O'Reilly Automotive ORLY · USD

NOTE 2 – SEGMENT REPORTING​The Company conducts its operations in the U.S., Canada, and Mexico, and collectively this represents its single operating segment, referred to as its automotive aftermarket parts segment, which is its only reportable segment. There have been no changes in the determination of segmentation or the measurements used to determine reported segment net income during the year ended December 31, 2025. The measure of segment assets is reported as “Total assets” on the accompanying Consolidated Balance Sheets as of December 31, 2025 and 2024. At December 31, 2025 and 2024, the Company’s consolidated long-lived assets were located primarily in the United States and consolidated revenue was primarily generated within the United States for the years ending December 31, 2025, 2024 and 2023, with immaterial assets and revenues associated with international operations. ​The table below identifies the Company’s significant segment expenses regularly provided to the chief operating decision maker that are included in reported segment profit or loss, which is consolidated net income, for the years ended December 31, 2025, 2024 and 2023 (in thousands):​​​​​​​​​​​​​​For the Year Ended ​​​December 31, ​​​2025​2024​2023Automotive aftermarket parts segment:​​​​​​​​​Sales​$ 17,781,992​$ 16,708,479​$ 15,812,250Cost of goods sold, including warehouse and distribution expenses​​ 8,607,851​​ 8,153,990​​ 7,707,447Gross profit​​ 9,174,141​​ 8,554,489​​ 8,104,803Less: Team Member compensation expense (1)​​ 3,587,196​​ 3,334,574​​ 3,139,448​Rent expense (2)​​ 461,744​​ 429,686​​ 402,572​Depreciation and amortization expense​​ 415,209​​ 372,878​​ 333,678​Advertising expense​​ 91,061​​ 90,744​​ 85,706​Other segment items (3)​​ 1,143,696​​ 1,058,995​​ 936,981​Interest expense​​ 235,064​​ 222,548​​ 201,668​Provision for income taxes​​ 701,962​​ 658,384​​ 658,169Consolidated net income​$ 2,538,209​$ 2,386,680​$ 2,346,581(1)Team Member compensation expense derived from selling, general and administrative expenses included in Segment net income includes payroll expense, benefits and withholdings expense, share-based compensation expense, and nonqualified deferred compensation expense. (2)Rent expense derived from selling, general and administrative expenses included in Segment net income includes rent and common area maintenance expense.

NOTE 13 – REVENUE​The table below identifies the Company’s revenues disaggregated by major customer type for the years ended December 31, 2025, 2024, and 2023 (in thousands):​​​​​​​​​​​​​For the Year Ended ​​December 31, ​ ​ ​ ​2025 ​ ​ ​2024 ​ ​ ​2023Sales to do-it-yourself customers​$ 8,765,647​$ 8,473,041​$ 8,248,213Sales to professional service provider customers ​ 8,651,746 ​ 7,836,283 ​ 7,245,747Other sales and sales adjustments ​ 364,599 ​ 399,155 ​ 318,290Total sales​$ 17,781,992​$ 16,708,479​$ 15,812,250​As of December 31, 2025 and 2024, the Company had recorded a deferred revenue liability of $7.8 million and $6.8 million, respectively, related to its loyalty program, which were included in “Other liabilities” on the accompanying Consolidated Balance Sheets. During the year ended December 31, 2025, 2024, and 2023, the Company recognized $19.8 million, $17.3 million and $13.9 million, respectively, of revenue related to its loyalty program, which were included in “Sales” on the accompanying Consolidated Statements of Income.​See Note 10 for information concerning the expected costs associated with the Company’s assurance warranty obligations.

