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O Reilly Automotive Inc – ‘10-K’ for 12/31/97

As of: Tuesday, 3/31/98 · For: 12/31/97 · Accession #: 898173-98-5 · File #: 0-21318

  As Of                Filer                Filing    For·On·As Docs:Size

 3/31/98  O Reilly Automotive Inc           10-K       12/31/97    7:141K

Annual Report — Form 10-K
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-K        Annual Report                                         17    120K 
 2: EX-10.4     Retirement Agreement                                   2     12K 
 3: EX-13.1     Portions of the 1997 Annual Report to Shareholders    21    126K 
 4: EX-21.1     Subsidiaries of the Company                            1      4K 
 5: EX-23       Consent of Ernst & Young                               1      7K 
 6: EX-27       Financial Data Schedule                                2±     9K 
 7: EX-99.1     Certain Risk Factors                                   1      9K

10-K — Annual Report
Document Table of Contents

Page	(sequential)	\|	(alphabetic)	Top
			Alternative Formats (Word, et al.) Business Certain Relationships and Related Transactions Changes in and Disagreements With Accountants on Accounting And Directors and Executive Officers of the Registrant Executive Compensation Executive Officers of the Company Exhibits, Financial Statement Schedule and Reports on Form 8-K Financial Statements and Supplementary Data Growth and Expansion Strategies Inventory Management and Distribution Systems Legal Proceedings Management's Discussion and Analysis of Financial Condition And Market for Registrant's Common Equity and Related Stockholder Matters Properties Quantitative and Qualitative Disclosures About Market Risk Report of Independent Auditors Security Ownership of Certain Beneficial Owners and Management Selected Financial Data Store Operations Store Personnel and Training Submission of Matters to A Vote of Security Holders
1	1st Page - Filing Submission
2	Item 1. Business
3	Inventory Management and Distribution Systems
4	Growth and Expansion Strategies
6	Store Operations
7	Store Personnel and Training
11	Item 2. Properties
"	Item 3. Legal Proceedings
"	Item 4. Submission of Matters to A Vote of Security Holders
12	Item 4A. Executive Officers of the Company
"	Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
"	Item 6. Selected Financial Data
"	Item 7. Management's Discussion and Analysis of Financial Condition And
"	Item 7(a). Quantitative and Qualitative Disclosures About Market Risk
"	Item 8. Financial Statements and Supplementary Data
"	Item 9. Changes in and Disagreements With Accountants on Accounting And
13	Item 10. Directors and Executive Officers of the Registrant
"	Item 11. Executive Compensation
"	Item 12. Security Ownership of Certain Beneficial Owners and Management
"	Item 13. Certain Relationships and Related Transactions
"	Item 14. Exhibits, Financial Statement Schedule and Reports on Form 8-K
"	Report of Independent Auditors

10-K 1st Page of 17 TOC ↑Top Previous Next ↓Bottom Just 1st
 
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
 FORM 10-K

(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 

 For the fiscal year ended December 31, 1997

OR

( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 

    For the transition period from ___________________ to ____________________

Commission file number 0-21318

 O'REILLY AUTOMOTIVE, INC.
--------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)

Missouri                                      44-0618012
--------------------------------------------------------------------------------
(State or other jurisdiction                   (IRS Employer Identification No.)
of incorporation or organization)                                             

 233 South Patterson
 Springfield, Missouri 65801
--------------------------------------------------------------------------------
(Address of principal executive offices, zip code)

(417) 862-6708
--------------------------------------------------------------------------------
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:  None               

Securities registered pursuant to Section 12(g) of the Act:  Common Stock,      
                                                        $.01 par value

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. Yes X No ______                              

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best  of  the  registrant's   knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part  III of this  Form  10-K or any
amendment to this Form 10-K. -------                                            

At February 27, 1998, an aggregate of  21,149,429  shares of the common stock of
the registrant were outstanding.  As of that date, the aggregate market value of
the  voting  stock  held by  non-affiliates  of the  Company  was  approximately
$418,915,154  based on the last sale price of the common  stock  reported by the
Nasdaq Stock Market (National Market).                                          

 DOCUMENTS INCORPORATED BY REFERENCE

As provided herein,  portions of the registrant's  documents specified below are
incorporated herein by reference:                                               

            Document                                  Part-Form 10-K
---------------------------------------------        ---------------------------

Portions of the Annual Shareholders' Report                                     
for the Year Ended December 31, 1997                     Parts I, II and IV     

Proxy Statement for 1998 Annual Meeting of                                      
Stockholders (to be filed pursuant to                                           
Regulation 14A within 120 days of the end of                                    
registrant's most recently completed fiscal year)        Part III               

10-K 2nd Page of 17 TOC 1st Previous Next ↓Bottom Just 2nd
The  information  contained  in this Form  10-K  includes  statements  regarding
matters  which are not  historical  facts  (including  statements as to O'Reilly
Automotive,  Inc.'s (the "Company")  plans,  beliefs or expectations)  which are
forward-looking  statements  within the meaning of the federal  securities laws.
Because such forward-looking statements involve certain risks and uncertainties,
the  Company's  actual  results and the timing of certain  events  could  differ
materially from those discussed  herein.  Factors that could cause or contribute
to such differences include those discussed in the Sections captioned "Business"
and "Management's  Discussion and Analysis of Financial Condition and Results of
Operations"  (incorporated herein by reference) and those risk factors discussed
in Exhibit 99.1 hereto.                                                         

PART I

ITEM 1   BUSINESS                                                               

General                                                                         

     O'Reilly  Automotive,  Inc.  ("O'Reilly"  or the  "Company") is a specialty
retailer  and  supplier  of  automotive   aftermarket  parts,  tools,  supplies,
equipment  and  accessories  ("Automotive  Products")  to both  "do-it-yourself"
("DIY")   customers   and   professional   mechanics   or  service   technicians
("Professional  Installers").  The  Company,  which was  founded  in 1957 by the
O'Reilly family in Springfield,  Missouri,  operates 259 stores (at December 31,
1997) within the states of Missouri,  Arkansas,  Kansas, Oklahoma,  Nebraska and
Iowa. See "Growth and Expansion  Strategies." O'Reilly stores carry an extensive
product line  consisting of (i) new and  remanufactured  automotive  hard parts,
such as  alternators,  starters,  fuel pumps,  water pumps,  and brake shoes and
pads, (ii) maintenance items, such as oil, antifreeze,  fluids, engine additives
and appearance products, (iii) accessories,  such as floor mats and seat covers,
and (iv) a complete  line of auto body paint and related  materials,  automotive
tools and professional service equipment.  The Company offers machining services
through  its  O'Reilly  stores,  but does not sell tires or  perform  automotive
repairs or installations.  Approximately 97% of the Company's 1997 product sales
were  generated  through the  O'Reilly  store  network,  of which  approximately
one-half  was  derived  from  DIY  customers  and  one-half  from   Professional
Installers. The remaining 3% of the Company's product sales was generated by its
wholly-owned subsidiary, Ozark Automotive Distributors,  Inc. ("Ozark"), through
wholesale sales to independently owned auto parts stores.                       

Background                                                                      

     O'Reilly was founded in 1957 by Charles F. O'Reilly and his son, Charles H.
"Chub" O'Reilly,  Sr. (a current director of the Company) and initially operated
from a  single  store  in  Springfield,  Missouri,  with  12  employees  selling
primarily  to  the  Professional  Installer  portion  of  the  market.  O'Reilly
established Ozark in October 1960 to purchase  Automotive Products directly from
the manufacturer and to distribute such Automotive Products to O'Reilly.        

