O’Reilly Automotive(ORLY) - 2025 Q2 - Quarterly Report

PART I - FINANCIAL INFORMATION This section provides the unaudited condensed consolidated financial statements and related notes, offering a detailed view of the company's financial performance and position ITEM 1 - FINANCIAL STATEMENTS (UNAUDITED) This section presents the unaudited condensed consolidated financial statements, including balance sheets, income statements, comprehensive income statements, shareholders' equity statements, and cash flow statements, along with detailed notes explaining the basis of presentation, segment reporting, fair value measurements, financing activities, share repurchase program, and recent accounting pronouncements Condensed Consolidated Balance Sheets This statement presents the company's financial position, detailing assets, liabilities, and shareholders' deficit at specific points in time Condensed Consolidated Balance Sheets (in thousands) | Item | June 30, 2025 (Unaudited) | December 31, 2024 (Note) | | :-------------------------------- | :------------------------ | :----------------------- | | Assets | | | | Cash and cash equivalents | $198,613 | $130,245 | | Total current assets | $6,315,806 | $5,839,895 | | Total assets | $15,820,619 | $14,893,741 | | Liabilities and Shareholders' Deficit | | | | Total current liabilities | $8,721,886 | $8,283,505 | | Long-term debt | $5,823,744 | $5,520,932 | | Total shareholders' deficit | $(1,231,862) | $(1,370,961) | | Total liabilities and shareholders' deficit | $15,820,619 | $14,893,741 | Condensed Consolidated Statements of Income This statement outlines the company's revenues, expenses, and net income over specific reporting periods Condensed Consolidated Statements of Income (in thousands, except per share data) | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Sales | $4,525,058 | $4,272,201 | $8,661,982 | $8,248,441 | | Gross profit | $2,326,538 | $2,168,060 | $4,448,023 | $4,202,232 | | Operating income | $914,470 | $863,298 | $1,655,936 | $1,615,779 | | Net income | $668,595 | $622,848 | $1,207,080 | $1,170,086 | | Earnings per share-basic | $0.78 | $0.71 | $1.41 | $1.33 | | Earnings per share-assuming dilution | $0.78 | $0.70 | $1.40 | $1.32 | Condensed Consolidated Statements of Comprehensive Income This statement provides a comprehensive view of the company's income, including net income and other comprehensive income items Condensed Consolidated Statements of Comprehensive Income (in thousands) | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income | $668,595 | $622,848 | $1,207,080 | $1,170,086 | | Foreign currency translation adjustments | $45,400 | $(37,672) | $51,378 | $(30,496) | | Comprehensive income | $713,995 | $585,176 | $1,258,458 | $1,139,590 | Condensed Consolidated Statements of Shareholders' Equity (Deficit) This statement details changes in the company's equity accounts, including common stock, retained deficit, and accumulated other comprehensive income Changes in Shareholders' Equity (Deficit) (in thousands) | Item | Balance at Dec 31, 2024 | Net Income (6M 2025) | Total Other Comprehensive Income (6M 2025) | Share Repurchases (6M 2025) | Balance at June 30, 2025 | | :------------------------------------ | :---------------------- | :------------------- | :----------------------------------- | :-------------------------- | :----------------------- | | Common Stock (Par Value) | $8,622 | — | — | $(133) | $8,506 | | Additional Paid-In Capital | $1,454,518 | — | — | $(22,812) | $1,499,288 | | Retained Deficit | $(2,791,288) | $1,207,080 | — | $(1,153,695) | $(2,748,221) | | Accumulated Other Comprehensive Income (Loss) | $(42,813) | — | $51,378 | — | $8,565 | | Total | $(1,370,961) | $1,207,080 | $51,378 | $(1,176,640) | $(1,231,862) | Condensed Consolidated Statements of Cash Flows This statement summarizes the cash inflows and outflows from operating, investing, and financing activities over specific periods Condensed Consolidated Statements of Cash Flows (in thousands) | Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $1,511,966 | $1,653,074 | | Net cash used in investing activities | $(594,998) | $(622,455) | | Net cash used in financing activities | $(850,815) | $(1,164,070) | | Effect of exchange rate changes on cash | $2,215 | $(639) | | Net increase (decrease) in cash and cash equivalents | $68,368 | $(134,090) | | Cash and cash equivalents at end of period | $198,613 | $145,042 | | Income taxes paid | $393,872 | $80,401 | | Interest paid, net of capitalized interest | $110,374 | $110,449 | Notes to Condensed Consolidated Financial Statements This section provides detailed explanations and additional information supporting the condensed consolidated financial statements NOTE 1 – BASIS OF PRESENTATION This note describes the accounting principles and conventions used in preparing the financial statements, including significant events like stock splits and tax legislation - The financial statements are prepared in accordance with U.S. GAAP for interim financial information and reflect a 15-for-1 forward stock split effected on June 10, 2025, with all share and per share information retrospectively adjusted[21][22] - H.R. 1, a tax reform legislation, was signed into law in July 2025, but its impacts are not included in the operating results for the six months ended June 30, 2025, as it occurred after the fiscal quarter end[24] NOTE 2 – SEGMENT REPORTING This note details the company's operating segments, revenue streams, and how performance is evaluated by the chief operating decision maker - The Company operates as a single operating segment, the automotive aftermarket parts segment, across the U.S., Canada, and Mexico, with consolidated net income used by the chief operating decision maker to evaluate performance[25] Automotive Aftermarket Parts Segment Performance (in thousands) | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Sales | $4,525,058 | $4,272,201 | $8,661,982 | $8,248,441 | | Gross profit | $2,326,538 | $2,168,060 | $4,448,023 | $4,202,232 | | Consolidated net income | $668,595 | $622,848 | $1,207,080 | $1,170,086 | NOTE 3 – VARIABLE INTEREST ENTITIES This note explains the company's investments in unconsolidated tax credit fund entities and the associated maximum exposure to losses - The Company has invested in five unconsolidated tax credit fund entities (VIEs) that promote renewable energy, but it is not the primary beneficiary and accounts for these investments using the equity method[29][30] - The maximum exposure to losses associated with these VIEs is limited to the net investment of $21.2 million as of June 30, 2025[31] NOTE 4 – FAIR VALUE MEASUREMENTS This note provides information on the fair value of financial instruments, including marketable securities and senior notes, and changes in their valuation Marketable Securities Fair Value (in thousands) | Item | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :---------------- | | Marketable securities | $64,169 | $65,156 | Senior Notes Fair Value (in thousands) | Item | June 30, 2025 Carrying Amount | June 30, 2025 Estimated Fair Value | December 31, 2024 Carrying Amount | December 31, 2024 Estimated Fair Value | | :-------------------- | :------------------------------ | :--------------------------------- | :---------------------------------- | :----------------------------------- | | Senior Notes | $5,324,367 | $5,258,178 | $5,321,219 | $5,151,768 | - The Company recorded an increase in fair value related to its marketable securities of $4.0 million for the three months ended June 30, 2025, and $3.4 million for the six months ended June 30, 2025[34] NOTE 5 – LEASES This note outlines the total lease costs and cash payments for operating leases, reflecting the company's leasing activities Total Lease Cost (in thousands) | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total lease cost | $147,600 | $135,282 | $293,056 | $265,818 | | Cash paid for operating leases | N/A | N/A | $221,991 | $205,149 | NOTE 6 – SUPPLIER FINANCE PROGRAM This note details the outstanding obligations under the company's supplier finance programs and their changes over time - Obligations outstanding under supplier finance programs were $4.9 billion as of June 30, 2025, an increase from $4.8 billion as of December 31, 2024[41] NOTE 7 – FINANCING This note provides comprehensive information on the company's long-term debt, credit facilities, and senior notes, including terms and outstanding amounts Long-term Debt (in thousands) | Item | June 30, 2025 | December 31, 2024 | | :------------------------------------ | :------------ | :---------------- | | Commercial paper program | $500,000 | $200,000 | | Total principal amount of debt | $5,850,000 | $5,550,000 | | Less: Unamortized discount and debt issuance costs | $26,256 | $29,068 | | Total long-term debt | $5,823,744 | $5,520,932 | - The Company has a $2.25 billion unsecured revolving credit facility maturing in