NOTE 15 – COMMITMENTS​Construction Commitments:As of December 31, 2025, the Company had purchase obligations for construction contract commitments in the amount of $275.9 million. ​Letters of Credit Commitments:As of December 31, 2025, the Company had outstanding letters of credit, primarily to satisfy workers’ compensation, general liability, and other insurance policies, in the amount of $155.6 million. See Note 9 for further information concerning the Company’s letters of credit commitments.​Debt Financing Commitments:Each series of senior notes is redeemable in whole, at any time, or in part, from time to time, at the Company’s option upon not less than 30 nor more than 60 days notice at a redemption price, plus any accrued and unpaid interest to, but not including, the redemption date, equal to the greater of (i) 100% of the principal amount thereof or (ii) the sum of the present values of the remaining scheduled payments of principal and interest thereon discounted to the redemption date on a semiannual basis at the applicable Treasury Yield plus basis points identified in the indenture governing such series of senior notes; provided, that on or after the date that is three months prior to the maturity date of the series of senior notes, such series of senior notes is redeemable at a redemption price equal to par plus accrued and unpaid interest to, but not including, the redemption date. In addition, if at any time the Company undergoes a Change of Control Triggering Event, as defined in the indenture governing such series of senior notes, the holders may require the Company to repurchase all or a portion of their senior notes at a price equal to 101% of the principal amount of the notes being repurchased, plus accrued and unpaid interest, if any, but not including the repurchase date. See Note 9 for further information concerning the Company’s debt financing commitments.​Self-Insurance Reserves:The Company uses a combination of insurance and self-insurance mechanisms to provide for potential liabilities for Team Member health care benefits, workers’ compensation, vehicle liability, general liability, and property loss. With the exception of certain Team Member health care benefit liabilities, employment related claims and litigation, certain commercial litigation and certain regulatory matters, the Company obtains third-party insurance coverage to limit its exposure to this obligation.

NOTE 17 – INCOME TAXES​The following table identifies components of income from continuing operations before income taxes included in “Income before income taxes” on the accompanying Consolidated Statements of Income for the years ended December 31, 2025, 2024, and 2023 (in thousands):​​​​​​​​​​​​​For the Year Ended ​​December 31, ​​2025​2024​2023Domestic​$ 3,259,128​$ 3,053,501​$ 2,994,856Foreign​​ (18,957)​​ (8,437)​​ 9,894Income before income taxes​$ 3,240,171​$ 3,045,064​$ 3,004,750​Provision for Income Taxes:The following tables reconcile the amounts included in “Provision for income taxes” on the accompanying Consolidated Statements of Income for the years ended December 31, 2025, 2024, and 2023 (in thousands):​​​​​​​​​​​​​For the Year Ended ​​December 31, ​ ​ ​ ​2025 ​ ​ ​2024 ​ ​ ​2023Current:​​​​​​​​​Federal income tax expense ​$ 584,569​$ 587,496​$ 497,492State income tax expense​ 153,026​ 120,209​ 109,924Foreign income tax expense ​​ 1,911​​ 446​​ 2,521Total current​​ 739,506​​ 708,151​​ 609,937​​​​​​​​​​Deferred:​​​​​​​​​Federal income tax (benefit) expense ​​ (20,482)​​ (43,222)​​ 41,782State income tax (benefit) expense​​ (8,986)​​ (3,229)​​ 6,003Foreign income tax (benefit) expense​​ (8,076)​​ (3,316)​​ 447Total deferred​​ (37,544)​​ (49,767)​​ 48,232​​​​​​​​​​Net income tax expense​$ 701,962​$ 658,384​$ 658,169​The following table outlines the reconciliation of the “Provision for income taxes” amounts included on the accompanying Consolidated Statements of Income to the amounts computed at the federal statutory rate for the years ended December 31, 2025, 2024, and 2023 (in thousands):​​​​​​​​​​​​​​​​​​​​​​For the Year Ended ​​December 31, ​ ​ ​ ​2025 ​ ​ ​2024 ​ ​ ​2023​​Amount​Percent​Amount​Percent​Amount​PercentU.S. federal statutory tax rate​$ 680,418​ 21.0%​$ 639,534​ 21.0%​$ 630,998​ 21.0%State and local income taxes, net of federal income tax effect (1)​​ 104,123​ 3.2​​​ 95,928​ 3.2​​​ 96,814​ 3.2​​​​​​​​​​​​​​​​​​​​Nontaxable or nondeductible items:​​​​​​​​​​​​​​​​​​Excess tax benefit from share-based compensation​​ (29,928)​ (0.9)​​​ (39,871)​ (1.3)​​​ (35,950)​ (1.2)​Other​​ 4,640​ 0.1​​​ 3,575​ 0.1​​​ 5,247​ 0.2​​​​​​​​​​​​​​​​​​​​Tax credits:​​​​​​​​​​​​​​​​​​Federal renewable energy tax credit​​ (49,519)​ (1.5)​​​ (28,345)​ (0.9)​​​ (19,627)​ (0.6)​Other​​ (9,979)​ (0.3)​​​ (11,541)​ (0.4)​​​ (14,115)​ (0.