     The Company has experienced steady growth from its first year of operation.
By 1980, each of Chub O'Reilly's children,  Charles, Lawrence and David O'Reilly
and Rosalie  O'Reilly  Wooten,  had  assumed  leadership  roles in the  Company.
Together  with their father,  they have managed the Company  through a period of
rapid growth and profitability.                                                 

     The  Company's  goal is to  continue  its  pattern  of  growth in sales and
profitability  by capitalizing on its role as a leading  specialty  retailer and
supplier of Automotive Products throughout its markets.  The key elements of the
multifaceted business strategy developed by the Company to achieve this goal are
discussed below.                                                                

Operating Strategies                                                            

     Dual Market  Strategy.  The Company  believes that because it  aggressively
pursues both the DIY and the Professional  Installer  portions of the automotive
aftermarket  through its O'Reilly  store network,  the Company can  successfully
compete  not  only in  large  metropolitan  markets  but  also  in less  densely
populated  areas.  In 1997, the Company  derived  approximately  one-half of its
O'Reilly  store  network  sales by selling  to the DIY market and  approximately
one-half  of such sales by  selling to the  Professional  Installer  market.  By
serving both  portions of the market,  the Company  believes  that it is able to
reach  substantially all consumers  Automotive Products within its market areas.
The  increased  demand  generated  by this  expanded  customer  base permits the
Company to (i) stock                                                            

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10-K 3rd Page of 17 TOC 1st Previous Next ↓Bottom Just 3rd
(either  in-store  or at  its  distribution  centers)  a  broader  selection  of
stock-keeping units ("SKU's"), and (ii) restock and fill special orders from its
distribution  centers on an overnight,  or in some cases, a same-day basis.  See
"Inventory Management and Distribution Systems."                                

     The Company also believes that its service to both the DIY and Professional
Installer portions of the automotive  aftermarket results in additional benefits
not  generally  enjoyed by  competitors  serving only one portion of the market.
Because  the  Company  deals  with  the more  technically-oriented  Professional
Installers,  the  Company's  Professional  Parts  People are required to be more
technically proficient,  particularly with regard to hard parts. The Company has
found  that such  technical  proficiency  is also  valued by its DIY  consumers,
thereby  enhancing  the  Company's  ability  to  execute  its  customer  service
strategy.  Further,  the Company has found that the more  progressive  marketing
concepts  utilized in the DIY portion of its business can be applied to increase
sales of Automotive Products to the Company's Professional Installer customers. 

     Inventory  Management and  Distribution  Systems.  The Company's  inventory
management and distribution  systems,  which  electronically  link each O'Reilly
store to a distribution center,  provide an efficient and sophisticated means of
inventory  control and  management.  The computer  system at each O'Reilly store
records  each  sale,  makes a  corresponding  inventory  adjustment  and  orders
replacement  inventory from the  distribution  center.  The Company  utilizes an
industry ranking method,  in addition to its own evaluation  criteria,  for each
SKU carried at the distribution  center which identifies and classifies each SKU
by demand.  Refinements to inventory levels to be carried in the stores are made
continuously  based in large part on the sales  movement  shown by the Company's
computerized  inventory  control  system and on  management's  assessment of the
changes and trends in the marketplace. Under arrangements with most suppliers of
Automotive  Products,  slow  moving or obsolete  merchandise  is returned to the
supplier  for  full  credit.   Accordingly,   the  Company   experiences  little
obsolescence in its inventory.                                                  

     The  Company's  distribution  centers are  equipped  with highly  automated
conveyor  systems which expedite the movement of Automotive  Products to loading
areas for shipment to individual  stores on a nightly  basis.  The  distribution
centers utilize computer assisted  technology to  electronically  receive orders
from computers  located in each O'Reilly store. The Company,  which  continually
seeks to further  enhance these systems,  has installed a bar code system in its
stores.  In  addition,  the  Company  has  established  a  satellite-based  data
interchange  system  between  those  O'Reilly  stores in which  high-speed  data
transmission technology is not readily available,  the distribution center which
services such stores and the O'Reilly corporate headquarters.                   

     During 1997, the Company's three distribution centers experienced an annual
inventory turn of approximately 5.3 times, and the O'Reilly store network had an
average inventory turn of approximately 3.7 times. The Company believes that its
warehouse  distribution  system enables it to maintain optimum  inventory levels
throughout  the  O'Reilly  store  network  and,  at the same time,  provide  its
customers  with an  outstanding  selection of SKU's at each O'Reilly store site.
The Company  further  believes  that its ability to provide its  customers  with
access  to over  105,000  SKU's  (many of which  are  lower  turnover  items not
typically  stocked at other parts stores) on an overnight  and, in some cases, a
same day basis  results in an  important  competitive  advantage  enjoyed by the
Company in this key area of SKU selection and availability.                     

     Superior  Customer  Service.  The Company's number one priority is customer
satisfaction.  The Company seeks to attract new DIY and  Professional  Installer
customers  and  to  retain  existing   customers  by  conducting  a  variety  of
advertising  and  promotional  programs and by offering  (i)  superior  in-store
service  through  highly-motivated,  technically-proficient  Professional  Parts
People using  advanced  point-of-sale  systems,  (ii) an extensive  selection of
SKU's stocked in each store,  (iii) same day or overnight  availability  of over
105,000 SKU's made possible through the Company's rapid,  on-line  communication
with its distribution  centers,  (iv) attractive stores in convenient locations,
and (v) competitive  pricing supported by the Company's Right Part, Right Price,
Right Now(R) policy.                                                            

     Each of O'Reilly's  Professional Parts People is required to be technically
proficient in the workings and  application of Automotive  Products.  See "Store
Operations--Store  Personnel and Training." This degree of technical proficiency
is  essential  because  of the  significant  portion of the  Company's  business
represented  by the  Professional  Installer.  The  Company  has found  that the
typical DIY customer often seeks assistance from sales persons,  particularly in
connection  with the  purchase of hard  parts.  The  Company  believes  that the
ability of its  Professional  Parts People to provide such assistance to the DIY
consumer is valued by the DIY  customer,  and  therefore  is likely to result in
repeat  DIY  business.  To assist the  Company's  Professional  Parts  People in
providing  superior  customer  service,   the  Company  has  installed  advanced
point-of-sale  information  systems.  These systems provide individual  O'Reilly
stores with access to the Company's  database of manufacturer  recommended parts
(the  "electronic  catalog")  and the ability to locate parts at other  O'Reilly
stores.  These systems also  significantly  shorten the time period  required to
obtain credit card and personal check approvals.                                
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     The  Company  believes  that  the  satisfaction  of  DIY  and  Professional
Installer customers often is substantially  dependent upon the Company's ability
to offer the specific Automotive Product requested.  Accordingly,  each O'Reilly
store carries a broad selection of Automotive Products designed to cover a broad
range of vehicle  specifications.  To emphasize its  commitment to providing its
customers with the Automotive Products  requested,  the Company has instituted a
Right Part, Right Price,  Right Now(R) policy.  Under this policy, if any of the
15,000 most commonly  requested  Automotive  Products is not available  in-store
when the  customer  requests  it, the  Company  will apply a 5%  discount to the
purchase  price of the item and the part will  usually  be  available  within 24
hours from one of the Company's distribution centers.                           

     The  Company  believes  that  O'Reilly  stores  are  "destination   stores"
generating  their own  traffic  rather  than  relying on traffic  created by the
presence of other stores in the immediate vicinity.  Consequently, most O'Reilly
stores  are   free-standing   buildings   situated  on  or  near  major  traffic
thoroughfares. O'Reilly stores offer ample parking and easy customer access.    

     The Company believes that a competitive  pricing policy is essential within
product  categories  in  order  to  compete  successfully.  Product  pricing  is
generally  established to meet the pricing policies of competitors in the market
area  served by each store.  Most  Automotive  Products  sold by the Company are
priced at  discounts  from the  manufacturer  suggested  prices  and  additional
savings are offered through volume  discounts and special  promotional  pricing.
Consistent with its Right Part, Right Price, Right Now(R) policy,  each O'Reilly
store will match any  verifiable  price on any  in-stock  product of the same or
comparable quality offered by any of its competitors.                           

