Unless otherwise indicated, "we," "us," "our" and similar terms, as well as references to the "Company" or "O'Reilly," refer to O'Reilly Automotive, Inc. and its subsidiaries.





In Management's Discussion and Analysis, we provide a historical and prospective
narrative of our general financial condition, results of operations, liquidity
and certain other factors that may affect our future results, including

? recent developments within our Company;

? an overview of the key drivers of the automotive aftermarket industry;

? our results of operations for the three and six months ended June 30, 2020 and

2019;

? our liquidity and capital resources;

? any contractual obligations, to which we are committed;

? our critical accounting estimates;

? the inflation and seasonality of our business; and

? recent accounting pronouncements that may affect our Company.






The review of Management's Discussion and Analysis should be made in conjunction
with our condensed consolidated financial statements, related notes and other
financial information, forward-looking statements and other risk factors
included elsewhere in this quarterly report.



FORWARD-LOOKING STATEMENTS



We claim the protection of the safe-harbor for forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995.  You can
identify these statements by forward-looking words such as "estimate," "may,"
"could," "will," "believe," "expect," "would," "consider," "should,"
"anticipate," "project," "plan," "intend" or similar words.  In addition,
statements contained within this quarterly report that are not historical facts
are forward-looking statements, such as statements discussing, among other
things, expected growth, store development, integration and expansion strategy,
business strategies, future revenues and future performance.  These
forward-looking statements are based on estimates, projections, beliefs and
assumptions and are not guarantees of future events and results.  Such
statements are subject to risks, uncertainties and assumptions, including, but
not limited to, the COVID-19 pandemic or other public health crisis, the economy
in general, inflation, tariffs, product demand, the market for auto parts,
competition, weather, risks associated with the performance of acquired
businesses, our ability to hire and retain qualified employees, consumer debt
levels, our increased debt levels, credit ratings on public debt, governmental
regulations, information security and cyber-attacks, terrorist activities, war
and the threat of war.  Actual results may materially differ from anticipated
results described or implied in these forward-looking statements.  Please refer
to the "Risk Factors" section of our annual report on Form 10-K for the year
ended December 31, 2019, and subsequent Securities and Exchange Commission
filings, for additional factors that could materially affect our financial
performance.  Forward-looking statements speak only as of the date they were
made, and we undertake no obligation to publicly update any forward-looking
statements, whether as a result of new information, future events or otherwise,
except as required by applicable law.



RECENT DEVELOPMENTS



The COVID-19 pandemic has caused significant disruption to the economy, placing
pressure on our business beginning in mid-March 2020, as self-quarantine or stay
at home orders were put in place in most cities, counties and states.  This
pressure continued until mid-April when our customers began to receive Economic
Impact Payments under the CARES Act.  We believe these government stimulus
payments, enhanced unemployment benefits, lifting of stay at home orders and the
associated market reopenings in May and June, and favorable industry dynamics,
such as consumers investing in existing vehicles, led to strong demand for our
products throughout the remainder of the quarter.



We have been deemed an essential service provider in the communities we serve
and have taken many steps to promote the health and safety of our customers and
team members, while keeping our stores open and operating to meet our customers'
critical needs during the COVID-19 crisis.  In addition, when our business was
pressured at the end of the first quarter, we took steps to strengthen our
liquidity and mitigate the expected ongoing impact on our operations and
financial performance.



                                       17

These actions include, but not limited to:

Implementing social distancing standards throughout the company, providing our

? team members with personal protective equipment and modifying store procedures,


   including the implementation of curbside pickup for Buy Online, Pick Up
   In-Store orders;

Temporarily reducing store operating hours across the chain when business was

? pressured to match demand, as well as allowing time for additional cleaning

procedures;

Putting in place programs to relax attendance policies, as well as advance sick

? time to assist Team Members who are sick or need time away to support family

members;

? Deferring certain capital investments and prudently managing our cost structure

in response to sales volatility;

Successfully issuing $500 million aggregate principal amount unsecured 4.20%

? Senior Notes due 2030, and drawing a precautionary $250 million on our existing

revolving credit facility, however during the second quarter of 2020, this

additional draw was repaid;

Temporarily suspending our share repurchase program on March 16, 2020, however,

? the program resumed on May 29, 2020, based on the improved business

environment; and

Utilizing relief efforts as part of the Coronavirus Aid, Relief, and Economic

? Security Act (CARES Act) signed into law on March 27, 2020, which included

bonus depreciation on eligible property, deferral of employer portion of social


   security taxes, and deferral of certain tax payments.




While we continue to make adjustments as we navigate the current environment, we
are unable to predict how long the current crisis will last or the extent of the
impact on our customers and our business.



