2020 Annual Report - O'Reilly Auto Parts

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2020 Annual Report

$8,593 $8,978 $9,536 $10,150 $11,604

$10.73 $12.67 $16.10 $17.88 $23.53

34.3% 35.1% 39.5% 38.7% 48.6%

2016 2017 2018 2019 2020

SALES

(in millions)

2016 2017 2018 2019 2020

DILUTED EARNINGS per SHARE

2016 2017 2018 2019 2020

RETURN on INVESTED CAPITAL

FINANCIAL HIGHLIGHTS

In thousands, except earnings per share and ratio data and store count

YEAR ENDED DECEMBER 31, Store Count Percentage Increase in Comparable Store Sales Sales Operating Income Net Income Accounts Payable to Inventory Working Capital Total Assets Total Debt Shareholders' Equity Earnings Per Share (assuming dilution) Weighted-Average Common Shares

Outstanding (assuming dilution)

2020

5,616

10.9%

$ 11,604,493 $

2,419,336

1,752,302

114.5%

(762,630)

11,596,642

4,123,217

140,258

$

23.53 $

74,462

2019 5,460 4.0% 10,149,985 $ 1,920,726 1,391,042 104.4% (635,765) 10,717,160 3,890,527 397,340 17.88 $ 77,788

2018 5,219 3.8% 9,536,428 $ 1,815,184 1,324,487 105.7% (350,918) 7,980,789 3,417,122 353,667 16.10 $ 82,280

2017 5,019 1.4% 8,977,726 $ 1,725,400 1,133,804 106.0% (249,694) 7,571,885 2,978,390 653,046 12.67 $ 89,502

2016 4,829 4.8% 8,593,096 1,699,206 1,037,691 105.7% (142,674) 7,204,189 1,887,019 1,627,136 10.73 96,720

COMPARISON OF TEN-YEAR CUMULATIVE RETURN

This graph shows the cumulative total shareholder return assuming the investment of $100 on December 31, 2010, and the reinvestment of dividends thereafter, if any, in the common stock of O'Reilly Automotive, Inc., the Standard and Poor's S&P 500 Retail Index and the Standard and Poor's S&P 500 Index.

$725 $749

$570

$100

$132

$148

$213

$319

$419

$461

$398

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

O'Reilly Automotive, Inc. S&P 500 Retail Index S&P 500 Index

Our commitment to our customers and our team members:

We are enthusiastic, hardworking professionals who are dedicated to teamwork, safety/wellness, 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.

Andres Quiroz-Marin, Installer Service Specialist, O'Reilly 5796-Aurora, IL.

"O'Reilly Strong" is a key foundation for our success and cannot be easily duplicated.

TO OUR FELLOW SHAREHOLDERS:

GREG JOHNSON

Chief Executive Officer and Co-President

2020was one of the most challenging years in the 63year history of our Company, and words simply cannot express the gratitude we have for the selfless dedication and hard work demonstrated by our Team of over 77,000 Team

JEFF SH AW

Chief Operating Officer and Co-President

Members in our stores, distribution centers and corporate offices.

At the beginning of the year, we could never have anticipated

the obstacles we would face during 2020 as a result of the COVID-19 pandemic, natural disasters and social unrest, and the disruptions and changes these would impose on every facet of

BRAD BECKHAM

Executive Vice President of Store Operations and Sales

our daily lives. In trying times, a company's true merit is put on

full display, and we were, and continue to be, extremely proud

to see our Team demonstrate the O'Reilly Culture to its fullest, showing that being "O'Reilly Strong" is a key foundation for our success and cannot be easily duplicated. Our commitment

BRENT KIRBY

Executive Vice President of Supply Chain

to protecting the health and safety of our Team Members and

customers has remained paramount, and it will continue to be

our top priority as we meet the critical needs of our customers as an essential service provider. Thank you, Team O'Reilly, for your commitment to our Culture, our Customers, and to each

THOMAS MCFALL

Executive Vice President and Chief Financial Officer

other; you continue to be our greatest competitive advantage and

the fuel for our future success.

O'REILLY AUTOMOTIVE 2020 ANNUAL REPORT ? 1

Eduardo Damian Garcia Jimenez, Assistant Store Manager, and Ana Karen Velasco, Store Manager, at the opening of our new ORMA store, Guadalajara, Jalisco, Mexico, in December 2020.