Growth and Expansion Strategies                                                 

     Accelerated New Store Openings. The Company's ability to open new stores in
both existing and new markets since the beginning of 1980 has been a significant
factor in achieving  its rapid  growth in product  sales and  profitability.  At
December  31,  1997,  the  Company  operated  259  stores  within  the states of
Missouri,  Arkansas,  Kansas,  Oklahoma,  Nebraska and Iowa.  For the five years
ended  December 31, 1997,  the Company has  increased the number of stores at an
average  annual rate of  approximately  15%. Aside from the  substantial  growth
resulting from the Hi-Lo  Automotive,  Inc.  merger (see below) in January 1998,
the Company has adopted certain strategic initiatives designed to accelerate its
new store opening rate to approximately 16% by 1998. The Company intends to open
50 new stores in 1998 and 80 new stores in 1999,  including  stores to be opened
in the new market areas of Texas,  Iowa and Nebraska,  and additional  stores in
the  Company's  current  market  areas.  Management  believes that the Company's
ability  to open new  stores  at this  accelerated  rate will  continue  to be a
significant  factor in achieving its growth objectives for the future,  and that
substantial opportunities exist for the opening of new stores to achieve greater
penetration in existing markets and to expand into new contiguous markets.      

     On January 30, 1998, the Company  completed a merger with Hi-Lo Automotive,
Inc. and its subsidiaries ("Hi/LO") by acquiring 100% of the outstanding capital
stock.  Hi/LO is a  specialty  retailer  and  supplier  of  Automotive  Products
headquartered in Houston,  Texas. Hi/LO is now a wholly-owned  subsidiary of the
Company,  with 189 stores located in Texas (165),  Louisiana (17) and California
(7), and a 375,000 square foot distribution center located in Houston. Excluding
California  and its  seven  stores,  the  Hi/LO  operations  are  contiguous  to
O'Reilly's existing operations,  thereby creating a natural geographic extension
for the  Company  into  market  areas  already  slated  for  future  growth  and
development. The equity purchase price was approximately $47.8 million, or $4.35
per common share. Additionally,  approximately $43.2 million of debt was assumed
for a total purchase price of $91 million.                                      

     In order to support O'Reilly's  acquisition of Hi/LO, and continued working
capital and general corporate needs, the Company replaced its lines of credit in
January 1998 with new,  unsecured,  syndicated credit  facilities  totaling $175
million.  The  facilities  are comprised of a $125 million  five-year  revolving
credit facility which includes a $5 million sublimit for the issuance of letters
of credit  and a $50  million  five-year  term loan  facility.  These new credit
facilities  are guaranteed by the  subsidiaries  of the Company and the acquired
Hi/LO subsidiaries.  The Company is required to meet various financial covenants
as detailed in the credit agreement.                                            

     During 1998,  the Company  will  convert the Hi/LO stores and  distribution
center to the  corresponding  O'Reilly systems,  strategies and policies.  Other
than  the  description  of the  merger  transaction  as  outlined  above  and as
discussed in  Management's  Discussion  and Analysis of Financial  Condition and
Results  of  Operations  (see  Exhibit  13.1) of the  Company,  the  results  of
operations  of Hi/LO and other  related  information  are not  included  in this
report.                                                                         

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     Until  1986,   the  Company's   expansion  was  targeted  to  markets  with
populations  of less than  100,000.  The  Company  entered  into a more  densely
populated  market in August  1986 with the opening of the first of its 29 stores
which now serve the greater  Kansas City,  Missouri,  marketing  area. Of the 40
(net) stores  opened in 1997, 10 are located in Nebraska,  10 in Oklahoma,  8 in
Kansas, 7 in Iowa and the remainder are located in Missouri and Arkansas.  While
the  Company  has  faced,  and  expects to  continue  to face,  more  aggressive
competition in its more densely populated markets,  the Company believes that it
has competed effectively,  and that it is well positioned to continue to compete
effectively,  in such markets and achieve its goal of continued sales and profit
growth within these markets.  The Company also believes that because of its Dual
Market  Strategy,  the Company is better able to operate  stores in less densely
populated areas within its regional  market which would not otherwise  support a
national  or regional  chain  store  selling to one portion of the market or the
other. Consequently,  the Company expects to continue to open new stores in less
densely populated market areas.                                                 

     To date,  the  Company  has  experienced  no  significant  difficulties  in
locating  suitable  store sites for  construction  of new stores or  identifying
suitable  acquisition  candidates for conversion to O'Reilly stores.  New stores
are typically  opened by the Company either (i) by constructing a new store at a
site which is purchased  or leased and stocking the new store with  fixtures and
inventory, or (ii) by acquiring an independently owned parts store, typically by
the purchase of substantially  all of the inventory and other assets (other than
realty) of such store.  The costs  associated with the opening of a new O'Reilly
store (including the cost of land acquisition, improvements, fixtures, inventory
and   computer    equipment)    are    estimated   to   average    approximately
$900,000-$1,100,000;  however, such costs may be significantly reduced where the
Company  leases,  rather than  purchases,  the store site.  Although the cost to
acquire the business of an  independently  owned parts store  varies,  depending
primarily  upon the amount of inventory  and the amount,  if any, of real estate
being  acquired,  the Company  estimates that the average cost to acquire such a
business and convert it to an O'Reilly store is  approximately  $350,000.  Store
sites are  strategically  located in  clusters  within  geographic  areas  which
complement the Company's  distribution  system in order to achieve  economies of
scale in management,  advertising,  and  distribution  costs.  Other key factors
considered  by the  Company in the site  selection  process  include  population
density and growth patterns,  age and per capita income, vehicle traffic counts,
the number and type of existing automotive repair facilities, auto parts stores,
and  other  competitors  within a  pre-determined  radius,  and the  operational
strength of such competitors. When entering new, more densely populated markets,
the Company generally seeks to initially open several stores within a short span
of time in order to  maximize  the effect of initial  promotional  programs  and
achieve further economies of scale.                                             

     Same store growth  through  increased  sales and  profitability  is also an
important part of the Company's growth  strategy.  To achieve improved sales and
profitability at existing O'Reilly stores,  the Company  continually  strives to
improve upon the service  provided to its customers.  The Company  believes that
while  competitive  pricing is essential in the  competitive  environment of the
automotive aftermarket business, it is customer satisfaction (whether of the DIY
consumer or Professional  Installer),  resulting from superior  customer service
that generates increased sales and profitability.                               

     Store Design and Location.  The Company's  current  prototype store design,
completed in 1994,  features several  enhancements  designed to increase product
sales,  customer service and operating  efficiencies,  which generally  includes
greater square footage,  higher ceilings, new fixtures, more convenient interior
store layouts,  brighter lighting,  increased parking availability and dedicated
counters to serve Professional Installers.  The Company aggressively manages its
store network through systematic  renovation and relocation of existing O'Reilly
stores which conform with the Company's  prototype  store design.  In 1997,  the
Company renovated or relocated 28 stores.                                       

     Expansion  of  Distribution  System.  In  order  to  facilitate  its  store
expansion strategy, the Company utilizes a central warehouse distribution system
to distribute  Automotive  Products to its O'Reilly store network.  The Company,
through its Ozark subsidiary, currently operates a 212,000 square foot warehouse
distribution center (including 51,000 square feet of mezzanine space) located in
Springfield,  Missouri,  a 113,000  square foot  warehouse  distribution  center
(including  36,000  square  feet of  mezzanine  space)  located in Kansas  City,
Missouri and a 123,000 square foot distribution  center (including 33,000 square
feet of mezzanine  space)  located in Oklahoma  City,  Oklahoma,  for receiving,
storing and distributing  Automotive Products. See "Management's  Discussion and
Analysis of Financial  Condition and Results of  Operations.  In January 1998, a
375,000 square foot warehouse distribution center was added in Houston, Texas as
a result  of the Hi/LO  merger.  By the end of 1998,  the  Company  expects  the
construction  of the 160,000  square foot warehouse  distribution  center in Des
Moines,  Iowa to be  completed.  The Company also  operates a 36,000 square foot
bulk merchandise warehouse in Springfield, Missouri for the distribution of bulk
products such as motor oil,  antifreeze,  batteries,  lubricants  and other fast
moving bulk  products.  The bulk warehouse  facility is located  adjacent to the
main  distribution  center  in  Springfield.   The  Company  believes  that  its

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distribution system results in lower inventory carrying costs, improved in-stock
positions at the O'Reilly stores, and superior inventory control and management.
Moreover,  the  Company  believes  that its  expanding  network of  distribution
centers allows it to efficiently  service existing  O'Reilly stores,  as well as
new stores  planned  for  opening in  contiguous  market  areas.  The  Company's
distribution  center  expansion  strategy also complements its new store opening
strategy by  supporting  newly  established  clusters  of stores  located in the
regions surrounding each distribution center.                                   

