Item 1. Financial Statements

​

O’REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

​

​	​	​	​	​	​	​
​		March 31, 2024			December 31, 2023
​	​	(Unaudited)		​	(Note)
Assets		​			​
Current assets:		​			​
Cash and cash equivalents	​	$	89,264	​	$	279,132
Accounts receivable, net	​		437,821	​		375,049
Amounts receivable from suppliers	​		139,267	​		140,443
Inventory	​		4,805,164	​		4,658,367
Other current assets	​		128,181	​		105,311
Total current assets	​		5,599,697	​		5,558,302
​	​	​	​	​	​	​
Property and equipment, at cost	​		8,555,556	​		8,312,367
Less: accumulated depreciation and amortization	​		3,360,351	​		3,275,387
Net property and equipment	​		5,195,205	​		5,036,980
​	​	​	​	​	​	​
Operating lease, right-of-use assets	​	​	2,227,783	​	​	2,200,554
Goodwill	​		1,009,857	​		897,696
Other assets, net	​		180,512	​		179,463
Total assets	​	$	14,213,054	​	$	13,872,995
​	​	​	​	​	​	​
Liabilities and shareholders’ deficit	​			​
Current liabilities:	​			​
Accounts payable	​	$	6,117,068	​	$	6,091,700
Self-insurance reserves	​		130,974	​		128,548
Accrued payroll	​		127,704	​		138,122
Accrued benefits and withholdings	​		174,125	​		174,650
Income taxes payable	​		147,645	​		7,860
Current portion of operating lease liabilities	​	​	399,245	​	​	389,536
Other current liabilities	​		791,633	​		730,937
Total current liabilities	​		7,888,394	​		7,661,353
​	​	​	​	​	​	​
Long-term debt	​		5,288,632	​		5,570,125
Operating lease liabilities, less current portion	​	​	1,900,200	​	​	1,881,344
Deferred income taxes	​		321,323	​		295,471
Other liabilities	​		205,703	​		203,980
​	​	​	​	​	​	​
Shareholders’ equity (deficit):	​			​
Common stock, $0.01 par value:	​		​	​	​	​
Authorized shares – 245,000,000	​	​	​	​	​	​
Issued and outstanding shares –	​	​	​	​	​	​
58,982,123 as of March 31, 2024, and	​	​	​	​	​	​
59,072,792 as of December 31, 2023	​	​	590	​		591
Additional paid-in capital	​		1,410,756	​		1,352,275
Retained deficit	​		(2,849,108)	​		(3,131,532)
Accumulated other comprehensive income	​	​	46,564	​	​	39,388
Total shareholders’ deficit	​		(1,391,198)	​		(1,739,278)
​	​	​	​	​	​	​
Total liabilities and shareholders’ deficit	​	$	14,213,054	​	$	13,872,995

​

Note: The balance sheet at December 31, 2023, has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by United States generally accepted accounting principles for complete financial statements.

See accompanying Notes to condensed consolidated financial statements.

​

O’REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(In thousands, except per share data)

​

​	​	​	​	​	​	​
​	​	For the Three Months Ended
​	​	March 31,
​		2024			2023
Sales	​	$	3,976,240	​	$	3,707,864
Cost of goods sold, including warehouse and distribution expenses	​		1,942,068	​		1,817,535
Gross profit	​		2,034,172	​		1,890,329
​	​	​	​	​	​	​
Selling, general and administrative expenses	​		1,281,691	​		1,173,684
Operating income	​		752,481	​		716,645
​	​	​	​	​	​	​
Other income (expense):	​			​
Interest expense	​		(57,148)	​		(44,572)
Interest income	​		1,656	​		868
Other, net	​		3,401	​		4,479
Total other expense	​		(52,091)	​		(39,225)
​	​	​	​	​	​	​
Income before income taxes	​		700,390	​		677,420
Provision for income taxes	​		153,152	​		160,535
Net income	​	$	547,238	​	$	516,885
​	​	​	​	​	​	​
Earnings per share-basic:	​			​
Earnings per share	​	$	9.27	​	$	8.36
Weighted-average common shares outstanding – basic	​		59,017	​		61,840
​	​	​	​	​	​	​
Earnings per share-assuming dilution:	​			​
Earnings per share	​	$	9.20	​	$	8.28
Weighted-average common shares outstanding – assuming dilution	​		59,454	​		62,398

​

See accompanying Notes to condensed consolidated financial statements.

