SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1999
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ___________________ to ____________________
Commission file number 0-21318
O'REILLY AUTOMOTIVE, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Missouri 44-0618012
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(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or
organization)
233 South Patterson
Springfield, Missouri 65802
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(Address of principal executive offices, Zip code)
(417) 862-6708
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Common stock, $0.01 par value - 25,366,464 shares outstanding as of September
30, 1999
<PAGE>
O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
FORM 10-Q
Quarter Ended September 30, 1999
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION Page
ITEM 1 - FINANCIAL STATEMENTS (UNAUDITED)
Condensed Consolidated Balance Sheets 3
Condensed Consolidated Statements of Income 4
Condensed Consolidated Statements of Cash Flows 5
Notes to Condensed Consolidated Financial Statements 6
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION 7
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK 9
PART II - OTHER INFORMATION
ITEM 5 - OTHER INFORMATION 9
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K 9
SIGNATURE PAGE 10
EXHIBIT INDEX 11
<PAGE>
PART I Financial Information
ITEM 1. Financial Statements
O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
------------- ------------
(Unaudited) (Note)
(In thousands, except share data)
<S> <C> <C>
Assets
Current assets:
Cash $ 2,729 $ 1,728
Short-term investments 500 500
Accounts receivable, net 33,187 27,580
Amounts receivable from vendors 21,579 26,660
Inventory 288,823 246,012
Refundable income taxes -- 3,026
Deferred income taxes 788 2,838
Other current assets 2,696 2,538
----------- -----------
Total current assets 350,302 310,882
Property and equipment 260,550 210,207
Accumulated depreciation 51,257 39,256
----------- -----------
209,293 170,951
Other assets 21,751 11,455
----------- -----------
Total assets $ 581,346 $ 493,288
=========== ===========
Liabilities and shareholders' equity
Current liabilities:
Note payable to bank $ 5,000 $ 5,000
Accounts payable 79,592 66,737
Income taxes payable 8,865 --
Other current liabilities 34,308 22,091
Current portion of long-term debt 12,808 8,691
----------- -----------
Total current liabilities 140,573 102,519
Long-term debt, less current portion 50,433 170,166
Other liabilities 631 2,209
Shareholders' equity:
Common stock, $.01 par value:
Authorized shares- 90,000,000
Issued and outstanding shares -
25,366,464 shares at
September 30, 1999 and
21,349,700 at December 31, 1998 253 213
Additional paid-in capital 220,149 82,658
Retained earnings 169,307 135,523
----------- -----------
Total shareholders' equity 389,709 218,394
----------- -----------
Total liabilities and shareholders'
equity $ 581,346 $ 493,288
=========== ============
</TABLE>
NOTE: The balance sheet at December 31, 1998 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
See notes to condensed consolidated financial statements.
Page 3
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O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------ ------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
(In thousands, except per share data)
Product sales $ 208,401 $ 172,784 $ 570,912 $ 456,295
Cost of goods sold, including
warehouse and distribution expenses 120,400 103,439 330,130 270,080
Operating, selling, general and
administrative expenses 65,770 53,910 182,679 146,199
----------- ----------- ----------- -----------
186,170 157,349 512,809 416,279
----------- ----------- ----------- -----------
Operating income 22,231 15,435 58,103 40,016
Other expense (564) (1,955) (3,417) (4,770)
----------- ----------- ----------- -----------
Income before income taxes 21,667 13,480 54,686 35,246
Provision for income taxes 8,255 5,119 20,901 13,394
----------- ----------- ----------- -----------
Net income $ 13,412 $ 8,361 $ 33,785 $ 21,852
=========== =========== =========== ===========
Basic income per share data:
Net income per common share $ 0.53 $ 0.39 $ 1.41 $ 1.03
=========== =========== =========== ===========
Weighted average common shares outstanding 25,346 21,256 23,987 21,209
=========== =========== =========== ===========
Income per common share-assuming dilution:
Net income per common share-assuming dilution $ 0.52 $ 0.38 $ 1.39 $ 1.00
=========== =========== =========== ===========
Adjusted weighted average common shares
outstanding 25,589 21,883 24,343 21,744
=========== =========== =========== ===========
</TABLE>
See notes to condensed consolidated financial statements.
Page 4
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O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
<S> <C> <C>
Nine Months Ended September 30,
----------------------------------
1999 1998
----------- -----------
(In thousands)
Net cash provided by (used in) operating activities $ 33,483 $ (16,698)
----------- ------------
Investing activities:
Purchases of property and equipment (54,138) (37,335)
Acquisition of Hi-Lo Automotive, Inc., net of cash acquired -- (49,296)
Proceeds from sale of property and equipment 6,775 2,627
Payments received on notes receivable 1,061 --
Advances made on notes receivable (70) --
Other -- (455)
----------- -----------
Net cash used in investing activities (46,372) (84,459)
----------- -----------
Financing activities:
Borrowings on note payable to bank 5,000 --
Payments on note payable to bank (5,000) --
Proceeds from issuance of long-term debt 84,013 145,241
Payments on long-term debt (201,976) (46,217)
Net proceeds from secondary offering 124,890 --
Proceeds from issuance of common stock 6,963 1,432
----------- -----------
Net cash provided by financing activities 13,890 100,456
----------- -----------
Net increase (decrease) in cash 1,001 (701)
Cash at beginning of period 1,728 2,285
----------- -----------
Cash at end of period $ 2,729 $ 1,584
=========== ===========
</TABLE>
See notes to condensed consolidated financial statements.