Store Operations                                                                

     Store  Layout.  Although  the Company has no present  intention to open new
Level 2 Stores,  the O'Reilly store network is composed generally of three store
formats  consisting  of the  Level 2 Store,  the  Level 1 Store  and the  Master
Inventory  Store which,  as of December 31, 1997, are  categorized  based on the
number of in-stock SKU's as follows:                                            

                                                                [Download Table]

                                                 Approximate                    
                                    Number of      Range of         Number of   
         Store Format                 Stores   Square Footage    In-Stock SKUs  
  ---------------------------         ------  -----------------  ---------------
                                                                                
Level 2 Stores                          28     3,000  -  5,000   12,000 - 16,000
Level 1 Stores (prototype)             198     4,000  -  8,000   16,001 - 25,000
Master Inventory Stores                 33     6,000  - 12,000   25,001 - 44,000
                                    ---------                                   
                                       259                                      
                                    =========                                   


     The  primary  function  of the  Master  Inventory  Stores,  like all  other
O'Reilly  stores,  is to  sell  Automotive  Products  to  both  portions  of the
marketplace.  However, because Master Inventory Stores carry a greater selection
of SKU's,  including  certain lower turnover hard parts not typically carried in
the Level 1 or Level 2 Stores,  a Master Inventory Store also provides the other
O'Reilly stores within its area with access to a greater selection of SKU's on a
same-day basis.                                                                 

     O'Reilly  stores offer the DIY and the  Professional  Installer  customer a
wide selection of nationally  recognized  brand name and private label SKU's for
domestic  and  imported  automobiles,  vans and trucks.  New and  remanufactured
automotive  hard  parts,  such as engine and  transmission  parts,  alternators,
starters,  water pumps,  and brake shoes and pads, have accounted for a majority
of total  sales.  An  O'Reilly  store also  carries an  extensive  selection  of
maintenance items, such as oil, antifreeze, fluids, engine additives, appearance
products,  and accessories,  such as floor mats and seat covers,  and a complete
line of auto body paint and related materials, automotive tools and professional
service equipment.  Maintenance items and accessories have accounted for most of
the remaining sales. The Company operates machine shops in 9 regional locations,
7 of which are located at an O'Reilly store. There are two free-standing machine
shops, one located in Springfield,  Missouri,  and the other in Tulsa, Oklahoma.
The O'Reilly  machine shops perform  engine  machining  services  (such as block
boring,  head  resurfacing,  and crankshaft  grinding) for DIY and  Professional
Installer consumers of such services.  The Company believes that its performance
of this service is valuable not only in maintaining its  relationships  with its
DIY and  Professional  Installer  customers but in attracting new customers,  in
each case  resulting in increased  sales of Automotive  Products.  Each O'Reilly
machine shop is equipped with sophisticated equipment, and employs ASE certified
machinists having an average of approximately ten years experience in machining.

     Store  exteriors  generally  feature a light tan facade  highlighted  by an
attractive  red,  white and green  stripe,  with the name  O'Reilly  Auto  Parts
written in Kelly green letters on a white  background in a lighted sign.  During
1994, a friendlier and more modern store format with an open architectural style
was  introduced.  These  new  stores  feature  greater  square  footage,  higher
ceilings,  brighter  lighting,  taller fixtures and a more  attractive  interior
design. The Company utilizes a computer-assisted  "plan-o-grammed"  store layout
system to provide uniform and consistent merchandise presentation;  however some
variation  occurs in order to meet the  specific  needs of a  particular  market
area.  Merchandise  is  arranged  to provide  easy  customer  access and maximum
selling space, keeping high-turnover products and accessories within view of the
customer,  and aisle  displays  are  generally  used to feature  high-demand  or
seasonal  merchandise,  new items and  advertised  specials.  All stores  have a
counter  adjacent to the front display area where  automotive  replacement  hard
parts that do not lend themselves to display are available. Although store hours
may vary by market  area,  O'Reilly  stores are  generally  open Monday  through
Friday,  8:00 a.m. to 9:00 p.m.,  Saturday,  8:00 a.m. to 8:00 p.m.  and Sunday,
9:00 a.m. to 6:00 p.m.  O'Reilly  stores  accept  cash,  checks and major credit
cards and extend short-term credit to those Professional  Installers who satisfy
the Company's credit requirements.                                              

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     Store  Automation.  To enhance store level operations and customer service,
the Company has installed  advanced  point-of-sale  computer terminals which are
generally located on the hard parts counters.  These point-of-sale terminals are
linked  with  the  IBM  AS/400  computers  located  in  each  of  the  Company's
distribution   centers  and  utilize  bar  code  scanning  technology  to  price
merchandise in sales  transactions.  In addition,  the  point-of-sale  terminals
provide  immediate access to the Company's  electronic  catalog to display parts
and pricing  information by make, model and year of vehicle.  This system speeds
transaction  times,  reduces  register  lines  and  provides  enhanced  customer
service. Moreover, this system captures sales information which assists in store
management,    strategic   planning,    inventory   control   and   distribution
effectiveness.                                                                  

     Store  Personnel  and  Training.   The  Company   believes  that  technical
proficiency on the part of each sales  specialist is essential to meet the needs
of  its  customers,  particularly  the  Professional  Installer,  and  that  the
technical proficiency of its Professional Parts People resulting from O'Reilly's
extensive and ongoing  training  program provides the Company with a significant
advantage over its  competitors,  particularly  the smaller retail operators and
the less specialized mass merchandisers.                                        

     The Company's training function is managed by a full time vice-president of
marketing  and  training  who,  together  with his staff,  is  headquartered  in
Springfield,   Missouri.  There  currently  are  regional  trainers  located  in
Springfield,  Missouri,  Kansas City, Missouri and Oklahoma City, Oklahoma.  The
Company screens prospective employees to identify  highly-motivated  individuals
with  either  experience  in  automotive  parts or repairs,  or an aptitude  for
automotive  knowledge.  Each person who becomes an employee,  or "team  member,"
first  participates  in an intensive  two-day  orientation  program  designed to
introduce the team member to the Company  culture and specific job duties before
being  assigned  specific job  responsibilities.  The  successful  completion of
additional  training is required  before a team member is deemed  qualified as a
parts  specialist  and thus able to work at the  parts  counter  at an  O'Reilly
store. All new counter people are required to successfully  complete a six-month
basic  automotive  systems  training course and are then enrolled in a six-month
advanced  automotive  systems course for ASE  certification.  As of December 31,
1997, approximately 500 parts specialists were ASE certified.                   

     In addition to extensive  on-the-job  training under the supervision of the
store manager or assistant  store manager,  each team member  completes a weekly
training  assignment  and  has  available  to him or her a  number  of  training
programs (videos,  booklets,  etc.) presented by the Company under the direction
of the  training  director.  For  example,  team members are given notice of and
encouraged  to  attend  seminars  designed  by the  Company  primarily  for  its
Professional  Installer  customers.  The seminars are generally conducted by the
Company's technical trainer or by representatives of a manufacturer or supplier,
and focus primarily on advanced automotive systems and parts knowledge.         

     Each O'Reilly store participates in the Company's sales specialist training
program  that is  conducted  by the  operations  training  manager.  Under  this
program,  selected  team  members  complete  two days of  extensive  sales  call
training for business development, after which these team members will spend one
day per week  calling on  existing  and new  Professional  Installer  customers.
Additionally, each team member engaged in such sales activities will participate
in quarterly advanced training programs for sales and business development.     

