Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

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Item 7. 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, 2025 and 2024.

	●	Our liquidity and capital resources.

	●	Our critical accounting estimates.

	●	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 on Form 10-K.

OVERVIEW

We are a specialty retailer of automotive aftermarket parts, tools, supplies, equipment, and accessories in the United States, Puerto Rico, Mexico, and Canada. We are one of the largest North American automotive aftermarket specialty retailers, selling our products to both DIY customers and professional service providers – our “dual market strategy.” Our goal is to achieve growth in sales and profitability by capitalizing on our competitive advantages, such as our dual market strategy, superior customer service provided by well-trained and technically proficient Team Members, and strategic distribution and hub store network that provides same day and over-night inventory access for our stores to offer a broad selection of product offerings. The successful execution of our growth strategy includes aggressively opening new stores, growing sales in existing stores, continually enhancing merchandising and store layouts, and implementing our Omnichannel initiatives. As of December 31, 2025, we operated 6,447 stores in 48 U.S. states and Puerto Rico, 112 stores in Mexico, and 26 stores in Canada.

The extensive product line offered in our stores consists of new and remanufactured automotive hard parts, maintenance items, accessories, a complete line of auto body paint and related materials, automotive tools, and professional service provider service equipment. Our extensive product line includes an assortment of products that are differentiated by quality and price for most of the product lines we offer. For many of our product offerings, this quality differentiation reflects “good,” “better,” and “best” alternatives. Our sales and total gross profit dollars are, generally, highest for the “best” quality category of products. Consumers’ willingness to select products at a higher point on the value spectrum is a driver of enhanced sales and profitability in our industry. We have ongoing initiatives focused on marketing and training to educate customers on the advantages of ongoing vehicle maintenance, as well as “purchasing up” on the value spectrum.

Our stores also offer enhanced services and programs to our customers, including used oil, oil filter, and battery recycling; battery, wiper, and bulb replacement; battery diagnostic testing; electrical and module testing; check engine light code extraction through our trusted VeriScan technology, which provides diagnostic information with possible repair fixes; referrals to trusted local repair shops; loaner tool program; drum and rotor resurfacing; custom hydraulic hoses; professional paint shop mixing and related materials; and machine shops.

Our business is influenced by a number of general macroeconomic factors that impact both our industry and consumers, including, but not limited to, inflation, including rising consumer staples; fuel and energy costs; unemployment trends; interest rates; and other economic factors. 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.

While inflationary cost pressures can impact our business, including inflation resulting from changes in tariff rates, historically we have been successful in reducing the effects of merchandise cost increases, principally by taking advantage of supplier incentive programs, economies of scale resulting from increased volume of purchases, and selective forward buying. To the extent our acquisition costs increase due to base commodity price increases or other input cost increases affecting the entire industry, we have typically been able to pass along these cost increases through higher selling prices for the affected products. As a result, we do not believe inflation has had a material adverse effect on our operating results.

We believe the key drivers of demand over the long-term for the products sold within the automotive aftermarket include the number of miles driven, number of registered vehicles, annual rate of light vehicle sales, and average vehicle age:

Number of Miles Driven:

The number of total miles driven influences the demand for repair and maintenance products sold within the automotive aftermarket. In the U.S., vehicles are driven approximately three trillion miles per year, resulting in ongoing wear and tear and a corresponding continued demand for the repair and maintenance products necessary to keep these vehicles in operation. According to the U.S. Department of Transportation, the number of total miles driven in the U.S. increased 2.1%, 1.0%, and 0.9% in 2023, 2024, and 2025, respectively. 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. As reported by the Auto Care Association, the total number of U.S. registered vehicles increased 13.4% from 2014 to 2024, bringing the number of light vehicles on the road to 286 million by the end of 2024. For the year ended December 31, 2025, the seasonally adjusted annual rate of light vehicle sales in the U.S. (“SAAR”) was approximately 16.0 million vehicles, contributing to the continued growth in the total number of registered vehicles on the road. From 2014 to 2024, U.S. vehicle scrappage rates have remained relatively stable, ranging from 4.1% to 5.6% annually. As a result, over the past decade, the average age of the U.S. vehicle population has increased 10.5%, from 11.4 years in 2014 to 12.6 years in 2024. 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 rising average new and used vehicle prices, as consumers are generally 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. As the average age of vehicles on the road increases, a larger percentage of miles are being driven by vehicles that are outside of a manufacturer warranty. These out-of-warranty, older vehicles generate strong demand for automotive aftermarket products as they go through more routine maintenance cycles, have more frequent mechanical failures, and generally require more maintenance than newer vehicles. We believe consumers will continue to invest in these reliable, higher-quality, higher-mileage vehicles, and these investments, along with an increasing total light vehicle fleet, will support continued demand for automotive aftermarket products.

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.

RESULTS OF OPERATIONS

The table below compares the Company’s selected financial data over a ten-year period:


Year ended December 31,	2025		2024		2023		2022		2021		2020		2019		2018		2017		2016
(In thousands, except per share, Team Members, stores and ratio data)

SELECT INCOME STATEMENT RELATED DATA:

Percentage increase in comparable store sales (a)(b)	4.7	%	2.9	%	7.9	%	6.4	%	13.3	%	10.9	%	4.0	%	3.8	%	1.4	%	4.8	%
Sales ($)	17,781,992		16,708,479		15,812,250		14,409,860		13,327,563		11,604,493		10,149,985		9,536,428		8,977,726		8,593,096
Gross profit	9,174,141		8,554,489		8,104,803		7,381,706		7,019,949		6,085,692		5,394,691		5,039,966		4,720,683		4,509,011
Operating income	3,460,612		3,251,157		3,186,376		2,954,491		2,917,168		2,419,336		1,920,726		1,815,184		1,725,400		1,699,206
Net income ($) (c)(d)	2,538,209		2,386,680		2,346,581		2,172,650		2,164,685		1,752,302		1,391,042		1,324,487		1,133,804		1,037,691
Earnings per share – basic ($)	2.98		2.73		2.59		2.25		2.09		1.58		1.20		1.08		0.85		0.72
Earnings per share – assuming dilution ($) (c)(d)	2.97		2.71		2.56		2.23		2.07		1.57		1.19		1.07		0.84		0.72

SELECT BALANCE SHEET AND CASH FLOW RELATED DATA:
Total assets ($)	16,538,253		14,893,741		13,872,995		12,627,979		11,718,707		11,596,642		10,717,160		7,980,789		7,571,885		7,204,189
Total debt ($)	6,016,904		5,520,932		5,570,125		4,371,653		3,826,978		4,123,217		3,890,527		3,417,122		2,978,390		1,887,019
Shareholders’ (deficit) equity ($) (c)	(763,352)		(1,370,961)		(1,739,278)		(1,060,752)		(66,423)		140,258		397,340		353,667		653,046		1,627,136
Inventory turnover (e)	1.6		1.7		1.7		1.7		1.7		1.5		1.4		1.4		1.4		1.5
Accounts payable to inventory (f)	123.9	%	128.0	%	130.8	%	134.9	%	127.4	%	114.5	%	104.4	%	105.7	%	106.0	%	105.7	%
Cash provided by operating activities ($) (g)	2,761,993		3,049,576		3,034,084		3,148,250		3,207,310		2,836,603		1,708,479		1,727,555		1,403,687		1,510,713
Capital expenditures ($)	1,168,815		1,023,387		1,006,264		563,342		442,853		465,579		628,057		504,268		465,940		476,344
Free cash flow ($) (g)(h)	1,563,250		1,987,808		1,987,720		2,371,123		2,548,922		2,189,995		1,020,649		1,188,584		889,059		978,375

SELECT OPERATING DATA:

Team Members	93,072		93,176		90,189		87,377		82,852		77,654		82,484		78,882		75,552		74,580
Total store count (i)(j)(k)	6,585		6,378		6,157		5,971		5,784		5,616		5,460		5,219		5,019		4,829
Domestic store count (i)	6,447		6,265		6,095		5,929		5,759		5,594		5,439		5,219		5,019		4,829
Mexico store count (j)	112		87		62		42		25		22		21		—		—		—
Canada store count (k)	26		26		—		—		—		—		—		—		—		—
Store square footage (a)(l)	51,515		48,809		46,681		44,604		43,185		41,668		40,227		38,455		36,685		35,123
Sales per weighted-average store ($) (a)(m)	2,728		2,642		2,578		2,415		2,298		2,057		1,881		1,842		1,807		1,826
Sales per weighted-average square foot ($) (a)(l)(n)	346		342		340		322		307		277		255		251		248		251

(a)	Represents O’Reilly’s U.S. and Puerto Rico operations only.

(b)

Comparable store sales are calculated based on the change in sales for U.S. stores open at least one year and exclude sales of specialty machinery, sales to independent parts stores, sales to Team Members, and sales from Leap Day during the years ended December 31, 2024, 2020, and 2016. Online sales for ship-to-home orders and pick-up-in-store orders for U.S. stores open at least one year are included in the comparable store sales calculation.

(c)

During the year ended December 31, 2017, the Company adopted a new accounting standard that requires excess tax benefits related to share-based compensation payments to be recorded through the income statement. In compliance with the standard, the Company did not restate prior period amounts to conform to current period presentation. The Company recorded a cumulative effect adjustment to opening retained earnings, due to the adoption of the new accounting standard. See Note 1 “Summary of Significant Accounting Policies” to the Consolidated Financial Statements of the annual report on Form 10-K for the year ended December 31, 2017, for more information.

(d)

Following the enactment of the U.S. Tax Cuts and Jobs Act in December of 2017, the Company revalued its deferred income tax liabilities, which resulted in a one-time benefit to the Company’s Consolidated Statement of Income for the years ended December 31, 2018 and 2017. See Note 17 “Income Taxes” to the Consolidated Financial Statements of the annual report on Form 10-K for the year ended December 31, 2018, for more information.

(e)	Inventory turnover is calculated as cost of goods sold for the last 12 months divided by average inventory. Average inventory is calculated as the average of inventory for the trailing four quarters used in determining the denominator.

(f)	Accounts payable to inventory is calculated as accounts payable divided by inventory.

(g)	Certain prior period amounts have been reclassified to conform to current period presentation, due to the Company’s adoption of a new accounting standard during the first quarter ended March 31, 2017. See Note 1 “Summary of Significant Accounting Policies” to the Consolidated Financial Statements of the annual report on Form 10-K for the year ended December 31, 2017, for more information.

(h)	Free cash flow is calculated as net cash provided by operating activities less capital expenditures, excess tax benefit from share-based compensation payments, and (return of)/investment in tax credit equity investments for the period.

(i)

In 2016 and 2018, the Company acquired materially all assets of Bond Auto Parts (“Bond”) and Bennett Auto Supply, Inc. (“Bennett”), respectively. After the close of business on December 31, 2018, the Company acquired substantially all of the non-real estate assets of Bennett, including 33 stores that were not included in the 2018 store count and were not operated by the Company in 2018, but beginning January 1, 2019, the operations of the acquired Bennett locations were included in the Company’s store count, and during the year ended December 31, 2019, the Company merged 13 of these acquired Bennett stores into existing O’Reilly locations and rebranded the remaining 20 Bennett stores as O’Reilly stores. Financial results for these acquired companies have been included in the Company’s consolidated financial statements from the dates of the acquisitions forward.

(j)	In 2019, the Company acquired Mayoreo de Autopartes y Aceites, S.A. de C.V. (“Mayasa”), which added 21 stores to the O’Reilly store count. Financial results for this acquired company have been included in the Company’s consolidated financial statements beginning from the date of the acquisition.

(k)	In January of 2024, the Company acquired Groupe Del Vasto (“Vast Auto”), which added 23 stores to the O’Reilly store count. Financial results for this acquired company have been included in the Company’s consolidated financial statements beginning from the date of the acquisition.

(l)	Square footage includes normal selling, office, stockroom, and receiving space.

(m)	Sales per weighted-average store are weighted to consider the approximate dates of store openings, acquisitions, or closures.

(n)	Sales per weighted-average square foot are weighted to consider the approximate dates of domestic store openings, acquisitions, expansions, or closures.

The following table includes income statement data as a percentage of sales, which is each calculated independently and may not compute to presented totals due to rounding differences, for the years ended December 31, 2025 and 2024:


		For the Year Ended
		December 31,
		2025		2024
Sales		100.0	%	100.0	%
Cost of goods sold, including warehouse and distribution expenses		48.4		48.8
Gross profit		51.6		51.2
Selling, general and administrative expenses		32.1		31.7
Operating income		19.5		19.5
Interest expense		(1.3)		(1.3)
Interest income		—		—
Income before income taxes		18.2		18.2
Provision for income taxes		3.9		3.9
Net income		14.3	%	14.3	%

2025 Compared to 2024

Sales:

Sales for the year ended December 31, 2025, increased $1.07 billion, or 6%, to $17.78 billion from $16.71 billion for the same period in 2024. Comparable store sales increased 4.7% and 2.9% for the year ended December 31, 2025 and 2024, respectively. Comparable store sales are calculated based on changes in sales for U.S. stores open at least one year and exclude sales of specialty machinery, sales to independent parts stores, and sales to Team Members, as well as sales from Leap Day in the year ended December 31, 2024. Online sales, resulting from ship-to-home orders and pickup in-store orders for U.S. stores open at least one year are included in the comparable store sales calculation. We opened 207 and 198 net, new stores during the year ended December 31, 2025 and 2024, respectively. Additionally, we began operating 23 stores in Canada from the Groupe Del Vasto (“Vast Auto”) acquisition during the year ended December 31, 2024. We anticipate new store growth will be 225 to 235 net, new store openings in 2026.