Page 5
<PAGE>
O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
September 30, 1999
1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of
O'Reilly Automotive, Inc. and Subsidiaries (the "Company") have been prepared in
accordance with generally accepted accounting principles for interim financial
information and the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the three and nine months ended September 30, 1999, are
not necessarily indicative of the results that may be expected for the year
ended December 31, 1999. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1998.
2. Debt
The Company has unsecured credit facilities totaling $175 million. The
facilities are comprised of a $125 million five-year revolving credit facility
which includes a $5 million sub-limit for the issuance of letters of credit and
a $50 million five-year term loan facility. These credit facilities are
guaranteed by the subsidiaries of the Company and currently bear interest at the
London Interbank Offered Rate ("LIBOR") plus 0.50%. The Company is required to
meet various financial covenants as defined in the credit agreement.
3. Secondary Offering
On March 31, 1999, the Company completed a public offering of 3,340,000 shares
of common stock, 3,000,000 of which were issued by the Company resulting in net
proceeds of $106.8 million. A portion of the proceeds was used to repay a
significant amount of the outstanding indebtedness of the Company under its
credit facility. The remaining portion of the proceeds will be used to fund
future expansion. On April 7, 1999, the Company issued 501,000 shares of common
stock related to the Company's portion of the over-allotment option resulting in
net proceeds to the Company of $17.9 million.
4. Business Acquisition
Effective January 31, 1998, the Company acquired all of the outstanding common
shares of Hi-Lo Automotive, Inc. and its subsidiaries ("Hi/LO") for $49.3
million or $4.35 per common share. This acquisition has been accounted for as a
purchase by recording the assets and liabilities of Hi/LO at their estimated
fair values at the acquisition date. The excess of net assets acquired over the
purchase price, which totaled approximately $9.7 million, has been applied as a
reduction to the acquired property and equipment.
The consolidated results of operations of the Company include the operations of
Hi/LO from the acquisition date. Unaudited Pro Forma consolidated results of
operations assuming the purchase was made at the beginning of each period are
shown below: (amounts in thousands, except per share data)
<TABLE>
<CAPTION>
<S> <C> <C>
Nine months ended September 30,
-----------------------------------
1999 1998
------------- -------------
Net sales $570,912 $474,064
Net income $33,785 $25,505
Net income per share $1.41 $1.09
</TABLE>
Page 6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Unless otherwise indicated, "we," "us," "our" and similar terms, as well as
references to the "Company" or "O'Reilly" refer to O'Reilly Automotive, Inc. and
its subsidiaries.
Results of Operations
Product sales for the third quarter of 1999 increased by $35.6 million, or
20.6%, over product sales for the third quarter of 1998. Product sales for the
first nine months of 1999 increased by $114.6 million, or 25.1% over product
sales for the first nine months of 1998. This is due to the opening of 14 net,
new O'Reilly stores during the last quarter of 1998 and the opening of 50 net,
new stores during the first three quarters of 1999, in addition to a 11.6%
increase in comparable store product sales (O'Reilly stores increased 6.7% and
HiLo stores increased 19.0%). At September 30, 1999, we operated 541 stores
compared to 477 stores at September 30, 1998.
Gross profit increased 26.9% from $69.3 million (or 40.1% of product sales) in
the third quarter of 1998 to $88.0 million (or 42.2% of product sales) in the
third quarter of 1999. Gross profit for the first nine months increased 29.3%
from $186.2 million (or 40.8% of product sales) in 1998 to $240.8 million or
(42.2% of product sales) in 1999. The increase in gross profit margin was
attributable to continued improvement to our product acquisition programs, some
of which were related to conversions of product lines in the Hi-Lo stores.
Operating, selling, general and administrative expenses ("OSG&A expenses")
increased $11.9 million from $53.9 million (or 31.2% of product sales) in the
third quarter of 1998 to $65.8 million (or 31.6% of product sales) in the third
quarter of 1999. OSG&A expenses increased $36.5 million from $146.2 million
(32.0% of product sales) in the first nine months of 1998 to $182.7 million (or
32.0% of product sales) in the first nine months of 1999. The dollar amount
increase in OSG&A expenses resulted from the addition of team members and
resources in order to support the increased level of our operations.
Other expense decreased by $1.4 million in the third quarter of 1999 compared to
the third quarter of 1998 and decreased by $1.4 million for the first nine
months of 1999 compared to the first nine months of 1998. The overall decrease
in other expense is due to the repayment of a significant amount of our debt in
the first quarter of 1999, thereby reducing interest expense.
Our estimated provision for income taxes increased from 38.0% of income before
income taxes in the third quarter and the first nine months of 1998 to 38.1% and
38.2%, respectively in the same periods in 1999. The increase in the effective
income tax rate was primarily due to changes in the mix of taxable income among
the states in which we operate.
Principally, as a result of the foregoing, net income increased from $8.4
million or 4.8% of product sales in the third quarter of 1998 to $13.4 million
or 6.4% of product sales in the third quarter of 1999 and from $21.9 million or
4.8% of products sales in the first nine months of 1998 to $33.8 million or 5.9%
of product sales in the first nine months of 1999.