     Management  training is also an important  part of the  Company's  training
program.  Each  O'Reilly  store is staffed with a store manager and an assistant
manager,  in addition to the counter sales persons and support staff required to
meet the specific needs of each store. There are currently 31 district managers,
each of whom has  general  supervisory  responsibility  for an  average of eight
O'Reilly stores within such manager's  district.  Each district manager receives
comprehensive training on a monthly basis at the Company's headquarters focusing
on management techniques, new product announcements, advanced automotive systems
and Company  policies and procedures.  In turn, the information  covered at such
monthly  meetings is discussed in full by district  managers at monthly meetings
with their store  managers.  All  assistant  managers  and manager  trainees are
required to successfully complete a six-month manager development program, which
includes 85 hours of classroom and field training, as a prerequisite to becoming
a  store  manager.  This  program  covers  operations  extensively,  as  well as
principles of successful management.                                            

     The Company provides financial  incentives to its district managers,  store
managers,   assistant  managers  and  sales  specialists  through  an  incentive
compensation  program.  Under the Company's incentive  compensation program, the
base salary of most team  members  engaged in the sale of  Automotive  Products,
particularly  district  managers and store  managers,  is augmented by incentive
compensation  which is based  upon the  achievement  of sales and  profitability
goals. Such sales and  profitability  goals are based upon the performance of an
individual  store or district in which the team member  performs  services.  The
Company believes that its incentive compensation program significantly increases
the motivation and overall performance of its Professional Parts People and     

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the  Company's  ability to attract  and retain  qualified  management  and other
personnel.  Most of the Company's current senior  management,  district managers
and store  managers  were promoted to their  positions  from within the Company.
Most members of senior  management  have at least 20 years  experience  with the
Company,  and district  managers and store  managers  have an average  length of
service  with  the  Company  of   approximately   eight  years  and  six  years,
respectively.                                                                   

Marketing and Products                                                          

     Marketing  to the  Professional  Installer.  Throughout  its  history,  the
Company has been a seller of Automotive Products to the Professional  Installer.
The Company considers this portion of its business to be an integral part of its
entire  business  strategy  and  devotes  substantial  time  and  energy  to the
development of its Professional  Installer  business.  The Company's Director of
Sales is  primarily  responsible  for the  development  and  maintenance  of the
Company's Professional Installer business. There are 40 full time O'Reilly sales
representatives strategically located in the more densely populated market areas
served by the  Company  dedicated  solely to  calling  upon and  selling  to the
Professional  Installer.  Moreover,  each  district  manager  and store  manager
participates  in these  activities  by calling upon  existing and  potential new
Professional  Installers on a regular and periodic  basis.  Most of the O'Reilly
stores  operate  one or more  small  trucks or vans in order to  provide  prompt
delivery  service to the  Professional  Installer.  In addition,  many  O'Reilly
stores provide a dedicated counter to serve Professional Installers. In order to
promote the Professional Installer portion of its business, the Company provides
various services of special interest to the Professional Installer. For example,
the Company  provides  trade credit for qualified  Professional  Installers  and
sponsors seminars concerning topics of interest to Professional Installers, such
as technical updates, safety and general business management.                   

     Marketing to the Independently  Owned Parts Store. Along with the operation
of the distribution  centers and the distribution of Automotive  Products to the
O'Reilly  stores,  Ozark also sells Automotive  Products to independently  owned
parts stores whose retail stores are generally  located in areas not serviced by
an O'Reilly store. The Company generally does not compete with any independently
owned parts store to which it sells Automotive  Products,  but has, on occasion,
acquired the business assets of an  independently  owned parts store supplied by
Ozark. Ozark operates its own separate marketing program to independently  owned
parts stores  through a staff of five.  Of the  approximately  60  independently
owned parts stores  currently  purchasing  Automotive  Products  from Ozark,  55
participate in the Auto Value(R) program through Ozark. As a participant in this
program,  an  independently  owned  parts  store  which  meets  certain  minimum
financial and  operational  standards is permitted to indicate its Auto Value(R)
membership through the display of the Auto Value(R) logo, which is owned by Auto
Value  Associates,  Inc. ("Auto Value  Associates"),  a non-profit  buying group
consisting of 43 members as of December 31, 1997, including the Company, engaged
in the distribution or sale of Automotive  Products.  Additionally,  the Company
provides  advertising  and  promotional   assistance  to  Auto  Value(R)  stores
purchasing  Automotive  Products  from  Ozark,  as well as  marketing  and sales
support.  In return for a commitment to purchase Automotive Products from Ozark,
the Company  offers  assistance  to an Auto Value(R)  independently  owned parts
store by providing loan guarantees and financing secured by inventory, furniture
and fixtures,  making  available  computer  software for  inventory  control and
performing certain accounting and bookkeeping functions.                        

     Pricing.  The  Company  believes  that a  competitive  pricing  strategy is
essential within all product  categories in order to compete  successfully.  The
Company's  pricing is  established by senior  management,  with input from store
management, in a manner designed to meet product prices charged by the Company's
competitors  in the  market.  To assure  competitive  pricing,  the  Company has
established its Low Price  Guarantee(R)  policy under which each O'Reilly store,
at the request of a customer,  will match any  verifiable  price on any in-stock
product of the same or comparable quality.  Most Automotive Products sold by the
Company are priced at discounts  from the  manufacturer's  suggested  prices and
additional savings are offered through volume discounts.  Special promotions are
also  offered  to  attract  customers,  particularly  the DIY  customer,  to the
O'Reilly  stores,  which special  promotions are often times  supported  through
newspaper and electronic advertising and through the use of special flyers.     

     Advertising  and  Promotion.  The Company  aggressively  promotes  sales to
consumers through an extensive  advertising  program which includes direct mail,
newspaper and radio and television  advertising in selected markets. The Company
believes  that its  advertising  and  promotional  activities  have  resulted in
significant  name  recognition in each of its market areas.  Newspaper and radio
advertisements  are  generally  directed  towards  specific  product  and  price
promotions,  frequently in connection  with specific sale events and promotions.
Total  advertising  expenses  (excluding  amounts  received  from  suppliers  as
allowances),  have decreased from  approximately  1.2% in 1996 to  approximately
1.1% of product sales in 1997.                                                  

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     Products and  Purchasing.  Aided by the  Company's  computerized  inventory
control and management  system,  the product selection and purchasing  functions
are  managed  centrally  at  the  Company's  executive  offices.  The  Company's
merchandise generally consists of nationally recognized,  well advertised,  name
brand products such as A.C. Delco,  Moog, Wagner,  Gates Rubber,  Federal Mogul,
Monroe, Prestone, Quaker State, Pennzoil, Castrol, Valvoline, STP, Armor All and
Turtle Wax. In addition to name brand  products,  O'Reilly  stores  carry a wide
variety of high-quality private label products under its O'Reilly Auto Parts(R),
SuperStart(R), BrakeBest(R), Ultima(R) and Omnispark(R) proprietary name brands,
and the Parts  Master(R)  name brand  (which  are  provided  through  Auto Value
Associates). Because most of such products are produced by nationally recognized
manufacturers  in  accordance  with the  Company's  specifications,  the Company
believes that the private label products are of equal or, in some cases,  better
quality than comparable name brand products, a characteristic which is important
to the Company's Professional Installer clientele.  The Company further believes
that the private label products are packaged  attractively  to promote  customer
interest and are generally  priced below  comparable name brand products carried
in the store.                                                                   

     Although the Company is not obligated to make purchases  through Auto Value
Associates,  Auto Value Associates assists the Company in negotiating  purchases
of Automotive  Products from a variety of vendors (including  purchases of Parts
Master(R) products). Because of its volume purchases of Automotive Products, the
Company  believes  that its  long-term  ability to buy  Automotive  Products  on
favorable terms would not be materially adversely affected if the Company ceased
to be a member of Auto Value Associates. The Company believes, however, that its
membership in Auto Value  Associates  provides  certain  benefits,  and does not
currently intend to terminate its membership therein.                           