March 2030, with no outstanding borrowings as of June 30, 2025[43][44] - As of June 30, 2025, the Company had $5.4 billion in unsecured senior notes outstanding, due between 2026 and 2034, with interest rates ranging from 1.750% to 5.750%[50] NOTE 8 – WARRANTIES This note details the company's product warranty liabilities, including balances, claims, and accruals over specific periods Product Warranty Liabilities (in thousands) | Item | Amount | | :------------------------------------ | :----- | | Warranty liabilities, balance at December 31, 2024 | $133,251 | | Warranty claims (six months ended June 30, 2025) | $(115,804) | | Warranty accruals (six months ended June 30, 2025) | $120,219 | | Warranty liabilities, balance at June 30, 2025 | $137,720 | NOTE 9 – SHARE REPURCHASE PROGRAM This note outlines the company's share repurchase authorizations, actual repurchases, and remaining authorized amounts - The Board of Directors approved additional $2.0 billion authorizations in November 2023 and November 2024, bringing the cumulative authorization to $27.8 billion[55] Share Repurchases (in thousands, except per share data) | Item | Three Months Ended June 30, 2025 | Six Months Ended June 30, 2025 | | :-------------------- | :------------------------------- | :----------------------------- | | Shares repurchased | 6,804 | 13,273 | | Average price per share | $90.71 | $88.65 | | Total investment | $617,184 | $1,176,612 | - As of June 30, 2025, $1.3 billion remained under the share repurchase authorization. Subsequent to quarter-end, an additional 2.6 million shares were repurchased for $240.0 million through August 8, 2025[56][57] NOTE 10 – ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) This note details the components and changes in accumulated other comprehensive income (loss), primarily foreign currency translation adjustments Accumulated Other Comprehensive Income (Loss) (in thousands) | Item | Balance at Dec 31, 2024 | Change (6M 2025) | Balance at June 30, 2025 | | :------------------------------------ | :---------------------- | :--------------- | :----------------------- | | Foreign currency translation adjustments | $(42,813) | $51,378 | $8,565 | | Total Accumulated Other Comprehensive Income (Loss) | $(42,813) | $51,378 | $8,565 | NOTE 11 – REVENUE This note disaggregates the company's revenue by major customer type, providing insight into sales channels Revenue Disaggregated by Major Customer Type (in thousands) | Customer Type | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :----------------------------- | :----------------------------- | | Sales to do-it-yourself customers | $4,280,425 | $4,156,485 | | Sales to professional service provider customers | $4,194,433 | $3,887,350 | | Total sales | $8,661,982 | $8,248,441 | NOTE 12 – SHARE-BASED COMPENSATION AND BENEFIT PLANS This note details the compensation expense related to stock options and other share-based plans, along with matching contributions to benefit plans Share-Based Compensation Expense (in thousands) | Item | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :----------------------------- | :----------------------------- | | Compensation expense for stock options awarded | $15,630 | $11,337 | | Compensation expense for other share-based plans | $4,500 | $4,600 | | Matching contributions to benefit plans | $28,300 | $26,700 | - The remaining unrecognized compensation expense for unvested stock option awards was $53.2 million as of June 30, 2025, to be recognized over a weighted-average period of 2.8 years[64] NOTE 13 – COMMITMENTS This note outlines the company's significant contractual commitments, including obligations to purchase renewable energy tax credits - The Company has a remaining commitment of approximately $340 million to purchase transferable federal renewable energy tax credits (RETCs), with the final payment anticipated by April 2026[69] NOTE 14 – EARNINGS PER SHARE This note provides a breakdown of basic and diluted earnings per share, including the weighted-average common shares outstanding Earnings Per Share (in thousands, except per share data) | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income | $668,595 | $622,848 | $1,207,080 | $1,170,086 | | Weighted-average common shares outstanding – basic | 854,003 | 880,182 | 856,768 | 882,728 | | Weighted-average common shares outstanding – assuming dilution | 858,440 | 885,655 | 861,368 | 888,746 | | Earnings per share-basic | $0.78 | $0.71 | $1.41 | $1.33 | | Earnings per share-assuming dilution | $0.78 | $0.70 | $1.40 | $1.32 | NOTE 15 – LEGAL MATTERS This note discusses the company's involvement in legal proceedings and management's assessment of their potential financial impact - The Company is involved in litigation incidental to its ordinary business but does not believe these matters will have a material adverse effect on its consolidated financial position, results of operations, or cash flows[73][74] NOTE 16 – RECENT ACCOUNTING PRONOUNCEMENTS This note describes recently issued accounting pronouncements and their anticipated impact on the company's financial statements - ASU 2023-09 (Income Taxes) is effective for annual periods beginning after December 15, 2024, and will be adopted by the Company in Q4 2025, with no material impact on financial condition, results of operations, or cash flows as it pertains to disclosure only[75] - ASU 2024-03 (Income Statement Expenses) is effective for annual periods beginning after December 15, 2026, and will be adopted by the Company in Q4 2027, with no material impact on financial condition, results of operations, or cash flows as it pertains to disclosure only[76] ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This section provides a narrative of the Company's financial condition, results of operations, and liquidity, highlighting key drivers of the automotive aftermarket industry, sales and profit performance, and capital resources. It also includes forward-looking statements, an overview of the business, and discussions on critical accounting estimates and recent accounting pronouncements FORWARD-LOOKING STATEMENTS This section outlines the nature of forward-looking statements within the report and the various risks and uncertainties that could affect future results - The report contains forward-looking statements identified by words like 'estimate,' 'may,' 'could,' 'will,' 'believe,' 'expect,' 'would,' 'consider,' 'should,' 'anticipate,' 'project,' 'plan,' or 'intend,' which are subject to risks and uncertainties[79] - Key risks include the general economy, inflation, consumer debt levels, product demand, competition, weather, trade disputes, supply chain disruptions, and governmental regulations[79] OVERVIEW This section provides a general description of the company's business, its operational strategy, and the key market drivers influencing demand for its products - O'Reilly Automotive, Inc. is a specialty retailer of automotive aftermarket parts, tools, supplies, equipment, and accessories in the U.S., Puerto Rico, Mexico, and Canada, operating 6,360 stores as of June 30, 2025[80] - The Company employs a 'dual market strategy,' selling products to both DIY customers and professional service providers, aiming for growth through new store openings, existing store sales, merchandising enhancements, and Omnichannel initiatives[80] - Key drivers of demand for automotive aftermarket products include the number of miles driven, registered vehicles, annual rate of light vehicle sales, and average vehicle age, with the average U.S. vehicle age increasing to 12.6 years in 2024[86][88] RESULTS OF OPERATIONS This section analyzes the company's financial performance, focusing on sales, gross profit, operating expenses, and net income drivers Sales This section details sales performance, including year-over-year growth, comparable store sales, and new store openings Sales Performance (in millions) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Sales | $4,525 | $4,272 | $8,662 | $8,248 | | YoY Growth | 6% | - | 5% | - | | Comparable store sales growth | 4.1% | 2.3% | 3.9% | 2.8% | | Net new stores opened | 67 | 27 | 105 | 64 | - Sales increases were driven by higher domestic comparable store sales and contributions from new stores, with comparable store sales benefiting from increases in average ticket values and transaction counts for both professional service provider and DIY customers[94] - The Company anticipates opening 200 to 210 net new stores in 2025[93] Gross Profit This section analyzes gross profit and its percentage of sales, highlighting factors influencing profitability Gross Profit Performance (in millions) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Gross profit | $2,327 | $2,168 | $4,448 | $4,202 | | YoY Growth | 7% | - | 6% | - | | Gross profit as % of sales | 51.4% | 50.7% | 51.4% | 50.9% | - The increase in gross profit percentage was primarily due to improved acquisition