OVERVIEW



We are a specialty retailer of automotive aftermarket parts, tools, supplies,
equipment and accessories in the United States.  We are one of the largest U.S.
automotive aftermarket specialty retailers, selling our products to both DIY
customers and professional service providers - our "dual market strategy."  Our
stores carry an extensive product line consisting of new and remanufactured
automotive hard parts, maintenance items, accessories, a complete line of auto
body paint and related materials, automotive tools and professional service
provider service equipment.

Our extensive product line includes an assortment of products that are differentiated by quality and price for most of the product lines we offer.

For


many of our product offerings, this quality differentiation reflects "good,"
"better," and "best" alternatives.  Our sales and total gross profit dollars
are, generally, highest for the "best" quality category of products.  Consumers'
willingness to select products at a higher point on the value spectrum is a
driver of sales and profitability in our industry.  We have ongoing initiatives
focused on marketing and training to educate customers on the advantages of
ongoing vehicle maintenance, as well as "purchasing up" on the value spectrum.



Our stores also offer enhanced services and programs to our customers,
including used oil, oil filter and battery recycling; battery, wiper and bulb
replacement; battery diagnostic testing; electrical and module testing; check
engine light code extraction; loaner tool program; drum and rotor resurfacing;
custom hydraulic hoses; professional paint shop mixing and related materials;
and machine shops.  As of June 30, 2020, we operated 5,562 stores in 47 U.S.
states and 21 stores in Mexico.



We are influenced by a number of general macroeconomic factors that impact both
our industry and our consumers, including, but not limited to, fuel costs,
unemployment trends, interest rates, and other economic factors.  Due to the
nature of these macroeconomic factors, we are unable to determine how long
current conditions will persist and the degree of impact future changes may have
on our business.  Macroeconomic factors, such as increases in the U.S.
unemployment rate, and demand drivers specific to the automotive aftermarket,
such as U.S. miles driven, have been pressured as a result of the COVID-19 stay
at home orders.  Gradual reopening processes across many markets positively
impacted our second quarter performance; however, we are unable to predict the
ongoing and future impact of these reopening processes or predict potential
reversals of these reopenings, including the extent of the impact on our
industry as a result of these changes.



We believe the key drivers of current and future long-term demand for the
products sold within the automotive aftermarket include the number of U.S. miles
driven, number of U.S. registered vehicles, new light vehicle registrations

and
average vehicle age.



Number of Miles Driven

The number of total miles driven in the U.S. influences the demand for repair
and maintenance products sold within the automotive aftermarket.  In total,
vehicles in the U.S. are driven approximately three trillion miles per year,
resulting in ongoing wear and tear and

                                       18

a corresponding continued demand for the repair and maintenance products
necessary to keep these vehicles in operation.  According to the Department of
Transportation, the number of total miles driven in the U.S. increased 0.9%,
0.4% and 1.2% in 2019, 2018 and 2017, respectively, and through February of
2020, year-to-date miles driven increased 2.1%.  Miles driven dramatically
declined in March of 2020, and through May of 2020, year-to-date miles driven
has decreased 17.3%, as a result of the measures taken by state and local
governments in response to COVID-19 and the corresponding impact to economic
activity as consumers responded to COVID-19.  To the extent these measures
continue to be in place in the future, or are reinstated as a result of a
resurgence of COVID-19, we believe there will be continued negative impact on
miles driven, but we are unable to predict the duration and severity of the
impact to our business.

Size and Age of the Vehicle Fleet


The total number of vehicles on the road and the average age of the vehicle
population heavily influence the demand for products sold within the automotive
aftermarket industry.  As reported by The Auto Care Association, the total
number of registered vehicles increased 10.4% from 2009 to 2019, bringing the
number of light vehicles on the road to 278 million by the end of 2019.  For
the year ended December 31, 2019, the seasonally adjusted annual rate of light
vehicle sales in the U.S. ("SAAR") was approximately 16.7 million.  In the past
decade, vehicle scrappage rates have remained relatively stable, ranging from
4.1% to 5.7% annually.  As a result, over the past decade, the average age of
the U.S. vehicle population has increased, growing 18.0%, from 10.0 years in
2009 to 11.8 years in 2019.  Estimates of the SAAR for 2020 have been revised
significantly downward, as a result of the sharp decline in new vehicle sales
coinciding with the onset of COVID-19, and the outlook for SAAR is highly
uncertain, as the severity and duration of the COVID-19 crisis is
indeterminable.  However, the rate of new vehicle sales in any given year
represents a small percentage of the total light vehicle population and has a
muted impact on the total number of vehicles on the road and average age of
vehicles over the short term.