​

​

O’REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(In thousands)

​

​	​	​	​	​	​	​
​	​	For the Three Months Ended
​	​	March 31,
​		2024			2023
Net income	​	$	547,238	​	$	516,885
Other comprehensive income (loss):	​	​	​	​	​	​
Foreign currency translation adjustments	​		7,176	​		18,898
Total other comprehensive income	​	​	7,176	​	​	18,898
​	​	​	​	​	​	​
Comprehensive income	​	$	554,414	​	$	535,783

​

See accompanying Notes to condensed consolidated financial statements.

​

​

​

O’REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT)

(Unaudited)

(In thousands)

​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	For the Three Months Ended March 31, 2024
​		​	​	​	​		​			​	​	​	Accumulated			​	​
​	​	​	​	​	​	​	Additional		​	​	​	​	Other		​	​	​
​	​	Common Stock				​	Paid-In		​	Retained		​	Comprehensive		​	​	​
​		Shares		Par Value			Capital			Deficit		​	Income			Total
Balance at December 31, 2023		59,073	​	$	591	​	$	1,352,275	​	$	(3,131,532)	​	$	39,388	​	$	(1,739,278)
Net income		—	​		—	​		—	​		547,238	​	​	—	​		547,238
Total other comprehensive income	​	—	​	​	—	​	​	—	​	​	—	​	​	7,176	​	​	7,176
Issuance of common stock under employee benefit plans, net of forfeitures and shares withheld to cover taxes		6	​		—	​		5,607	​		—	​	​	—	​		5,607
Net issuance of common stock upon exercise of stock options		165	​		2	​		52,414	​		—	​	​	—	​		52,416
Share-based compensation		—	​		—	​		6,548	​		—	​	​	—	​		6,548
Share repurchases, including fees	​	(262)	​	​	(3)	​	​	(6,088)	​	​	(263,928)	​	​	—	​	​	(270,019)
Excise tax on share repurchases		—	​		—	​		—	​		(886)	​	​	—	​		(886)
Balance at March 31, 2024		58,982	​	$	590	​	$	1,410,756	​	$	(2,849,108)	​	$	46,564	​	$	(1,391,198)
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	For the Three Months Ended March 31, 2023
​		​	​	​	​		​			​	​	​	Accumulated			​	​
​	​	​	​	​	​	​	Additional		​	​	​	​	Other		​	​	​
​	​	Common Stock				​	Paid-In		​	Retained		​	Comprehensive		​	​	​
​		Shares		Par Value			Capital			Deficit		​	Income			Total
Balance at December 31, 2022		62,353	​	$	624	​	$	1,311,488	​	$	(2,375,860)	​	$	2,996	​	$	(1,060,752)
Net income		—	​		—	​		—	​		516,885	​	​	—	​		516,885
Total other comprehensive income	​	—	​	​	—	​	​	—	​	​	—	​	​	18,898	​	​	18,898
Issuance of common stock under employee benefit plans, net of forfeitures and shares withheld to cover taxes		8	​		—	​		5,293	​		—	​	​	—	​		5,293
Net issuance of common stock upon exercise of stock options		35	​		—	​		10,255	​		—	​	​	—	​		10,255
Share-based compensation		—	​		—	​		6,980	​		—	​	​	—	​		6,980
Share repurchases, including fees		(1,357)	​		(14)	​		(28,740)	​		(1,082,707)	​	​	—	​		(1,111,461)
Excise tax on share repurchases	​	—	​	​	—	​	​	—	​	​	(11,115)	​	​	—	​	​	(11,115)
Balance at March 31, 2023		61,039	​	$	610	​	$	1,305,276	​	$	(2,952,797)	​	$	21,894	​	$	(1,625,017)

​

See accompanying Notes to condensed consolidated financial statements.