NOTE 14 – SHARE-BASED COMPENSATION AND BENEFIT PLANS​The Company recognizes share-based compensation expense based on the fair value of the grants, awards, or shares at the time of the grant, award, or issuance. Share-based compensation includes stock option awards, restricted stock awards, and stock appreciation rights issued under the Company’s incentive plans and stock issued through the Company’s employee stock purchase plan.​The table below identifies the shares that have been authorized for issuance and the shares available for future issuance under the Company plans, as of December 31, 2025 (in thousands):​​​​​​​​December 31, 2025​ ​ ​ ​Total Shares Authorized for ​ ​ ​Shares Available for FuturePlans​Issuance under the Plans​Issuance under the PlansIncentive Plans 175,650 55,937Employee Stock Purchase Plan 25,250 5,206Profit Sharing and Savings Plan 63,000 —​Stock Options:The Company’s incentive plans provide for the granting of stock options for the purchase of common stock of the Company to certain key employees of the Company. Employee stock options are granted at an exercise price that is equal to the closing market price of the Company’s common stock on the date of the grant. Employee stock options granted under the plans expire after 10 years and typically vest 25% per year, over four years. The Company records compensation expense for the grant date fair value of the option awards evenly over the vesting period or minimum required service period.​The table below identifies stock option activity under these plans during the year ended December 31, 2025:​​​​​​​​​​​​​​ ​ ​ ​​ ​ ​ ​​ ​ ​ ​Average ​ ​ ​Aggregate​​Shares​Weighted- Average​Remaining​Intrinsic Value​​(in thousands)​Exercise Price​Contractual Terms​(in thousands)Outstanding at December 31, 2024 9,422​$ 36.59 ​​ ​ ​Granted 891​ 89.82 ​​ ​ ​Exercised (2,051)​ 26.28 ​​ ​ ​Forfeited or expired (78)​ 66.05 ​​ ​ ​Outstanding at December 31, 2025 8,184​$ 44.70 5.5Years​$ 382,128Vested or expected to vest at December 31, 2025 8,049​$ 44.26 5.5Years​$ 377,929Exercisable at December 31, 2025 5,592​$ 32.59 4.3Years​$ 327,772​The fair value of each stock option award is estimated on the date of the grant using the Black-Scholes option pricing model. The Black-Scholes model requires the use of assumptions, including the risk-free rate, expected life, expected volatility, and expected dividend yield.

NOTE 6 – LEASES​Operating Lease Commitments:The following table summarizes Total lease cost for the years ended December 31, 2025, 2024, and 2023, which was primarily included in “Selling, general and administrative expenses” on the accompanying Consolidated Statements of Income (in thousands):​​​​​​​​​​​​For the Year Ended ​​December 31, ​ ​ ​ ​2025​2024​2023Operating lease cost​$ 457,952​$ 425,481​$ 398,537Short-term operating lease cost​ 8,187​ 8,206​ 9,508Variable operating lease cost​ 130,778​ 114,634​ 99,911Sublease income​ (4,796)​ (4,826)​ (4,805)Total lease cost​$ 592,121​$ 543,495​$ 503,151​The following table summarizes other lease related information for the years ended December 31, 2025 and 2024 (in thousands):​​​​​​​​​ ​ ​ ​For the Year Ended ​​December 31, ​​2025​2024Cash paid for amounts included in the measurement of operating lease liabilities: ​ ​​​​​Operating cash flows from operating leases​$ 453,544​$ 416,714Right-of-use assets obtained in exchange for new operating lease liabilities​​ 375,163​​ 423,196​The following table identifies the future minimum lease payments under all of the Company’s operating leases for each of the next five years, and in the aggregate thereafter, and reconciles to the present value of the “Operating lease liabilities, less current portion” included in the accompanying Consolidated Balance Sheet as of December 31, 2025 (in thousands):​​​​​​​​​​​​December 31, 2025​ ​ ​ ​Related Parties ​ ​ ​Non-Related Parties ​ ​ ​Total2026​$ 4,188​$ 442,624​$ 446,8122027​​ 3,370​​ 410,365​​ 413,7352028​ 3,182​ 360,190​ 363,3722029​ 1,119​ 312,368​ 313,4872030​ 336​ 268,913​ 269,249Thereafter​ 25​ 1,213,576​ 1,213,601Total operating lease payments​ 12,220​ 3,008,036​ 3,020,256Less: present value discount​ 897​ 544,764​ 545,661Total operating lease liabilities​ 11,323​ 2,463,272​ 2,474,595Less: current portion of operating lease liabilities​ 4,188​ 435,719​ 439,907Operating lease liabilities, less current portion​$ 7,135​$ 2,027,553​$ 2,034,688​See Note 16 for further information concerning the Company’s related party operating leases.​The future minimum lease payments under the Company’s operating leases, in the table above, do not include potential amounts for percentage rent and other variable operating lease related costs and have not been reduced by expected future minimum sublease income under non-cancelable subleases, which was approximately $8.8 million as of December 31, 2025.