We believe the increase in average age can be attributed to better engineered
and manufactured vehicles, which can be reliably driven at higher mileages due
to better quality power trains, interiors and exteriors, and the consumer's
willingness to invest in maintaining these higher-mileage, better built
vehicles.  As the average age of vehicles on the road increases, a
larger percentage of miles are being driven by vehicles that are outside of a
manufacturer warranty.  These out-of-warranty, older vehicles generate strong
demand for automotive aftermarket products as they go through more routine
maintenance cycles, have more frequent mechanical failures and generally require
more maintenance than newer vehicles.  We believe consumers will continue to
invest in these reliable, higher-quality, higher-mileage vehicles and these
investments, along with an increasing total light vehicle fleet, will support
continued demand for automotive aftermarket products.



We remain confident in our ability to gain market share in our existing markets
and grow our business in new markets by focusing on our dual market strategy and
the core O'Reilly values of hard work and excellent customer service.



RESULTS OF OPERATIONS



Sales:

Sales for the three months ended June 30, 2020, increased $502 million or 19% to
$3.09 billion from $2.59 billion for the same period one year ago.  Sales for
the six months ended June 30, 2020, increased $568 million or 11% to $5.57
billion from $5.00 billion for the same period one year ago.  Comparable store
sales for stores open at least one year increased 16.2% and increased 3.4% for
the three months ended June 30, 2020 and 2019, respectively.  Comparable store
sales for stores open at least one year increased 7.5% and increased 3.3% for
the six months ended June 30, 2020 and 2019, respectively.  Comparable store
sales are calculated based on the change in sales for stores open at least
one year and exclude sales of specialty machinery, sales to independent parts
stores and sales to Team Members, as well as sales from Leap Day in the six
months ended June 30, 2020. Online sales, resulting from ship-to-home orders and
pickup in-store orders, for stores open at least one year, are included in the
comparable store sales calculation.



                                       19

The following table presents the components of the increase in sales for the three and six months ended June 30, 2020 (in millions):




                                   Increase in Sales for the         Increase in Sales for the
                                       Three Months Ended                Six Months Ended
                                         June 30, 2020                     June 30, 2020
                                     Compared to the Same              Compared to the Same
                                         Period in 2019                   Period in 2019
Store sales:
Comparable store sales            $                        412    $                           367
Non-comparable store sales:
Sales for stores opened
throughout 2019, excluding
stores open at least one year
that are included in comparable
store sales and sales from the
acquired Mayasa stores                                      42                                 86
Sales for stores opened
throughout 2020                                             28                                 37
Sales from Leap Day                                          -                                 34
Decline in sales for stores
that have closed                                           (1)                                (3)
Non-store sales:
Includes sales of machinery and
sales to independent parts
stores and Team Members                                     21                                 47
Total increase in sales           $                        502    $                           568




We believe the increased sales are the result of store growth, the acquisition
of Mayasa, sales from one additional day due to Leap Day for the six months
ended June 30, 2020, the high levels of customer service provided by our
well-trained and technically proficient Team Members, superior inventory
availability, including same day and over-night access to inventory in our
regional distribution centers, enhanced services and programs offered in our
stores, a broader selection of product offerings in most stores with a dynamic
catalog system to identify and source parts, a targeted promotional and
advertising effort through a variety of media and localized promotional events,
continued improvement in the merchandising and store layouts of our stores,
compensation programs for all store Team Members that provide incentives for
performance and our continued focus on serving both DIY and professional service
provider customers.  The Company incurred significant sales headwinds beginning
in the middle of March and through the middle of April, as a result of COVID-19;
however, the government stimulus payments, enhanced unemployment benefits,
lifting of stay at home orders and the associated market reopenings in May and
June when combined with favorable industry dynamics, such as consumers investing
in existing vehicles, led to strong demand for our products over the remainder
of the quarter.



Our comparable store sales increases for the three and six months ended
June 30, 2020, were driven by an increase in average ticket for both DIY and
professional service provider customers and positive transaction counts for DIY
customers, partially offset by negative transaction counts for professional
service provider customers.  The improvement in average ticket values were the
result of the increasing complexity and cost of replacement parts necessary to
maintain the current population of better-engineered and more technically
advanced vehicles.  These better-engineered, more technically advanced vehicles
require less frequent repairs, as the component parts are more durable and last
for longer periods of time.  This decrease in repair frequency creates pressure
on customer transaction counts; however, when repairs are needed, the cost of
replacement parts is, on average, greater, which is a benefit to average ticket
values.  Average ticket values also benefited from increased selling prices on a
SKU-by-SKU basis, as compared to the prior year, driven by increases in
acquisition cost of inventory, which were passed on in market prices.  Beginning
in April of 2020, average ticket values, primarily for DIY customers, also
benefited from consumers spending additional time and money repairing and
maintaining their vehicles in response to the COVID-19 and economic environment.





