2009 Dynamic Dozen, No. 2: O'Reilly Automotive Inc.

With the acquisition last year of Phoenix-based CSK Auto Corp., O'Reilly Automotive Inc. is within 12 states of claiming a coast-to-coast presence.

"Our eventual goal would be to be in all 50 states," said Mark Merz, investor relations manager for the Springfield-based after-market auto parts supplier.

O'Reilly reported 2008 revenues of nearly $3.5 billion, up from $2.52 billion in 2007.

On March 3, the public company's stock (NASDAQ: ORLY) hit a 52-week high of $33.88.

The CSK acquisition, which added 1,350 stores, brought O'Reilly's store count to 3,285 locations in 38 states, 10 of which are new to O'Reilly.

The auto-parts retailer is No. 3 in the industry, barely behind No. 2 Advance Auto Parts Inc., Merz said.

CSK wasn't initially willing to sell. O'Reilly had been eyeing the Western competitor for awhile before attempting to orchestrate a buyout with CSK executives. When that didn't happen, CEO Greg Henslee sent a hostile bid direct to CSK shareholders. The company attempted to block the takeover by enacting a "poison pill," which prevents a company from acquiring more than 10 percent of the sought-after stock.

Ultimately, O'Reilly upped the ante to $1 billion in cash, stock and debt assumption, and the acquisition - O'Reilly's largest to date - closed in July 2008.

"O'Reilly has always been a growth-oriented company ... especially since we went public, and one of those ways is acquisitions," Merz said. "You couldn't have planned a better acquisition to reach a part of the country you haven't been in than CSK."

Integrating CSK is ongoing and requires opening distribution centers in California, Washington, Colorado and Utah to reach the Western states that don't have an O'Reilly facility, Merz said. Two sites are new warehouses that will be converted to distribution centers; a purchase contract has been signed on the third site; and prospective sites have been identified for the fourth.

Eastern growth will be fueled by a Michigan distribution center purchased through the CSK merger that will be converted to the O'Reilly format this spring, and the company will open another distribution center in Greensboro, N.C., Merz said.

About 60 CSK stores had been converted as of the end of 2008, which will increase to about 300 stores by the end of this year.

Folding 15,000 CSK employees into O'Reilly will continue through next year, but Phil Thompson, human resources vice president, thinks O'Reilly's culture and core values aid that process, and ultimately, the company's continued growth.

"It's how we do everything," Thompson said. "It's really how we try to make decisions on everything and live every day. We start off every meeting with someone doing a culture talk about a particular value ... and how they've seen that demonstrated in their team."

O'Reilly plans to open about 150 additional stores across the country in 2009 and is always open to small acquisitions - the "independent jobbers" with a few stores who want to sell, Merz said.

"O'Reilly has never been a company that is content to sit on its laurels. There's nothing out there right now (to acquire), but if something came along, we'd certainly have to look at it," he said.

Thompson also credits O'Reilly's growth to its business model, which captures two sides of the auto-parts market: "do-it-yourself" retail sales and "do-it-for-me" wholesale sales to professional installers.

"In this economy where people aren't buying new cars like they used to, both sides work," he said.

Declining new-car sales translate into older cars on the road that need more repair, Merz said, adding, "it's very much a positive for our industry."

O'Reilly started as a wholesaler in 1957 and moved into the retail side on a large scale in the late 1970s and early 1980s. This dual-market strategy is unique in the industry, Merz said.

"We focus the same amount of effort to both sides of the business ... and about half of the business comes from each side," he said.[[In-content Ad]]