Liquidity and Capital Resources
Net cash of $33.5 million was provided by operating activities for the first
nine months of 1999 as compared to $16.7 million of cash used by operating
activities for the first nine months of 1998. This increase was principally the
result of improved operating results and increases in income taxes payable,
offset by increases in inventory and accounts receivable. These increases are
the result of the addition of new stores and increased sales levels in existing
and newly opened stores and the results of product line conversions.
Net cash used in investing activities has decreased from $84.5 million in 1998
to $46.4 million in 1999 primarily due to the acquisition of Hi/LO in early
1998, partially offset by the proceeds of the sale of property and equipment.
Cash provided by financing activities has decreased from $100.5 million in the
first nine months of 1998 to $13.9 million in the first nine months of 1999. The
decrease was primarily due to the substantial reduction of debt with the funds
generated by the secondary offering in the first quarter of 1999, as well as the
scheduled principal payments on debt. Additionally, cash provided by operations
has funded growth without having to increase our use of the credit facilities.
Aside from the 50 net, new stores opened in the first nine months of 1999, we
plan to open an additional 30 net new stores during the 4th quarter of 1999. The
funds required for such planned expansions will be provided by operating
activities, short-term investments and the existing and available bank credit
facilities.
Page 7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION (CONT.)
Management believes that the cash expected to be generated from operating
activities, existing cash and short-term investments, existing bank credit
facilities and trade credit will be sufficient to fund our short and long-term
capital and liquidity needs for the foreseeable future.
Inflation and Seasonality
We have been successful, in many cases, in reducing the effects of merchandise
cost increases principally by taking advantage of vendor incentive programs,
economies of scale resulting from increased volume of purchases and selective
forward buying. As a result, we do not believe our operations have been
materially affected by inflation.
Our business is seasonal to some extent primarily as a result of the impact of
weather conditions on store sales. Store sales and profits have historically
been higher in the second and third quarters (April through September) of each
year than in the first and fourth quarters.
Year 2000 Readiness Disclosure
We have appointed an internal Year 2000 issue project manager and remediation
team and have adopted a four phase approach of assessment, remediation, testing
and contingency planning. The scope of the project includes our review of all
internal software, hardware and operating systems and an assessment of the risk
to our business posed by any lack of vendor preparedness with respect to the
Year 2000 issue. We have completed the initial assessment of all internal
systems, are progressing with the remediation and testing phases, and have begun
contingency planning for information technology systems. We believe that this
approach of assessment (including prioritization by business risk), remediation
(including conversions to new software), testing of necessary changes, and
contingency planning will minimize the business risk of the Year 2000 issue from
internal systems.
We utilized internal personnel to correct, replace and test our software for the
Year 2000 project. The total cost of the project was approximately $200,000. Of
the total project cost, approximately $25,000 represented the purchase of
replacements or upgrades of software and hardware, which were capitalized. We
expensed the remaining portion of the project cost as incurred during 1999.
We have established ongoing communications with all our significant vendors to
monitor their progress in resolving their issues related to the Year 2000 issue.
Many of such vendors have informed us that they are making substantial progress
in resolving their Year 2000 issue. However, the most likely worst case scenario
for us would entail failure of one or more of our significant vendors to
continue operations (even temporarily) following transition to the year 2000. We
have also contacted suppliers of products significant to our operations
containing embedded chips to monitor their progress in resolving issues related
to the Year 2000 issue. No material issues have been identified to date as a
result of these contacts. We cannot guarantee that our business partners will
adequately address issues related to the Year 2000 issue in a timely manner or
that the failure of our business partners to correct these issues would not have
a material adverse effect on the Company.
We have completed contingency plans to be used in the event of a business
interruption caused by the Year 2000 issue for some, but not all, of our
internal information technology systems. Such plans are being developed for some
of our other systems. Elements of our contingency plans include switching
vendors and utilizing back-up systems that do not rely on computers.
Forward-Looking Statements
Certain statements contained in this quarterly report on Form 10-Q are
forward-looking statements. These statements discuss, among other things,
expected growth, store development and expansion strategy, business strategies,
future revenues and future performance. The forward-looking statements are
subject to risks, uncertainties and assumptions including, but not limited to
competitive pressures, demand for our products, the market for auto parts, the
economy in general, inflation, consumer debt levels and the weather. Actual
results may materially differ from anticipated results described in these
forward-looking statements. Certain risks are discussed in Exhibit 99.1 hereto.
Page 8
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our exposure to market risk through derivative financial instruments and other
financial instruments is not material.
PART II - OTHER INFORMATION
Item 5. Other information
On November 8, 1999, the Company announced the declaration by its Board
of Directors, at its third quarter meeting held Thursday, November 4,
1999, of a two-for-one stock split in the form of a 100% stock dividend
to all shareholders of record of its common stock as of the close of
business on November 15, 1999. Each shareholder entitled to the
dividend will receive one additional share of the Company's common
stock for every one share of common stock held. The Company anticipates
that the additional shares resulting from the dividend will be made
available to the shareholders on or about November 30, 1999.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits: See Exhibit Index on page 11 hereof.
(b) No reports on Form 8-K were filed by the Company during the quarter ended
September 30, 1999.