As the COVID-19 stay at home orders and recommendations took effect in our
markets in the middle of March 2020, transaction counts for both DIY and
professional service provider customers turned sharply negative, with a larger
impact realized on the professional side of the business, as we believe a larger
segment of the demographic served by our professional service provider customers
is more likely to accommodate working from home than a typical DIY customer.

However, in the middle of April 2020, as the government stimulus and enhanced unemployment benefits reached consumers, we saw a reversal in transaction counts, with a more immediate impact realized on the DIY side of the business.


 Improvement in transaction counts continued through May and June 2020, as
states implemented reopening plans and many individuals returned to work.  We
cannot predict what continued impact the COVID-19 pandemic will have to our
business in the future given the high degree of uncertainty as to the duration
and severity of the pandemic, the potential future changes to economic reopening
plans and the mitigating impact of government stimulus for consumers.



We opened 50 and 123 net, new U.S. stores during the three and six months ended
June 30, 2020, respectively, compared to opening 43 and 105 net, new U.S. stores
for the three and six months ended June 30, 2019, respectively.  In addition, on
January 1, 2019, we began operating 33 acquired Bennett stores, and during the
six months ended June 30, 2019, we merged of 13 of these acquired Bennett stores

                                       20

into existing O'Reilly locations.  As of June 30, 2020, we operated 5,562 stores
in 47 U.S. states and 21 stores in Mexico compared to 5,344 stores in 47 U.S.
states at June 30, 2019.



Gross profit:

Gross profit for the three months ended June 30, 2020, increased 20% to $1.64
billion (or 53.0% of sales) from $1.37 billion (or 52.8% of sales) for the same
period one year ago.  Gross profit for the six months ended June 30, 2020,
increased 11% to $2.93 billion (or 52.7% of sales) from $2.65 billion (or 52.9%
of sales) for the same period one year ago.  The increase in gross profit
dollars for the three months ended June 30, 2020, was primarily the result of
new stores, the increase in comparable store sales at existing stores, and the
acquired Mayasa stores.  The increase in gross profit dollars for the six months
ended June 30, 2020, was primarily the result of new stores, the increase in
comparable store sales at existing stores, the acquired Mayasa stores and one
additional day due to Leap Day.  The increase in gross profit as a percentage of
sales for the three months ended June 30, 2020, was primarily due to a greater
percentage of total sales generated from DIY customers, which carry a higher
gross margin than professional service provider sales, acquisition cost
reductions and leverage of fixed distribution costs, as a result of strong
comparable store sales growth, partially offset by the comparable period in the
prior year receiving a benefit from selling through inventory purchased prior to
tariff related industry-wide acquisition cost increases and corresponding
selling price increases and lower gross margin sales from the acquired Mayasa
stores, due to their large independent jobber customer base.  The decrease in
gross profit as a percentage of sales for the six months ended June 30, 2020,
was due to the comparable period in the prior year receiving a benefit from
selling through inventory purchased prior to tariff related industry-wide
acquisition cost increases and corresponding selling price increases and lower
gross margin sales from the acquired Mayasa stores, partially offset by a
favorable mix of DIY business and leverage of fixed distribution costs in the
current period, as a result of strong comparable store sales growth.  We
determine inventory cost using the last-in, first-out ("LIFO") method, but have,
over time, seen our LIFO reserve balance exhausted, as a result of cumulative
historical acquisition cost decreases.  Our policy is to not write up inventory
in excess of replacement cost, and accordingly, we are effectively valuing our
inventory at replacement cost.

Selling, general and administrative expenses:


Selling, general and administrative expenses ("SG&A") for the three months ended
June 30, 2020, increased 4% to $901 million (or 29.1% of sales) from $870
million (or 33.6% of sales) for the same period one year ago.  SG&A for the six
months ended June 30, 2020, increased 4% to $1.77 billion (or 31.8% of sales)
from $1.70 billion (or 34.1% of sales) for the same period one year ago.  The
increase in total SG&A dollars for the three months ended June 30, 2020, was the
result of additional facilities and vehicles to support our increased sales and
store count.  The increase in total SG&A dollars for the six months ended
June 30, 2020, was the result of additional facilities and vehicles to support
our increased sales and store count and one additional day due to Leap Day.

The


decreases in SG&A as a percentage of sales for the three and six months ended
June 30, 2020, were principally due to leverage of store operating costs on
strong comparable store sales growth combined with our cautionary approach and
strict expense control measures in response to the onset of the COVID-19
environment.