The increase in sales for the year ended December 31, 2025, was primarily the result of the 4.7% increase in domestic comparable store sales, a $354 million increase in sales from new stores opened in 2024 and 2025 that are not considered comparable stores, partially offset by the effect of sales from one additional day in the prior year due to Leap Day. Our comparable store sales increase for the year ended December 31, 2025, was driven by an increase in average ticket value for both professional service provider and DIY customers and an increase in transaction counts for professional service provider customers, partially offset by a decrease in transaction counts for DIY customers. Average ticket values benefited from increases in average selling prices on a same-SKU basis, as compared to the same period in 2024, driven by increases in acquisition costs of inventory, principally resulting from increased tariffs, which were passed on in selling prices. Average ticket values also continue to be positively impacted by the increasing complexity and cost of replacement parts necessary to maintain the current population of better-engineered and more technically advanced vehicles. These better-engineered, more technically advanced vehicles require less frequent repairs, as the component parts are more durable and last for longer periods of time. The resulting decrease in repair frequency creates pressure on customer transaction counts; however, when repairs are needed, the cost of replacement parts is, on average, greater, which is a benefit to average ticket values. The decrease in DIY customer transaction counts was driven by pressured consumer spending on discretionary categories and broader industry pressure on certain hard part categories.

See Note 13 “Revenue” to the Consolidated Financial Statements for further information concerning the Company’s sales.

Gross Profit:

Gross profit for the year ended December 31, 2025, increased 7% to $9.17 billion (or 51.6% of sales) from $8.55 billion (or 51.2% of sales) for the same period in 2024. The increase in gross profit dollars for the year ended December 31, 2025, was primarily the result of increase in comparable store sales at existing stores and sales from new stores, partially offset by prior year gross profit dollars generated from one additional day due to Leap Day. The increase in gross profit as a percentage of sales for the year ended December 31, 2025, was due to improved acquisition costs and distribution operating efficiencies, partially offset by a greater percentage of our total sales mix being generated from professional service provider customers, which carry a lower gross margin percentage than DIY sales.

Selling, General and Administrative Expenses:

Selling, general and administrative expenses (“SG&A”) for the year ended December 31, 2025, increased 8% to $5.71 billion (or 32.1% of sales) from $5.30 billion (or 31.7% of sales) for the same period in 2024. The increase in total SG&A dollars for the year ended December 31, 2025, was the result of additional Team Members and vehicles to support our increased sales and store count, partially offset by prior year incremental SG&A expenses incurred from one additional day due to Leap Day. The increase in SG&A as a percentage of sales for the year ended December 31, 2025, was principally due to broad inflationary pressure in costs, primarily relating to medical and casualty insurance programs, and enhancements to store-level compensation and benefits.

Operating Income:

As a result of the impacts discussed above, operating income for the year ended December 31, 2025, increased 6% to $3.46 billion (or 19.5% of sales) from $3.25 billion (or 19.5% of sales) for the same period in 2024.

Other Income and Expense:

Total other expense for the year ended December 31, 2025, increased 7% to $220 million (or 1.2% of sales), from $206 million (or 1.2% of sales) for the same period in 2024. The increase in total other expense for the year ended December 31, 2025, was the result of increased interest expense on higher average outstanding borrowings. See Note 9 “Financing” to the Consolidated Financial Statements for further information concerning the Company’s borrowings.

Income Taxes:

Our provision for income taxes for the year ended December 31, 2025, increased 7% to $702 million (21.7% effective tax rate) from $658 million (21.6% effective tax rate) for the same period in 2024. The increase in our provision for income taxes for the year ended December 31, 2025, was primarily the result of higher taxable income and lower excess tax benefits from share-based compensation. The increase in our effective tax rate for the year ended December 31, 2025, was primarily the result of lower excess tax benefits from share-based compensation partially offset by higher transferable federal renewable energy tax credits. See Note 17 “Income Taxes” to the Consolidated Financial Statements for further information concerning the Company’s income taxes.

Net Income:

As a result of the impacts discussed above, net income for the year ended December 31, 2025, increased to $2.54 billion (or 14.3% of sales), from $2.39 billion (or 14.3% of sales) for the same period in 2024.

Earnings Per Share:

Our diluted earnings per common share for the year ended December 31, 2025, increased 10% to $2.97 on 856 million shares from $2.71 on 881 million shares for the same period in 2024.

2024 Compared to 2023

A discussion of the changes in our results of operations for the year ended December 31, 2024, as compared to the year ended December 31, 2023, has been omitted from this Form 10-K but may be found in Item 7. “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, 2024, filed with the Securities and Exchange Commission (the “SEC”) on February 28, 2025, 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. Our material cash requirements necessary to maintain the current operations of our long-term business strategy include, but are not limited to, inventory purchases; human capital obligations, including payroll and benefits; contractual obligations, including debt and interest obligations; capital expenditures; payment of income taxes; and other operational priorities. 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. 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. 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, 2025, 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 payments for the purchase of inventory.

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. See Note 6 “Leases,” Note 14 “Share-Based Compensation and Benefit Plans,” Note 15 “Commitments,” and Note 17 “Income Taxes” to the Consolidated Financial Statements for further information on our leasing arrangements, share-based compensation payments, commitments, and uncertain tax positions, respectively, which are not reflected in the table below.

The following table identifies the estimated payments for each of the next five years, and in the aggregate thereafter, of the Company’s debt instruments and related interest payments and self-insurance reserves as of December 31, 2025 (in thousands):


		December 31, 2025
		Long-Term Debt Principal			Self-Insurance
		and Interest Payments (1)			Reserves (2)
2026		$	2,157,231		$	297,304
2027			915,231			68,365
2028			627,363			44,655
2029			606,731			24,641
2030			586,481			12,079
Thereafter			2,014,863			15,733
Contractual cash obligations		$	6,907,900		$	462,777

(1)	See Note 9 “Financing” to the Consolidated Financial Statements for further information on our debt instruments and related interest payments.

(2)	See Note 15 “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 2026, 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. See Note 1 “Summary of Significant Accounting Policies” for more information on our variable interest entities. We issue stand-by letters of credit, for more information see Note 9 “Financing” to the Consolidated Financial Statements for further information on our stand-by letters of credit.

Other than the commitments discussed in Note 15 “Commitments” to the Consolidated Financial Statements, we do not have any off-balance sheet financing that has, or is reasonably likely to have, a material, current, or future effect on our financial condition, cash flows, results of operations, liquidity, capital expenditures, or capital resources.

The following table identifies cash provided by/(used in) our operating, investing and financing activities for the years ended December 31, 2025, 2024, and 2023 (in thousands):


		For the Year Ended
		December 31,
Liquidity:		2025		2024		2023
Total cash provided by/(used in):
Operating activities		$	2,761,993	$	3,049,576	$	3,034,084
Investing activities			(1,152,356)		(1,166,805)		(995,936)
Financing activities			(1,548,795)		(2,029,717)		(1,868,738)
Effect of exchange rate changes on cash			2,706		(1,941)		1,139
Net increase (decrease) in cash and cash equivalents		$	63,548	$	(148,887)	$	170,549

Capital expenditures		$	1,168,815	$	1,023,387	$	1,006,264
Free cash flow (1)		$	1,563,250	$	1,987,808		1,987,720

(1)	Calculated as net cash provided by operating activities, less capital expenditures, excess tax benefit from share-based compensation payments, and investment in tax credit equity investments for the period. See page 37 for the reconciliation of the calculation of free cash flow.

Cash and cash equivalents balances held outside of the U.S. were $19.1 million and $17.2 million as of December 31, 2025 and 2024, respectively, which was generally utilized to support the liquidity needs of foreign operations in Mexico and Canada.

2025 Compared to 2024

Operating Activities:

The decrease in net cash provided by operating activities in 2025 compared to 2024 was primarily due to the timing of payment for transferrable federal renewable energy tax credits, partially offset by an increase in operating income.

Investing Activities:

The decrease in net cash used in investing activities in 2025 compared to 2024 was primarily the result of the acquisition of Vast Auto in 2024, partially offset by an increase in capital expenditures. The increase in capital expenditures was primarily due to distribution enhancement and expansion projects and an increase in investments in new store growth.

We opened 207 and 198 net, new stores in 2025 and 2024, respectively. We plan to open 225 to 235 net, new stores in 2026. The costs associated with the expected openings of owned store locations in 2026, including the cost of land acquisition, building construction, fixtures, vehicles, net inventory investment, and computer equipment, are estimated to average approximately $3.2 million to $3.5 million per store. However, such costs may be significantly lower where we lease, rather than purchase, the store site and higher where we build a Hub, as they are larger in size.

Financing Activities:

The decrease in net cash used in financing activities in 2025 compared to 2024 was primarily attributable to net borrowings on the Company’s commercial paper program in 2025 versus net paydown on commercial paper in 2024, partially offset by the issuance of senior notes in 2024.

2024 Compared to 2023

A discussion of the changes in our operating activities, liquidity activities, and financing activities for the year ended December 31, 2024, as compared to the year ended December 31, 2023, has been omitted from this Form 10-K but may be found in Item 7. “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, 2024, filed with the Securities and Exchange Commission (the “SEC”) on February 28, 2025, 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 9 “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. These covenants are, however, subject to a number of important limitations and exceptions. As of December 31, 2025, we were in compliance with the covenants applicable to our senior notes.

As discussed in Note 9 “Financing” to the Consolidated Financial Statements, the Company is party to a credit agreement dated June 15, 2021, as amended and restated by the First Amended and Restated Credit Agreement as of March 31, 2025 (the “Credit Agreement”). 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. 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. In the event that we should default on any covenant contained within the Credit Agreement, certain actions may be taken, including, but not limited to, possible termination of commitments, immediate payment of outstanding principal amounts plus accrued interest and other amounts payable under the Credit Agreement, and litigation from our lenders.

We had a consolidated fixed charge coverage ratio of 6.08 times and 6.11 times as of December 31, 2025 and 2024, respectively, and a consolidated leverage ratio of 1.92 times and 1.89 times as of December 31, 2025 and 2024, respectively, remaining in compliance with all covenants related to the borrowing arrangements.

The table below outlines the calculations of the consolidated fixed charge coverage ratio and consolidated leverage ratio covenants, as defined in the Credit Agreement governing our revolving credit facility, for the years ended December 31, 2025 and 2024 (dollars in thousands):


			For the Year Ended
			December 31,
			2025			2024
GAAP net income			$	2,538,209		$	2,386,680
Add:	Interest expense			235,064			222,548
	Rent expense (1)			490,357			452,529
	Provision for income taxes			701,962			658,384
	Depreciation expense			507,341			457,047
	Amortization expense			3,889			4,845
	Non-cash share-based compensation			35,115			28,931
Non-GAAP EBITDAR			$	4,511,937		$	4,210,964

	Interest expense		$	235,064		$	222,548
	Capitalized interest			17,141			14,141
	Rent expense (1)			490,357			452,529
Total fixed charges			$	742,562		$	689,218

Consolidated fixed charge coverage ratio				6.08			6.11

GAAP debt			$	6,016,904		$	5,520,932
Add:	Stand-by letters of credit			155,642			127,310
	Unamortized discount and debt issuance costs			23,096			29,068
	Five-times rent expense			2,451,785			2,262,645
Non-GAAP adjusted debt			$	8,647,427		$	7,939,955

Consolidated leverage ratio				1.92			1.89

(1)	The table below outlines the calculation of Rent expense and reconciles Rent expense to Total lease cost, per Accounting Standard Codification 842 (“ASC 842”), the most directly comparable GAAP financial measure, for the years ended December 31, 2025 and 2024 (in thousands):


		For the Year Ended
		December 31,
		2025		2024
Total lease cost, per ASC 842		$	592,121	$	543,495
Less:	Variable non-contract operating lease components, related to property taxes and insurance		101,764		90,966
Rent expense		$	490,357	$	452,529

The table below outlines the calculation of Free cash flow and reconciles Free cash flow to Net cash provided by operating activities, the most directly comparable GAAP financial measure, for the years ended December 31, 2025, 2024, and 2023 (in thousands):


			For the Year Ended
			December 31,
			2025		2024		2023
Cash provided by operating activities			$	2,761,993	$	3,049,576	$	3,034,084
Less:	Capital expenditures			1,168,815		1,023,387		1,006,264
	Excess tax benefit from share-based compensation payments			29,928		39,871		35,950
	(Return of) investment in tax credit equity investments			—		(1,490)		4,150
Free cash flow			$	1,563,250	$	1,987,808	$	1,987,720

Free cash flow, the consolidated fixed charge coverage ratio, and the consolidated leverage ratio discussed and presented in the tables above are not derived in accordance with United States generally accepted accounting principles (“GAAP”). 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. 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. Material limitations of these non-GAAP measures are that such measures do not reflect actual GAAP amounts. 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 11 “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. Management bases its assumptions, estimates, and adjustments on historical experience, current trends, and other factors believed to be relevant at the time the consolidated financial statements are prepared. Management believes that the following policies are critical due to the inherent uncertainty of these matters and the complex and subjective judgments required in establishing these estimates. Management continues to review these critical accounting estimates and assumptions to ensure that the consolidated financial statements are presented fairly in accordance with GAAP. However, actual results could differ from our assumptions and estimates and such differences could be material.