Page 9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
O'REILLY AUTOMOTIVE, INC.
November 15, 1999 /s/ David E. O'Reilly
- -------------------------- ------------------------------------------
Date David E. O'Reilly, Chief Executive Officer
November 15, 1999 /s/ James R. Batten
- -------------------------- ------------------------------------------
Date James R. Batten, Vice-President of Finance
and Chief Financial Officer
Page 10
<PAGE>
EXHIBIT INDEX
Number Description Page
- ------ ----------------------------------------------------- -----------
3.3 Restated Articles of Incorporation, as amended 12
27.1 Financial Data Schedule 20
99.1 Certain Risk Factors, filed herewith. 21
Page 11
Pursuant to the provisions of The General and Business Corporation Law of
Missouri, the undersigned Corporation certifies the following:
1. The name of the Corporation is O'Reilly Automotive, Inc.
2. An amendment to the Corporation's Restated Articles of Incorporation was
adopted by the shareholders at a meeting duly held on May 4, 1999.
3. Section (a) of Article III of the Corporation's Restated Articles of
Incorporation is deleted in its entirety, and the following is inserted in
its place:
ARTICLE III
The aggregate number, class and par value of shares which the corporation
shall have the authority to issue shall be ninety million (90,000,000) shares of
common stock, par value $.01 per share and five million (5,000,000) shares of
preferred stock, par value $.01 per share.
4. Of the 21,376,421 shares outstanding, all of such shares were entitled to
vote on such amendment.
5. The number of shares voted for and against the amendment was as follows:
16,122,317 shares voted for the amendment 1,080,310 shares voted
against the amendment 28,027 shares abstained from voting
6. The amendment changed the number of authorized shares having a par value,
and the amount in dollars of authorized shares having a par value as
changed is $950,000.
The amendment did not change the number of authorized shares without par
value.
7. The amendment does not provide for an exchange, reclassification or
cancellation of issued shares, or a reduction of the number of authorized
shares of any class.
Page 12
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O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
Exhibit 3.3 - RESTATED ARTICLES OF INCORPORATION, AS AMENDED (cont.)
IN WITNESS WHEREOF, the undersigned, James R. Batten, has executed this
instrument and its Secretary has affixed its corporate seal hereto and attested
said seal as of the 20th day of July, 1999.
O'REILLY AUTOMOTIVE, INC.
CORPORATE SEAL
By: /s/ James R. Batten
-------------------------------------
Title: Vice-President of Finance/CFO
ATTEST:
/s/ Tricia Headley, Secretary
- -----------------------------
STATE OF MISSOURI )
) SS
COUNTY OF GREENE )
I, Cynthia L. Bennett, a Notary Public, do hereby certify that on this
20th day of July, 1999, personally appeared before me James R. Batten, who being
by me first duly sworn, declared that he is the Vice-President of Finance and
CFO of O'Reilly Automotive, Inc., that he signed the foregoing document as
Vice-President of the Corporation, and that the statements therein contained are
true.
/s/ Cynthia L. Bennett
--------------------------------------
Notary Public
My commission expires:
January 28, 2003
(Attachment)
Page 13
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O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
Exhibit 3.3 - RESTATED ARTICLES OF INCORPORATION, AS AMENDED (cont.)
RESTATED
ARTICLES OF INCORPORATION
OF
O'REILLY AUTOMOTIVE, INC.
Pursuant to the provisions of the General and Business Corporation Law
of Missouri, we, the undersigned officers of O'Reilly Automotive, Inc., hereby
execute the following Restated Articles of Incorporation of said corporation and
state that the Restated Articles of Incorporation set forth below have been
adopted by action duly taken pursuant to Section 351.106, R.S.Mo. 1986, as
amended (by the vote in favor thereof by a majority of the outstanding shares
entitled to vote). The original Articles of Incorporation of the corporation
were filed in the office of the Missouri Secretary of State on August 15, 1957.
The name under which the corporation was originally organized was Springfield
Supply and Motor Parts, Inc. The incorporators of the corporation and the place
of residence of each at the time of incorporation were George N. Lockridge, 6617
Wenonga Terrace, Kansas City, Missouri; Russell W. Baker, 417 West 59th Terrace,
Kansas City, Missouri; and Daniel McDonald, 5441 Chadwick, Kansas City, Kansas.
These Restated Articles of Incorporation correctly set forth without change the
corresponding provisions of the Articles of Incorporation of the corporation as
heretofore amended, and supersede the original Articles of Incorporation and all
amendments thereto.
ARTICLE I
The name of this corporation is "O'Reilly Automotive, Inc."
ARTICLE II
The address of the corporation's registered office in the State of Missouri
is 233 South Patterson, Box 1156, Springfield, Missouri, 65805 and the name of
its registered agent is C. H. O'Reilly.
ARTICLE III
(a) The aggregate number, class, and par value of shares which the
corporation shall have the authority to issue shall be thirty-five million
(35,000,000) shares, which shall include thirty million (30,000,000) shares of
common stock having a par value of one cent ($.01) per share and five million
(5,000,000) shares of preferred stock having a par value of one cent ($.01) per
share.