Operating income:

As a result of the impacts discussed above, operating income for the three months ended June 30, 2020, increased 48% to $736 million (or 23.8% of sales) from $498 million (or 19.2% of sales) for the same period one year ago.


 As a result of the impacts discussed above, operating income for the six months
ended June 30, 2020, increased 23% to $1.16 billion (or 20.8% of sales) from
$943 million (or 18.9% of sales) for the same period one year ago.

Other income and expense:


Total other expense for the three months ended June 30, 2020, increased 9% to
$36 million (or 1.2% of sales) from $33 million (or 1.3% of sales) for the same
period one year ago.  Total other expense for the six months ended
June 30, 2020, increased 25% to $80 million (or 1.4% of sales) from $64 million
(or 1.3% of sales) for the same period one year ago.  The increase in total
other expense for the three months ended June 30, 2020, was the result of
increased interest expense on higher average outstanding borrowings, partially
offset by a smaller increase in the value of our trading securities, as compared
to the same period one year ago.  The increase in total other expense for the
six months ended June 30, 2020, was the result of increased interest expense on
higher average outstanding borrowings and a decrease in the value of our trading
securities, as compared to an increase in the same period one year ago.

Income taxes:



Our provision for income taxes for the three months ended June 30, 2020,
increased 52% to $169 million (24.1% effective tax rate) from $111 million
(23.9% effective tax rate) for the same period one year ago.  Our provision for
income taxes for the six months ended June 30, 2020, increased 21% to $248
million (23.0% effective tax rate) from $204 million (23.2% effective tax rate)
for the same period one year ago.  The increase in our provision for income
taxes for the three months ended June 30, 2020, was the result of higher taxable
income, partially offset by higher excess tax benefits from share-based
compensation.  The increase in our provision for income taxes for the six months
ended June 30, 2020, was the result of higher taxable income and lower excess
tax benefits from share-based compensation, partially offset by benefits from
tax credit equity investments.  The increase in our effective tax rate for the
three months ended June 30, 2020, was the result of lower benefits from
employment related tax credits, partially offset by higher excess tax benefits

                                       21

from share-based compensation. The decrease in our effective tax rate for the six months ended June 30, 2020, was the result of benefits from tax credit equity investments, partially offset by lower excess tax benefits from share-based compensation.





Net income:

As a result of the impacts discussed above, net income for the three months
ended June 30, 2020, increased 50% to $532 million (or 17.2% of sales) from $354
million (or 13.7% of sales) for the same period one year ago.  As a result of
the impacts discussed above, net income for the six months ended June 30, 2020,
increased 23% to $832 million (or 14.9% of sales) from $675 million (or 13.5% of
sales) for the same period one year ago.

Earnings per share:



Our diluted earnings per common share for the three months ended June 30, 2020,
increased 57% to $7.10 on 75 million shares from $4.51 on 78 million shares for
the same period one year ago.  Our diluted earnings per common share for the six
months ended June 30, 2020, increased 29% to $11.06 on 75 million shares from
$8.56 on 79 million shares for the same period one year ago.

LIQUIDITY AND CAPITAL RESOURCES





Our long-term business strategy requires capital to open new stores, fund
strategic acquisitions, expand distribution infrastructure, operate and maintain
existing stores and may include the opportunistic repurchase of shares of our
common stock through our Board-approved share repurchase program.  The primary
sources of our liquidity are funds generated from operations and borrowed under
our unsecured revolving credit facility.  Decreased demand for our products or
changes in customer buying patterns could negatively impact our ability to
generate funds from operations.  Additionally, decreased demand or changes in
buying patterns could impact our ability to meet the debt covenants of our
credit agreement and, therefore, negatively impact the funds available under our
unsecured revolving credit facility.



As we operate amid uncertainty and disruption caused by the COVID-19 pandemic,
we have taken prudent steps to support the continued stability and financial
flexibility of our Company.  Our teams have taken action to reduce costs and
conserve cash, which included delaying capital investments and temporarily
suspending our share repurchase program from March 16, 2020, through May 28,
2020.  As we are unable to determine the duration or severity of this crisis, we
cannot predict its impact on our ability to generate funds from operations or
maintain liquidity, and as such, we will continue to make adjustments as we
navigate the current and expected environment.