Self-Insurance Reserves:

We use a combination of insurance and self-insurance mechanisms to provide for potential liabilities from workers’ compensation, general liability, vehicle liability, property loss, and Team Member health care benefits. With the exception of certain Team Member health care benefit liabilities, employment related claims and litigation, certain commercial litigation, and certain regulatory matters, we obtain third-party insurance coverage to limit our exposure for any individual workers’ compensation, general liability, vehicle liability, or property loss claim.

When estimating our self-insurance liabilities, we consider a number of factors, including historical claims experience and trend-lines, projected medical and legal inflation, growth patterns, and exposure forecasts. The assumptions made by management as they relate to each of these factors represent our judgment as to the most probable cumulative impact of each factor to our future obligations. Certain of the self-insurance liabilities are determined at an estimate of their net present value, using the U.S. treasury risk-free rate. Our calculation of self-insurance liabilities requires management to apply a significant amount of subjective judgment to estimate the ultimate cost to resolve reported claims and claims incurred but not yet reported as of the balance sheet date. The application of alternative assumptions could result in a different estimate of these liabilities. Management believes the assumptions developed and used to determine the estimate for our self-insurance reserve are reasonable. Actual claim activity or development may vary from our assumptions and estimates, which may result in material losses or gains.

As we obtain additional information that affects the assumptions and estimates we used to recognize liabilities for claims incurred in prior accounting periods, we adjust our self-insurance liabilities to reflect the revised estimates based on this additional information. These liabilities are recorded at our estimate of their net present value. These liabilities do not have scheduled maturities, but we can estimate the timing of future payments based upon historical patterns. We could apply alternative assumptions regarding the timing of payments that could result in materially different estimates of the net present value of the liabilities.

Our self-insurance reserve estimate included on our Consolidated Balance Sheets increased $175 million from 2024 to 2025, which is primarily due to general litigation accruals, inflation in claim development costs, our growing operations, increases in healthcare costs, the number of vehicles, and the number of hours worked, partially offset by having resolved and paid out claims throughout 2025. If the underlying assumptions in management’s estimate changed self-insurance reserves by 10% from our estimated reserves at December 31, 2025, the financial impact would have been approximately $44 million or 1.4% of pretax income for the year ended December 31, 2025. See Note 1 “Summary of Significant Accounting Policies” to the Consolidated Financial Statements for further information on our self-insurance reserves.

RECENT ACCOUNTING PRONOUNCEMENTS

See Note 1 “Summary of Significant Accounting Policies” to the Consolidated Financial Statements for information about recent accounting pronouncements.

Item 7A. 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. As of December 31, 2025, we had no outstanding borrowings under our Revolving Credit Facility.

We are subject to interest rate risk to the extent we issue short-term, unsecured commercial paper notes under our commercial paper program (the “Program”) with variable interest rates. As of December 31, 2025, we had outstanding borrowings under the Program in the amount of $690.0 million, at the weighted-average variable interest rate of 3.979%. At this borrowing level, a 10% increase in interest rates would have had an unfavorable annual impact on our pre-tax earnings and cash flows in the amount of $2.8 million.

We had outstanding fixed rate debt of $5.4 billion as of December 31, 2025 and 2024. The fair value of our fixed rate debt was estimated at $5.3 billion and $5.2 billion as of December 31, 2025 and 2024, 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. We do not expect any material losses from our invested cash balances and we believe that our interest rate exposure is minimal. As of December 31, 2025, our cash and cash equivalents totaled $193.8 million.

Foreign Currency Risk:

Foreign currency exposures arising from transactions include firm commitments and anticipated transactions denominated in a currency other than our entities’ functional currencies. To minimize our risk, we generally enter into transactions denominated in the respective functional currencies. Our foreign currency exposure arises from Mexican peso-denominated and Canadian dollar-denominated revenues and profits and their translation into U.S. dollars.

We view our investments in Mexican subsidiaries as long-term. The net asset exposure in the Mexican subsidiaries translated into U.S. dollars using the year-end exchange rates was $507.8 million at December 31, 2025. The year ended December 31, 2025, exchange rates of the Mexican peso, relative to the U.S. dollar, strengthened by approximately 15.7% from December 31, 2024. The potential loss in value of our net assets in the Mexican subsidiaries resulting from a 10% change in quoted foreign currency exchange rates at December 31, 2025, would be approximately $46.2 million. Any changes in our net assets in the Mexican subsidiaries relating to foreign currency exchange rates would be reflected in the financial statement through the foreign currency translation component of accumulated other comprehensive income, unless the Mexican subsidiaries are sold or otherwise disposed. A 10% change in average exchange rates would not have had a material impact on our results of operations.

We view our investments in Canadian subsidiaries as long-term. The net asset exposure in the Canadian subsidiaries translated into U.S. dollars using the period-end exchange rates was $177.7 million, at December 31, 2025. The year ended December 31, 2025, exchange rates of the Canadian dollar, relative to the U.S. dollar, strengthened by approximately 4.8% from December 31, 2024. The potential loss in value of our net assets in the Canadian subsidiaries resulting from a 10% change in quoted foreign currency exchange rates at December 31, 2025, would be approximately $16.2 million. Any changes in our net assets in the Canadian subsidiaries relating to foreign currency exchange rates would be reflected in the financial statement through the foreign currency translation component of accumulated other comprehensive income, unless the Canadian subsidiaries are sold or otherwise disposed. A 10% change in average exchange rates would not have had a material impact on our results of operations.

Item 8. Financial Statements and Supplementary Data

Index


	Page
Management’s Report on Internal Control over Financial Reporting	41
Report of Independent Registered Public Accounting Firm: Internal Control over Financial Reporting (PCAOB ID: 42)	42
Report of Independent Registered Public Accounting Firm: Financial Statements (PCAOB ID: 42)	43
Consolidated Balance Sheets	45
Consolidated Statements of Income	46
Consolidated Statements of Comprehensive Income	47
Consolidated Statements of Shareholders’ Equity	48
Consolidated Statements of Cash Flows	49
Notes to Consolidated Financial Statements	50

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. The Company’s internal control system is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States.

Internal control over financial reporting includes all policies and procedures that:

	●	Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;

	●	Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and

	●	Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.

Management recognizes that all internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to risk. 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, 2025. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control - Integrated Framework (2013 framework). Based on this assessment, management believes that as of December 31, 2025, the Company’s internal control over financial reporting is effective based on those criteria.

Ernst & Young LLP, Independent Registered Public Accounting Firm, has audited the Company’s consolidated financial statements and has issued an attestation report on the effectiveness of the Company’s internal control over financial reporting, as stated in their report, which is included herein.


/s/	Brad Beckham	/s/	Jeremy A. Fletcher
Brad Beckham		Jeremy A. Fletcher
Chief Executive Officer		Executive Vice President and
February 27, 2026		Chief Financial Officer
		February 27, 2026

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, 2025, 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). 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, 2025, 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, 2025 and 2024, 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, 2025, and the related notes and our report dated February 27, 2026 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. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. 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 27, 2026

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, 2025 and 2024, 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, 2025, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2025, 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, 2025, 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 27, 2026 expressed an unqualified opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. 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. 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, 2025, the Company’s self-insurance reserve estimate was $443 million. As discussed in Note 1 of the consolidated financial statements, the Company retains a significant portion of the risks associated with workers’ compensation, property, and vehicle claims. The Company’s self-insurance reserves are estimated based upon historical claim experience, expected claim development and trend lines. Auditing management’s self-insurance reserves was complex and judgmental and required us to use our actuarial specialists for certain reserves due to the estimation required in determining the ultimate claim value. The estimate is sensitive to assumptions such as claim severity and duration, projected inflation, claim development 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 evaluate 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 selected assumptions and the estimate determined 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.

Kansas City, Missouri

February 27, 2026

O’REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)


	December 31,
	2025		2024
Assets
Current assets:
Cash and cash equivalents	$	193,793	$	130,245
Accounts receivable, less allowance for doubtful accounts $25,851 in 2025 and $22,545 in 2024		389,793		356,839
Amounts receivable from suppliers		159,900		139,091
Inventory		5,731,385		5,095,804
Other current assets		269,406		117,916
Total current assets		6,744,277		5,839,895

Property and equipment, at cost		10,222,249		9,192,254
Less: accumulated depreciation and amortization		3,964,824		3,587,098
Net property and equipment		6,257,425		5,605,156

Operating lease, right-of-use assets		2,391,150		2,324,638
Goodwill		948,208		930,161
Other assets, net		197,193		193,891
Total assets	$	16,538,253	$	14,893,741

Liabilities and shareholders’ deficit
Current liabilities:
Accounts payable	$	7,103,684	$	6,524,811
Self-insurance reserves		297,304		149,387
Accrued payroll		119,603		107,495
Accrued benefits and withholdings		240,072		199,593
Income taxes payable		13,957		6,274
Current portion of operating lease liabilities		439,907		419,213
Other current liabilities		561,294		876,732
Total current liabilities		8,775,821		8,283,505

Long-term debt		6,016,904		5,520,932
Operating lease liabilities, less current portion		2,034,688		1,980,705
Deferred income taxes		211,210		247,599
Other liabilities		262,982		231,961

Shareholders’ equity (deficit):
Preferred stock, $0.01 par value:
Authorized shares – 5,000,000
Issued and outstanding shares – none		—		—
Common stock, $0.01 par value:
Authorized shares – 1,250,000,000
Issued and outstanding shares –
841,909,238 as of December 31, 2025, and
862,232,760 as of December 31, 2024		8,419		8,622
Additional paid-in capital		1,530,292		1,454,518
Retained deficit		(2,328,817)		(2,791,288)
Accumulated other comprehensive income (loss)		26,754		(42,813)
Total shareholders’ deficit		(763,352)		(1,370,961)

Total liabilities and shareholders’ deficit	$	16,538,253	$	14,893,741

See accompanying Notes to consolidated financial statements.

O’REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share data)


		For the Year Ended
		December 31,
		2025		2024		2023
Sales		$	17,781,992	$	16,708,479	$	15,812,250
Cost of goods sold, including warehouse and distribution expenses			8,607,851		8,153,990		7,707,447
Gross profit			9,174,141		8,554,489		8,104,803

Selling, general and administrative expenses			5,713,529		5,303,332		4,918,427
Operating income			3,460,612		3,251,157		3,186,376

Other income (expense):
Interest expense			(235,064)		(222,548)		(201,668)
Interest income			7,323		7,295		4,900
Other, net			7,300		9,160		15,142
Total other expense			(220,441)		(206,093)		(181,626)

Income before income taxes			3,240,171		3,045,064		3,004,750
Provision for income taxes			701,962		658,384		658,169
Net income		$	2,538,209	$	2,386,680	$	2,346,581

Earnings per share-basic:
Earnings per share		$	2.98	$	2.73	$	2.59
Weighted-average common shares outstanding – basic			851,472		875,082		907,131

Earnings per share-assuming dilution:
Earnings per share		$	2.97	$	2.71	$	2.56
Weighted-average common shares outstanding – assuming dilution			855,919		880,572		914,976

See accompanying Notes to consolidated financial statements.

O’REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)


		For the Year Ended
		December 31,
		2025		2024		2023
Net income		$	2,538,209	$	2,386,680	$	2,346,581
Other comprehensive income (loss):
Foreign currency translation adjustments			69,567		(82,201)		36,392
Total other comprehensive income (loss)			69,567		(82,201)		36,392

Comprehensive income		$	2,607,776	$	2,304,479	$	2,382,973

See accompanying Notes to consolidated financial statements.

O’REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(In thousands)


												Accumulated
							Additional					Other
		Common Stock					Paid-In			Retained		Comprehensive
		Shares		Par Value			Capital			Deficit		Income (Loss)		Total
Balance at December 31, 2022		935,298		$	9,353		$	1,302,759		$	(2,375,860)	$	2,996	$	(1,060,752)
Net income		—			—			—			2,346,581		—		2,346,581
Other comprehensive income		—			—			—			—		36,392		36,392
Issuance of common stock under employee benefit plans, net of forfeitures and shares withheld to cover taxes		420			5			21,686			—		—		21,691
Net issuance of common stock upon exercise of stock options		3,896			39			71,114			—		—		71,153
Share based compensation		—			—			25,642			—		—		25,642
Share repurchases, including fees		(53,522)			(536)			(77,196)			(3,073,423)		—		(3,151,155)
Excise tax on share repurchases		—			—			—			(28,830)		—		(28,830)
Balance at December 31, 2023		886,092		$	8,861		$	1,344,005		$	(3,131,532)	$	39,388	$	(1,739,278)
Net income		—			—			—			2,386,680		—		2,386,680
Other comprehensive loss		—			—			—			—		(82,201)		(82,201)
Issuance of common stock under employee benefit plans, net of forfeitures and shares withheld to cover taxes		381			3			23,741			—		—		23,744
Net issuance of common stock upon exercise of stock options		4,803			48			106,622			—		—		106,670
Share based compensation		—			—			26,964			—		—		26,964
Share repurchases, including fees		(29,043)			(290)			(46,814)			(2,029,425)		—		(2,076,529)
Excise tax on share repurchases		—			—			—			(17,011)		—		(17,011)
Balance at December 31, 2024		862,233		$	8,622		$	1,454,518		$	(2,791,288)	$	(42,813)	$	(1,370,961)
Net income		—			—			—			2,538,209		—		2,538,209
Other comprehensive income		—			—			—			—		69,567		69,567
Issuance of common stock under employee benefit plans, net of forfeitures and shares withheld to cover taxes		353			4			28,559			—		—		28,563
Net issuance of common stock upon exercise of stock options		2,051			21			53,869			—		—		53,890
Share based compensation		—			—			33,062			—		—		33,062
Share repurchases, including fees		(22,728)			(228)			(39,716)			(2,057,018)		—		(2,096,962)
Excise tax on share repurchases		—			—			—			(18,720)		—		(18,720)
Balance at December 31, 2025		841,909		$	8,419		$	1,530,292		$	(2,328,817)	$	26,754	$	(763,352)

See accompanying Notes to consolidated financial statements.