     The Company purchases  Automotive  Products from approximately 400 vendors,
the three  largest of which  accounted  for  approximately  13% of the Company's
total  purchases in fiscal 1997 and none of which  accounted for more than 5% of
such purchases.  The Company has no long-term  contractual  purchase commitments
with any of its vendors. The Company has not experienced difficulty in obtaining
satisfactory  alternative  sources of supply for Automotive  Parts, and believes
that  adequate  sources of supply  exist at  substantially  similar  costs,  for
substantially all Automotive Products sold by the Company. The Company considers
its  relationships  with its suppliers to be good.  Manufacturers  of Automotive
Products,  particularly  hard parts,  typically  provide repair and  replacement
warranties  which are passed on by the Company to its  customers.  However,  the
Company does provide warranties on a few product lines. The Company's Automotive
Product  vendors  generally  permit the  Company  to return  any slow  moving or
obsolete  inventory  for a full  credit.  It is the  Company's  policy  to  take
advantage of early  payment and  seasonal  purchasing  discounts  offered by its
vendors,  and to utilize  extended  dating terms  available  from vendors due to
volume purchasing.                                                              

Competition                                                                     

     The Company  believes  that while the industry is still highly  fragmented,
the  ability of national  and  regional  specialty  retail  chains,  such as the
Company,  to operate more efficiently than the smaller  independent  operator or
mass  merchandiser will result in industry  consolidation.  The Company believes
that automotive specialty chains are able to operate more efficiently than small
or less  specialized  competitors  because of  economies  of scale and  internal
efficiencies,  particularly in the areas of purchasing,  distribution, inventory
management  and  advertising.  The Company also  believes  that  staffing  sales
positions with  technically  proficient sales personnel is essential to meet the
needs of purchasers of today's more  sophisticated and complex  automotive parts
and that such  staffing  differentiates  the  specialty  retailer  from the less
specialized  mass  merchandiser.  The Company  believes  that  specialty  retail
chains,  such as the Company,  which have the financial resources to provide for
such  internal  efficiencies  and the  ongoing  training  required to ensure the
staffing of technically proficient sales personnel,  are well positioned to gain
market share from the smaller independent operators and mass merchandisers.     

     The Company competes in both the DIY and Professional Installer portions of
the  automotive  aftermarket  business.  Competitors  in the DIY  portion of its
business  within  its  current  market  areas  (primarily  in the  more  densely
populated market areas) include automotive parts chains such as AutoZone,  Parts
America (formerly known as Western Auto) and Pep Boys, independently owned parts
stores (some of which are associated  with national auto parts  distributors  or
associations),  automobile dealerships and mass or general merchandise, discount
and  convenience  chains that carry  Automotive  Products.  The Company's  major
competitors  in the  Professional  Installer  portion  of its  business  include
independent  warehouse   distributors  and  independently  owned  parts  stores,
automobile dealers and national warehouse distributors and associations, such as
National Automotive Parts Association (NAPA),  Carquest and Parts Plus. AutoZone
entered into certain of the Company's  Professional  Installer  markets in 1997.
The Company competes on the basis of customer service, merchandise selection and
availability, price, and store location. The Company believes that its principal

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strengths  are its ability to provide both the DIY and  Professional  Installers
same day or overnight availability to more than 105,000 SKU's through its highly
motivated and technically proficient Professional Parts People. However, some of
the Company's current and potential  competitors are larger than the Company and
have greater financial resources than the Company.                              

Employees                                                                       

     As of December 31, 1997, the Company had 3,945 team members,  of whom 2,973
were  employed at the O'Reilly  stores,  595 were  employed at the  distribution
centers and 377 were employed at the corporate and administrative  headquarters.
The Company's team members are not subject to a collective bargaining agreement.
The Company  considers its relations with its team members to be excellent,  and
strives to promote good employee relations through various programs designed for
such purposes.                                                                  

Servicemarks and Trademarks                                                     

     The  Company  has  registered  the  servicemarks  O'Reilly   Automotive(R),
O'Reilly Auto Parts(R), Right Part, Right Price, Right Now(R), Because It's Your
Car We're Talking About(R) and Parts Payoff(R) and the trademarks SuperStart(R),
BrakeBest(R),  Ultima(R) and Omnispark(R).  Further,  the Company is licensed to
use the registered trademarks and servicemarks Auto Value(R) and Parts Master(R)
in connection  with its marketing  program,  which marks are owned by Auto Value
Associates.  The Company  believes that its business is not otherwise  dependent
upon any patent, trademark, servicemark or copyright.                           

Regulation                                                                      

     Although subject to various laws and governmental  regulations  relating to
its business,  including those related to the environment,  the Company does not
believe that compliance  with such laws and  regulations has a material  adverse
effect on its  operations.  Further,  the  Company is unaware of any  failure to
comply with any such laws and  regulations  which could have a material  adverse
effect on its operations.  No assurance can be given,  however, that significant
expenses  could not be  incurred  by the  Company to comply with any such law or
regulation in the future.                                                       

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ITEM 2     PROPERTIES                                                           
------------------------                                                        

     The  following  table  provides  certain  information  with  respect to the
Company's headquarters and distribution centers as of December 31, 1997:        

                                                                [Download Table]


                                                         Square                 
Location                Principal Use(s)                Footage        Interest 
---------------     -------------------------------    ----------      -------- 
                                                                                
Springfield, MO     Executive and Administrative                                
                    Offices and Distribution Center     256,000(a)(b)  Owned    

Springfield, MO     Administrative Offices, Training                            
                    and Research                         35,000        Leased(c)

Springfield, MO     Bulk Merchandise Warehouse           36,000        Owned    

Kansas City, MO     Distribution Center                 113,000(a)     Owned    

Oklahoma City, OK   Distribution Center                 123,000(a)     Owned    

-----------------------                                                         

(a)  Includes mezzanine space.                                                  

(b)  Includes  212,000 square feet (including  mezzanine  space) utilized by the
Company for its distribution center.                                  

(c)  Occupied under the terms of a lease  expiring in 2014 with an  unaffiliated
     party,  subject  to  renewal  for a term of 10 years at the  option  of the
     Company. To facilitate construction, the Company loaned to the owner of the
     facility an aggregate of approximately $2.5 million.  The principal balance
     of such loan bears interest at a rate of six percent per annum,  is payable
     in equal  monthly  installments  through  January  2005 and is secured by a
first deed of trust.                                                  

     Of the 259 stores  operated by the Company at December 31, 1997, 131 stores
were owned, 69 stores were leased from  unaffiliated  parties and 59 stores were
leased  from  one of two  real  estate  investment  partnerships  formed  by the
O'Reilly family.  Leases with unaffiliated parties generally provide for payment
of a fixed base rent, payment of certain tax, insurance and maintenance expense,
and an original term of ten years, subject to one or more renewals at the option
of the Company. The original terms of 15 stores leased from unaffiliated parties
expire prior to the end of 1998.  The Company has entered into  separate  master
lease agreements with each of the affiliated real estate investment partnerships
for the occupancy of the stores covered  thereby.  Such master lease  agreements
expire on December 31, 1998, subject to renewal at the option of the Company for
an additional period of up to six years.                                        

     The Company believes that its present facilities are in good condition, are
adequately insured and together with those under construction,  are suitable and
adequate for the conduct of its current operations.                             

ITEM 3    LEGAL PROCEEDINGS                                                     
------------------------------                                                  

The Company is not a party to any legal  proceedings,  other than routine claims
and lawsuits  arising in the ordinary  course of its business.  The Company does
not believe that such claims and  lawsuits,  individually  or in the  aggregate,
will have a material adverse effect on the Company's business.                  

ITEM 4    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                   
----------------------------------------------------------------                

No  matters  were  submitted  to  a  vote  of  security  holders,   through  the
solicitation  of proxies or otherwise,  during the fourth  quarter of the fiscal
year ended December 31, 1997.                                                   

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ITEM 4A   EXECUTIVE OFFICERS OF THE COMPANY                                     
---------------------------------------------                                   

The  following  paragraphs  set forth  certain  information  with respect to the
executive officers of the Company, who are not also directors:                  

Ted F. Wise, age 47, Executive Vice-President, has served in this capacity since
March 1993. Mr. Wise had served as Vice President-Operations of the Company from
June, 1984 until being elected to his current position.                         

James R. Batten, CPA, age 35, Vice-President of Finance/Chief Financial Officer,
has served in this capacity since October 1997.  From March 1994 until promotion
to his current  position,  Mr. Batten served as Chief  Financial  Officer of the
Company and previously  held the position of Finance Manager of the Company from
January 1993 until March 1994.  From September 1986 until joining the Company in
January 1993, Mr. Batten was employed by the accounting firm of Whitlock,  Selim
& Keehn where he attained the position of Audit Manager in 1991.                