The following table identifies cash provided by/(used in) our operating,
investing and financing activities for the six months ended June 30, 2020 and
2019 (in thousands):


                                               For the Six Months Ended
                                                      June 30,
Liquidity:                                       2020            2019
Total cash provided by/(used in):
Operating activities                         $   1,559,078    $   847,004
Investing activities                             (335,228)      (293,348)
Financing activities                             (390,732)      (529,162)
Effect of exchange rate changes on cash            (1,101)              -

Net increase in cash and cash equivalents $ 832,017 $ 24,494



Capital expenditures                         $     244,471    $   295,608
Free cash flow (1)                               1,212,855        538,957

(1) Calculated as net cash provided by operating activities, less capital

expenditures and excess tax benefit from share-based compensation payments,


    and investment in tax credit equity investments for the period.




Operating activities:

The increase in net cash provided by operating activities during the six months
ended June 30, 2020, compared to the same period in 2019, was primarily due to a
larger increase in net income, an increase in income taxes payable, a larger
decrease in net inventory investment and a larger increase in accrued benefits
and withholdings.  The increase from income taxes payable, compared to a
decrease in income taxes payable for the same period in the prior year, was
primarily the result of deferral of income tax payments under the CARES Act.
 The larger decrease in net inventory investment in the current period, as
compared to the same period in the prior year, was primarily attributable to the
strong comparable store sales growth and the resulting benefit to inventory
turns.  The larger increase in accrued benefits and withholdings is primarily
due to the deferral of payroll tax payments under the CARES Act and the timing
of Team Member incentive payments.



                                       22

Investing activities:


The increase in net cash used in investing activities during the six months
ended June 30, 2020, compared to the same period in 2019, was the result of an
increase in investments in tax credit equity investments, partially offset by a
decrease in capital expenditures.  The increase in investments in tax credit
equity investments were the result of entering into more tax credit equity
investments in the current period, compared to the same period in the prior
year, primarily for the purpose of receiving renewable energy tax credits.  The
decrease in capital expenditures was primarily due to the level of distribution
expansion projects in the comparable period of the prior year.

Financing activities:


The decrease in net cash used in financing activities during the six months
ended June 30, 2020, compared to the same period in 2019, was attributable to a
decrease in repurchases of our common stock during the current period, as
compared to the same period in the prior year, partially offset by lower average
net borrowings on our revolving credit facility.

Unsecured revolving credit facility:


On April 5, 2017, the Company entered into a credit agreement (the "Credit
Agreement").  The Credit Agreement provides for a five-year $1.2 billion
unsecured revolving credit facility (the "Revolving Credit Facility") arranged
by JPMorgan Chase Bank, N.A., which is scheduled to mature in April 2022.  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.  As described
in the Credit Agreement governing the Revolving Credit Facility, the Company
may, from time to time, subject to certain conditions, increase the aggregate
commitments under the Revolving Credit Facility by up to $600 million, provided
that the aggregate amount of the commitments does not exceed $1.8 billion at any
time.



As of June 30, 2020, we had outstanding letters of credit, primarily to support
obligations related to workers' compensation, general liability and other
insurance policies, in the amount of $51.6 million, reducing the aggregate
availability under the Credit Agreement by that amount.  As of June 30, 2020, we
did not have any outstanding borrowings under our Revolving Credit Facility.



Senior Notes:

On March 25, 2020, we issued $500 million aggregate principal amount of
unsecured 4.200% Senior Notes due 2030 ("4.200% Senior Notes due 2030") at a
price to the public of 99.959% of their face value with U.S. Bank National
Association ("U.S. Bank") as trustee. Interest on the 4.200% Senior Notes due
2030 is payable on April 1 and October 1 of each year, beginning on October 1,
2020, and is computed on the basis of a 360-day year.



We have issued a cumulative $4.2 billion aggregate principal amount of unsecured
senior notes, which are due between 2021 and 2030, with UMB Bank, N.A. and U.S.
Bank as trustees.  Interest on the senior notes, ranging from 3.550% to 4.875%,
is payable semi-annually and is computed on the basis of a 360-day year.  None
of our subsidiaries is a guarantor under our senior notes.

Debt covenants:


The indentures governing our senior notes contain covenants that limit our
ability and the ability of certain of our subsidiaries to, among other things,
create certain liens on assets to secure certain debt and enter into certain
sale and leaseback transactions, and limit our ability to merge or consolidate
with another company or transfer all or substantially all of our property, in
each case as set forth in the indentures.  These covenants are, however, subject
to a number of important limitations and exceptions.  As of June 30, 2020, we
were in compliance with the covenants applicable to our senior notes.