O’REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)


		For the Year Ended
		December 31,
		2025			2024			2023
Operating activities:
Net income		$	2,538,209		$	2,386,680		$	2,346,581
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of property, equipment and intangibles			511,230			461,892			409,061
Amortization of debt discount and issuance costs			7,379			6,613			4,954
Deferred income taxes			(37,544)			(50,238)			48,232
Share-based compensation programs			35,115			28,931			27,511
Other			11,069			6,360			2,116
Changes in operating assets and liabilities:
Accounts receivable			(35,505)			30,495			(35,539)
Inventory			(604,537)			(403,886)			(288,323)
Accounts payable			576,413			421,364			207,061
Income taxes payable			4,537			(8,690)			33,889
Accrued payroll			12,072			(30,810)			11,234
Accrued benefits and withholdings			35,561			71,128			(12,763)
Other			(292,006)			129,737			280,070
Net cash provided by operating activities			2,761,993			3,049,576			3,034,084

Investing activities:
Purchases of property and equipment			(1,168,815)			(1,023,387)			(1,006,264)
Proceeds from sale of property and equipment			30,845			16,350			17,689
Return of (investment in) tax credit equity investments			—			1,490			(4,150)
Other, including acquisitions, net of cash acquired			(14,386)			(161,258)			(3,211)
Net cash used in investing activities			(1,152,356)			(1,166,805)			(995,936)

Financing activities:
Proceeds from borrowings on revolving credit facility			—			30,000			3,227,000
Payments on revolving credit facility			—			(30,000)			(3,227,000)
Net proceeds (payments) of commercial paper			488,786			(547,604)			746,789
Proceeds from the issuance of long-term debt			—			498,910			749,655
Principal payments on long-term debt			—			—			(300,000)
Payment of debt issuance costs			(3,997)			(4,076)			(4,989)
Payment of excise tax on share repurchases			(17,012)			(28,830)			—
Repurchases of common stock			(2,096,962)			(2,076,529)			(3,151,155)
Net proceeds from issuance of common stock			80,823			128,981			91,316
Other			(433)			(569)			(354)
Net cash used in financing activities			(1,548,795)			(2,029,717)			(1,868,738)

Effect of exchange rate changes on cash			2,706			(1,941)			1,139
Net increase (decrease) in cash and cash equivalents			63,548			(148,887)			170,549
Cash and cash equivalents at beginning of the period			130,245			279,132			108,583
Cash and cash equivalents at end of the period		$	193,793		$	130,245		$	279,132

Supplemental disclosures of cash flow information:
Income taxes paid		$	1,067,524		$	640,426		$	315,060
Interest paid, net of capitalized interest			226,752			209,094			189,611

See accompanying Notes to consolidated financial statements.

O’REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2025

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. The Company’s stores carry an extensive product line, including new and remanufactured automotive hard parts, maintenance items, and various automotive accessories. As of December 31, 2025, the Company owned and operated 6,585 stores in 48 U.S. states, Puerto Rico, Mexico, and Canada, servicing both do-it-yourself (“DIY”) and professional service provider customers. The Company’s robust distribution system provides stores with same-day or overnight access to an extensive inventory of hard-to-find items not typically stocked in the stores of other auto parts retailers.

In May 2025, the number of shares of the Company’s authorized common stock was increased to 1.25 billion shares in order to implement a 15-for-1 forward stock split of its common stock, which was completed on June 10, 2025. All share and per share information, including share-based compensation, in the current and comparable periods throughout this annual report on Form 10-K, has been retrospectively adjusted to reflect the stock split. All shares of common stock retained a par value of $0.01 per share. Accordingly, an amount equal to the par value of the increased shares resulting from the stock split was reclassified from “Additional paid-in capital” to “Common stock.”

Segment Reporting:

The Company conducts its operations in the U.S., Canada, and Mexico in a similar nature and, because of this, collectively represents its single operating segment, referred to as its automotive aftermarket parts segment. Product sales of automotive aftermarket parts are the only material source of revenue for the Company. The products sold by the Company, across all geographic areas, have similar economic characteristics, are sourced from the Company’s suppliers in a similar manner, and are available for sale to all of the Company’s customers through the Company’s stores. All of the Company’s stores have similar characteristics, including the nature of the products and services, the type and class of customers, and the methods used to distribute products and provide service to its customers. The loss of any single customer would not have a material adverse effect on the Company. The chief operating decision maker regularly reviews consolidated financial information, supplemented with other specific information when needed, to make decisions about the resources to be allocated and to assess performance. Due to these reasons, the Company has one operating segment, referred to as its automotive aftermarket parts segment.

The Company’s chief operating decision maker is its Chief Executive Officer. The Company evaluates its reportable segment primarily on the basis of sales and segment profit, which is net income. Net income is utilized by the chief operating decision maker to evaluate budget to actual results, as well as trends over time, to allocate resources, and evaluate performance. See Note 2 for further information concerning the Company’s segment reporting.

Principles of Consolidation:

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All inter-company balances and transactions have been eliminated in consolidation.

Use of Estimates:

The preparation of the consolidated financial statements, in conformity with United States (“U.S.”) generally accepted accounting principles (“GAAP”), requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could materially differ from those estimates.

Cash Equivalents:

Cash equivalents include investments with maturities of 90 days or less on the date of purchase.

Foreign Currency:

The Company accounts for its Mexican operations using the local market currency, the Mexican peso, and converts its financial statements compiled for these operations from the Mexican peso to U.S. dollars. The Company accounts for its Canadian operations using the local market currency, the Canadian dollar, and converts its financial statements compiled for these operations from the Canadian dollar to U.S. dollars. The cumulative gain or loss on currency translation is included as a component of “Accumulated other

comprehensive income (loss)” on the accompanying Consolidated Balance Sheets. See Note 12 for further information concerning the Company’s accumulated other comprehensive income (loss).

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. The Company considers the following factors when determining if collection is reasonably assured: customer creditworthiness, past transaction history with the customer, current expectations of future economic and industry trends, changes in customer payment terms, and management’s expectations. Allowances for doubtful accounts are determined based on historical experience and an evaluation of the current composition of accounts receivable.

The Company grants credit to certain professional service provider and jobber customers who meet the Company’s pre-established credit requirements. Concentrations of credit risk with respect to these receivables are limited because the Company’s customer base consists of a large number of relatively small customers, spreading the credit risk across a broad base regarded as a single class of financing receivable by the Company. The Company also controls this credit risk through credit approvals, credit limits and accounts receivable, and credit monitoring procedures. Generally, the Company does not require security when credit is granted to customers. Credit is granted to customers on a short-term basis, consisting primarily of daily, weekly, or monthly accounts. Credit losses are provided for in the Company’s consolidated financial statements and have consistently been within management’s expectations.

Amounts due to the Company from its Team Members are included in “Accounts receivable” on the accompanying Consolidated Balance Sheets. These amounts consist primarily of purchases of merchandise on Team Member accounts. Accounts receivable due from Team Members was approximately $0.7 million and $0.8 million as of December 31, 2025 and 2024, 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. Co-operative advertising allowances that are incremental to the Company’s advertising program, specific to a product or event and identifiable for accounting purposes are reported as a reduction of advertising expense in the period in which the advertising occurred. All other supplier concessions are recognized as a reduction to the cost of sales. Amounts receivable from suppliers also include amounts due to the Company for changeover merchandise and product returns. The Company regularly reviews supplier receivables for collectability and assesses the need for a reserve for uncollectable amounts based on an evaluation of the Company’s suppliers’ financial positions and corresponding abilities to meet financial obligations. 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, 2025 or 2024.

Inventory:

Inventory, which consists of automotive hard parts, maintenance items, accessories, and tools, is stated at the lower of cost or market. Inventory also includes capitalized costs related to procurement, warehousing, and distribution centers (“DCs”). Cost has been determined using the last-in, first-out (“LIFO”) method, which more accurately matches costs with related revenues. The replacement cost of inventory was $6.25 billion and $5.32 billion as of December 31, 2025 and 2024, respectively.

Fair Value of Financial Instruments:

The Company uses the fair value hierarchy, which prioritizes the inputs used to measure the fair value of certain of its financial instruments. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement). The Company uses the income and market approaches to determine the fair value of its assets and liabilities. The three levels of the fair value hierarchy are set forth below:

	●	Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity can access at the measurement date.

	●	Level 2 – Inputs other than quoted prices in active markets included within Level 1 that are observable for the asset or liability, either directly or indirectly.

	●	Level 3 – Unobservable inputs for the asset or liability.

See Note 3 for further information concerning the Company’s financial and non-financial assets and liabilities measured at fair value on a recurring and non-recurring basis.

Property and Equipment:

Property and equipment are carried at cost. Depreciation is calculated using the straight-line method, generally over the estimated useful lives of the assets. Leasehold improvements are amortized over the lesser of the lease term or the estimated economic life of the assets. The lease term includes renewal options determined by management at lease inception, for which failure to execute renewal options would result in a substantial economic penalty to the Company. Maintenance and repairs are charged to expense as incurred. Upon retirement or sale, the cost and accumulated depreciation are eliminated and the gain or loss, if any, is recognized in the Company’s Consolidated Statements of Income. The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable. See Note 5 for further information concerning the Company’s property and equipment.

Goodwill and Other Intangibles:

The accompanying Consolidated Balance Sheets at December 31, 2025 and 2024, include goodwill and other intangible assets recorded as the result of acquisitions. The Company operates a single reporting unit and evaluates goodwill and indefinite-lived intangibles for impairment annually during the fourth quarter, or when events or changes in circumstances indicate the carrying value of these assets might exceed their current fair values. The goodwill impairment test includes an optional qualitative assessment. 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, 2025 and 2024. As such, no goodwill impairment adjustment was required as of December 31, 2025 and 2024. 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 7 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. The Company does not separate non-lease components from lease components for any current lease contracts. Leases generally include renewal options and some include options to purchase, provisions for percentage rent based on sales, and/or incremental step increase provisions. The exercise of renewal options is typically at the Company’s sole discretion and all operating lease expense is recognized on a straight-line basis over the lease term. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants. The Company rents or subleases certain surplus real estate to third parties. Right-of-use assets and corresponding operating lease liabilities are recognized for all leases with an initial term greater than 12 months. See Note 6 for further information concerning the Company’s operating leases.

Impairment of Long-Lived Assets:

The Company reviews its long-lived assets, including its right-of-use assets, for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. When such an event occurs, the Company compares the sum of the undiscounted expected future cash flows of the asset (asset group) with the carrying amounts of the asset. If the undiscounted expected future cash flows are less than the carrying value of the assets, the Company measures the amount of impairment loss as the amount by which the carrying amount of the assets exceeds the fair value of the assets. The Company has not historically recorded any material impairment charges to its long-lived assets. See Note 5 for further information concerning the Company’s impairment of long-lived assets activities.

Valuation of Investments:

The Company has an unsecured obligation to pay, in the future, the value of deferred compensation and a Company match relating to employee participation in the Company’s nonqualified deferred compensation plan (the “Deferred Compensation Plan”). The future obligation is adjusted to reflect the performance, whether positive or negative, of selected investment measurement options, chosen by each participant. The Company invests in various marketable securities with the intention of selling these securities to fulfill its future obligations under the Deferred Compensation Plan. 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, 2025 and 2024. See Note 3 for further information concerning the fair value measurements of the Company’s marketable securities. See Note 14 for further information concerning the Company’s benefit plans.

Variable Interest Entities:

The Company invested in certain tax credit funds that promote renewable energy. These investments generated 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. Under this method, realized investment tax credits and other tax benefits are recognized as a reduction of the renewable energy investments.

The Company has determined its investment in these tax credit funds were investments in variable interest entities (“VIEs”). The Company analyzes any investments in VIEs at inception and again if certain triggering events are identified to determine if it is the primary beneficiary. The Company considers a variety of factors in identifying the entity that holds the power to direct matters that most significantly impact the VIEs’ economic performance including, but not limited to, the ability to direct financing, leasing, construction, and other operating decisions and activities. As of December 31, 2025, the Company had invested in five 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. During the year ended December 31, 2024, the Company exited one unconsolidated tax credit fund entity, considered a VIE, and received a return of investment payment in the amount of $1.5 million, which was included in “Return of (investment in) tax credit equity investments” on the accompanying Consolidated Statements of Cash Flows.

