baird’s 2009 growth stockmarket for auto parts, the economy in general, inflation, consumer debt...
TRANSCRIPT
Page 1
Baird’s 2009 Growth Stock
Conference
May 13, 2009
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The Company claims the protection of the safe-harbor for forward-looking
statements contained in the Private Securities Litigation Reform Act of 1995.
The Company intends these forward-looking statements to speak only as of the
time of the presentation and does not undertake to update or revise them, as more
information becomes available. These statements discuss, among other things,
expected growth, store development 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 approvals, our ability to hire and retain qualified employees, risks
associated with the integration of acquired businesses, weather, terrorist activities,
war and the threat of war. Actual results may materially differ from anticipated
results described in these forward-looking statements. Please refer to the Risk
Factors sections of the Company’s Form 10-K for the year ended December 31,
2008, for more details.
Forward Looking Statements
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Automotive Aftermarket Industry
Overview
• Estimated annual sales of approximately $122 billion*
• Growth in both DIY and DIFM markets
• O’Reilly believes industry’s growth is driven by:
– $60 Billion Estimated Unperformed Maintenance
– Vehicle Population Growth
– Vehicle Average Age Growth
– Approximately 3 Trillion Annual Miles Driven
– Declining light vehicle sales
Unperformed
Maintenance
Consumer ―DIY‖
Professional Installers (―DIFM‖)
$40 billion
$60 billion$82 billion
Source: 2009 AAIA Factbook * Excludes tire sales
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U.S. Miles Driven vs. U.S. Gas Prices
$0.00
$0.50
$1.00
$1.50
$2.00
$2.50
$3.00
$3.50
0.000
0.500
1.000
1.500
2.000
2.500
3.000
3.500
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80
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Miles Driven Gas Prices
Mil
es d
riv
en i
n t
ril
lio
ns
Ga
s p
rice
s in
do
lla
rs p
er g
all
on
Miles Driven Source: U.S. Department of Transportation – Federal Highway Administration
Gas Prices Source: U.S. Department of Labor – Bureau of Labor Statistics
Average gas price at
5/04/2009 was $2.08
60
99
140
175
212240 245 249
0
40
80
120
160
200
240
280
1960 1970 1980 1990 2000 2005 2006 2007
Millio
ns
Source: 2007/2008 AAIA Factbook
Vehicle Population Growth
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Light Vehicle Population:
Average Age & Annual Sales
Source: Average Age: 2008/2009 AAIA Factbook
Unit Sales: 2008/2009 AAIA Factbook plus J.D. Power estimates
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Industry Consolidation
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
2001 2002 2003 2004 2005 2006 2007
10,587 10,921 11,270 12,049 12,882 13,712 15,088US
Au
to
Pa
rts S
to
res
Top 10 Stores Industry
35,238 35,590 35,357 35,405 35,690 35,850 36,136 Top 10 U.S. Auto Parts Stores
1. AutoZone (4,141)(1)
2. Advance Auto Parts (3,368)(2)
3. O’Reilly Auto Parts (3,337)
4. CARQUEST (1,674) (3)
5. NAPA (1,085) (3)
6. Pep Boys (562)
7. Uni-Select (321)
8. Fisher Auto Parts (320)
9. Replacement Parts (152)
10. Auto-Wares Group (128)
(1)Excludes Mexico
(2) Includes Puerto Rico
(3) Company-owned stores
30% 31% 32% 34% 38% 42%36%
Source: U.S. Auto Parts Stores: 2009 AAIA Factbook
Top 10 U.S. Auto Parts Stores: January 2009 Aftermarket Business Magazine or latest SEC filing.
Page 8
• Pressure on Miles Driven:
– Recessionary economy
– Rising unemployment: March 2009 @ 8.5%; Year-end 2009E @ 10%
• Continued aging of the U.S. Vehicle Population:
– Falling new car sales: 2005 @ 17 million and 2009 Forecast @ 10.4 million
– Tight consumer credit & spending leads to investing in currently owned autos
• Industry consolidation:
– Big and small
– Lack of available credit
2009 Aftermarket Outlook
Page 9
Company Overview
• Founded in 1957 by the O’Reilly family with initial public offering in 1993 – Listed on NASDAQ as ORLY
• America’s #3 retailer of automotive parts and accessories with 3,337 stores in 38 states as of March 31, 2009
• 16 consecutive years of increased revenue and operating income, EBITDA and comparable store sales growth
• Annual sales of $3.6 billion in 2008 with EBITDA of $464 million (CSK added 7/12/2008)
• 2009 estimated annual sales of $4.7 to $4.8 billion (full year of CSK’s revenue)
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Company Overview
3,337 stores in 38 states as of March 31, 2009, on a combined basis
18 Distribution Centers with Greensboro opening in May and signed purchase agreements on four others (Seattle, Los Angeles, Denver and Salt Lake
City metro areas)
Over 40,000 Team Members
Market Capitalization – over $4.0 billion
Total Assets - $4.2 billion
Net Income of 186.2 million
First quarter 2009 adjusted EPS of $0.47 versus EPS of $0.40 for the same in 2008
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• Established track record of serving both do-it-yourself (―DIY‖) customers and
professional installers
• Greater market penetration and reduced vulnerability to competition
• Leverages our existing retail and distribution infrastructure
• Can profitably operate in large and small markets