costs and distribution operating efficiencies, partially offset by a greater percentage of sales from professional service provider customers, which carry lower gross margins[96] Selling, General and Administrative Expenses This section examines trends in selling, general, and administrative expenses, including their impact on overall profitability Selling, General and Administrative Expenses (SG&A) (in millions) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | SG&A | $1,412 | $1,305 | $2,792 | $2,586 | | YoY Growth | 8% | - | 8% | - | | SG&A as % of sales | 31.2% | 30.5% | 32.2% | 31.4% | - The increase in SG&A dollars was primarily due to additional Team Members and operating expenses supporting increased sales and store count, along with enhancements to store-level compensation and benefits and broad inflationary pressures[97] Operating Income This section presents the company's operating income and its percentage of sales, reflecting core business profitability Operating Income (in millions) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Operating income | $914 | $863 | $1,656 | $1,616 | | YoY Growth | 5.9% | - | 2% | - | | Operating income as % of sales | 20.2% | 20.2% | 19.1% | 19.6% | Other Income and Expense This section details non-operating income and expenses, primarily focusing on interest expense and its impact on net income Total Other Expense (in millions) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total other expense | $53 | $52 | $110 | $104 | | YoY Growth | 2% | - | 6% | - | | Total other expense as % of sales | 1.2% | 1.2% | 1.3% | 1.3% | - The increase in total other expense was due to higher interest expense on increased average outstanding borrowings[101] Income Taxes This section analyzes the provision for income taxes and the effective tax rate, including factors influencing tax expense Provision for Income Taxes (in millions) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Provision for income taxes | $193 | $189 | $339 | $342 | | YoY Change | +2% | - | -1% | - | | Effective tax rate | 22.4% | 23.3% | 21.9% | 22.6% | - The decrease in the effective tax rate for both periods was primarily due to the timing of the recognition of tax credits[102] Net Income This section presents the company's net income and its percentage of sales, reflecting overall profitability Net Income (in millions) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income | $669 | $623 | $1,210 | $1,170 | | YoY Growth | 7% | - | 3% | - | | Net income as % of sales | 14.8% | 14.6% | 13.9% | 14.2% | Earnings Per Share This section details diluted earnings per share and the weighted-average common shares outstanding, indicating shareholder value Diluted Earnings Per Share | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Diluted EPS | $0.78 | $0.70 | $1.40 | $1.32 | | YoY Growth | 11% | - | 6% | - | | Weighted-average common shares outstanding (diluted, in millions) | 858 | 886 | 861 | 889 | LIQUIDITY AND CAPITAL RESOURCES This section assesses the company's ability to generate and manage cash, covering operating, investing, and financing activities, along with debt and capital strategies - The Company's long-term business strategy requires capital for maintaining existing stores, opening new ones, strategic acquisitions, distribution infrastructure, IT systems, and opportunistic share repurchases[105] - Primary liquidity sources include cash from operations, borrowings under the unsecured revolving credit facility, commercial paper program, and senior note offerings[105] Operating Activities This section analyzes cash flows from operating activities, highlighting key drivers of cash generation from core business operations Cash Flow from Operating Activities (in thousands) | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $1,511,966 | $1,653,074 | | YoY Change | -8.5% | - | | Free cash flow | $904,008 | $1,157,089 | - The decrease in net cash provided by operating activities was primarily due to the timing of payment for transferable federal renewable energy tax credits, partially offset by an increase in operating income[108] Investing Activities This section details cash flows used in investing activities, including capital expenditures and acquisitions Cash Flow from Investing Activities (in thousands) | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :----------------------------- | :----------------------------- | | Net cash used in investing activities | $(594,998) | $(622,455) | | YoY