The Credit Agreement contains certain covenants, including limitations on
indebtedness, a minimum consolidated fixed charge coverage ratio of 2.50:1.00
and a maximum consolidated leverage ratio of 3.50:1.00.  The consolidated fixed
charge coverage ratio includes a calculation of earnings before interest, taxes,
depreciation, amortization, rent and non-cash share-based compensation expense
to fixed charges.  Fixed charges include interest expense, capitalized interest
and rent expense.  The consolidated leverage ratio includes a calculation of
adjusted debt to earnings before interest, taxes, depreciation, amortization,
rent and non-cash share-based compensation expense.  Adjusted debt includes
outstanding debt, outstanding stand-by letters of credit and similar
instruments, five-times rent expense and excludes any premium or discount
recorded in conjunction with the issuance of long-term debt.  In the event that
we should default on any covenant contained within the Credit Agreement, certain
actions may be taken, including, but not limited to, possible termination of
commitments, immediate payment of outstanding principal amounts plus accrued
interest and other amounts payable under the Credit Agreement and litigation
from our lenders.



We had a consolidated fixed charge coverage ratio of 5.49 times and 5.24 times
as of June 30, 2020 and 2019, respectively, and a consolidated leverage ratio of
2.12 times and 2.22 times as of June 30, 2020 and 2019, respectively, remaining
in compliance with all covenants related to the borrowing arrangements.



                                       23

The table below outlines the calculations of the consolidated fixed charge coverage ratio and consolidated leverage ratio covenants, as defined in the Credit Agreement governing the Revolving Credit Facility, for the twelve months ended June 30, 2020 and 2019 (dollars in thousands):




                                                For the Twelve Months Ended
                                                         June 30,
                                                   2020              2019
GAAP net income                               $     1,548,314     $ 1,341,341
Add:  Interest expense                                152,255         131,879
      Rent expense (1)                                345,530         328,529

      Provision for income taxes                      442,962        

386,590
      Depreciation expense                            286,593         257,579
      Amortization expense                              3,880           2,841

      Non-cash share-based compensation                22,386         

21,039
Non-GAAP EBITDAR                              $     2,801,920     $ 2,469,798

      Interest expense                        $       152,255     $   131,879
      Capitalized interest                             12,376          10,891
      Rent expense (1)                                345,530         328,529
Total fixed charges                           $       510,161     $   471,299

Consolidated fixed charge coverage ratio                 5.49

5.24



GAAP debt                                     $     4,127,397     $

3,783,738


Add:  Stand-by letters of credit                       51,551

39,109


      Discount on senior notes                          3,295

3,930


      Debt issuance costs                              19,308

18,332


      Five-times rent expense                       1,727,650

1,642,645


Non-GAAP adjusted debt                        $     5,929,201     $

5,487,754



Consolidated leverage ratio                              2.12

2.22

(1) The table below outlines the calculation of Rent expense and reconciles Rent

expense to Total lease cost, per Accounting Standard Codification 842 ("ASC

842"), adopted and effective January 1, 2019, the most directly comparable

GAAP financial measure, for the twelve months ended June 30, 2020 and for the

six and twelve months ended June 30, 2019 (in thousands):

Total lease cost, per ASC 842, for the twelve months ended June 30, 2020 $ 408,583 Less: Variable non-contract operating lease components, related


             to property taxes and insurance, for the twelve months
             ended June 30, 2020

63,053


Rent expense for the twelve months ended June 30, 2020

$ 345,530

Total lease cost, per ASC 842, for the six months ended June 30, 2019 $ 197,839 Less: Variable non-contract operating lease components, related


             to property taxes and insurance, for the six months ended
             June 30, 2019

29,433


Rent expense for the six months ended June 30, 2019

168,406

Add: Rent expense for the six months ended December 31, 2018, as


             previously reported prior to the adoption of ASC 842

160,123


Rent expense for the twelve months ended June 30, 2019
$      328,529




The table below outlines the calculation of Free cash flow and reconciles Free
cash flow to Net cash provided by operating activities, the most directly
comparable GAAP financial measure, for the six months ended June 30, 2020 and
2019 (in thousands):


                                                             For the Six Months Ended
                                                                     June 30,
                                                               2020              2019

Cash provided by operating activities                     $    1,559,078     $    847,004
Less: Capital expenditures                                       244,471   

      295,608
      Excess tax benefit from share-based compensation
      payments                                                     6,460           10,722
      Investment in tax credit equity investments                 95,292            1,717
Free cash flow                                            $    1,212,855     $    538,957




                                       24

Free cash flow, the consolidated fixed charge coverage ratio and the
consolidated leverage ratio discussed and presented in the tables above are not
derived in accordance with United States generally accepted accounting
principles ("GAAP").  We do not, nor do we suggest investors should, consider
such non-GAAP financial measures in isolation from, or as a substitute for, GAAP
financial information.  We believe that the presentation of our free cash flow,
consolidated fixed charge coverage ratio and consolidated leverage ratio
provides meaningful supplemental information to both management and investors
and reflects the required covenants under the Credit Agreement.  We include
these items in judging our performance and believe this non-GAAP information is
useful to investors as well.  Material limitations of these non-GAAP measures
are that such measures do not reflect actual GAAP amounts.  We compensate for
such limitations by presenting, in the tables above, a reconciliation to the
most directly comparable GAAP measures.