​

​

O’REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

​

​	​	​	​	​	​	​
​	​	For the Three Months Ended
​	​	March 31,
​		2024			2023
Operating activities:		​			​
Net income	​	$	547,238	​	$	516,885
Adjustments to reconcile net income to net cash provided by operating activities:	​			​		​
Depreciation and amortization of property, equipment and intangibles	​		109,648	​		93,747
Amortization of debt discount and issuance costs	​		1,593	​		1,215
Deferred income taxes	​		2,374	​		3,393
Share-based compensation programs	​		7,022	​		7,435
Other	​		2,997	​		29
Changes in operating assets and liabilities:	​		​	​		​
Accounts receivable	​		(36,954)	​		(2,610)
Inventory	​		(92,042)	​		(179,481)
Accounts payable	​		6,107	​		172,701
Income taxes payable	​		140,025	​		145,441
Other	​		16,207	​		(44,991)
Net cash provided by operating activities	​		704,215	​		713,764
​	​	​	​	​	​	​
Investing activities:	​			​
Purchases of property and equipment	​		(249,240)	​		(223,268)
Proceeds from sale of property and equipment	​		3,853	​		2,704
Other, including acquisitions, net of cash acquired	​		(155,366)	​		(956)
Net cash used in investing activities	​		(400,753)	​		(221,520)
​	​	​	​	​	​	​
Financing activities:	​			​
Proceeds from borrowings on revolving credit facility	​		30,000	​		1,216,000
Payments on revolving credit facility	​		—	​		(661,000)
Net payments of commercial paper	​	​	(310,805)	​	​	—
Repurchases of common stock	​		(270,019)	​		(1,111,461)
Net proceeds from issuance of common stock	​		57,815	​		15,146
Other	​		(569)	​		(354)
Net cash used in financing activities	​		(493,578)	​		(541,669)
​	​	​	​	​	​	​
Effect of exchange rate changes on cash	​	​	248	​	​	714
Net decrease in cash and cash equivalents	​		(189,868)	​		(48,711)
Cash and cash equivalents at beginning of the period	​		279,132	​		108,583
Cash and cash equivalents at end of the period	​	$	89,264	​	$	59,872
​	​	​	​	​	​	​
Supplemental disclosures of cash flow information:	​			​
Income taxes paid	​	$	9,798	​	$	9,696
Interest paid, net of capitalized interest	​		34,671	​		26,531

​

See accompanying Notes to condensed consolidated financial statements.

​

​

​

O’REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

March 31, 2024

​

NOTE 1 – BASIS OF PRESENTATION

​

The accompanying unaudited condensed consolidated financial statements of O’Reilly Automotive, Inc. and its subsidiaries (the “Company” or “O’Reilly”) have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2024, are not necessarily indicative of the results that may be expected for the year ended December 31, 2024. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2023.

​

Principles of consolidation:

The condensed 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.

​

NOTE 2 – BUSINESS COMBINATION

​

On January 22, 2024, the Company completed the previously announced strategic acquisition of Groupe Del Vasto (“Vast Auto”), an auto parts supplier headquartered in Montreal, Quebec, Canada, pursuant to a stock purchase agreement whereby 100% of all outstanding shares of Vast Auto were acquired, with all consideration paid in cash at closing. The acquisition of Vast Auto represents O’Reilly’s entrance into the Canadian automotive aftermarket. At the time of the acquisition, Vast Auto operated two distribution centers and six satellite warehouses that support a network of 23 company-owned stores and thousands of independent jobber and professional customers across Eastern Canada. The results of Vast Auto’s operations have been included in the Company’s condensed consolidated financial statements beginning from the date of acquisition. Pro forma results of operations related to the acquisition of Vast Auto are not presented as Vast Auto’s results are not material to the Company’s results of operations.

​

The purchase price allocation process consists of collecting data and information to enable the Company to value the assets acquired and liabilities assumed as a result of the business combination. Potential identifiable intangible assets under evaluation include, but are not limited to, trade names and trademarks, non-compete agreements, and customer relationships. In addition, other assets, including internal use software, and other assumed liabilities may be identified, valued, and recorded. Due to the close proximity of the Vast Auto acquisition closing date and the Company’s fiscal quarter end, the Company remains in the initial measurement period.

​

The preliminary purchase price allocation, which is provisional and will change as additional information is obtained and valuation work is completed during the initial measurement period, resulted in the initial recognition of $109.8 million of goodwill and intangible assets included in “Goodwill”, including impacts from the recognition of applicable deferred taxes related to the acquisition, on the accompanying Condensed Consolidated Balance Sheets as of March 31, 2024. Goodwill generated from this acquisition is not amortizable for tax purposes.