The Company’s maximum exposure to losses associated with these VIEs is generally limited to its net investment, which was $12.8 million as of December 31, 2025, and was included in “Other assets, net” on the accompanying Consolidated Balance Sheets. The Company did not recognize investment tax credits from association with these VIEs during the years ended December 31, 2025 and 2024. During the year ended December 31, 2023, the Company recognized investment tax credits from association with these VIEs in the amounts of $0.5 million, 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.

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. With the exception of certain Team Member health care benefit liabilities, employment related claims and litigation, certain commercial litigation, and certain regulatory matters, the Company obtains third-party insurance coverage to limit its exposure. The Company estimates its self-insurance liabilities by considering a number of factors, including historical claims experience and trend-lines, projected cost inflation, growth patterns, and exposure forecasts. Certain of these liabilities were recorded at an estimate of their net present value.

The following table identifies the components of the Company’s self-insurance reserves as of December 31, 2025 and 2024 (in thousands):


		December 31,
		2025			2024
Self-insurance reserves (undiscounted)		$	462,777		$	286,566
Self-insurance reserves (discounted)			443,027			268,308

The current portion of the Company’s discounted self-insurance reserves totaled $297.3 million and $149.4 million as of December 31, 2025 and 2024, respectively, which was included in “Self-insurance reserves” on the accompanying Consolidated Balance Sheets as of December 31, 2025 and 2024. The remainder was included in “Other liabilities” on the accompanying Consolidated Balance Sheets as of December 31, 2025 and 2024.

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. Certain suppliers provide upfront allowances to the Company in lieu of accepting the obligation for warranty claims. For this merchandise, when sold, the Company bears the risk of loss associated with the cost of warranty claims. Differences between supplier allowances received by the Company, in lieu of warranty obligations and estimated warranty expense, are recorded as an adjustment to cost of sales. Estimated warranty costs, which are recorded as obligations at the time of sale, are based on the historical failure rate of each individual product line. The Company’s historical experience has been that failure rates are relatively consistent over time and that the ultimate cost of warranty claims to the Company has been driven by volume of units sold as opposed to fluctuations in failure rates or the variation of the cost of individual claims. See Note 10 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. Based on existing facts and historical patterns, the Company accrues for litigation losses in instances where an adverse outcome is probable and the Company is able to reasonably estimate the probable loss in accordance with Accounting Standard Codification 450-20. The Company also accrues for an estimate of legal costs to be incurred for litigation matters. 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.

Share Repurchases:

Revenue Recognition:

The Company’s primary source of revenue is derived from the sale of automotive aftermarket parts and merchandise to its customers. Revenue is recognized when performance obligations under the terms of a contract with a customer are satisfied, in an amount representing the consideration the Company expects to receive in exchange for transferring goods to the customer. 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. The Company does not recognize revenue related to product warranties, as these are considered assurance warranty obligations.

Over-the-counter retail sales to DIY customers are recorded when the customer takes possession of the merchandise. Internet retail sales, included in sales to DIY customers, are recorded when the merchandise is shipped or when the customer picks up the merchandise at a store. Sales to professional service provider customers, also referred to as “commercial sales,” are recorded upon same-day delivery of the merchandise to the customer, generally at the customer’s place of business. 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. Jobber sales are recorded upon shipment of the merchandise from a regional distribution center with same-day delivery to the jobber customer’s location.

The Company maintains a retail loyalty program named O’Reilly O’Rewards, which represents a performance obligation. The Company records a deferred revenue liability, based on a breakage adjusted, estimated redemption rate, and a corresponding reduction in revenue in periods when loyalty points are earned by members. The Company recognizes revenue and a corresponding reduction to the deferred revenue liability in periods when loyalty program issued coupons are redeemed by members, generally within a period of three months from issuance, or when unredeemed points expire, generally within 12 months after the date they were earned, which satisfies the Company’s performance obligation. See Note 13 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.

	●	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. The Company expenses advertising costs as incurred. The Company also participates in cooperative advertising arrangements with certain of its suppliers. Advertising expense, net of cooperative advertising allowances from suppliers that were incremental to the advertising program, specific to the product or event and identifiable for accounting purposes, were $91.1 million, $90.7 million and $85.7 million for the year ended December 31, 2025, 2024, and 2023, respectively, which were included in “Selling, general and administrative expenses” on the accompanying Consolidated Statements of Income.

Share-Based Compensation and Benefit Plans:

The Company sponsors share-based compensation plans and benefit plans. 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. Share-based plans include 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. See Note 14 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. 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. Total interest costs capitalized for the year ended December 31, 2025, 2024, and 2023, were $17.1 million, $14.1 million and $7.2 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. Debt issuance costs related to the Company’s long-term unsecured senior notes are recorded as a reduction of the principal amount of the corresponding unsecured senior notes. Debt issuance costs related to the Company’s unsecured revolving credit facility are recorded as an asset. These debt issuance costs have been deferred and are being amortized over the term of the corresponding debt instrument, and the amortization expense is included in “Interest expense” on the accompanying Consolidated Statements of Income. Deferred debt issuance costs totaled $21.6 million and $24.0 million net of accumulated amortization, as of December 31, 2025 and 2024, respectively, of which $4.1 million and $1.1 million were included in “Other assets, net” as of December 31, 2025 and 2024, respectively, with the remainder included in “Long-term debt” on the accompanying Consolidated Balance Sheets.

The Company issued its long-term unsecured senior notes and commercial paper program at a discount. The original issuance discounts on the senior notes are recorded as a reduction of the principal amount of the corresponding senior notes and are accreted over the term of the applicable senior note, and the original issuance discounts on the commercial paper program are recorded as a reduction of the face amount of the borrowings, with the accretion expenses included in “Interest expense” on the accompanying Consolidated Statements of Income. Original issuance discounts, net of accretion, totaled $5.6 million and $6.2 million as of December 31, 2025 and 2024, respectively.

See Note 9 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. Under this method, deferred tax assets and liabilities are determined based on differences between the U.S. GAAP basis and tax basis of assets and liabilities using enacted tax rules and rates currently scheduled to be in effect for the year in which the differences are expected to reverse. Tax carry forwards are also recognized in deferred tax assets and liabilities under this method. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period of the enactment date. The Company would record a valuation allowance against deferred tax assets to the extent it is more likely than not the amount will not be realized, based upon evidence available at the time of the determination and any change in the valuation allowance is recorded in the period of a change in such determination. The

Company did not establish a valuation allowance for deferred tax assets as of December 31, 2025 and 2024, 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 amount of such liabilities is based on various factors, such as differing interpretations of tax regulations by the responsible tax authority, experience with previous tax audits, and applicable tax law rulings. In management’s opinion, adequate provisions for income taxes have been made for all years presented. The estimates of the Company’s potential tax liabilities contain uncertainties because management must use judgment to estimate the exposures associated with the Company’s various tax positions and actual results could differ from estimates.

In July 2025, H.R. 1 was signed into law in the U.S., which contained a broad range of tax reform provisions affecting businesses. The effects of the legislation, which were immaterial, are reflected in the accompanying consolidated financial statements for the period ended December 31, 2025.

See Note 17 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. 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. Generally, stock options are antidilutive and excluded from the earnings per share calculation when the exercise price exceeds the market price of the common shares. See Note 18 for further information concerning the Company’s common stock equivalents.

New Accounting Pronouncements:

In December of 2023, FASB issued Accounting Standard Update ASU No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” (“ASU 2023-09”). ASU 2023-09 enhances the transparency and decision usefulness of income tax disclosures. Under ASU 2023-09, a public entity would be required to disclose specific categories in the rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold, such as if the effect of the reconciling items is equal to or greater than five percent of the amount computed by multiplying pretax income/loss by the applicable statutory income tax rate. Entities would also have to disclose the amount of income taxes paid disaggregated by federal, state, and foreign taxes and the amount of income taxes paid disaggregated by individual jurisdictions in which income taxes paid is equal to or greater than five percent of total income taxes paid, along with income/loss from continuing operations before income tax expense disaggregated between domestic and foreign and income tax expense from continuing operations disaggregated by federal, state, and foreign. ASU 2023-09 is effective for annual reporting periods beginning after December 15, 2024. ASU 2023-09 allows for early adoption for annual financial statements that have not yet been issued and allows retrospective and prospective adoption. The Company adopted this guidance beginning with its fourth quarter ending December 31, 2025. The application of this new guidance did not have a material impact on the Company’s consolidated financial condition, results of operations, or cash flows, as the guidance pertains to disclosure only. See Note 17 for further information concerning the Company’s income taxes.

In November of 2024, FASB issued Accounting Standard Update ASU No. 2024-03, “Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses” (“ASU 2024-03”). Under ASU 2024-03, a public entity would be required to disclose information about purchases of inventory, employee compensation, depreciation, intangible asset amortization, and depletion for each income statement line item that contains those expenses. Entities would also have to disclose other specific expenses, gains, or losses that are already required to be disclosed under GAAP in this same disclosure, a qualitative description of the amounts remaining that are not separately disaggregated quantitatively, and the total amount of selling expenses, as well as an entity’s definition of selling expenses. ASU 2024-03 is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. ASU 2024-03 allows for early adoption and requires either prospective adoption to financial statements issued for reporting periods after the effective date of ASU 2024-03 or retrospectively to any or all prior periods presented in the financial statements. The Company will adopt this guidance beginning with its fourth quarter ending December 31, 2027. 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.

In September of 2025, the FASB issued ASU No. 2025-06, “Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 35040): Targeted Improvements to the Accounting for Internal-Use Software” (“ASU 2025-06”). ASU 2025-06 modernizes the accounting for software costs related to internal-use software. Under ASU 2025-06, public entities would be required to start capitalizing software costs when two thresholds are met: management has authorized and committed to funding the software project and it is probable

that the project will be completed and the software will be used to perform the function intended. ASU 2025-06 will also require entities to follow different disclosure requirements for capitalized internal-use software costs. ASU 2025-06 is effective for annual reporting periods beginning after December 15, 2027, and interim reporting periods within those annual reporting periods. Early adoption is permitted and allows for prospective, modified, or retrospective transition approach. The Company will adopt this guidance beginning with its first quarter ending March 31, 2028. 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.

NOTE 2 – SEGMENT REPORTING

The Company conducts its operations in the U.S., Canada, and Mexico, and collectively this represents its single operating segment, referred to as its automotive aftermarket parts segment, which is its only reportable segment. There have been no changes in the determination of segmentation or the measurements used to determine reported segment net income during the year ended December 31, 2025. The measure of segment assets is reported as “Total assets” on the accompanying Consolidated Balance Sheets as of December 31, 2025 and 2024. At December 31, 2025 and 2024, the Company’s consolidated long-lived assets were located primarily in the United States and consolidated revenue was primarily generated within the United States for the years ending December 31, 2025, 2024 and 2023, with immaterial assets and revenues associated with international operations.

The table below identifies the Company’s significant segment expenses regularly provided to the chief operating decision maker that are included in reported segment profit or loss, which is consolidated net income, for the years ended December 31, 2025, 2024 and 2023 (in thousands):


		For the Year Ended
		December 31,
		2025		2024		2023
Automotive aftermarket parts segment:
Sales		$	17,781,992	$	16,708,479	$	15,812,250
Cost of goods sold, including warehouse and distribution expenses			8,607,851		8,153,990		7,707,447
Gross profit			9,174,141		8,554,489		8,104,803
Less:	Team Member compensation expense (1)		3,587,196		3,334,574		3,139,448
	Rent expense (2)		461,744		429,686		402,572
	Depreciation and amortization expense		415,209		372,878		333,678
	Advertising expense		91,061		90,744		85,706
	Other segment items (3)		1,143,696		1,058,995		936,981
	Interest expense		235,064		222,548		201,668
	Provision for income taxes		701,962		658,384		658,169
Consolidated net income		$	2,538,209	$	2,386,680	$	2,346,581

(1)	Team Member compensation expense derived from selling, general and administrative expenses included in Segment net income includes payroll expense, benefits and withholdings expense, share-based compensation expense, and nonqualified deferred compensation expense.

(2)	Rent expense derived from selling, general and administrative expenses included in Segment net income includes rent and common area maintenance expense.

(3)	Other segment items included in Segment net income includes vehicle expenses, utilities expense, real estate taxes and insurance expense, bad debt and banking fees expense, interest income, and other operating expenses.

NOTE 3 – 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. See Note 14 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, 2025 and 2024. The Company recorded an increase in fair value related to its marketable securities in the amount of $8.0 million and $7.1 million for the year ended December 31, 2025 and 2024, respectively, which were included in “Other income (expense)” on the accompanying Consolidated Statements of Income.