Share repurchase program:

In January of 2011, our Board of Directors approved a share repurchase program.


 Under the program, we may, from time to time, repurchase shares of our common
stock, solely through open market purchases effected through a broker dealer at
prevailing market prices, based on a variety of factors such as price, corporate
trading policy requirements and overall market conditions.  Our Board of
Directors may increase or otherwise modify, renew, suspend or terminate the
share repurchase program at any time, without prior notice.  As announced on
February 5, 2020, our Board of Directors approved a resolution to increase the
authorization amount under our share repurchase program by an additional $1.0
billion, resulting in a cumulative authorization amount of $13.8 billion.  The
additional authorization is effective for a three-year period, beginning on its
respective announcement date.  In order to conserve liquidity in response to
COVID-19, we suspended our share repurchase program on March 16, 2020.  We
continued to evaluate business conditions and our liquidity and, as a result of
this evaluation, resumed our share repurchase program on May 29, 2020.



The following table identifies shares of our common stock that have been
repurchased as part of our publicly announced share repurchase program for the
three and six months ended June 30, 2020 and 2019 (in thousands, except per
share data):


                                             For the Three Months Ended          For the Six Months Ended
                                                      June 30,                           June 30,
                                              2020                2019             2020             2019
Shares repurchased                                  185               1,633            1,669           2,560
Average price per share                   $      417.79      $       366.76
$      390.14     $    359.63
Total investment                          $      76,974      $      598,846    $     651,011     $   920,692




As of June 30, 2020, we had $917.7 million remaining under our share repurchase
program.  Subsequent to the end of the second quarter and through August 7,
2020, we repurchased 0.1 million additional shares of our common stock under our
share repurchase program, at an average price of $423.09, for a total investment
of $35.8 million.  We have repurchased a total of 77.9 million shares of our
common stock under our share repurchase program since the inception of the
program in January of 2011 and through August 7, 2020, at an average price of
$165.10, for a total aggregate investment of $12.9 billion.



CONTRACTUAL OBLIGATIONS

There have been no material changes to the contractual obligations, to which we are committed, since those discussed in our Annual Report on Form 10-K for the year ended December 31, 2019.





CRITICAL ACCOUNTING ESTIMATES



The preparation of our financial statements in accordance with GAAP requires the
application of certain estimates and judgments by management. Management bases
its assumptions, estimates, and adjustments on historical experience, current
trends and other factors believed to be relevant at the time the condensed
consolidated financial statements are prepared. There have been no material
changes in the critical accounting estimates since those discussed in our Annual
Report on Form 10-K for the year ended December 31, 2019.



INFLATION AND SEASONALITY



We have been successful, in many cases, in reducing the effects of merchandise
cost increases principally by taking advantage of supplier incentive programs,
economies of scale resulting from increased volume of purchases and selective
forward buying. To the extent our acquisition costs increased due to base
commodity price increases industry-wide, we have typically been able to pass
along these increased costs through higher retail prices for the affected
products. As a result, we do not believe inflation has had a material adverse
effect on our operations.



To some extent, our business is seasonal primarily as a result of the impact of
weather conditions on customer buying patterns. While we have historically
realized operating profits in each quarter of the year, our store sales and
profits have historically been higher in the second and third quarters
(April through September) than in the first and fourth quarters (October through
March) of the year.

                                       25

RECENT ACCOUNTING PRONOUNCEMENTS

See Note 14 "Recent Accounting Pronouncements" to the Condensed Consolidated Financial Statements for information about recent accounting pronouncements.

INTERNET ADDRESS AND ACCESS TO SEC FILINGS


Our Internet address is www.OReillyAuto.com. Interested readers can access, free
of charge, our annual reports on Form 10-K, quarterly reports on Form 10-Q,
current reports on Form 8-K, and any amendments to those reports filed or
furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of
1934, as amended, through the Securities and Exchange Commission's ("SEC")
website at www.sec.gov and searching with our ticker symbol "ORLY."  Such
reports are generally available the day they are filed. Upon request, we will
furnish interested readers a paper copy of such reports free of charge.  The
information on our website is not part of this report and is not incorporated by
reference into this report or any of the Company's other filings with the SEC.

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