​

NOTE 3 – VARIABLE INTEREST ENTITIES

​

The Company invests in certain tax credit funds that promote renewable energy. These investments generate 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 tax credits.

​

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 March 31, 2024, the Company had invested in six 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.

​

The Company’s maximum exposure to losses associated with these VIEs is generally limited to its net investment, which was $29.8 million as of March 31, 2024, and was included in “Other assets, net” on the accompanying Condensed Consolidated Balance Sheets.

​

NOTE 4 – FAIR VALUE MEASUREMENTS

​

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.

​

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 12 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 Condensed Consolidated Balance Sheets as of March 31, 2024, and December 31, 2023. The Company recorded an increase in fair value related to its marketable securities in the amount of $3.5 million and $2.5 million for the three months ended March 31, 2024 and 2023, respectively, which were included in “Other income (expense)” on the accompanying Condensed 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 March 31, 2024, and December 31, 2023 (in thousands):

​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	March 31, 2024
​	​	Quoted Priced in Active Markets		​	Significant Other		​	Significant		​	​	​
​	​	for Identical Instruments		​	Observable Inputs		​	Unobservable Inputs		​	​	​
​		(Level 1)			(Level 2)			(Level 3)			Total
Marketable securities	​	$	62,219	​	$	—	​	$	—	​	$	62,219

​

​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	December 31, 2023
​	​	Quoted Prices in Active Markets		​	Significant Other		​	Significant		​	​
​	​	for Identical Instruments		​	Observable Inputs		​	Unobservable Inputs		​	​
​		(Level 1)			(Level 2)			(Level 3)			Total
Marketable securities	​	$	59,508	​	$	—	​	$	—	​	$	59,508

​

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 March 31, 2024, and December 31, 2023, the Company did not have any 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 Condensed Consolidated Balance Sheets as of March 31, 2024, and December 31, 2023.

​

The table below identifies the estimated fair value of the Company’s senior notes, using the market approach. The fair value as of March 31, 2024, and December 31, 2023, was determined by reference to quoted market prices of the same or similar instruments (Level 2) (in thousands):

​

​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	March 31, 2024					​	December 31, 2023
​	​	Carrying Amount		​	Estimated Fair Value		​	Carrying Amount		​	Estimated Fair Value
Senior Notes	​	$	4,821,943	​	$	4,643,028	​	$	4,820,543	​	$	4,687,065

​

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 7 for further information concerning the Company’s senior notes, unsecured revolving credit facility, and commercial paper program.

​

The accompanying Condensed 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 5 – LEASES

​

The Company leases certain office space, retail stores, distribution centers, and equipment under long-term, non-cancelable operating leases. The following table summarizes Total lease cost for the three months ended March 31, 2024 and 2023, which were primarily included in “Selling, general and administrative expenses” on the accompanying Condensed Consolidated Statements of Income (in thousands):

​

​	​	​	​	​	​	​
​	​	For the Three Months Ended
​	​	March 31,
​		2024		​	2023
Operating lease cost	​	$	103,556	​	$	96,518
Short-term operating lease cost	​		2,500	​		3,704
Variable operating lease cost	​		25,634	​		24,471
Sublease income	​		(1,154)	​		(1,214)
Total lease cost	​	$	130,536	​	$	123,479

​

The following table summarizes other lease-related information for the three months ended March 31, 2024 and 2023:

​

​	​	​	​	​	​	​	​
​			For the Three Months Ended
​		​	March 31,
​		​	2024		​	2023
Cash paid for amounts included in the measurement of operating lease liabilities:			​		​	​	​
​	Operating cash flows from operating leases	​	$	101,616	​	$	95,494
Right-of-use assets obtained in exchange for new operating lease liabilities		​	​	88,091	​	​	126,986

​

​

NOTE 6 – SUPPLIER FINANCE PROGRAM

​

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 financial institutions. As of March 31, 2024, and December 31, 2023, 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 $4.3 billion and $4.4 billion, respectively, which were included as a component of “Accounts payable” on the accompanying Condensed Consolidated Balance Sheets.