The tables below identify the estimated fair value of the Company’s marketable securities, determined by reference to quoted market prices (Level 1), as of December 31, 2025 and 2024 (in thousands):


		December 31, 2025
		Quoted Priced in Active Markets			Significant Other			Significant
		for Identical Instruments			Observable Inputs			Unobservable Inputs
		(Level 1)			(Level 2)			(Level 3)			Total
Marketable securities		$	67,840		$	—		$	—		$	67,840


		December 31, 2024
		Quoted Prices in Active Markets		Significant Other		Significant
		for Identical Instruments		Observable Inputs		Unobservable Inputs
		(Level 1)		(Level 2)		(Level 3)		Total
Marketable securities		$	65,156	$	—	$	—	$	65,156

Non-financial Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis:

Certain long-lived non-financial assets and liabilities may be required to be measured at fair value on a nonrecurring basis in certain circumstances, including when there is evidence of impairment. These non-financial assets and liabilities may include assets acquired in a business combination or property and equipment that are determined to be impaired. As of December 31, 2025 and 2024, 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, 2025 and 2024.

The table below identifies the estimated fair value of the Company’s senior notes, using the market approach. The fair values as of December 31, 2025 and 2024, were determined by reference to quoted market prices of the same or similar instruments (Level 2) (in thousands):


	December 31, 2025				December 31, 2024
	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Senior Notes	$	5,327,587	$	5,308,675	$	5,321,219	$	5,151,768

The carrying amount of the Company’s unsecured revolving credit facility approximates fair value (Level 2), as borrowings under the facility bear variable interest at current market rates. The carrying amount of the Company’s commercial paper program approximates fair value (Level 2), as borrowings under the program bear interest at market rates prevailing at the time of issuance. See Note 9 for further information concerning the Company’s senior notes, unsecured revolving credit facility, and commercial paper program.

The accompanying Consolidated Balance Sheets include other financial instruments, including cash and cash equivalents, accounts receivable, amounts receivable from suppliers, and accounts payable. Due to the short-term nature of these financial instruments, the Company believes that the carrying values of these instruments approximate their fair values.

NOTE 4 – ALLOWANCE FOR DOUBTFUL ACCOUNTS

The following table identifies the changes in the Company’s allowance for doubtful accounts included in “Accounts receivable” on the accompanying Consolidated Balance Sheets as of December 31, 2025 and 2024 (in thousands):


	2025		2024
Allowance for doubtful accounts, balance at January 1	$	22,545	$	15,834
Reserve accruals		13,109		14,837
Uncollectable accounts written-off		(10,134)		(7,973)
Foreign currency translation		331		(153)
Allowance for doubtful accounts, balance at December 31	$	25,851	$	22,545

NOTE 5 – PROPERTY AND EQUIPMENT

The following table identifies the types and balances of property and equipment included in “Property and equipment, at cost” on the accompanying Consolidated Balance Sheets as of December 31, 2025 and 2024, and includes the estimated useful lives for its types of property and equipment (in thousands, except original useful lives):


	Original Useful		December 31,
	Lives		2025		2024
Land			$	1,228,262	$	1,070,098
Buildings and building improvements	15 – 39 years			3,830,809		3,407,685
Leasehold improvements	3 – 25 years			1,438,562		1,277,447
Furniture, fixtures and equipment	3 – 20 years			2,461,876		2,250,540
Vehicles	5 – 10 years			790,700		748,315
Construction in progress				472,040		438,169
Total property and equipment				10,222,249		9,192,254
Less: accumulated depreciation and amortization				3,964,824		3,587,098
Net property and equipment			$	6,257,425	$	5,605,156

The Company recorded depreciation and amortization expense related to property and equipment in the amounts of $504.9 million, $457.0 million, and $404.9 million for the year ended December 31, 2025, 2024, and 2023, respectively, which were included in “Selling, general and administrative expenses” and “Cost of goods sold, including warehouse and distribution expenses” on the accompanying Consolidated Statements of Income.

The Company recorded charges of $2.5 million related to property and equipment for the year ended December 31, 2025, primarily due to certain hardware and software projects that were disposed or were no longer expected to provide a long-term benefit; $0.5 million related to property and equipment for the year ended December 31, 2024, primarily due to the write-down of equipment that exceeded market value; and $2.2 million related to property and equipment for the year ended December 31, 2023, primarily due to the write-down of equipment that exceeded market value and certain hardware and software projects that were disposed or were no longer expected to provide a long-term benefit, which were included in “Selling, general and administrative expenses” on the accompanying Consolidated Statements of Income.

NOTE 6 – LEASES

Operating Lease Commitments:

The following table summarizes Total lease cost for the years ended December 31, 2025, 2024, and 2023, which was primarily included in “Selling, general and administrative expenses” on the accompanying Consolidated Statements of Income (in thousands):


	For the Year Ended
	December 31,
	2025		2024		2023
Operating lease cost	$	457,952	$	425,481	$	398,537
Short-term operating lease cost		8,187		8,206		9,508
Variable operating lease cost		130,778		114,634		99,911
Sublease income		(4,796)		(4,826)		(4,805)
Total lease cost	$	592,121	$	543,495	$	503,151

The following table summarizes other lease related information for the years ended December 31, 2025 and 2024 (in thousands):


			For the Year Ended
			December 31,
			2025		2024
Cash paid for amounts included in the measurement of operating lease liabilities:
	Operating cash flows from operating leases		$	453,544	$	416,714
Right-of-use assets obtained in exchange for new operating lease liabilities				375,163		423,196

The following table identifies the future minimum lease payments under all of the Company’s operating leases for each of the next five years, and in the aggregate thereafter, and reconciles to the present value of the “Operating lease liabilities, less current portion” included in the accompanying Consolidated Balance Sheet as of December 31, 2025 (in thousands):


	December 31, 2025
	Related Parties		Non-Related Parties		Total
2026	$	4,188	$	442,624	$	446,812
2027		3,370		410,365		413,735
2028		3,182		360,190		363,372
2029		1,119		312,368		313,487
2030		336		268,913		269,249
Thereafter		25		1,213,576		1,213,601
Total operating lease payments		12,220		3,008,036		3,020,256
Less: present value discount		897		544,764		545,661
Total operating lease liabilities		11,323		2,463,272		2,474,595
Less: current portion of operating lease liabilities		4,188		435,719		439,907
Operating lease liabilities, less current portion	$	7,135	$	2,027,553	$	2,034,688

See Note 16 for further information concerning the Company’s related party operating leases.

The future minimum lease payments under the Company’s operating leases, in the table above, do not include potential amounts for percentage rent and other variable operating lease related costs and have not been reduced by expected future minimum sublease income under non-cancelable subleases, which was approximately $8.8 million as of December 31, 2025. The weighted-average remaining lease term and weighted-average discount rate for the Company’s operating leases was 8.9 years and 4.6%, respectively, as of December 31, 2025.

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. Inputs for the calculation of the Company’s incremental borrowing rate include valuations and yields of U.S. domestic investment grade corporate bonds and the applicable credit spread over comparable U.S. Treasury rates, adjusted to a collateralized basis by estimating the credit spread improvement that would result from an upgrade of one ratings classification. 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 7 – 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. Goodwill is not amortizable for financial statement purposes. The Company did not record any goodwill impairment during the years ended December 31, 2025, 2024, or 2023.

The following table identifies the changes in goodwill, which were included in “Goodwill” on the accompanying Consolidated Balance Sheets for the years ended December 31, 2025 and 2024 (in thousands):


		2025		2024
Goodwill, balance at January 1,		$	930,161	$	897,696
Change in goodwill related to acquisitions			4,657		52,105
Foreign currency translation			13,390		(19,640)
Goodwill, balance at December 31,		$	948,208	$	930,161

Intangibles Other than Goodwill:

The following table identifies the components of the Company’s intangible assets, inclusive of foreign currency translation adjustments, which were included in “Other assets, net” on the accompanying Consolidated Balance Sheets for the years ended December 31, 2025 and 2024 (in thousands):


		December 31, 2025						December 31, 2024
		Cost of		Accumulated		Net		Cost of		Accumulated			Net
		Intangibles		Amortization		Intangibles		Intangibles		Amortization			Intangibles
Finite-lived intangible assets:
Trade names (1)		$	2,933	$	(2,230)	$	703	$	2,536	$	(1,612)		$	924
Non-compete agreements (2)			2,141		(1,736)		405		2,161		(1,548)			613
Customer relationships (3)			41,506		(10,023)		31,483		38,758		(6,193)			32,565
Total finite-lived intangible assets			46,580		(13,989)		32,591		43,455		(9,353)			34,102

Indefinite-lived intangible assets:
Trade names			39,103		—		39,103		33,810		—			33,810

Total intangible assets		$	85,683	$	(13,989)	$	71,694	$	77,265	$	(9,353)		$	67,912

(1)	Weighted-average remaining useful life of approximately 1.9 years as of December 31, 2025.

(2)	Weighted-average remaining useful life of approximately 2.5 years as of December 31, 2025.

(3)	Weighted-average remaining useful life of approximately 11.9 years as of December 31, 2025.

During the years ended December 31, 2025 and 2024, the Company recorded non-compete agreement assets in conjunction with small acquisitions in the amount of less than $0.1 million for each year. Other than the non-compete agreement assets, the Company did not record additional finite-lived assets during the year ended December 31, 2025, or indefinite-lived intangible assets during the years ended December 31, 2025 and 2024. During the year ended December 31, 2024, the Company recorded a finite-lived asset, related to customer relationships from the Vast Auto acquisition, in the amount of $32.8 million. For the year ended December 31, 2025, 2024, and 2023, the Company recorded aggregate amortization expense related to its intangible assets in the amounts of $3.6 million, $3.6 million and $3.0 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. The Company did not record any indefinite-lived intangible asset impairment during the years ended December 31, 2025, 2024, or 2023.

The following table identifies the estimated amortization expense of the Company’s intangibles for each of the next five years, and the aggregate thereafter, and reconciles to net, finite-lived intangible assets included in “Other assets, net” on the accompanying Consolidated Balance Sheets as of December 31, 2025 (in thousands):


		December 31, 2025
		Amortization Expense
2026		$	3,654
2027			3,516
2028			3,176
2029			3,009
2030			2,140
Thereafter			17,096
Total net, finite-lived intangible assets		$	32,591

NOTE 8 – SUPPLIER FINANCE PROGRAMS

The Company has established and maintains supplier finance programs with certain third-party financial institutions, which allow participating merchandise suppliers to voluntarily elect to assign the Company’s payment obligations due to these merchandise suppliers to one of the designated third-party institutions. Under these supplier finance programs, the Company has agreed to pay the third-party financial institutions the stated amount of confirmed merchandise supplier invoices on the original maturity dates of the invoices, which are generally for a term of one year. The Company does not have any assets pledged as security or other forms of guarantees for the committed payment to the third-party institutions. As of December 31, 2025, and 2024, the Company had obligations outstanding under these programs for invoices that were confirmed as valid to the third-party financial institutions in the amounts of $5.1 billion and $4.8 billion, respectively, which were included as a component of “Accounts payable” on the accompanying Consolidated Balance Sheets.

The following table identifies the changes in the outstanding obligations of the Company’s supplier finance programs for the year ended December 31, 2025 and 2024 (in thousands):


	2025		2024
Obligations outstanding, balance at January 1,	$	4,807,430	$	4,423,008
Invoices added		5,582,708		5,338,154
Invoices paid		(5,244,760)		(4,953,732)
Obligations outstanding, balance at December 31,	$	5,145,378	$	4,807,430

NOTE 9 – FINANCING

The following table identifies the amounts included in “Long-term debt” on the accompanying Consolidated Balance Sheets as of December 31, 2025 and 2024 (in thousands):


	December 31,
		2025		2024
Commercial paper program, weighted-average variable interest rate of 3.979% as of December 31, 2025 and 4.750% as of December 31, 2024		690,000		200,000
3.550% Senior Notes due 2026, effective interest rate of 3.570%		500,000		500,000
5.750% Senior Notes due 2026, effective interest rate of 5.767%		750,000		750,000
3.600% Senior Notes due 2027, effective interest rate of 3.619%		750,000		750,000
4.350% Senior Notes due 2028, effective interest rate of 4.383%		500,000		500,000
3.900% Senior Notes due 2029, effective interest rate of 3.901%		500,000		500,000
4.200% Senior Notes due 2030, effective interest rate of 4.205%		500,000		500,000
1.750% Senior Notes due 2031, effective interest rate of 1.798%		500,000		500,000
4.700% Senior Notes due 2032, effective interest rate of 4.740%		850,000		850,000
5.000% Senior Notes due 2034, effective interest rate of 5.028%		500,000		500,000
Total principal amount of debt		6,040,000		5,550,000
Less: Unamortized discount and debt issuance costs		23,096		29,068
Total long-term debt	$	6,016,904	$	5,520,932

The following table identifies the principal maturity payments of the Company’s financing facilities for each of the next five years, and in the aggregate thereafter, as of December 31, 2025 (in thousands):


		December 31, 2025
		Scheduled Maturities
2026		$	1,940,000
2027			750,000
2028			500,000
2029			500,000
2030			500,000
Thereafter			1,850,000
Total principal amount of debt		$	6,040,000

Unsecured Revolving Credit Facility:

The Company is party to a credit agreement dated June 15, 2021, as amended and restated by the First Amended and Restated Credit Agreement as of March 31, 2025 (the “Credit Agreement”). The Credit Agreement provides for a five-year $2.25 billion unsecured

revolving credit facility (the “Revolving Credit Facility”) arranged by JPMorgan Chase Bank, N.A., which is scheduled to mature in March of 2030. The Credit Agreement includes a $200 million sub-limit for the issuance of letters of credit and a $75 million sub-limit for swing line borrowings under the Revolving Credit Facility. As described in the Credit Agreement governing the Revolving Credit Facility, the Company may, from time to time, subject to certain conditions, increase the aggregate commitments under the Revolving Credit Facility by up to $900 million, provided that the aggregate amount of the commitments does not exceed $3.15 billion at any time.