Christopher T. Stange,  CPA, age 30, is the Director of Accounting since October
1997,  in  addition  to holding  the  position  of  Corporate  Controller  since
September  1996. He previously held the position of Accounting  Supervisor.  Mr.
Stange joined the Company in 1994 as the Investor Relations  Coordinator and was
previously employed by Deloitte & Touche, LLP in St. Louis Missouri.            

 PART II

ITEM 5    MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS 
------------------------------------------------------------------------------- 

The material  contained in the  registrant's  annual report to its  shareholders
(the  "Annual  Shareholders'  Report")  under the  captions  "Market  Prices and
Dividend  Information"  and  "Number of  Stockholders"  included  on page 28, is
incorporated herein by this reference.                                          

ITEM 6    SELECTED FINANCIAL DATA                                               
------------------------------------                                            
The  material  contained  in the Annual  Shareholders'  Report under the caption
"Selected   Consolidated  Financial  Data"  included  on  page  10  and  11,  is
incorporated herein by this reference.                                          

ITEM 7    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND       
----------------------------------------------------------------------------    
RESULTS OF OPERATIONS                                       
------------------------                                    
The  material  contained  in the Annual  Shareholders'  Report under the caption
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations"  included  on pages 12 through  16, is  incorporated  herein by this
reference.                                                                      

ITEM 7(a) QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK            
------------------------------------------------------------------------        

None.                                                                           

ITEM 8    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                           
--------------------------------------------------------                        

The  Company's  consolidated  financial  statements,  the notes  thereto and the
report of Ernst and Young LLP,  independent  auditors,  appearing  in the Annual
Shareholders'  Report under the captions  "Consolidated  Financial  Statements",
"Notes  to  Consolidated   Financial  Statements"  and  "Report  of  Independent
Auditors"  included  on pages 17  through  27, are  incorporated  herein by this
reference.                                                                      

ITEM 9    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND       
------------------------------------------------------------------------------  
FINANCIAL DISCLOSURE                                        
------------------------                                    

None.                                                                           

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PART III

ITEM 10   DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT                    
---------------------------------------------------------------                 

The  information  regarding  the  directors  of  the  Company  contained  in the
Company's  Proxy  Statement for the 1998 Annual  Meeting of  Stockholders  ("the
Proxy  Statement")  under the caption  "Election of Directors"  is  incorporated
herein by this reference. The Proxy Statement is being filed with the Securities
and Exchange  Commission within 120 days of the end of the Company's most recent
fiscal year end. The information regarding executive officers called for by item
401 of  Regulation  S-K is  included  in Part I as Item 4A, in  accordance  with
General Instruction G(3) to Form 10-K, for the executive officers of the Company
who are not also directors.                                                     

The  information  regarding  compliance  with  Section  16(a) of the  Securities
Exchange Act of 1934 included in the Company's Proxy Statement under the caption
"Compliance  with  Section  16(a)  of the  Securities  Exchange  Act of 1934" is
incorporated herein by this reference.                                          

ITEM 11   EXECUTIVE COMPENSATION                                                
------------------------------------                                            

The material in the Proxy Statement under the caption  "Executive  Compensation"
other than the material under the caption "Report of the Compensation Committee"
is incorporated herein by this reference.                                       

ITEM 12   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT        
----------------------------------------------------------------------------    

The material in the Proxy  Statement  under the caption  "Security  Ownership of
Management  and  Certain  Beneficial  Owners"  is  incorporated  herein  by this
reference.                                                                      

ITEM 13   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                        
-------------------------------------------------------------                   

The  material  in the Proxy  Statement  under  the  caption  "Transactions  with
Insiders and Others" is incorporated herein by this reference.                  

 PART IV

ITEM 14   EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K        
-----------------------------------------------------------------------------   

(a) 1.  Financial Statements-O'Reilly Automotive, Inc. and Subsidiaries         

     The following  consolidated  financial  statements of O'Reilly  Automotive,
     Inc. and Subsidiaries  included in the Annual  Shareholders'  Report of the
     registrant for the year ended December 31, 1997, are incorporated herein by
this reference in Part II, Item 8:                                    

Consolidated Balance Sheets as of December 31, 1997 and 1996

      Consolidated Statements of Income for the years ended December 31,
1997, 1996 and 1995                                         

       Consolidated Statements of Stockholders' Equity for the years ended
December 31, 1997, 1996 and 1995                            

          Consolidated Statements of Cash Flows for the years ended December 31,
1997, 1996 and 1995                                         

  Notes to Consolidated Financial Statements for the years ended
December 31, 1997, 1996 and 1995                            

Report of Independent Auditors                              

Page 13 

10-K 14th Page of 17 TOC 1st Previous Next ↓Bottom Just 14th
(a) 2.  Financial Statement Schedule-O'Reilly Automotive, Inc. and Subsidiaries 

The following consolidated financial statement schedule of O'Reilly   
Automotive, Inc. and subsidiaries is included in Item 14(d):          

Schedule II-Valuation and qualifying accounts                 

     All  other  schedules  for  which  provision  is  made  in  the  applicable
     accounting  regulation of the  Securities  and Exchange  Commission are not
     required under the related instructions or are inapplicable,  and therefore
have been omitted.                                                    

(a) 3.  Management Contracts and Compensatory Plans or Arrangements             

     Each of the  Company's  management  contracts  and  compensatory  plans  or
arrangements are identified in the Exhibit Index on Page E-1.         

(b) Reports on Form 8-K                                                         

     The Company did not file any reports on Form 8-K during the last quarter of
the year ended December 31, 1997.                                               

(c) Exhibits                                                                    

See Exhibit Index on page E-1.                                        

(d) Financial Statement Schedules                                               

 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES

                                                        [Enlarge/Download Table]


---------------------------------- -------------------- --------------------------------------- ------------------- ----------------
             Col. A                      Col. B                         Col. C                        Col. D              Col. E    
---------------------------------- -------------------- --------------------------------------- ------------------- ----------------
                                                                               Additions -                                          
           Description                 Balance at          Additions -       Charged to Other      Deductions -     Balance at End  
                                   Beginning of Period   Charged to Costs       Accounts -           Describe          of Period    
                                                           and Expenses          Describe                                           
---------------------------------- -------------------- ------------------- ------------------- ------------------- ----------------
                                                                                                                                    

Year Ended December 31, 1997:                                                                                                       
Deducted from asset account:                                                                                                        
   Allowance for doubtful                         $444                $662                  $0            $743 (1)           $363   
     accounts                                                                                                                       

Year Ended December 31, 1996:                                                                                                       
Deducted from asset account:                                                                                                        
   Allowance for doubtful                         $386                $592                  $0            $534 (1)           $444   
     accounts                                                                                                                       

Year Ended December 31, 1995:                                                                                                       
Deducted from asset account:                                                                                                        
   Allowance for doubtful                         $293                $467                  $0            $374 (1)           $386   
     accounts                                                                                                                       

(1)  Uncollectible accounts written off.                              

 Page 14

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SIGNATURES

Pursuant to the  requirements of Section 13 or 15(d) of the Securities  Exchange
Act of 1934,  the  registrant  has duly  caused  this report to be signed on its
behalf by the undersigned, thereunto duly authorized.                           