Change | +4.4% (less cash used) | - | | Capital expenditures | $587,685 | $474,607 | - The decrease in net cash used in investing activities was a result of the prior year's acquisition of Vast Auto, partially offset by increased capital expenditures for distribution enhancement and new store growth[109] Financing Activities This section outlines cash flows from financing activities, such as debt management and share repurchases Cash Flow from Financing Activities (in thousands) | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :----------------------------- | :----------------------------- | | Net cash used in financing activities | $(850,815) | $(1,164,070) | | YoY Change | +26.9% (less cash used) | - | | Repurchases of common stock | $(1,176,640) | $(1,063,791) | | Net proceeds (payments) of commercial paper | $298,918 | $(173,500) | - The decrease in net cash used in financing activities was primarily due to net borrowings on the commercial paper program in the current period compared to net paydown in the prior year, partially offset by increased common stock repurchases[110] Debt Instruments This section describes the company's various debt instruments, including credit facilities, commercial paper, and senior notes - The Company's debt instruments include a credit agreement, unsecured revolving credit facility, outstanding letters of credit, a commercial paper program, and unsecured senior notes, with further details provided in Note 7[111] Debt Covenants This section reports on the company's compliance with debt covenants, including key financial ratios Debt Covenant Ratios | Metric | June 30, 2025 | June 30, 2024 | Covenant Requirement | | :------------------------------------ | :------------ | :------------ | :------------------- | | Consolidated fixed charge coverage ratio | 6.02x | 6.22x | Minimum 2.50:1.00 | | Consolidated leverage ratio | 1.95x | 1.87x | Maximum 3.50:1.00 | - The Company was in compliance with all covenants under its Credit Agreement as of June 30, 2025[46][114] Share Repurchase Program This section refers to detailed information on the company's share repurchase program as presented in the financial statement notes - Information regarding the Company's share repurchase program is detailed in Note 9 to the Consolidated Financial Statements[117] CRITICAL ACCOUNTING ESTIMATES This section confirms that there have been no material changes to the company's critical accounting estimates since the previous annual report - There have been no material changes in the Company's critical accounting estimates since those discussed in its annual report on Form 10-K for the year ended December 31, 2024[118] RECENT ACCOUNTING PRONOUNCEMENTS This section refers to the detailed information on recent accounting pronouncements provided in the notes to the condensed consolidated financial statements - Information about recent accounting pronouncements is provided in Note 16 to the Condensed Consolidated Financial Statements[119] ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK This section details the Company's exposure to market risks, specifically interest rate risk and foreign currency risk, and outlines strategies to manage these exposures. It also confirms no material changes to market risks since the previous annual report Interest Rate Risk This section assesses the company's exposure to fluctuations in interest rates, particularly on variable-rate borrowings - The Company is exposed to interest rate risk from variable-rate borrowings under its unsecured revolving credit facility (no outstanding borrowings as of June 30, 2025) and its commercial paper program[120][121] - As of June 30, 2025, $500.0 million was outstanding under the commercial paper program at a weighted-average variable interest rate of 4.670%; a 10% increase in interest rates would result in an unfavorable annual impact of $2.4 million on pre-tax earnings and cash flows[121] Cash Equivalents Risk This section discusses the risk associated with the company's investments in short-term, highly-liquid cash equivalents - The Company invests excess cash in short-term, highly-liquid instruments with maturities of 90 days or less, totaling $198.6 million as of June 30, 2025, and expects minimal interest rate exposure[122] Foreign Currency Risk This section details the company's exposure to foreign currency exchange rate fluctuations, particularly for Mexican peso and Canadian dollar operations - Foreign