​

NOTE 7 – FINANCING

​

The following table identifies the amounts included in “Long-term debt” on the accompanying Condensed Consolidated Balance Sheets as of March 31, 2024, and December 31, 2023 (in thousands):

​

​	​	​	​	​	​	​
​		March 31, 2024			December 31, 2023
Revolving Credit Facility, weighted-average variable interest rate of 8.500%	​	$	30,000	​	$	—
Commercial paper program, weighted-average variable interest rate of 5.527% as of March 31, 2024, and 5.640% as of December 31, 2023	​	​	437,000	​	​	750,900
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
Total principal amount of debt	​	​	5,317,000	​	​	5,600,900
Less: Unamortized discount and debt issuance costs	​	​	28,368	​	​	30,775
Total long-term debt	​	$	5,288,632	​	$	5,570,125

​

Unsecured revolving credit facility:

The Company is party to a credit agreement dated June 15, 2021, as amended as of March 6, 2023 (the “Credit Agreement”). The Credit Agreement provides for a five-year $1.8 billion unsecured revolving credit facility (the “Revolving Credit Facility”) arranged by JPMorgan Chase Bank, N.A., which is scheduled to mature in June of 2026. 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 $2.7 billion at any time.

​

As of March 31, 2024, and December 31, 2023, 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 in the amounts of $5.7 million and $5.4 million, respectively, reducing the aggregate availability under the Credit Agreement by those amounts. Substantially all of these outstanding letters of credit have a one-year term from the date of issuance.

​

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. 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. 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 March 31, 2024, 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, 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 March 31, 2024, 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 March 31, 2024, and December 31, 2023, the Company had additional outstanding letters of credit, primarily to support obligations under workers’ compensation, general liability, and other insurance policies, in the amount of $132.1 million and $106.8 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 $1.8 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 Condensed Consolidated Balance Sheet as of March 31, 2024, as the Company has the ability and intent to refinance these Notes on a long-term basis.

​

Senior notes:

As of March 31, 2024, the Company has issued and outstanding a cumulative $4.9 billion aggregate principal amount of unsecured senior notes, which are due between 2026 and 2032, 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. 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 March 31, 2024.

​

NOTE 8 – 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.

​

The Company’s product warranty liabilities are included in “Other current liabilities” on the accompanying Condensed Consolidated Balance Sheets as of March 31, 2024, and December 31, 2023; the following table identifies the changes in the Company’s aggregate product warranty liabilities for the three months ended March 31, 2024 (in thousands):

​

​	​	​	​
Warranty liabilities, balance at December 31, 2023	​	$	117,895
Warranty claims	​		(44,585)
Warranty accruals	​		48,275
Foreign currency translation	​	​	14
Warranty liabilities, balance at March 31, 2024	​	$	121,599

​

​

NOTE 9 – 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 May 23, 2023, and November 16, 2023, 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 $25.8 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 three months ended March 31, 2024 and 2023 (in thousands, except per share data):

​

​	​	​	​	​	​	​
​	​	For the Three Months Ended
​	​	March 31,
​		2024			2023
Shares repurchased		​	262	​	​	1,357
Average price per share	​	$	1,029.24	​	$	819.06
Total investment	​	$	270,017	​	$	1,111,447

​

As of March 31, 2024, the Company had $2.3 billion remaining under its share repurchase authorization. Excise tax on shares repurchased, assessed at one percent of the fair market value of shares repurchased, was $2.7 million for the three months ended March 31, 2024.

​

Subsequent to the end of the first quarter and through May 9, 2024, the Company repurchased 0.2 million additional shares of its common stock under its share repurchase program, at an average price of $1,053.19, for a total investment of $208.7 million. The Company has repurchased a total of 94.5 million shares of its common stock under its share repurchase program since the inception of the program in January of 2011 and through May 9, 2024, at an average price of $250.21, for a total aggregate investment of $23.7 billion.

​

NOTE 10 – ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

​

Accumulated other comprehensive income (loss) includes adjustments for foreign currency translations. The tables below summarize activity for changes in accumulated other comprehensive income (loss) for the three months ended March 31, 2024 and 2023 (in thousands):

​

​	​	​	​	​	​	​
​	​	Foreign		​	Total Accumulated Other
​	​	Currency (1)		​	Comprehensive Income
Accumulated other comprehensive income, balance at December 31, 2023	​	$	39,388	​	$	39,388
Change in accumulated other comprehensive income	​	​	7,176	​	​	7,176
Accumulated other comprehensive income, balance at March 31, 2024	​	$	46,564	​	$	46,564