                                             O'REILLY AUTOMOTIVE, INC.
                                (Registrant)

Date:  March 31, 1998                             By /s/ David E. O'Reilly      
                                            ------------------------
                                     David E. O'Reilly
                                 President and
                                           Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1934, this report has been
signed  below by the  following  persons  on  behalf  of the  registrant  in the
capacities and on the dates indicated.                                          

                                                                [Download Table]


Signature                                Title                     Date        
                                                                               

/s/David E. O'Reilly          Director, President and            March 31, 1998
---------------------------   Chief Executive Officer                          
David E. O'Reilly             (principal executive officer)                    

/s/James R. Batten            Vice-President of Finance/         March 31, 1998
---------------------------   Chief Financial Officer                          
James R. Batten               (principle financial officer)                    

/s/Lawrence P. O'Reilly       Director, President and            March 31, 1998
---------------------------   Chief Operating Officer                          
Lawrence P. O'Reilly                                                           

/s/Charles H. O'Reilly, Jr.   Director and Chairman              March 31, 1998
---------------------------   of the Board                                     
Charles H. O'Reilly, Jr.                                                       

/s/Rosalie O'Reilly Wooten    Director and Executive             March 31, 1998
---------------------------   Vice-President                                   
Rosalie O'Reilly Wooten                                                        

/s/Charles H. O'Reilly, Sr.   Director and Chairman Emeritus     March 31, 1998
---------------------------                                                    
Charles H. O'Reilly, Sr.                                                       

/s/Jay D. Burchfield          Director                           March 31, 1998
---------------------------                                                    
Jay D. Burchfield                                                              

/s/Joe C. Greene              Director                           March 31, 1998
---------------------------                                                    
Joe C. Greene                                                                  

/s/Chris T. Stange            Director of Accounting/            March 31, 1998
----------------------------  Controller                                       
Chris T. Stange               (principal accounting officer)                   


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 EXHIBIT INDEX

                                                                [Download Table]


Exhibit                                                                         
  No.     Description                                                           
-------   --------------------------------------------------------------------- 
                                                                                
 2.1*     Plan of Reorganization Among the Registrant, Greene County Realty Co. 
          ("Greene County Realty") and Certain Shareholders.                    

 2.2      Agreement  and Plan of Merger,  dated as of December 23, 1997,  by and
          among O'Reilly Automotive, Inc., Shamrock Acquisition,  Inc. and Hi-Lo
          Automotive,  Inc., filed as Exhibit (c)(1) to the Registrants'  Tender
          Offer Statement on Schedule 14D-1 dated December 23, 1997.            

 3.1*     Restated Articles of Incorporation of the Registrant.                 

 3.2*     Amended and Restated Bylaws of the Registrant.                        

 4.1*     Form of Stock Certificate for Common Stock.                           

10.1*     Form of  Employment  Agreement  between the  Registrant  and          
          David  E.  O'Reilly,   Lawrence  P.  O'Reilly,   Charles  H.          
          O'Reilly, Jr. and Rosalie O'Reilly Wooten.                            

10.2*     Lease between the Registrant and O'Reilly Investment Company.         

10.3*     Lease between the Registrant and O'Reilly Real Estate Company.        

10.4      Form of  Retirement  Agreement  between the  Registrant  and          
          David  E.  O'Reilly,   Lawrence  P.  O'Reilly,   Charles  H.          
          O'Reilly, Jr. and Rosalie O'Reilly Wooten, filed herewith.            

10.7(a)   O'Reilly Automotive, Inc. Profit Sharing and Savings Plan, filed as   
          Exhibit 4.1 to the Registrant's Registration  Statement on Form S-8,  
          File No. 33-73892, and incorporated herein by this                    
          reference.                                                            

10.8*(a)  O'Reilly Automotive, Inc. 1993 Stock Option Plan.                     

10.9*(a)  O'Reilly Automotive, Inc. Stock Purchase Plan.                        

10.10*(a) O'Reilly Automotive, Inc. Director Stock Option Plan.                 

10.11*    Commercial and Industrial Real Estate Sale Contract between           
          Westinghouse Electric Corporation and Registrant.                     

10.12*    Form of Assignment, Assumption and Indemnification Agreement between  
          Greene County Realty and Shamrock Properties, Inc.                    


Page E - 1

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 EXHIBIT INDEX (continued)

                                                                [Download Table]

Exhibit                                                                         
  No.        Description                                                        
-------  ---------------------------------------------------------------------- 
                                                                                
10.13    Loan commitment and construction loan agreement between the Registrant 
         and Deck Enterprises, filed as Exhibit 10.13 to the Registrant's Annual
         Shareholders' Report on Form 10-K for the year ended December 31, 1993 

10.14    Lease between the Registrant and Deck Enterprises, filed as            
         Exhibit 10.14 to the Registrant's Annual Shareholders' Report on       
         Form 10-K for the year ended December 31, 1993                         

10.15    Amended  Employment Agreement between the Registrant and Charles H.    
         O'Reilly,  Jr.,  filed as  Exhibit  10.17 to the Registrant's Annual   
         Shareholders'  Report on Form 10-K for the year ended                  
         December 31, 1996                                                      

10.16    Second Amendment to the O'Reilly Automotive, Inc. 1993 Stock Option    
         Plan, filed as Exhibit 10.20 to the Registrant's Quarterly Report on   
         Form 10-Q for the quarter ended June 30, 1997.                         

10.17    Credit  Agreement  between the Registrant  and  NationsBank, N.A.,     
         dated October 16, 1997, filed as Exhibit 10.17 to the Registrant's     
         Quarterly  Report  on Form  10-Q for the quarter ended                 
         September 30, 1997.                                                    

10.18    O'Reilly Automotive, Inc. Performance Incentive Plan, filed as         
         Exhibit 10.18 (a) to the Registrant's Annual Shareholders' Report on   
         Form 10-K for the year ended December 31, 1996                         

10.19    Loan Agreement between the Registrant and Commerce Bank, N.A., dated   
         October 1, 1997, filed as Exhibit 10.19 to the Registrant's Quarterly  
         Report on Form 10-Q for the quarter ended September 30, 1997.          

13.1     1997 Annual Report to Shareholders, filed herewith.  Portions not      
         specifically incorporated by reference in this Report are not deemed   
         "filed" for the purposes of the Securities Exchange Act of 1934.       

21.1     Subsidiaries of the Registrant, filed herewith.                        

23.1     Consent of Ernst & Young LLP, independent auditors, filed herewith.    

27.1     Financial Data Schedule, filed herewith.                               

99.1     Certain Risk Factors, filed herewith.                                  

--------------------                                                            

* Previously filed as Exhibit of same number to the Registration Statement of   
 the Registrant on Form S-1, File No.33-58948, and incorporated herein by this
reference.                                                                  

(a) Management contract or compensatory plan or arrangement required to be filed
pursuant to Item 14(c) of Form 10-K.                                    

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Dates Referenced Herein and Documents Incorporated by Reference

		Referenced-On Page
This ‘10-K’ Filing	Date	First	Last	Other Filings

	12/31/98	11		10-K, 11-K, 5, 5/A, PRE 14A
Filed on:	3/31/98	15		10-Q, 10-Q/A, 4
	2/27/98	1
	1/30/98	4
For Period End:	12/31/97	1	14	10-K/A, 11-K, 4, 5, DEF 14A
	12/23/97	16
	10/16/97	17
	10/1/97	17
	9/30/97	17		10-Q, 4, 4/A
	6/30/97	17		10-Q, 4
	12/31/96	13	17	10-K
	12/31/95	13	14
	12/31/93	17
				List all Filings

4 Subsequent Filings that Reference this Filing

  As Of               Filer                 Filing    For·On·As Docs:Size             Issuer                      Filing Agent

 2/28/24  O’Reilly Automotive, Inc.         10-K       12/31/23  116:12M
 2/28/23  O’Reilly Automotive, Inc.         10-K       12/31/22  107:11M
 2/28/22  O’Reilly Automotive, Inc.         10-K       12/31/21  107:11M
 2/26/21  O’Reilly Automotive, Inc.         10-K       12/31/20  112:12M

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Filing Submission 0000898173-98-000005 – Alternative Formats (Word / Rich Text, HTML, Plain Text, et al.)

O Reilly Automotive Inc – ‘10-K’ for 12/31/97

As of: Tuesday, 3/31/98 · For: 12/31/97 · Accession #: 898173-98-5 · File #: 0-21318

Annual Report — Form 10-KFiling Table of Contents

10-K — Annual ReportDocument Table of Contents

Dates Referenced Herein and Documents Incorporated by Reference

4 Subsequent Filings that Reference this Filing

Annual Report — Form 10-K
Filing Table of Contents

10-K — Annual Report
Document Table of Contents