(b) Upon the effectiveness of this Amendment to the Articles of
Incorporation, and without any further action on the part of the corporation or
its shareholders, each share of common stock, par value $0.50 per share, then
issued and outstanding shall be changed and reclassified into 120.15353 fully
paid and non-assessable shares of common stock, par value $0.01 per share, and
holders of shares of common stock, par value $0.50, shall for all purposes be
deemed holders of the number of shares of common stock, par value $0.01 per
share, into which such shares shall have been changed and reclassified;
provided, that no fractional shares of common stock, par value 0.01 per share,
shall be issued pursuant to such change, and an amount of cash equal to the
value of any fractional interest created thereby, based upon a valuation of
$15.00 per share, shall be paid to a shareholder in lieu thereof. To reflect the
change and reclassification provided above, each certificate representing shares
of common stock, par value $0.50 per share, theretofore issued and outstanding
shall, as soon as practicable after the effective date of this Amendment, be
surrendered to the corporation, which as soon as practicable thereafter shall
issue a new certificate representing the number of whole shares of common stock,
par value $0.01 per share, equal to 120.15353 times the number of shares
theretofore held.
(c) The voting power of the corporation shall be vested in the holders of
the common stock, who shall be entitled to one vote per share of common stock on
all matters to be voted on by the shareholders, except to the extent voting
rights are determined for holders of preferred stock by the Board of Directors
in accordance with part (e) of this Article III.
(d) The Board of Directors may cause shares of preferred stock to issued
from time to time, in one or more series and for such consideration (not less
than the par value of such shares to be so issued) as the Board of Directors may
determine from time to time.
Page 14
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O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
Exhibit 3.3 - RESTATED ARTICLES OF INCORPORATION, AS AMENDED (cont.)
(e) The Board of Directors shall determine the relative rights,
preferences, and limitations of each series of preferred stock established
pursuant to part (d) of this Article III, including, but not limited to, the
following: O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES Exhibit 3.3 - AMENDMENT OF
ARTICLES OF INCORPORATION (cont.) RESTATED ARTICLES OF INCORPORATION
(i) the number of shares constituting that series and its distinctive
designation;
(ii) the dividend rate whether dividends shall be cumulative, and, if
so, from which date or dates and the relative rights of priority, if any,
of the payment of dividends on shares of that series;
(iii) whether that series shall have voting rights in addition to the
voting rights provided by law, and, if so, the terms of such voting rights;
(iv) whether that series shall have conversion privileges, and, if so,
the terms and conditions of such conversion privileges, including the
designation of the securities into which such series may be converted, the
conversion rate, and provisions for adjustment of the conversion rate upon
the occurrence of such events as the Board of Directors shall determine;
(v) whether or not the shares of the series shall be redeemable, and,
if so, the terms and conditions of such redemption, including the date or
dates upon or after which they shall be redeemable, and the amount per
share payable in case of redemption, which amount may vary under different
conditions and at different redemption dates;
(vi) whether the corporation shall establish a sinking fund for the
redemption or purchase of shares of that series, and, if so, the terms and
amount of such sinking fund; and
(vii) the rights of the shares of that series in the event of the
voluntary or involuntary liquidation, dissolution or winding up of the
corporation, and the relative rights of priority, if any, of payment of
shares of that series.
(f) No holder of any share of stock or other security of the corporation,
either now or hereafter authorized or issued, shall have any preferential or
preemptive right to acquire additional shares of stock or any other security of
the corporation other than such, if any, as the Board of Directors may in its
discretion from time to time determine pursuant to the authority conferred by
these Articles of Incorporation of the corporation.
(g) There shall be no right to cumulative voting in the election of
directors.
(h) Except as otherwise required by The General and Business Corporation
Law of Missouri, whenever the holders of shares of stock of the corporation
shall be entitled to vote as a class with respect to any matter, the affirmative
vote of a majority of the outstanding shares of such class shall be required to
constitute the act of such class.
ARTICLE IV
The number of directors of the corporation shall be that number that is
fixed by, or in the manner provided in, the Bylaws of the corporation; provided,
however, that the number of directors of the corporation shall not be less than
three. Any changes in the number of directors shall be reported to the Missouri
Secretary of State within thirty (30) calendar days of such change. Directors
need not be shareholders of the corporation. The Board of Directors shall be
divided into three classes, as nearly equal in number as possible, which shall
be designated Class I, Class II and Class III. The term of office the initial
Class I directors shall expire at the annual meeting of shareholders held in
1994; the term of office of the initial Class II directors shall expire at the
annual meeting of shareholders held in 1995; and the term of office of the
initial Class III directors shall expire at the annual meeting of shareholders
held in 1996. At each annual meeting of shareholders held after 1993, the
directors elected to succeed those whose terms then expire shall be elected for
a term of three (3) years expiring at the third succeeding annual meeting
thereafter. If the number of directors is changed, any increase or decrease in
the number of directors shall be apportioned among the classes so that the
number of directors in each class remains as nearly equal as possible. As used
in these Articles of Incorporation, the term "entire Board of Directors" means
the directors comprising all three classes into which the Board of Directors has
been so divided. Subject to the rights, if any, of the holders of any class of
capital stock of the corporation other than common stock then outstanding, any
vacancies in the Board of Directors that occur for any reason prior to the
expiration of the term of office of the class in which the vacancy occurs,
including vacancies that occur by reason of an increase in the number of
directors, shall be filled only by the Board of Directors of the corporation,
acting by the affirmative vote of a majority of the remaining directors then in
office (even if less than a quorum).