We execute a comprehensive approach to cybersecurity risk management, helping ensure the data customers and other stakeholders entrust to us remains safe and secure. Our board of directors (the “Board”), Compliance Committee, and Information Security Program leaders are actively involved in the oversight of our cybersecurity risk management program. As described in more detail below, we have established standards, policies, practices, and processes focused on identifying, assessing, managing, mitigating, and responding to material risks from cybersecurity threats. To date, the Company is not aware of risks from cybersecurity threats, including as a result of any previous cybersecurity incidents that have materially affected, or are reasonably likely to materially affect, our business strategies, results of operations, financial condition, or cash flows. However, while we have devoted financial and personnel resources to implement and maintain security measures to meet regulatory requirements and customer expectations, and we intend to continue to make investments to maintain the security of our data and cybersecurity infrastructure, we cannot provide absolute assurance that any potential future cybersecurity threats or incidents will not materially affect us or our business strategies, results of operations, financial condition, or cash flows. For further discussion on cybersecurity related risks, see the “Risk Factors” section of Item 1A of this annual report on Form 10-K. ​RISK MANAGEMENT AND STRATEGY​We execute a holistic approach to our standards, policies, practices, and processes for identifying, assessing, managing, mitigating, and responding to material risks from cybersecurity threats, all of which are integrated into our overall risk management program. Our cybersecurity program is guided by industry-wide recognized standards, including The National Institute of Standards and Technology (NIST) Cybersecurity Framework. ​We have implemented best practices and established numerous programs and controls to reduce cybersecurity risk. Our Information Security Program includes physical, administrative, and technical safeguards. Some key components of the Information Security Program include:●Security awareness training for Team Members.●A dedicated security operations team to monitor, analyze, and respond to security threats.●Security governance to manage and maintain security processes.●Intrusion, detection, and prevention systems.

NOTE 9 – FINANCING​The following table identifies the amounts included in “Long-term debt” on the accompanying Consolidated Balance Sheets as of December 31, 2025 and 2024 (in thousands):​​​​​​​​​​December 31, ​​​2025​​2024Commercial paper program, weighted-average variable interest rate of 3.979% as of December 31, 2025 and 4.750% as of December 31, 2024​​ 690,000​​ 200,0003.550% Senior Notes due 2026, effective interest rate of 3.570%​ 500,000​ 500,0005.750% Senior Notes due 2026, effective interest rate of 5.767%​​ 750,000​​ 750,0003.600% Senior Notes due 2027, effective interest rate of 3.619%​ 750,000​ 750,0004.350% Senior Notes due 2028, effective interest rate of 4.383%​ 500,000​ 500,0003.900% Senior Notes due 2029, effective interest rate of 3.901%​​ 500,000​​ 500,0004.200% Senior Notes due 2030, effective interest rate of 4.205%​​ 500,000​​ 500,0001.750% Senior Notes due 2031, effective interest rate of 1.798%​​ 500,000​​ 500,0004.700% Senior Notes due 2032, effective interest rate of 4.740%​​ 850,000​​ 850,0005.000% Senior Notes due 2034, effective interest rate of 5.028%​​ 500,000​​ 500,000Total principal amount of debt​​ 6,040,000​​ 5,550,000Less: Unamortized discount and debt issuance costs​​ 23,096​​ 29,068Total long-term debt​$ 6,016,904​$ 5,520,932​The following table identifies the principal maturity payments of the Company’s financing facilities for each of the next five years, and in the aggregate thereafter, as of December 31, 2025 (in thousands):​​​​​​ ​ ​ ​December 31, 2025​​Scheduled Maturities2026​$ 1,940,0002027​ 750,0002028​ 500,0002029​ 500,0002030​ 500,000Thereafter​ 1,850,000Total principal amount of debt​$ 6,040,000​Unsecured Revolving Credit Facility:The Company is party to a credit agreement dated June 15, 2021, as amended and restated by the First Amended and Restated Credit Agreement as of March 31, 2025 (the “Credit Agreement”). The Credit Agreement provides for a five-year $2.25 billion unsecured revolving credit facility (the “Revolving Credit Facility”) arranged by JPMorgan Chase Bank, N.A., which is scheduled to mature in March of 2030. The Credit Agreement includes a $200 million sub-limit for the issuance of letters of credit and a $75 million sub-limit for swing line borrowings under the Revolving Credit Facility.