currency exposure arises from Mexican peso and Canadian dollar denominated revenues and profits, with investments in Mexican and Canadian subsidiaries viewed as long-term[123][124][125] - Net asset exposure in Mexican subsidiaries was $432.3 million at June 30, 2025; a 10% change in the Mexican peso exchange rate could result in a $39.3 million loss[124] - Net asset exposure in Canadian subsidiaries was $178.2 million at June 30, 2025; a 10% change in the Canadian dollar exchange rate could result in a $16.2 million loss[125] ITEM 4 - CONTROLS AND PROCEDURES This section confirms the effectiveness of the Company's disclosure controls and procedures and reports no material changes in internal control over financial reporting during the quarter EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES This section confirms the effectiveness of the company's disclosure controls and procedures as evaluated by management - Management, under the supervision of the CEO and CFO, concluded that the Company's disclosure controls and procedures were functioning effectively as of June 30, 2025[128] CHANGES IN INTERNAL CONTROLS This section reports on any material changes to the company's internal control over financial reporting during the fiscal quarter - There were no material changes in the Company's internal control over financial reporting during the fiscal quarter ended June 30, 2025[129] PART II - OTHER INFORMATION This section covers legal proceedings, risk factors, equity security sales, other information, exhibits, and signature pages, providing additional context to the financial report ITEM 1 - LEGAL PROCEEDINGS This section addresses the Company's involvement in legal matters, stating that while litigation is ongoing, it is not expected to have a material adverse effect on the Company's financial position or operations - The Company is involved in litigation incidental to its ordinary business but does not currently believe these matters will have a material adverse effect on its consolidated financial position, results of operations, or cash flows[131] ITEM 1A - RISK FACTORS This section confirms that there have been no significant changes to the risk factors previously disclosed in the Company's annual report - There have been no material changes to the risk factors set forth in the Company's annual report on Form 10-K for the year ended December 31, 2024[132] ITEM 2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS This section reports no unregistered sales of equity securities and details the Company's common stock repurchases during the quarter, including the remaining authorization under its share repurchase program - The Company had no sales of unregistered securities during the six months ended June 30, 2025[133] Common Stock Repurchases (in thousands, except per share data) | Period | Total Number of Shares Purchased | Average Price Paid per Share | Maximum Dollar Value of Shares that May Yet Be Purchased Under the Programs | | :------------------------------------ | :------------------------------- | :--------------------------- | :------------------------------------------------------------------------ | | April 1, 2025, to April 30, 2025 | 1,790 | $91.68 | $1,772,137 | | May 1, 2025, to May 31, 2025 | 2,175 | $91.03 | $1,574,157 | | June 1, 2025, to June 30, 2025 | 2,839 | $89.86 | $1,319,079 | | Total as of June 30, 2025 | 6,804 | $90.71 | N/A | ITEM 5 - OTHER INFORMATION This section confirms that no Rule 10b5-1 trading agreements were adopted, modified, or terminated by Directors or Officers during the fiscal quarter - None of the Company's Directors or Officers adopted, modified, or terminated a Rule 10b5-1 trading agreement during the fiscal quarter ended June 30, 2025[134] ITEM 6 - EXHIBITS This section lists all exhibits filed with the Form 10-Q, including corporate governance documents, credit agreements, and certifications - The report includes various exhibits such as the Third Amended and Restated Articles of Incorporation, Fourth Amended and Restated Bylaws, First Amended and Restated Credit Agreement, and CEO/CFO certifications under the Sarbanes-Oxley Act[135] SIGNATURE PAGES This section contains the official signatures of the Company's Chief Executive Officer and Chief Financial Officer, certifying the report - The report was signed by Brad Beckham, Chief Executive Officer, and Jeremy A. Fletcher, Executive Vice President and Chief Financial Officer, on August 8, 2025[139]