As of December 31, 2025 and 2024, the Company had outstanding letters of credit, primarily to support obligations related to workers’ compensation, general liability and other insurance policies, under the Credit Agreement each in the amount of $5.3 million and $5.4 million, respectively, reducing the aggregate availability under the Credit Agreement by those amounts. Substantially all of the outstanding letters of credit have a one-year term from the date of issuance. As of December 31, 2025 and 2024, 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 0.050% in the case of loans bearing interest at the Alternate Base Rate and 0.680% to 1.075% 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. Swing line loans made under the Revolving Credit Facility bear interest at an Alternate Base Rate plus the applicable margin for Alternate Base Rate loans. In addition, the Company pays a facility fee on the aggregate amount of the commitments under the Credit Agreement in an amount equal to a percentage of such commitments, varying from 0.070% to 0.175% per annum. The interest rate margins and facility fee are based upon the better of the ratings assigned to the Company’s debt by Moody’s Investor Service, Inc. and Standard & Poor’s Ratings Services, subject to limited exceptions. As of December 31, 2025, 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. 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. In the event that the Company should default on any covenant (subject to customary grace periods, cure rights, and materiality thresholds) contained in the Credit Agreement, certain actions may be taken, including, but not limited to, possible termination of commitments, immediate payment of outstanding principal amounts plus accrued interest and other amounts payable under the Credit Agreement, and litigation from lenders. As of December 31, 2025, 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, 2025 and 2024, 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 $150.4 million and $121.9 million, respectively. Substantially all of these letters of credit have a one-year term from the date of issuance and were not issued under the Company’s Credit Agreement or another committed facility.

Commercial Paper Program:

On August 9, 2023, the Company established a commercial paper program (the “Program”) pursuant to which it may issue short-term, unsecured commercial paper notes (the “Notes”) under the exemption from registration contained in Section 4(a)(2) of the Securities Act of 1933, as amended. Amounts available under the Program may be borrowed, repaid, and re-borrowed from time to time, with the aggregate face or principal amount of the Notes outstanding under the Program at any time not to exceed $2.25 billion. The Notes will have maturities of up to 397 days from the date of issue. The Notes rank at least pari passu with all of the Company’s other unsecured and unsubordinated indebtedness. The Company plans to use its Revolving Credit Facility as a liquidity backstop for the repayment of Notes outstanding under the Program. The Notes issued under the Program were included in “Long-term debt” on the accompanying Consolidated Balance Sheet as of December 31, 2025 and 2024, as the Company has the ability and intent to refinance these Notes on a long-term basis.

Senior Notes:

As of December 31, 2025, the Company has issued and outstanding a cumulative $5.4 billion aggregate principal amount of unsecured senior notes, which are due between 2026 and 2034, with UMB Bank, N.A. and U.S. Bank Trust Company, National Association as trustees. Interest on the senior notes, ranging from 1.750% to 5.750%, is payable semi-annually and is computed on the basis of a 360-day year. The $500 million aggregate principal amount of unsecured 3.550% Senior Notes due 2026 and $750 million aggregate principal amount of unsecured 5.750% Senior Notes due 2026 were included in “Long-term debt” on the accompanying Consolidated

Balance Sheet as of December 31, 2025, as the Company has the ability and intent to refinance these notes on a long-term basis. None of the Company’s subsidiaries is a guarantor under the senior notes. Each of the senior notes is subject to certain customary covenants, with which the Company complied as of December 31, 2025.

NOTE 10 – WARRANTIES

The Company’s product warranty liabilities are included in “Other current liabilities” on the accompanying Consolidated Balance Sheets as of December 31, 2025 and 2024. The following table identifies the changes in the Company’s aggregate product warranty liabilities for the years ended December 31, 2025 and 2024 (in thousands):


		2025		2024
Warranty liabilities, balance at January 1,		$	133,251	$	117,895
Warranty claims			(250,072)		(203,645)
Warranty accruals			263,021		219,121
Foreign currency translation			79		(120)
Warranty liabilities, balance at December 31,		$	146,279	$	133,251

NOTE 11 – SHARE REPURCHASE PROGRAM

In January of 2011, the Company’s Board of Directors approved a share repurchase program. 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 Company’s Board of Directors may increase or otherwise modify, renew, suspend, or terminate the share repurchase program at any time, without prior notice. As announced on November 22, 2024, and November 18, 2025, the Company’s Board of Directors each time approved a resolution to increase the authorization amount under the share repurchase program by an additional $2.0 billion, resulting in a cumulative authorization amount of $29.8 billion. The additional authorizations are effective for three years, beginning on its respective announcement date.

The following table identifies shares of the Company’s common stock that have been repurchased as part of the Company’s publicly announced share repurchase program for the years ended December 31, 2025 and 2024 (in thousands, except per share data):


		For the Year Ended
		December 31,
		2025		2024
Shares repurchased			22,728		29,043
Average price per share		$	92.26	$	71.50
Total investment		$	2,096,840	$	2,076,510

As of December 31, 2025, the Company had $2.4 billion remaining under its share repurchase program. Excise tax on shares repurchased, assessed at one percent of the fair market value of net shares repurchased, was $21.0 million for the year ended December 31, 2025.

Subsequent to the end of the year and through February 27, 2026, the Company repurchased an additional 4.7 million shares of its common stock under its share repurchase program, at an average price of $93.61, for a total investment of $436.3 million. The Company has repurchased a total of 1.5 billion shares of its common stock under its share repurchase program since the inception of the program in January of 2011 and through February 27, 2026, at an average price of $18.93, for a total aggregate investment of $27.8 billion. As of February 27, 2026, we had approximately $2.0 billion remaining under our share repurchase program.

NOTE 12 – ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

Accumulated other comprehensive income (loss) includes adjustments for foreign currency translations. The table below summarizes activity for changes in accumulated other comprehensive loss included in “Accumulated other comprehensive income (loss)” on the accompanying Consolidated Balance Sheets as of December 31, 2025 and 2024 (in thousands):


	Foreign		Total Accumulated Other
	Currency (1)		Comprehensive Income (Loss)
Accumulated other comprehensive income, balance at December 31, 2023	$	39,388	$	39,388
Change in accumulated other comprehensive loss		(82,201)		(82,201)
Accumulated other comprehensive loss, balance at December 31, 2024	$	(42,813)	$	(42,813)
Change in accumulated other comprehensive income		69,567		69,567
Accumulated other comprehensive income, balance at December 31, 2025	$	26,754	$	26,754

(1)	Foreign currency translation is not shown net of additional U.S. tax, as other basis differences of non-U.S. subsidiaries are intended to be permanently reinvested.

NOTE 13 – REVENUE

The table below identifies the Company’s revenues disaggregated by major customer type for the years ended December 31, 2025, 2024, and 2023 (in thousands):


		For the Year Ended
		December 31,
		2025		2024			2023
Sales to do-it-yourself customers		$	8,765,647	$	8,473,041		$	8,248,213
Sales to professional service provider customers			8,651,746		7,836,283			7,245,747
Other sales and sales adjustments			364,599		399,155			318,290
Total sales		$	17,781,992	$	16,708,479		$	15,812,250

As of December 31, 2025 and 2024, the Company had recorded a deferred revenue liability of $7.8 million and $6.8 million, respectively, related to its loyalty program, which were included in “Other liabilities” on the accompanying Consolidated Balance Sheets. During the year ended December 31, 2025, 2024, and 2023, the Company recognized $19.8 million, $17.3 million and $13.9 million, respectively, of revenue related to its loyalty program, which were included in “Sales” on the accompanying Consolidated Statements of Income.

See Note 10 for information concerning the expected costs associated with the Company’s assurance warranty obligations.

NOTE 14 – 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. 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, 2025 (in thousands):


		December 31, 2025
		Total Shares Authorized for		Shares Available for Future
Plans		Issuance under the Plans		Issuance under the Plans
Incentive Plans		175,650		55,937
Employee Stock Purchase Plan		25,250		5,206
Profit Sharing and Savings Plan		63,000		—

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. 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. The Company records compensation expense for the grant date fair value of the option awards evenly over the vesting period or minimum required service period.

The table below identifies stock option activity under these plans during the year ended December 31, 2025:


							Average			Aggregate
		Shares		Weighted- Average			Remaining			Intrinsic Value
		(in thousands)		Exercise Price			Contractual Terms			(in thousands)
Outstanding at December 31, 2024		9,422		$	36.59
Granted		891			89.82
Exercised		(2,051)			26.28
Forfeited or expired		(78)			66.05
Outstanding at December 31, 2025		8,184		$	44.70		5.5	Years		$	382,128
Vested or expected to vest at December 31, 2025		8,049		$	44.26		5.5	Years		$	377,929
Exercisable at December 31, 2025		5,592		$	32.59		4.3	Years		$	327,772

The fair value of each stock option award is estimated on the date of the grant using the Black-Scholes option pricing model. The Black-Scholes model requires the use of assumptions, including the risk-free rate, expected life, expected volatility, and expected dividend yield.

	●	Risk-Free Interest Rate – The United States Treasury rates in effect at the time the options are granted for the options’ expected life.

	●	Expected Life – Represents the period of time that options granted are expected to be outstanding. The Company uses historical experience to estimate the expected life of options granted.

	●	Expected Volatility – Measure of the amount, by which the Company’s stock price is expected to fluctuate, based on a historical trend.

	●	Expected Dividend Yield – The Company has not paid, nor does it have plans in the foreseeable future to pay, any dividends.

The table below identifies the weighted-average assumptions used for grants awarded during the years ended December 31, 2025, 2024, and 2023:


		December 31,
		2025		2024		2023
Risk free interest rate		4.18	%	4.16	%	3.96	%
Expected life		6.6	Years	6.4	Years	6.3	Years
Expected volatility		26.7	%	28.2	%	29.0	%
Expected dividend yield		—	%	—	%	—	%

The following table summarizes activity related to stock options awarded by the Company for the years ended December 31, 2025, 2024, and 2023:


		For the Year Ended
		December 31,
		2025		2024		2023
Compensation expense for stock options awarded (in thousands)		$	28,309	$	23,024	$	22,090
Income tax benefit from compensation expense related to stock options (in thousands)			6,997		5,769		5,477
Total intrinsic value of stock options exercised (in thousands)			136,307		239,563		170,521
Cash received from exercise of stock options (in thousands)			53,890		106,670		71,153
Weighted-average grant-date fair value of options awarded		$	33.43	$	26.94	$	21.54
Weighted-average remaining contractual life of exercisable options (in years)			5.5		5.6		5.3

At December 31, 2025, the remaining unrecognized compensation expense related to unvested stock option awards was $44.2 million, and the weighted-average period of time, over which this cost will be recognized, is 2.6 years.

Restricted Stock:

The Company’s incentive plans provide for the awarding of shares of restricted stock to certain key employees or the non-employee directors of the Company that vest after one-year or evenly over a three-year period and are held in escrow until such vesting has occurred. Generally, unvested shares are forfeited when an employee or a director ceases employment or service on the Company’s

Board of Directors, for reasons other than death or retirement. The fair value of shares awarded under these plans is based on the closing market price of the Company’s common stock on the date of award, and compensation expense is recorded over the vesting period or minimum required service period.

The table below identifies restricted stock activity under these plans during the year ended December 31, 2025 (in thousands, except per share data):


				Weighted-Average Grant-Date
		Shares		Fair Value
Non-vested at December 31, 2024		35		$	64.38
Granted during the period		23			90.21
Vested during the period (1)		(35)			64.38
Forfeited during the period		—			—
Non-vested at December 31, 2025		23		$	90.21

(1)	Includes less than five thousand shares withheld to cover employees’ taxes upon vesting.

The following table summarizes activity related to restricted stock awarded by the Company for the years ended December 31, 2025, 2024, and 2023 (in thousands, except per share data):


		For the Year Ended
		December 31,
		2025			2024			2023
Compensation expense for restricted shares awarded		$	2,053		$	1,967		$	1,869
Income tax benefit from compensation expense related to restricted shares		$	507		$	493		$	463
Total fair value of restricted shares at vest date		$	3,109		$	3,093		$	2,693
Shares awarded under the plans			23			29			32
Weighted-average grant-date fair value of shares awarded under the plans		$	90.21		$	68.22		$	59.24

At December 31, 2025, the remaining unrecognized compensation expense related to unvested restricted share awards was $0.5 million, and the weighted-average period of time, over which this cost will be recognized, is 0.3 years_._

Employee Stock Purchase Plan:

The Company’s employee stock purchase plan (the “ESPP”) permits eligible employees to purchase shares of the Company’s common stock at 85% of the fair market value. Employees may authorize the Company to withhold up to 5% of their annual salary to participate in the plan. The fair value of shares issued under the ESPP is based on the average of the high and low market prices of the Company’s common stock during the offering periods, and compensation expense is recognized based on the discount between the grant-date fair value and the employee purchase price for the shares sold to employees.