​

​	​	​	​	​	​	​
​	​	Foreign		​	Total Accumulated Other
​	​	Currency (1)		​	Comprehensive Income
Accumulated other comprehensive income, balance at December 31, 2022	​	$	2,996	​	$	2,996
Change in accumulated other comprehensive income	​	​	18,898	​	​	18,898
Accumulated other comprehensive income, balance at March 31, 2023	​	$	21,894	​	$	21,894

(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 11 – REVENUE

​

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

​

​	​	​	​	​	​	​
​	​	For the Three Months Ended
​	​	March 31,
​		2024			2023
Sales to do-it-yourself customers	​	$	2,001,986	​	$	1,918,467
Sales to professional service provider customers		​	1,869,740		​	1,711,964
Other sales, sales adjustments, and sales from the acquired Vast Auto stores		​	104,514		​	77,433
Total sales	​	$	3,976,240	​	$	3,707,864

​

See Note 8 for information concerning the expected costs associated with the Company’s assurance warranty obligations.

​

NOTE 12 – 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.

​

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 three months ended March 31, 2024 (in thousands, except per share data):

​

​	​	​	​	​	​
​		​		​
​	​	Shares	​	Weighted- Average
​	​	(in thousands)	​	Exercise Price
Outstanding at December 31, 2023		884	​	$	428.50
Granted		54	​		1,069.20
Exercised		(165)	​		316.84
Forfeited or expired		(2)	​		641.53
Outstanding at March 31, 2024		771	​	$	496.55
Exercisable at March 31, 2024		545	​	$	369.68

​

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 three months ended March 31, 2024 and 2023:

​

​	​	​	​	​	​	​
​	​	March 31,
​		2024		​	2023
Risk free interest rate		4.14	%	​	3.91	%
Expected life		6.6	Years	​	6.5	Years
Expected volatility		28.3	%	​	29.1	%
Expected dividend yield		—	%	​	—	%

​

The following table summarizes activity related to stock options awarded by the Company for the three months ended March 31, 2024 and 2023 (in thousands, except per share data):

​

​	​	​	​	​	​	​
​	​	For the Three Months Ended
​	​	March 31,
​		2024			2023
Compensation expense for stock options awarded	​	$	5,595	​	$	6,119
Income tax benefit from compensation expense related to stock options	​		1,438	​		1,534

​

The weighted-average grant-date fair value of options granted during the three months ended March 31, 2024, was $411.22, compared to $318.08 for the three months ended March 31, 2023. The remaining unrecognized compensation expense related to unvested stock

option awards at March 31, 2024, was $55.5 million, and the weighted-average period of time over which this cost will be recognized is 3.0 years.

​

Other share-based compensation plans:

The Company sponsors other share-based compensation plans: an employee stock purchase plan and incentive plans that provide for the awarding of shares of restricted stock to certain key employees and directors. 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. 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 fair value and the employee purchase price for the shares sold to employees. Restricted stock awarded under the incentive plans to certain key employees and directors vests after one-year or evenly over a three-year period and is held in escrow until such vesting has occurred. The fair value of shares awarded under the incentive plans is based on the closing market price of the Company’s common stock on the date of the award, and compensation expense is recorded evenly over the vesting period or the minimum required service period.

​

The table below summarizes activity related to the Company’s other share-based compensation plans for the three months ended March 31, 2024 and 2023 (in thousands):

​

​	​	​	​	​	​	​
​	​	For the Three Months Ended
​	​	March 31,
​		2024			2023
Compensation expense for shares issued under the ESPP	​	$	953	​	$	861
Income tax benefit from compensation expense related to shares issued under the ESPP	​	​	245	​	​	216
Compensation expense for restricted shares awarded	​	​	474	​	​	455
Income tax benefit from compensation expense related to restricted awards	​	$	122	​	$	114

​

Profit sharing and savings plan:

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 may also make additional discretionary profit sharing contributions to the 401(k) 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 during the three months ended March 31, 2024 or 2023. The Company expensed matching contributions under the 401(k) Plan in the amount of $13.8 million and $9.6 million for the three months ended March 31, 2024 and 2023, respectively, which were primarily included in “Selling, general and administrative expenses” on the accompanying Condensed Consolidated Statements of Income.