Page 15
<PAGE>
O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
Exhibit 3.3 - RESTATED ARTICLES OF INCORPORATION, AS AMENDED (cont.)
ARTICLE V
The corporation shall continue in perpetual existence or until dissolved
and liquidated according to law.
ARTICLE VI
The corporation is formed for the following purposes and shall have the
following powers:
(a) to distribute and sell automotive aftermarket parts, products, tools,
supplies, equipment, and accessories (collectively, "Automotive Products") to
all segments of the marketplace, including, without limitation, mechanics,
automobile repair shops, automobile dealers, fleet owners, mass and general
merchandisers, retail and all other consumers of Automotive Products, and in
furtherance thereof, to operate retail stores selling Automotive Products to the
public, and to do all things necessary or desirable in furtherance of the
foregoing activities; and
(b) to do all other things permitted of corporations pursuant to the
provisions of The General and Business Corporation Law of Missouri, as amended
from time to time.
ARTICLE VII
A special meeting of the shareholders may be called only by: (i) the Board
of Directors pursuant to a resolution adopted by the affirmative vote of a
majority of the entire Board of Directors; (ii) the Chief Executive Officer of
the corporation; or (iii) the Chief Operating Officer of the corporation. At
such special meeting of shareholders, only such business shall be conducted, and
only such proposals shall be acted upon, as were specified in the notice
thereof.
ARTICLE VIII
The provisions of Section 351.407 or any other section of The General and
Business Corporation Law of Missouri limiting the voting rights of control
shares of public corporations that are acquired in a control share acquisition
shall not apply to control share acquisitions of shares of the corporation.
ARTICLE IX
(a) The corporation may indemnify any person (other than a party plaintiff
suing on his own behalf or in the right of the corporation) who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit, or proceeding, whether civil, criminal, administrative
or investigative, other than an action by or in the right of the corporation, by
reason of the fact that such person is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses, including attorneys'
fees, judgments, fines and amounts paid in settlement actually and reasonably
incurred by such person in connection with such action, suit, or proceeding if
such person acted in good faith and in a manner he or she reasonably believed to
be in or not opposed to the best interests of the corporation, and with respect
to any criminal action or proceeding, had no reasonable cause to believe his or
her conduct was unlawful. The termination of any action, suit, or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which he or she reasonably believed to be
in or not opposed to the best interests of the corporation, and, with respect to
any criminal action or proceeding, had reasonable cause to believe that his or
her conduct was unlawful. Indemnification under this part (a) of Article IX
shall be mandatory with respect to any action taken by a person in such person's
capacity as a director of this corporation that would otherwise be indemnifiable
under this part (a) at the discretion of this corporation.
(b) The corporation may indemnify any person (other than a party plaintiff
suing on such person's own behalf or in right of the corporation) who was or is
a party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that such person is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against expenses, including attorneys' fees, and amounts paid in settlement
actually and reasonably incurred by him or her in connection with the defense or
settlement of the action or suit if such person acted in good faith and in a
manner he or she reasonably believed to be in or not opposed to the best
interests of the corporation; except that no indemnification shall be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable for negligence or misconduct in the performance of his or
her duty to the corporation unless and only to the extent that the court in
which the action or suit was brought determines upon application that, despite
Page 16
<PAGE>
O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
Exhibit 3.3 - RESTATED ARTICLES OF INCORPORATION, AS AMENDED (cont.)
the adjudication of liability and in view of all the circumstances of the case,
the person is fairly and reasonably entitled to indemnity for such expenses
which the court shall deem proper. The indemnification permitted under this part
(b) of Article IX shall be mandatory with respect to any action taken by a
person in such person's capacity as a director of this corporation that would
otherwise be indemnifiable under this part (b) at the discretion of the
corporation.
(c) To the extent that an officer, employee, or agent of the corporation
has been successful on the merits or otherwise in defense of any action, suit,
or proceeding referred to in parts (a) and (b) of this Article IX, or in defense
of any claim, issue or matter therein, such person shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by him or
her in connection with the action, suit, or proceeding.
(d) Subject to any applicable court order, any indemnification of a
director required under part (a) or part (b) of this Article IX shall be made by
the corporation unless a determination is made reasonably and promptly that
indemnification of said director is not proper under the circumstances because
he has not met the applicable standard of conduct set forth in or established
pursuant to this Article IX. Subject to any applicable court order, any
indemnification of an officer, employee, or agent of the corporation authorized
under part (a) or part (b) of this Article IX shall be made by the corporation
only as authorized in a specific case upon a determination that indemnification
is proper in the circumstances because such person has met the applicable
standard of conduct set forth in or established pursuant to this Article IX. Any
such determination with respect to indemnification of a director, officer,
employee, or agent shall be made (i) by the Board of Directors by a majority
vote of a quorum consisting of directors who were not parties to such action,
suit or proceeding, or (ii) if such a quorum is not obtainable, or even if
obtainable a quorum of disinterested directors so directs, by independent legal
counsel in a written opinion, or (iii) by majority vote of the shareholders;
provided that no such determination shall preclude an action brought in an
appropriate court to challenge such determination.
