taking a well-deserved vacation, so he is not present for today's call.

We also announced in December that Jeff Shaw was promoted to the position of Executive Vice President of Store Operations and Sales. Jeff has been an O'Reilly team member for 24 years, beginning his career at the store level. He held numerous store, district and regional manager positions throughout our company before being promoted to Vice President of Store Operations in 2003 and then Senior Vice President in 2004. Many of you have met Jeff and have heard him present at our O'Reilly Analyst Days. Jeff will be participating in our conference call today and will be an ongoing participant on our quarterly calls.

I would like to begin the discussion of our fourth quarter and full year 2012 results by thanking our 53,000 members of Team O'Reilly for their hard work and commitment to our success.

During the fourth quarter, we continue to face a very challenging demand environment. However, your dedication to providing the best customer service in our industry yielded a 4.2% increase in comparable store sales, which exceeded our guidance range of 2% to 4%. For the year, your efforts have led to a 3.8% increase in comparable store sales. And by growing profitable sales and prudently managing our expenses over the long term, we generated another record annual operating margin of 15.8%, exceeding our prior year's record adjusted operating margin of 14.9%. Your relentless focus on excellent customer service resulted in a 23% increase in fourth quarter adjusted diluted earnings per share, marking our 16th consecutive quarter of adjusted diluted earnings per share growth of 15% or greater and our fourth consecutive year of annual adjusted diluted earnings per share growth of 20% or greater. It takes a tremendous team effort to generate these types of record-breaking results, and I would like to thank each of you for your hard work and your unrelenting focus on providing outstanding service to each of our valued customers. The great service you provide remains the backbone of our continued success.

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