The table below summarizes activity related to the Company’s ESPP for the years ended December 31, 2025, 2024, and 2023 (in thousands, except per share data):


		For the Year Ended
		December 31,
		2025			2024			2023
Compensation expense for shares issued under the ESPP		$	4,753		$	3,940		$	3,552
Income tax benefit from compensation expense related to shares issued under the ESPP		$	1,175		$	987		$	881
Shares issued under the ESPP			336			360			394
Weighted-average price of shares issued under the ESPP		$	80.05		$	61.99		$	51.07

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. There were 176,535 and 204,765 stock appreciation rights outstanding as of December 31, 2025 and 2024, respectively. During the year ended December 31, 2025, there were 21,270 stock appreciation rights granted, 43,665 stock appreciation rights exercised, and 5,835 stock appreciation rights forfeited. The liability for compensation to be paid for redeemed stock appreciation rights was $7.3 million and $6.4 million as of December 31, 2025 and 2024, respectively, which were included in “Other liabilities” on the Consolidated Balance Sheets. The Company recorded compensation expense for stock appreciation rights in the amounts of $2.4 million, $4.3 million and $1.1 million for the year ended December 31, 2025, 2024, and 2023, respectively, which were included in “Selling, general and administrative expenses” on the accompanying Consolidated Statements of Income.

Benefit Plans:

The Company sponsors a contributory profit sharing and savings plan (the “401(k) Plan”) that covers substantially all employees who are at least 21 years of age. The Company makes matching contributions equal to 100% of the first 2% of each employee’s wages that are contributed and 25% of the next 4% of each employee’s wages that are contributed. The Company also sponsors a nonqualified deferred compensation plan (the “Deferred Compensation Plan”) for highly compensated employees whose contributions to the 401(k) Plan are limited due to the application of the annual limitation under the Internal Revenue Code. In the event of bankruptcy, the assets of the Deferred Compensation Plan are available to satisfy the claims of general creditors. The Company has an unsecured obligation to pay, in the future, the value of the deferred compensation and Company match, if applicable, adjusted to reflect the performance, whether positive or negative, of selected investment measurement options chosen by each participant during the deferral period. The Company may make discretionary contributions to the 401(k) Plan or the Deferred Compensation Plan on an annual basis as determined by the Board of Directors.

The Company did not make any discretionary contributions to the 401(k) Plan or the Deferred Compensation Plan during the years ended December 31, 2025, 2024, or 2023. The Company expensed matching contributions under the plans in the amount of $58.9 million, $52.7 million and $48.6 million for the year ended December 31, 2025, 2024, and 2023, respectively, which were primarily included in “Selling, general and administrative expenses” on the accompanying Consolidated Statements of Income. The liability for compensation deferred under the Deferred Compensation Plan was $67.8 million and $65.2 million as of December 31, 2025 and 2024, respectively, which were included in “Other liabilities” on the accompanying Consolidated Balance Sheets. See Note 3 for further information concerning the Company’s marketable securities held to fulfill our future unsecured obligations under this plan.

NOTE 15 – COMMITMENTS

Construction Commitments:

As of December 31, 2025, the Company had purchase obligations for construction contract commitments in the amount of $275.9 million.

Letters of Credit Commitments:

As of December 31, 2025, the Company had outstanding letters of credit, primarily to satisfy workers’ compensation, general liability, and other insurance policies, in the amount of $155.6 million. See Note 9 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 addition, if at any time the Company undergoes a Change of Control Triggering Event, as defined in the indenture governing such series of senior notes, the holders may require the Company to repurchase all or a portion of their senior notes at a price equal to 101% of the principal amount of the notes being repurchased, plus accrued and unpaid interest, if any, but not including the repurchase date. See Note 9 for further information concerning the Company’s debt financing commitments.

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. With the exception of certain Team Member health care benefit liabilities, employment related claims and litigation, certain commercial litigation and certain regulatory matters, the Company obtains third-party insurance coverage to limit its exposure to this obligation. See Note 1 for further information concerning the Company’s self-insurance reserves.

Federal Renewable Energy Tax Credits:

Subsequent to the end of the year, the Company entered into a conditional agreement to purchase transferrable federal renewable energy tax credits (“RETC”). As of February 27, 2026, the Company had a total commitment of approximately $450 million to purchase RETCs, with the final closing payment anticipated to occur by August of 2026.

NOTE 16 – RELATED PARTIES

The Company leases certain land and buildings related to 66 of its O’Reilly Auto Parts stores and one surplus property under fifteen- or twenty-year operating lease agreements with entities that include one or more of the Company’s affiliated directors or members of an affiliated director’s immediate family. 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 $4.6 million, $4.8 million, and $4.7 million for the year ended December 31, 2025, 2024, and 2023, respectively. The Company believes that the lease agreements with the affiliated entities are on terms comparable to those obtainable from third parties. See Note 6 for further information concerning the Company’s operating leases.

NOTE 17 – INCOME TAXES

The following table identifies components of income from continuing operations before income taxes included in “Income before income taxes” on the accompanying Consolidated Statements of Income for the years ended December 31, 2025, 2024, and 2023 (in thousands):


	For the Year Ended
	December 31,
	2025		2024		2023
Domestic	$	3,259,128	$	3,053,501	$	2,994,856
Foreign		(18,957)		(8,437)		9,894
Income before income taxes	$	3,240,171	$	3,045,064	$	3,004,750

Provision for Income Taxes:

The following tables reconcile the amounts included in “Provision for income taxes” on the accompanying Consolidated Statements of Income for the years ended December 31, 2025, 2024, and 2023 (in thousands):


		For the Year Ended
		December 31,
		2025			2024			2023
Current:
Federal income tax expense		$	584,569		$	587,496		$	497,492
State income tax expense			153,026			120,209			109,924
Foreign income tax expense			1,911			446			2,521
Total current			739,506			708,151			609,937

Deferred:
Federal income tax (benefit) expense			(20,482)			(43,222)			41,782
State income tax (benefit) expense			(8,986)			(3,229)			6,003
Foreign income tax (benefit) expense			(8,076)			(3,316)			447
Total deferred			(37,544)			(49,767)			48,232

Net income tax expense		$	701,962		$	658,384		$	658,169

The following table outlines the reconciliation of the “Provision for income taxes” amounts included on the accompanying Consolidated Statements of Income to the amounts computed at the federal statutory rate for the years ended December 31, 2025, 2024, and 2023 (in thousands):


		For the Year Ended
		December 31,
		2025					2024					2023
		Amount		Percent			Amount		Percent			Amount		Percent
U.S. federal statutory tax rate		$	680,418	21.0	%		$	639,534	21.0	%		$	630,998	21.0	%
State and local income taxes, net of federal income tax effect (1)			104,123	3.2				95,928	3.2				96,814	3.2

Nontaxable or nondeductible items:
Excess tax benefit from share-based compensation			(29,928)	(0.9)				(39,871)	(1.3)				(35,950)	(1.2)
Other			4,640	0.1				3,575	0.1				5,247	0.2

Tax credits:
Federal renewable energy tax credit			(49,519)	(1.5)				(28,345)	(0.9)				(19,627)	(0.6)
Other			(9,979)	(0.3)				(11,541)	(0.4)				(14,115)	(0.5)

Effect of cross-border tax laws			—	—				—	—				—	—
Effect of changes in tax laws or rates enacted in the current period			—	—				—	—				—	—
Change in unrecognized tax benefits			11,696	0.4				(817)	—				(502)	—
Changes in valuation allowances			—	—				—	—				—	—
Other adjustments			(7,720)	(0.2)				1,495	—				(4,905)	(0.2)
Foreign tax effects			(1,769)	(0.1)				(1,574)	(0.1)				209	—
Total		$	701,962	21.7	%		$	658,384	21.6	%		$	658,169	21.9	%

(1)	State taxes in California, Illinois, Minnesota, Tennessee, and Texas for the years ended December 31, 2025, 2024, and 2023, made up the majority (greater than 50%) of the tax effect in this category.

The Company has purchased transferrable federal renewable energy tax credits, and during the year ended December 31, 2025, 2024, and 2023, the Company recognized federal renewable energy tax credits in the amount $453.1 million, $376.4 million, and $336.5 million, respectively. As of December 31, 2025 and 2024, the Company had recorded a liability for the purchase of transferrable federal renewable energy tax credits in the amount of $17.6 million and $346.6 million, respectively, which were included in “Other current liabilities” on the accompanying Consolidated Balance Sheets. Payments for the purchases of transferrable federal renewable energy tax credits are included in income taxes paid.

Income taxes have not been accrued by the Company for the unremitted earnings of its foreign subsidiaries because such earnings are intended to be reinvested in the subsidiaries indefinitely.

Income Taxes Paid:

The following table outlines the components of income taxes paid (net of refunds received) for the years ended December 31, 2025, 2024, and 2023 (in thousands):


	December 31,
	2025		2024		2023
Federal	$	921,798	$	508,917	$	208,310
State		140,673		126,802		100,085
Foreign		5,053		4,707		6,665
Total income taxes paid	$	1,067,524	$	640,426	$	315,060

Deferred Income Tax Assets and Liabilities:

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, and also include the tax effect of carryforwards.

The following table identifies significant components of the Company’s net deferred tax liabilities included in “Deferred income taxes” on the accompanying Consolidated Balance Sheets as of December 31, 2025 and 2024 (in thousands):


	December 31,
	2025		2024
Deferred tax assets:
Allowance for doubtful accounts	$	4,488	$	4,161
Other accruals		195,819		174,307
Operating lease liability		604,407		589,140
Net operating loss		14,172		5,831
Other		19,700		17,726
Total deferred tax assets		838,586		791,165

Deferred tax liabilities:
Inventories		59,192		118,712
Property and equipment		341,413		298,804
Operating lease asset		582,567		568,577
Other		66,624		52,671
Total deferred tax liabilities		1,049,796		1,038,764

Net deferred tax liabilities	$	(211,210)	$	(247,599)

As of December 31, 2025 and 2024, the Company had foreign net operating loss (“NOL”) carryforwards totaling approximately $45.7 million ($14.2 million tax effected) and $17.9 million ($5.8 million tax effected), respectively. These NOLs will expire, if not utilized, in various years ranging from 2033 to 2035.

Unrecognized Tax Benefits:

The following table summarizes the changes in the gross amount of unrecognized tax benefits, excluding interest and penalties, for the years ended December 31, 2025, 2024, and 2023 (in thousands):


		2025		2024		2023
Unrealized tax benefit, balance at January 1,		$	22,524	$	23,943	$	24,798
Additions based on tax positions related to the current year			3,493		3,907		3,932
Additions based on tax positions related to the prior years			8,401		—		—
Payments related to items settled with taxing authorities			(10,683)		(420)		—
Reductions due to the lapse of statute of limitations and settlements			(3,133)		(4,906)		(4,787)
Unrealized tax benefit, balance at December 31,		$	20,602	$	22,524	$	23,943

For the year ended December 31, 2025, 2024, and 2023, the Company recorded a reserve in the amount of $19.3 million, $21.0 million and $21.9 million, respectively, for unrecognized tax benefits, including interest and penalties, net of federal benefits, which if recognized would affect the Company’s effective tax rate. The timing related to the ultimate resolution or settlement of these uncertain tax positions cannot be determined. The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. As of December 31, 2025, 2024, and 2023, the Company had accrued approximately $3.9 million, $4.0 million and $3.9 million, respectively, of interest and penalties related to uncertain tax positions before the benefit of the deduction for interest on state and federal returns. During the year ended December 31, 2025, 2024, and 2023, the Company recorded tax expense related to an increase in its liability for interest and penalties in the amounts of $1.8 million, $2.4 million and $2.1 million, respectively.

The Company’s United States federal income tax returns for tax years 2022 and beyond remain subject to examination by the Internal Revenue Service. The IRS is currently conducting an examination of the Company’s consolidated returns for the tax year 2023. The Company’s state income tax returns remain subject to examination by various state authorities for tax years ranging from 2014 through 2024.

NOTE 18 – EARNINGS PER SHARE

The following table illustrates the computation of basic and diluted earnings per share for the years ended December 31, 2025, 2024, and 2023 (in thousands, except per share data):


		For the Year Ended
		December 31,
		2025			2024			2023
Numerator (basic and diluted):
Net income		$	2,538,209		$	2,386,680		$	2,346,581

Denominator:
Weighted-average common shares outstanding – basic			851,472			875,082			907,131
Effect of stock options (1)			4,447			5,490			7,845
Weighted-average common shares outstanding – assuming dilution			855,919			880,572			914,976

Earnings per share:
Earnings per share-basic		$	2.98		$	2.73		$	2.59
Earnings per share-assuming dilution		$	2.97		$	2.71		$	2.56

Antidilutive potential common shares not included in the calculation of diluted earnings per share:
Stock options (1)			1,142			1,490			1,421
Weighted-average exercise price per share of antidilutive stock options (1)		$	84.51		$	67.79		$	55.74

(1)	See Note 14 for further information concerning the terms of the Company’s share-based compensation plans.

See Note 11 for information concerning the Company’s subsequent share repurchases.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

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