O'Reilly posts record first-quarter growth

The good news – record first-quarter earnings per share of 59 cents – comes less than two weeks after the company lost its co-founder, Charles H. “Chub” O’Reilly. O’Reilly died April 20 at the age of 92. (See sidebar on page 37.)

David O’Reilly, board chairman and Chub’s son, says the company is moving forward, staying true to the “O’Reilly culture” his dad created.

“His influence is perpetuated through the values that he defined for us through example that we call now the O’Reilly culture – it’s hard work and commitment,” he said. “It’s also his enthusiasm and the respect that he commanded through his honesty and fair dealings.”

The O’Reilly culture produced positive first-quarter financial results: net income and sales were up 22 percent and 16 percent, respectively, and earnings per share increased 10 cents to the 59-cent quarterly record.

Company officials believe the financial success is partly attributable to steady, yet consistent store growth.

O’Reilly officials told shareholders they plan to add 160 new stores in 2005, bringing the total to more than 1,400 stores across the Midwest and southeast.

The company had just 188 stores 10 years ago.

Greg Henslee, O’Reilly co-president, said much of the current expansion is in the Southeast, due to the recent opening of a new distribution center.

“We just opened the Atlanta distribution center about 45 days ago, and it will service up to 250 stores,” he said. “It’s currently serving 60, so we’ve got a lot of room for expansion.”

O’Reilly said the company practices patience in its growth model.

“We don’t grow for growth’s sake;

we grow profitably and consistently, and

I think that’s why the market really appreciates us,” he said. “We’re not trying to go out and conquer the whole country all at once.”

$61 million buyout

O’Reilly announced May 2 that it had reached an agreement to purchase all shares of stock in W.E. Lahr Co., parent of Midwest Auto Parts Distributors Inc. The St. Paul, Minn.-based company operates 71 stores in Minnesota, Montana, South Dakota, Wisconsin and Wyoming, as well as distribution centers in St. Paul, Minn., and Billings, Mont.

The purchase will cost O’Reilly $61 million, to be paid from the company’s cash reserves.

The deal, which would give O’Reilly stores in 25 states, is expected to close May 31.

Henslee said the purchase is right in line with O’Reilly’s long-term growth plan.

“It’s a perfect geographic fit – we’re up in northern Iowa now,” Henslee said. “They’re really sparsely spread out over six states, and we’re not in those states right now, but they border our territory. It’s really a bolt-on growth area that we have not yet been in.”

Book chapter

Based on its consistent operations and earnings – sales have been up 26 percent year over year since the company went public in 1993 – O’Reilly is being featured in a new business book.

Author Jason Jennings devotes an entire chapter of his forthcoming book, “Think Big, Act Small,” to the O’Reilly business model. The book is scheduled for release May 9.

Jennings said O’Reilly is one of only 20 companies in the world that has grown both revenues and operating income by more than 10 percent for 10 consecutive years. He cited several factors for the company’s success, including the owners’ willingness to “keep their hands dirty.”

“All the executives of these companies specialize in being in constant touch with their customers,” he said. “Each business only has two assets – its team and its customers. Any good leader spends his or her time with the people that they’ve brought together as a team and the people they’ve assembled as customers.”

Jennings also said there is a surprising geographic occurrence with the list he’s compiled – none of the companies are in New York City, Los Angeles, Atlanta, Miami or Seattle.

“All of these companies are right in Midwestern America. They are headed by people who are incredibly humble and down-to-earth,” he said. “The dress of the best business leaders is not Armani suits and $500 haircuts. It’s khaki slacks and polo shirts. They don’t have mansions; they drive modest cars. David (O’Reilly’s) office has room for a desk, a credenza, David and a guest – and that’s it. There is something to the concept of a Midwestern work ethic.”

Other companies in Jennings’ book include Sidney, Neb.-based Cabela’s, Oklahoma City-based Sonic Drive-In and Koch Industries of Wichita, Kan.

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