In the face of unprecedented stimulus, our Team's performance allowed us to gain significant

challenges, Team O'Reilly

market share.

delivered record-breaking operating performance, highlighted by full-year comparable store sales growth of 10.9% and an incredible 26% increase in operating profit. The significance of these outstanding results cannot be understated, but it is also extremely important to note that these results were

We remain optimistic regarding the health and strength of the automotive aftermarket industry and the ability of our Team to produce strong top-line results. Miles driven is the fundamental long-term driver of demand in our industry, and we expect to benefit as miles driven returns to normal levels and more consumers return to work. With these miles being driven by a growing and aging vehicle fleet, we remain confident consumers will continue to see value in repairing and

achieved by executing our time-tested business model of excellent customer service by our professional parts people, supported by our robust distribution network supplying industry-leading

parts availability. Our mission is to be the dominant supplier of auto parts in all of our markets, and while the strong results in 2020 were supported by significant macroeconomic tailwinds and government

Krishna Lakkamraju, Outbound Materials Handler, at the opening of our new DC-Lebanon, TN, on March 9, 2020.

O'REILLY AUTOMOTIVE 2020 ANNUAL REPORT ? 2

Ricardo Bernabe Hernandez, Retail Service Specialist, O'Reilly 281-Des Moines, IA.

maintaining their vehicles, particularly as economic uncertainty persists. These drivers provide both a short-term and long-term positive outlook for our industry.

On top of the impressive operating results, our Team was able to make investments in the continued growth of our business. During 2020, we successfully opened 156 net, new stores, including our first greenfield new store opening in Mexico. For 2021, we have established a growth target of 165 to 175 net, new store openings, which includes an additional five new stores in Mexico. During 2020, we further expanded our

industry-leading distribution network with the opening of our Lebanon, Tennessee, distribution center in 2020, and we made significant progress on our new Horn Lake, Mississippi, distribution center, which is expected to open during the second quarter of 2021. In addition, we continue to invest heavily in enhancing our omnichannel capabilities to meet our customers on their terms, whether they visit a store, call or click.

As we seek the highest return for our shareholders' capital, reinvesting in our business remains the top priority. Our capital strategy continues to be to enhance our existing store base and distribution network, grow organically through new store openings, and consolidate the market

Tonny Nguyen, Retail Service Specialist, O'Reilly 396-Lincoln, NE. O'REILLY AUTOMOTIVE 2020 ANNUAL REPORT ? 3

CUSTOMER SERVICE Coast To Coast

Store Count 200-700+ 100-199 1-99 Distribution Center Future Distribution Center

United States Alabama...............152 Alaska....................15 Arizona.................142 Arkansas............... 117 California............. 562 Colorado............. 109 Connecticut............ 26 Florida................. 246 Georgia............... 224 Hawaii....................13 Idaho.................... 48 Illinois..................213 Indiana.................156 Iowa...................... 80 Kansas.................. 86 Kentucky............. 105 Louisiana..............127 Maine.................... 34 Massachusetts........51 Michigan..............181 Minnesota.............124 Mississippi............. 82 Missouri............... 204 Montana................ 28

Mexico Guanajuato.............. 3 Jalisco...................19

Nebraska............... 49 Nevada.................. 57 New Hampshire...... 33 New Mexico........... 60 New York .............. 20 North Carolina...... 199 North Dakota..........15 Ohio..................... 211 Oklahoma.............124 Oregon.................. 71 Pennsylvania......... 37 Rhode Island...........12 South Carolina......115 South Dakota..........19 Tennessee.............185 Texas................... 755 Utah...................... 66 Vermont ................ 24 Virginia.................. 90 Washington..........158 West Virginia...........18 Wisconsin.............128 Wyoming............... 23

through prudent acquisitions of existing auto parts chains. We continue to be pleased with the strong performance of our new stores, driven by our Teams of Professional Parts People delivering excellent customer service from the day the doors are opened. 2020 also represented our first full year with operations in Mexico, after completing the acquisition of Mayasa Auto Parts at the end of 2019, and we are delighted with our Team and the expansion opportunities that lie ahead in the Mexican automotive aftermarket.

Our Team's dedication to excellent customer service and expense control drove free cash flow of $2.2 billion in 2020, an increase of $1.2 billion over 2019. After investing $466 million in capital projects across our business, we were able to return $2.1 billion, to you, our shareholders, through prudent execution of our share repurchase program during 2020. We continue to view share repurchases as an effective means of returning excess capital to our shareholders after we have exhausted

O'REILLY AUTOMOTIVE 2020 ANNUAL REPORT ? 4

opportunities to profitably grow our business and generate strong returns. We remain committed to a capital structure that upholds our investment-grade credit ratings and provides us the ability to take advantage of growth opportunities, while also optimizing returns for our shareholders.

We conclude this year's shareholder letter by renewing our commitment to you, our shareholders, to perpetuate the O'Reilly Culture that has been the driver of our success, and ensuring it remains the foundation for every decision we make. 2021 will mark 64 years of dedication to excellent customer service, and we consider it an honor to continue to build on our strong legacy. We are thankful for the trust and confidence our shareholders place in the O'Reilly Team, and we look forward to extending our long record of profitable growth in 2021, while we continue to navigate the challenges presented by the pandemic and focus on protecting the health and safety of our Team Members and customers.

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