• Enhances service levels offered to our DIY customers
• Significant barriers to success in professional installer market
Dual Market Strategy
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• Superior service provided by Professional Parts People
• Leading point-of-sale systems
- Electronic cataloging
- Proprietary Sourcing System
- High-speed internal network
• Competitive pricing
• Broad inventory availability
- Stores average 21,000 SKUs
- Stores have overnight access to over 100,000 SKUs
• Convenient store locations and modern, attractive store design
Superior Customer Service
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• O’Reilly started exclusively in the commercial business in 1957
• Unsurpassed availability of quality brand name parts through distribution system and hub store network
Commercial Strategy
• National account supplier
• Strong commercial sales force through First Call program
• Sophisticated pricing system to maximize gross margin
• Full service provider of all business needs of professional installers
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• Distribute to stores daily — not weekly
• Stock over 100,000 SKUs — more than competitors
• Computerized inventory management system
• Master Inventory ―Hub‖ stores – More than 100
• Eighteen strategically located distribution centers:
- Houston, TX - Mobile, AL - Belleville, MI – Converted April 2009
- Springfield, MO - Dallas, TX - Greensboro, NC – May 2009
- Oklahoma City, OK - Little Rock, AR - Kansas City, MO – Relocating August 2009
- Atlanta, GA - Nashville, TN - Seattle, WA – November 2009
- Billings, MT - Indianapolis, IN - Southern California – spring 2010
- Brooklyn Park, MN - Lubbock, TX - Denver, CO – spring 2010
- Des Moines, IA - Phoenix, AZ - Salt Lake City, UT – summer 2010
- Knoxville, TN - Dixon, CA
Strategic Distribution System
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• Expand in clusters around distribution centers and master inventory stores
23 31 4050
182
80101
39
82106
128140
149
72
170190
150
1,342
150
0
25
50
75
100
125
150
175
200
225
250
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009E
Consistent Growth
Note: Major Acquisitions: 1998 - Hi/LO; 2001 – Midstate; 2005 – Midwest; 2008 – CSK Auto
Major Acquisitions
Internal Growth
Page 16
2010
Q4
2010
Q2
2010
Q3
2009
Q4
2010
Q1
2009
Q2
2009
Q3
2008
Q4
2009
Q1
2
3
4
5
6
7
1
1 Convert Northern Plains, New Mexico,
El Paso and Chicago stores – all stores
in O’Reilly distribution reach.
Convert Detroit, MI distribution center
Convert Michigan and Ohio stores
Seattle distribution center opens
Utah distribution center opens
Denver and Southern California distribution centers open
Convert West Coast stores
2
3
4
5
6
7
• Progressive conversion of CSK stores based on Distribution Reach
Integration Strategy
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+
=
38 States and Growing…
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9.2%
11.4%
14.9%
8.9% 8.9%
14.4%
6.8% 6.8%
9.6%
5.0%
8.8%
3.7%
7.8%
6.8% 7.5%
3.3%3.7%
1.5%
0%
2%
4%
6%
8%
10%
12%
14%
16%
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Same-store product sales data are calculated based on the change in product sales of stores open at least one year. Prior to 2000,
same-store product sales data were calculated based on the change in product sales of only those stores open during both full
periods being compared.
2009 Guidance2% to 4% combined Company
3% to 5% for existing O’Reilly stores
2% to 4% for CSK stores
Same Store Sales
(1)
(1) Consolidated same stores sales. For 2008 O’Reilly stores rose 2.6% and CSK stores declined 1.7%
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Adjusted EPS Growth
$0.20$0.23$0.27
$0.36$0.46 $0.50
$0.63
$0.77
$0.92
$1.09
$1.41
$1.55
$1.67 $1.64
$0.00
$0.25
$0.50
$0.75
$1.00
$1.25
$1.50
$1.75
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
2009 Guidance$1.92 to $1.96(1) (2)
(1) Excluding one-time acquisition related charges(2) GAAP EPS $1.89 to $1.93
Comparable EPS for all periods presented
(3)
(3) 2008 adjusted EPS excludes one-time charges of $19.2 million. GAAP EPS of $1.48 for 2008.
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$202 $259 $316
$616$754
$890$1,092
$1,313$1,512
$1,721
$2,045
$2,283$2,522
$3,577
$0
$300
$600
$900
$1,200
$1,500
$1,800
$2,100
$2,400
$2,700
$3,000
$3,300
$3,600
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
($ in millions)
2009 Guidance$4,700 to $4,800
Product Sales
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$14 $19 $23$31
$46$52
$66
$82
$100
$118
$164$178
$194$205
-$30
$20
$70
$120
$170
$220
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
($ in millions)
Adjusted Net Income
(1) 2008 adjusted net income excludes one-time charges of $19.2 million. GAAP net income of $186 million for 2008.
(1)
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$27 $37 $47$72
$99$119
$149
$181
$213
$252
$321
$363
$403
$466
$0
$50
$100
$150
$200
$250
$300
$350
$400
$450
$500
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
($ in millions)
EBITDA
Page 23
Culture Statement
"We are ENTHUSIASTIC, HARDWORKING
PROFESSIONALS who are DEDICATED to
TEAMWORK, SAFETY, and EXCELLENT
CUSTOMER SERVICE. We will practice EXPENSE
CONTROL while setting an example of RESPECT,
HONESTY, and a WIN-WIN ATTITUDE in
everything we do!"