(e) Expenses incurred by a person who is or was a director of the
corporation in defending a civil or criminal action, suit, or proceeding shall
be paid by the corporation in advance of the final disposition of an action,
suit, or proceeding, and expenses incurred by a person who is or was an officer,
employee, or agent of the corporation in defending a civil or criminal action,
suit, or proceeding may be paid by the corporation in advance of the final
disposition of such action, suit or proceeding as authorized by or at the
direction of the Board of Directors, in either case upon receipt of an
undertaking by or on behalf of the director, officer, employee, or agent to
repay such amount if it shall ultimately be determined that he or she is not
entitled to be indemnified by the corporation as authorized in or pursuant to
this Article.
(f) The indemnification provided by this Article IX shall not be deemed
exclusive of any other rights to which those seeking indemnification may be
entitled, whether under any statute, agreement, vote of shareholders or
disinterested directors or otherwise, both as to action in an official capacity
and as to action in another capacity while holding such office.
(g) Without limiting the other provisions of this Article IX, the
corporation is authorized from time to time, without further action by the
shareholders of the corporation, to enter into agreements with any director,
officer, employee or agent of the corporation providing such rights of
indemnification as the corporation may deem appropriate, up to the maximum
extent permitted by law. Any agreement entered into by the corporation with a
director may be authorized by the other directors, and such authorization shall
not be invalid on the basis that different of similar agreements may have been
or may thereafter be entered into with other directors.
(h) Except as may otherwise be permitted by law, no person shall be
indemnified pursuant to this Article IX (including, without limitation, pursuant
to any agreement entered into pursuant to part (g) of this Article IX) from or
on account of such person's conduct which is finally adjudged to have been
knowingly fraudulent, deliberately dishonest or willful misconduct. The
corporation may (but need not) adopt a more restrictive standard of conduct with
respect to the indemnification of any employee or agent of the corporation.
(i)The corporation may purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee, or agent of the corporation,
or who is or was otherwise serving on behalf or at the request of the
corporation as a director, officer, employee, member or agent of another
corporation, partnership, joint venture, trust, trade or industry association,
or other enterprise (whether incorporated or unincorporated, for-profit or
not-for-profit), against any claim, liability or expense asserted against such
person and incurred by him or her in any such capacity, or arising out of his or
her status as such, whether or not the corporation would have the power to
indemnify him against such liability under the provisions of this Article IX.
Page 17
<PAGE>
O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
Exhibit 3.3 - RESTATED ARTICLES OF INCORPORATION, AS AMENDED (cont.)
(j) For the purposes of this Article IX:
(i) Any director of the corporation who shall serve as a director,
officer, or employee of any other corporation, partnership, joint venture,
trust, or other enterprise of which the corporation, directly or
indirectly, is or was the owner of 20% or more of either the outstanding
equity interests or the outstanding voting stock (or comparable interests),
shall be deemed to be so serving at the request of the corporation, unless
the Board of Directors of the corporation shall determine otherwise. In all
other instances where any person shall serve as a director, officer,
employee, or agent of another corporation, partnership, joint venture,
trust, or other enterprise of which the corporation is or was a shareholder
or creditor, or in which it is or was otherwise interested, if it is not
otherwise established that such person is or was serving as a director,
officer, employee, or agent at the request of the corporation, the Board of
Directors of the corporation may determine whether such service is or was
at the request of the corporation, and it shall not be necessary to show
any actual or prior request for such service.
(ii) References to a corporation include all constituent corporations
absorbed in a consolidation or merger as well as the resulting or surviving
corporation so that any person who is or was a director, officer, employee,
or agent of a constituent corporation or is or was serving at the request
of a constituent corporation as a director, officer, employee, or agent of
another corporation, partnership, joint venture, trust, or other enterprise
shall stand in the same position under the provisions of this Article IX
with respect to the resulting or surviving corporation as such person would
if he or she had served the resulting or surviving corporation in the same
capacity.
(iii) The term "other enterprise" shall include, without limitation,
employee benefit plans and voting or taking action with respect to stock or
other assets therein; the term "serving at the request of the corporation"
shall include, without limitation, any service as a director, officer,
employee, or agent of the corporation which imposes duties on or involves
services by , a director, officer, employee, or agent with respect to any
employee benefit plan, its participants, or beneficiaries; and a person who
acted in good faith and in a manner he or she reasonably believed to be in
the interest of the participants and beneficiaries of an employee benefit
plan shall be deemed to have satisfied any standard of care required by or
pursuant to this Article IX in connection with such plan; and the term
"fines" shall include, without limitation, any excise taxes assessed on a
person with respect to an employee benefit plan and shall also include any
damages (including treble damages) and any other civil penalties.
(k) Any indemnification rights provided pursuant to this Article IX shall
continue as to a person who has ceased to be a director, officer, employee, or
agent and shall inure to the benefit of the heirs, executors, and administrators
of such a person. Notwithstanding any other provision in these Articles of
Incorporation, any indemnification rights arising under or granted pursuant to
this Article IX shall survive the amendment or repeal of this Article IX with
respect to any acts or omissions occurring prior to the effective time of such
amendment or repeal and persons to whom such indemnification rights are given
shall be entitled to rely upon such indemnification rights with respect to such
acts or omissions as a binding contract with the corporation.