​

Nonqualified deferred compensation plan:

The Company 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 limitations under the Internal Revenue Code, which could then be matched by the Company using the same formula as the 401(k) plan. In the event of bankruptcy, the assets of this 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. See Note 4 for further information concerning the Company’s marketable securities held to fulfill our future unsecured obligations under this plan.

​

The liability for compensation deferred under the Deferred Compensation Plan was $62.2 million and $59.5 million as of March 31, 2024, and December 31, 2023, respectively, which was included in “Other liabilities” on the accompanying Condensed Consolidated Balance Sheets. The Company expensed contributions under the Deferred Compensation Plan in the amount of $0.1 million and less than $0.1 million for each of the three months ended March 31, 2024 and 2023, respectively, which were included in “Selling, general and administrative expenses” on the accompanying Condensed Consolidated Statements of Income.

​

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. As of March 31, 2024, and December 31, 2023, there were 14,204 and 13,079 stock appreciation rights outstanding, respectively. During the three months ended March 31, 2024, there were 1,125 stock appreciation rights granted and no stock appreciation rights exercised or forfeited. The liability for compensation to be paid for redeemed stock appreciation rights was $6.2 million and $4.5 million as of March 31, 2024, and December 31, 2023, respectively, which were included in “Other liabilities” on the Condensed Consolidated Balance Sheets. The Company recorded compensation expense for stock appreciation rights in the amount

of $1.6 million and $0.3 million for the three months ended March 31, 2024 and 2023, respectively, which were included in “Selling, general and administrative expenses” on the accompanying Condensed Consolidated Statements of Income.

​

NOTE 13 – COMMITMENTS

​

The Company has entered into a conditional agreement to purchase federal renewable energy tax credits (“RETC”). As of March 31, 2024, the Company has committed to purchase approximately $375 million RETCs upon the credit transfer date, which is anticipated to occur by June of 2025.

​

NOTE 14 – EARNINGS PER SHARE

​

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

​

​	​	​	​	​	​	​
​	​	For the Three Months Ended
​	​	March 31,
​		2024			2023
Numerator (basic and diluted):		​			​
Net income	​	$	547,238	​	$	516,885
​	​	​	​	​	​	​
Denominator:	​			​
Weighted-average common shares outstanding – basic	​		59,017	​		61,840
Effect of stock options (1)	​		437	​		558
Weighted-average common shares outstanding – assuming dilution	​		59,454	​		62,398
​	​	​	​	​	​	​
Earnings per share:	​			​
Earnings per share-basic	​	$	9.27	​	$	8.36
Earnings per share-assuming dilution	​	$	9.20	​	$	8.28
​	​	​	​	​	​	​
Antidilutive potential common shares not included in the calculation of diluted earnings per share:	​			​
Stock options (1)	​		119	​		149
Weighted-average exercise price per share of antidilutive stock options (1)	​	$	917.74	​	$	725.14

(1)	See Note 12 for further information concerning the terms of the Company’s share-based compensation plans.

​

For the three months ended March 31, 2024 and 2023, the computation of diluted earnings per share did not include certain securities. These securities represent underlying stock options not included in the computation of diluted earnings per share, because the inclusion of such equity awards would have been antidilutive.

​

See Note 9 for information concerning the Company’s subsequent share repurchases.

​

NOTE 15 – LEGAL MATTERS

​

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.

​

NOTE 16 – RECENT ACCOUNTING PRONOUNCEMENTS

​

In November of 2023, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standard Update (“ASU”) No. 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures” (“ASU 2023-07”). ASU 2023-07 increases the disclosures about a public entity’s reportable segments. Under ASU 2023-07, a public entity would be required to disclose significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”), a description of other segment items by reportable segment, annual disclosures about a reportable segment’s profit or loss and assets required by Topic 280 in interim periods, any additional measures of a segment’s profit or loss used by the CODM to allocate resources, and the title and position of the CODM.

ASU 2023-07 is effective for annual reporting periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. ASU 2023-07 allows for early adoption and requires retrospective adoption. The Company will adopt this guidance beginning with its fourth quarter ending December 31, 2024. 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 December of 2023, FASB issued Accounting Standard Update ASU No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” (“ASU 2023-09”). Under ASU 2023-09, a public entity will 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 item 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 will adopt this guidance beginning with its fourth quarter ending December 31, 2025. 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.

​