Analysis of Debt
Total Debt (Carrying Amount)
O’Reilly Automotive Inc., balance sheet: debt
US$ in thousands
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
- Long-term debt trend
- The long-term debt exhibited a general upward trajectory from 2017 to 2020, increasing from approximately 2.98 billion to 4.12 billion US dollars. This represents a steady accumulation of debt over the four-year period.
- In 2021, a decline in long-term debt was observed, decreasing to approximately 3.83 billion US dollars. This reversal may suggest efforts to reduce debt levels, repayment of borrowings, or restructuring of financial obligations during that year.
- Percentage change analysis
- Between 2017 and 2018, long-term debt increased by roughly 14.7%, followed by another increase of about 13.8% from 2018 to 2019. From 2019 to 2020, the growth rate was more moderate at approximately 5.9%.
- The 2021 decrease amounted to around 7.2%, marking a notable shift from previous growth patterns and indicating a possible change in financial strategy or operational circumstances impacting debt levels.
- Carrying amount consistency
- The carrying amount of total long-term debt was consistent with reported long-term debt figures, suggesting no significant adjustments or impairments affecting the recorded debt values across the examined periods.
Total Debt (Fair Value)
| Dec 31, 2021 | |
|---|---|
| Selected Financial Data (US$ in thousands) | |
| Senior Notes | 4,135,629) |
| Unsecured revolving credit facility | —) |
| Total long-term debt (fair value) | 4,135,629) |
| Financial Ratio | |
| Debt, fair value to carrying amount ratio | 1.08 |
Based on: 10-K (reporting date: 2021-12-31).
Weighted-average Interest Rate on Debt
Weighted-average interest rate on long-term debt: 3.62%
| Interest rate | Debt amount1 | Interest rate × Debt amount | Weighted-average interest rate2 |
|---|---|---|---|
| 3.85% | 300,000) | 11,535) | |
| 3.85% | 300,000) | 11,553) | |
| 3.57% | 500,000) | 17,850) | |
| 3.62% | 750,000) | 27,143) | |
| 4.38% | 500,000) | 21,915) | |
| 3.90% | 500,000) | 19,505) | |
| 4.21% | 500,000) | 21,025) | |
| 1.80% | 500,000) | 8,990) | |
| Total | 3,850,000) | 139,516) | |
| 3.62% | |||
Based on: 10-K (reporting date: 2021-12-31).
1 US$ in thousands
2 Weighted-average interest rate = 100 × 139,516 ÷ 3,850,000 = 3.62%
Interest Costs Incurred
O’Reilly Automotive Inc., interest costs incurred
US$ in thousands
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
- Interest Expense
- The interest expense increased steadily from US$91,349 thousand in 2017 to US$161,126 thousand in 2020, reflecting a consistent upward trend over the four-year period. However, in 2021, a decline to US$144,768 thousand was observed, indicating a reduction in interest expenses compared to the prior year.
- Interest Costs Capitalized
- Interest costs capitalized showed fluctuations during the period under review. The value rose from US$8,500 thousand in 2017 to a peak of US$13,000 thousand in 2019, followed by a decline to US$7,000 thousand in 2021. This pattern suggests changing capital investment activities or accounting policies affecting capitalization.
- Interest Costs Incurred
- The total interest costs incurred, encompassing both expenses and capitalized amounts, exhibited a rising pattern from US$99,849 thousand in 2017 to a high of US$171,326 thousand in 2020. In 2021, this figure decreased to US$151,768 thousand, mirroring the decline observed in interest expense. Overall, the total costs incurred increased notably over the five-year period, though the most recent year saw a mild contraction.
- Overall Analysis
- The data reveal a general upward trend in interest-related costs from 2017 through 2020, with the highest figures recorded in 2020. The subsequent decrease in 2021 suggests either reduced borrowing costs, decreased debt levels, or more effective cost management. The fluctuation in capitalized interest costs may reflect varying levels of qualifying capital expenditures or strategic shifts in how the company manages its financing and asset development.
Adjusted Interest Coverage Ratio
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
2021 Calculations
1 Interest coverage ratio (without capitalized interest) = EBIT ÷ Interest expense
= 2,926,682 ÷ 144,768 = 20.22
2 Adjusted interest coverage ratio (with capitalized interest) = EBIT ÷ Interest costs incurred
= 2,926,682 ÷ 151,768 = 19.28
- Interest Coverage Ratio (without capitalized interest)
- The interest coverage ratio exhibited a fluctuating trend over the analyzed period. Beginning at 18.93 in 2017, it declined through 2018 and 2019 to reach its lowest point of 13.79. Subsequently, it increased in 2020 to 15.07 and then experienced a significant rise in 2021, reaching the highest value observed at 20.22. This pattern suggests an initial weakening in the ability to cover interest expenses, followed by a notable strengthening towards the end of the period.
- Adjusted Interest Coverage Ratio (with capitalized interest)
- The adjusted interest coverage ratio mirrors the overall trend seen in the unadjusted ratio but reflects slightly lower values throughout the timeline. Starting at 17.32 in 2017, it declined steadily to a low of 12.62 in 2019. From this point, it rose to 14.17 in 2020 and then sharply increased to 19.28 in 2021. The difference between the adjusted and unadjusted ratios narrows somewhat as both ratios improve, indicating that capitalized interest affects the coverage but does not significantly change the overall trend.