(l) It is the intention of the corporation to limit the liability to the
directors of the corporation, in their capacity as such, whether to the
corporation, its shareholders or otherwise, to the fullest extent permitted by
law. Consequently, should The General and Business Corporation Law of Missouri
or any other applicable law be amended or adopted hereafter so as to permit the
elimination or limitation of such liability, the liability of the directors of
the corporation shall be so eliminated or limited to the greatest possible
extent without the need for amendment of this Article IX or further action on
the part of the Board of Directors or shareholders of the corporation.
Page 18
<PAGE>
O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
Exhibit 3.3 - RESTATED ARTICLES OF INCORPORATION, AS AMENDED (cont.)
ARTICLE X
The Board of Directors shall have power to adopt, repeal, or amend the
By-laws of this corporation and to adopt new or additional By-laws, subject
however, to the paramount right of the holders or common stock to limit or
divest such power of the Board of Directors, to such extent and for such periods
as the holders of common stock at any regular or special meeting shall
determine.
IN WITNESS WHEREOF, the undersigned, David O'Reilly, Vice President, and Ann
Drennan, Secretary, of the corporation, have executed these Restated Articles of
Incorporation on behalf of the Corporation this 26th day of February, 1993.
O'REILLY AUTOMOTIVE, INC.
By: /s/ David O'Reilly
------------------------------------------
Vice President and Chief Executive Officer
By: /s/ Ann Drennan
------------------------------------------
Secretary
STATE OF MISSOURI )
) SS.
COUNTY OF GREENE )
I, Patricia M. Headley, a notary public, do hereby certify that on this
26th day of February, 1993, personally appeared before me David O'Reilly and Ann
Drennan, who being by me first duly sworn, declared that they are the persons
who signed the foregoing document as officers of the corporation named therein
and the statements therein contained are true.
/s/ Patricia M. Headley
-----------------------------------------
Notary Public
My Commission Expires:
January 3, 1995
(Filed and Certificate Issued Mar. 1, 1993)
Page 19
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Condensed Consolidated Balance Sheet at September 30, 1999 (unaudited) and the
Condensed Consolidated Statement of Income for the Nine Months Ended September
30, 1999 (unaudited) and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<CIK> 0000898173
<NAME> O'REILLY AUTOMOTIVE, INC.
<MULTIPLIER> 1000
<CURRENCY> U. S. Dollars
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<EXCHANGE-RATE> 1
<CASH> $2,729
<SECURITIES> 500
<RECEIVABLES> 55,205
<ALLOWANCES> 439
<INVENTORY> 288,823
<CURRENT-ASSETS> 350,302
<PP&E> 260,550
<DEPRECIATION> 51,257
<TOTAL-ASSETS> 581,346
<CURRENT-LIABILITIES> 140,573
<BONDS> 0
0
0
<COMMON> 253
<OTHER-SE> 389,456
<TOTAL-LIABILITY-AND-EQUITY> 581,346
<SALES> 570,912
<TOTAL-REVENUES> 571,219
<CGS> 330,130
<TOTAL-COSTS> 182,679
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,277
<INTEREST-EXPENSE> 4,322
<INCOME-PRETAX> 54,686
<INCOME-TAX> 20,901
<INCOME-CONTINUING> 33,785
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 33,785
<EPS-BASIC> 1.41
<EPS-DILUTED> 1.39
</TABLE>
The following factors could affect our actual results, including revenues,
expenses and net income, and could cause them to differ from any forward-looking
statements made by or on behalf of us.
Competition
We compete with a large number of retail and wholesale automotive aftermarket
product suppliers. The distribution of automotive aftermarket products is a
highly competitive industry, particularly in the more densely populated market
areas served by us. Competitors include national and regional automotive parts
chains, independently owned parts stores (some of which are associated with
national auto parts distributors or associations), automobile dealerships, mass
or general merchandise, discount and convenience chains that carry automotive
products, independent warehouse distributors and parts stores and national
warehouse distributors and associations. Some of our competitors are larger and
have greater financial resources than us.
No Assurance of Future Growth
We believe that our ability to open additional stores at an accelerated rate
will be a significant factor in achieving our growth objectives for the future.
Our ability to accomplish this growth is dependent, in part, on matters beyond
our control, such as weather conditions, zoning and other issues related to new
store site development, the availability of qualified management personnel and
general business and economic conditions. No assurance can be given that our
current growth rate can be maintained.
Dependence Upon Key and Other Personnel
The success of our company has been largely dependent on the efforts of certain
key personnel, including David E. O'Reilly, Lawrence P. O'Reilly, Charles H.
O'Reilly, Jr., Rosalie O'Reilly Wooten, Ted F. Wise, and Greg Henslee. The loss
of the services of one or more of these individuals could have a material
adverse effect on the business and results of operations. Additionally, in order
to successfully implement and manage our growth strategy, we will be dependent
upon our ability to continue to attract and retain qualified personnel. There
can be no assurance that we will be able to continue to attract such personnel.
Concentration of Ownership by Management
Our executive officers and directors as a group beneficially own a substantial
percentage of the outstanding shares of our common stock. These officers and
directors have the ability to exercise effective voting control of the company,
including the election of all of our directors, and to effectively determine the
vote on any matter being voted on by our shareholders, including any merger,
sale of assets or other change in control of the company.
Page 21
